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HomeMy WebLinkAboutReso 2002-039 RESOLUTION NO. 2002-039 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING THE EXISTING CITY INVESTMENT POLICY AND GUIDELINES TO COMPLY WITH NEW STATE LEGISLATION WHEREAS, the City has an existing Investment Policy and Guidelines to insure the prudent management of idle cash; and WHEREAS, state law requires that the Investment Policy and Guidelines be adopted by resolution of the City Council on an annual basis after being reviewed to ensure consistency with the overall objectives of preservation of principal, liquidity, and yield, and its relevance to current law and financial and economic trends; and WHEREAS, several assembly bills were recently passed which changed some of the provisions and reporting requirements currently listed in the City's Investment Policy and Guidelines; and WHEREAS, staff recommends amending the existing Investment Policy and Guidelines to reflect these new requirements. NOW, THEREFORE, BE IT RESOLVED the City Council of the City of Chula Vista does hereby amend the existing City Investment Policy and Guidelines, attached hereto and incorporated herein by reference as if set forth in full. Presented by Approved as to form by J?.~M. Kaheny ,~ Assistant City Manager City Attorney Resolution 2002-039 Page 2 PASSED, APPROVED, and ADOPTED by the City Council of the City of Chula Vista, California, this 12th day of February, 2002, by the following vote: AYES: Councilmembers: Davis, Padilla, Rindone, Salas and Horton NAYS: Councilmembers: None ABSENT: Councilmembers: None Shirley Horfe~n, Mayor ATTEST: Susan Bigelow, City Clerk''-~ STATE OF CALIFORNIA ) --' COUNTY OF SAN DIEGO ) CITY OF CHULA VISTA ) I, Susan Bigelow, City Clerk of Chula Vista, California, do hereby certify that the foregoing Resolution No. 2002-039 was duly passed, approved, and adopted by the City Council at a regular meeting of the Chula Vista City Council held on the 12th day of February, 2002. Executed this 12th day of February, 2002. Susan Bigelow, City Clerk R2002-039 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND POLICY EFFECTIVE GUIDELINES NUMBER DATE PAGE 220-01 02/12/02 1 OF 5 ADOPTEDBY: 17578 DATED: 07/26/94 AMENDED BY: 15571 (02/04/97); 2002-039 (02/12/02) Pl IR Effective cash flow management and cash investment practices arc recognized as essential to good fiscal management. This Statement is intended to provide guidelines for the prudent investment of the City's temporarily idle cash in all Funds, and outline the policies for maximizing the efficiency of the City's cash management system. ~I~IECTIVIE The objective of the investment policy is to provide guidelines for insuring the safety of funds invested while maximizing investment interest income to the City. INVEgTMF. NT POI .ICY A. The Finance Director is responsible for investing the cash balances in all City Funds in accordance with the California Governmem Code, Sections 53600 et seq. and 53635 et seq. This policy does not include Long Term Debt Reserve Funds and Deferred Compensation Funds, which are exceptions covered by other more specific Government Code sections and the legal documents unique to each debt transaction. Investment practices shall conform to the prudem man rule (Civil Code Sect. 2261, et seq.) which states, in essence, that "in investing... property for the benefit of another, a trustee shall exercise the judgment and care, under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs..." The Finance Director and other individuals assigned to manage the investment portfolio, acting within the intern and scope of the investmem policy and other written procedures, and exercising due diligence, shall be relieved of personal responsibility and liability for an individual investment's credit risk or market price changes, provided material deviations from expectations are reported in a timely manner and appropriate action is taken to control any adverse developments. B. It is the City's full intent, at the time of purchase, to hold all investments until maturity in order to ensure the return of all invested principal. However, it is realistically anticipated that market prices of securities purchased as investments will vary depending on economic conditions, interest rate fluctuations, or individual security credit factors. In a well diversified investment portfolio, such temporary variations in market value will inevitably result in measurable losses at any specific point in time. From time to time, changes in economic or market conditions may dictate that it is in the City's best interest to sell a security prior to maturity. COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND POLICY EFFECTIVE GUIDELINES NUMBER DATE PAGE 220-01 02/12/02 2 OF 5 ADOPTED BY: 17578 I DATED: 07/26/94 AMENDED BY: 18571 (02/04/97); 2002-039 (02/12/02) C. The three principle factors of Safety, Liquidity and Yield are to be taken into consideration, in the specific order listed, when making investment decisions. 1. Safety of principal is the foremost factor to be considered during each investment transaction. Safety in investing refers to minimizing the potential for loss of principal, interest or a combination of the two due to the two types of risk, Credit Risk and Market Risk. a) Credit Risk, defined as the risk of loss due to failure of the issuer of a security, shall be mitigated by only investing in very safe, or "investment grade" securities and diversifying where feasible. b) Market Risk, defined as market value fluctuations due to overall changes in interest rates shall be mitigated by limiting the average maturity of the investment portfolio to less than 3 years, with a maximum maturity of any one security of 5 years without prior Council approval. Also, the portfolio will be structured based on liquidity needs so as to avoid the need to sell securities prior to maturity. 2. Liquidity refers to the ability to convert an investment to cash promptly with minimum risk of losing some portion of principal or interest. The investment portfolio will be structured based on historic cash flow analysis in order to provide the necessary liquidity as investments routinely mature. A portion of the portfolio will be maintained in liquid short-term securities which can be converted to cash if necessary to meet unforeseen disbursement requirements. 3. Yield is the average annual return on an investment based on the interest rate, price, and length of time to maturity. The City attempts to obtain the highest yield possible, provided that the basic criteria of safety and liquidity have been met. A 11THOgtlTI~D INVF.~qTMI~NT IN~qTR 11M~NTq The City may invest in the following instruments under the guidelines as provided herein: A. Certificate~ af Bepn~it. Time Certificates of Deposit will be made only in FDIC or FSLIC insured accounts. For deposits in excess of the insured maximum of $100,000, approved collateral shall be required in accordance with California Government Code Section 53652 and/or 53651 (m) (1). No more than 25% of the investment portfolio may be invested in this investment type. COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND POLICY EFFECTIVE GUIDELINES NUMBER DATE PAGE 220-01 02/12/02 3 OF 5 ADOPTED BY: 17578 [DATED: 07/26/94 AMENDED BY: 18571 (02/04/97); 2002-039 (02/12/02) B. ~qec~ritie~ of the Il ~ Government or itR Agencie~ Includes obligations issued by Federal Home Loan Banks, Government National Mortgage Association, the Farm Credit System, the Federal Home Loan Bank, the Federal Home Loan Mortgage Association, the Federal National Mortgage Association, the Student Loan Marketing Association, or obligations or other instruments of or issued by a federal agency or a United States Government sponsored enterprise. C. Treachery Ftill~ and Nc~te~. U.S. Treasury Bills, Notes, Bonds or Certificates of Indebtedness or those for which the full faith and credit of the United States are pledged for the payment of principal and interest. D. l.c~cal Agency lnve~trnent Fnnd (I,AIF) Investment of funds in the California LAIF which allows the State Treasurer to invest through the Pooled Money Investment Account. Maximum investment is subject to state regulation. E. County cfi ~qan Diee~c} Treachery Pool. Investment of funds in the County of San Diego Treasury which allows the County Treasurer-Tax Collector to invest local funds through a pooled concept. F. I:lanker~ Accentance. Bills of Exchange or Time Drafts drawn on and accepted by a commercial bank, otherwise known as Bankers Acceptances, both domestic and foreign, which are eligible for purchase by the Federal Reserve System. Purchases of Bankers Acceptances may not exceed 180 days maturity or total more than 40% of the cost value of the City' s investment portfolio. G. Commercial Paper Paper of the highest rating as provided by Moody's Investors Service, Inc. (P1), or Standard and Poor's Corporation (Al +). Eligible paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000). Purchases of eligible conmaercial paper may not exceed 270 days maturity, represent more than 10% of the outstanding paper of the issuer, or total more than 25% of the cost value of the City's investment portfolio. H. Negotiable CertificateR of Oepc, sit, Issued by a nationally or state-chartered bank or a state or federal savings and loan association or by a state-licensed branch of a foreign bank. Purchases of Negotiable Certificates of Deposit may not total more than 30% of the cost value of the City's investment portfolio. COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND POLICY EFFECTIVE GUIDELINES NUMBER DATE PAGE 220-01 02/12/02 4 OF 5 ADOPTED BY: 17578 DATED: 07/26/94 AMENDED BY: 18571 (02/04/97); 2002-039 (02/12/02) I. Rennrcha~e Aoreement~. A purchase of securities by the City pursuant to a Master Repurchase Agreement by which the seller will repurchase such securities on or before a specified date, or on demand of either party, and for a specified amount. Investments in repurchase agreements will be used solely as short term investments not to exceed 90 days and be collateral[zed by securities having a market value of at least 102% of the value of the repurchase agreement at all times during the term of the investment. J. Medium Term Cnmnrate Nnte~ Corporate obligations shall be rated A or better by Moody's and or Standard and Poor's rating agencies. Purchases of corporate medium term notes shall not total more than 30% of the cost value of the City's investment portfolio, nor for any one corporation, when combined with any Commercial Paper issued by the same corporation, total more than 15 % of the cost value of the City's investment portfolio. K. Various daily cash funds administered for or by Trustees, Paying Agents, or Custodian Banks contracted by the City may be purchased as allowed under California Government Code. Only those funds holding U.S. Treasury or Government Agency obligations shall be purchased. DIVI~RRIF[C ATII3N Investments shall be diversified among institutions, types of securities and maturities to maximize safety and yield with changing market conditions. Local financial institutions will be given preferential consideration for investment of City funds consistent with the City's objective of attaining market rates of return, and consistent with constraints imposed by its safety objectives, cash flow considerations and State laws. R A FEI~'EEPING All investments of the City shall have the City of Chula Vista as registered owner and shall be held in safekeeping by a third party bank trust department, acting as agent for the City under the terms of a custody agreement. INVI~STMI~NT REPORTS A. The Director of Finance shall submit a quarterly investment report to the City Manager and City Council in accordance with Government Code Section 16481.2 containing the following information for each individual investment: Financial institution Type of investment COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: INVESTMENT POLICY AND POLICY EFFECTIVE GUIDELINES NUMBER DATE PAGE 220-01 02/12/02 5 OF 5 ADOPTED BY: 17578 DATED: 07/26/94 AMENDED BY: 18571 (02/04/97); 2002-039 (02/12/02) Purchase Price of investment Rate of interest Purchase date Maturity date Current market value for securities Other data as required by the City In addition, the report shall include a statement of compliance of the portfolio with the Council approved Investment Policy and a statement indicating the ability of the City to meet its expenditure requirements for the next six months. B. The Director of Finance shall submit copies of the second and fourth quarter calendar year investment reports to the California Debt and Advisory Commission (CDAIC) in accordance with AB 943. Also a copy of the City's Investment Policy shall be sent to CDAIC annually. POI ,ICY REVIlqW This investment policy and guidelines shall be adopted by resolution of the City Council on an annual basis after being reviewed to ensure its consistency with the overall objectives of preservation of principal, liquidity, and yield, and its relevance to current law and financial and economic trends.