CC Resolution 12748RESOLUTION NO. 12748
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CAMPBELL APPROVING THE ANNUAL UPDATE TO THE INVESTMENT
POLICY AND RELATED ADMINISTRATIVE POLICY REVISIONS
WHEREAS, Government Code Section 53646(a)(2) recommends that a
statement of Investment Policy be submitted to the City's legislative body annually for its
consideration at a public meeting; and
WHEREAS, there has been submitted to the City Council a statement of the
City's Investment Policy; and
WHEREAS, the Policy and any changes recommended by staff and the Finance
Sub -Committee have been reviewed by the City Council and it has been determined
that the Fiscal Year (FY) 2021-22 Investment Policy as recommended is acceptable.
NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of
Campbell that the FY 2021-22 Investment Policy is hereby approved as submitted.
vote:
PASSED AND ADOPTED this 17th day of August, 2021, by the following roll call
AYES:
Councilmembers: Bybee, Landry, Lopez, Gibbons, Resnikoff
NOES:
Councilmembers: None
ABSENT:
Councilmembers: None
APPROVED:
i beth "Liz" Gibbons, Mayor
ATTEST:
D.C��-Y
Dusty Christopherson, City Clerk
City of Campbell, California
Investment Policy Date: August 17, 2021
I. PURPOSE
It is the policy of the City of Campbell to invest public funds in a prudent manner which
conforms to all statutes governing the investment of public funds while providing security and
meeting the daily cash flow needs of the City.
The purpose of this document is to identify the policies guiding prudent investment of the
City's temporarily idle funds and to establish guidelines and objectives for suitable
investments including delegation of authority, prudence, monitoring and reporting, policy
review, diversification, eligible securities, safekeeping, collateral ization, selection of financial
institutions and-broker/dealers, glossary of terms, and forms utilized.
II. SCOPE
A. This investment policy shall apply to all financial assets, investment activities, and
debt issues of the City of Campbell including the following fund types:
1.
General Fund
2.
Special Revenue Funds
3.
Debt Service Funds
4.
Capital Projects Funds
5.
Internal Service Funds
6.
Trust and Agency Funds
B. The policy does not cover funds held by the Public Employees Retirement System
nor funds of the Deferred Compensation program.
III. OBJECTIVES
A. It is the objective of this policy to provide a system which will monitor and forecast
revenues and expenditures so that the City can invest temporarily idle funds to the
fullest extent possible. The temporarily idle funds shall be invested in accordance
with provisions of California Government Code Section 53600 et. seq.
B. The City adheres to conservative investment philosophies including investment of all
idle cash, preservation of principal at the risk of yield, maintenance of adequate
liquidity to meet anticipated cash flow needs and diversification to avoid the risks
inherent in over investing in any one asset class.
C. This policy specifically prohibits trading securities for the sole purpose of speculating
on the future direction of interest rates. It further prohibits reverse repurchase
agreements, use of derivative products, and/or leveraging of the portfolio.
D. The City shall ensure the safety of invested funds by limiting credit and interest rate
risks. The three primary objectives of the City's Investment Policy in order of priority
a re:
City of Campbell, California
°F
f
Investment Policy Date: August 17, 2021
1. Safety: Safety of principal is the foremost objective of the City of
Campbell. Safety and the minimizing of risk associated with
investing refer to attempts to reduce the potential for loss of
principal, interest or a combination of the two. The City ensures
safety of its invested idle funds and limits credit and interest rate
risks by following these guidelines (all of which are detailed within
the body of the Investment Policy):
a. Investing only in those instruments that are generally accepted
as safe investment vehicles for local government as authorized
by this Policy,
b. Carefully reviewing the qualifications and financial strength of
financial institutions and broker/dealers prior to conducting
business with them,
c. Diversifying the investment portfolio as prescribed within this
Policy,
d. Structuring the portfolio such that securities mature to meet the
City's cash requirements for ongoing operations, thereby
avoiding the need to sell securities on the open market prior to
their maturation,
e. Limiting the final maturity of purchased securities to five years;
limiting the weighted average maturity of the portfolio to three
years, and
f. Ensuring the physical security or safekeeping of the City's
investments.
2. Liquidity: Liquidity is the second most important objective of the City's
Policy. Liquidity refers to the ability to convert an investment to
cash promptly without loss of principal and minimal loss of
interest. For example, this is accomplished by investing either in
the Local Agency Investment Fund (LAIF) with same day
availability, or investing in securities with active secondary or
resale markets.
3. Yield: Yield on the City's portfolio is last in rank among investment
objectives. Investments are limited to relatively low risk securities
in anticipation of earning a fair return relative to the risk being
assumed.
IV. STRUCTURE AND RESPONSIBILITY
A. DELEGATION OF AUTHORITY:
1. The City Council assumes direction over the City's investments, and assigns
management responsibility for the investment program to the Finance
Director, who shall serve as Chief Fiscal Officer, and have legal custody of
funds. The Finance Director may provide for delegation of his/her
responsibilities to other persons under his/her control responsible for
investment transactions, including designation of certain portions of the
City of Campbell, California
Investment Policy Date: August 17, 2021
investment portfolio related to debt financing to be administered by
professional portfolio administrators, i.e. California Arbitrage Management
Program (C.A.M.P.) or such other designated administrators approved by the
Finance Sub -Committee.
B. POLICY REVIEW:
1. This Investment Policy shall be reviewed and approved annually as
recommended by California Government Code Section 53600 et. seq.
C. RESPONSIBILITIES:
Responsibilities of the City Council: The City Council consists of a Mayor
and four Council members and is the policy setting board for the City of
Campbell. The City Council has considered and adopted a written Investment
Policy for the City of Campbell. Pursuant to the City's Financial Policies, the
City Council shall on an annual basis, approve necessary changes to the
Investment Policy as recommended by the Finance Sub -Committee. On a
quarterly basis, the City Council shall receive, review and accept the Quarterly
Investment Report submitted by the Finance Department.
2. Responsibilities of the Finance Sub -Committee: The Finance Sub -
Committee consists of two Council members, the City Manager, the Finance
Director, and the Finance Manager. On an annual basis, this Sub -Committee
shall review necessary revisions to the established Investment Policy of the
City of Campbell and make a recommendation to the City Council accordingly.
No less than once per fiscal year, the City's investment strategy will be
reviewed by the Finance Sub -Committee. A summary of the investment
strategy will be shared with the City Council at that time. Should market
activity encourage revisions in the City's strategy, the Finance Sub -Committee
shall be advised accordingly.
3. Responsibilities of the City Manager: The City Manager is responsible for
directing and supervising the Finance Director. He/she has the responsibility
of keeping the City Council fully advised as to the financial condition of the
City.
a. Wire Transfer Authority: The City Manager has unlimited wire transfer
authority for a single transaction. Such a transaction requires joint review,
approval and verification in advance by the City Manager and Finance
Director. The transaction shall be highlighted in the Quarterly Investment
Report to Council.
4. Responsibilities of the Finance Director: The Finance Director is appointed
by the City Manager and serves as Chief Fiscal Officer. He/she is subject to
the direction and supervision of the City Manager. The Finance Director is
charged with the responsibility for the conduct of all Finance Department
functions including the custody and investment of City funds, and investment of
those funds in accordance with principles of sound treasury management and
in accordance with applicable laws and policies. Refer to "Delegation of
Authority" for additional information pertaining to delegation of investment
responsibilities.
City of Campbell, California
Investment Policy Date: August 17, 2021
a. Wire Transfer Authority: The Finance Director has wire transfer
authority not to exceed $5,000,000 for a single transaction. Such a
transaction shall be reviewed, approved and verified in advance by the
City Manager. The transaction shall be highlighted in the Quarterly
Investment Report to Council.
5. Responsibilities of the Finance Manager: The Finance Manager is
appointed by the Finance Director and serves as the Investment Manager for
the City pursuant to specific delegation authority provided by this Investment
Policy. He/she is subject to the direction and supervision of the Finance
Director and is charged with the responsibility and conduct of the day-to-day
accounting and cash management functions of the City. This includes the
custody and investment of City funds, and investment of those funds in
accordance with principles of sound treasury management and in accordance
with applicable laws and policies. Refer to "Delegation of Authority" for
additional information pertaining to delegation of investment responsibilities.
Implementation and maintenance of the Investment Policy are the
responsibility of this individual. On an annual basis, the Finance Manager shall
present to the Finance Sub -Committee, recommended changes to the City's
Investment Policy. On a quarterly basis, the Finance Manager shall present to
the City Council, via the City Manager, a Quarterly Investment Report. Refer
to "Monitoring and Reporting" for additional information.
a. Wire Transfer Authority: The Finance Manager has wire transfer
authority not to exceed $3,000,000 for a single investment transaction.
Such a transaction shall be reviewed, approved and verified in advance by
the Finance Director, and shall be reported in the Quarterly Investment
Report to Council.
6. Responsibilities of the Accountant and Sr. Accountant: The Accountant is
appointed by the Finance Director and is subject to the direction and
supervision of the Finance Manager. The Accountant carries out the specific
instructions provided by the Finance Manager regarding the purchase and sale
of securities in accordance with principles of sound treasury management and
in accordance with applicable laws and policies. Accounting for the various
investment transactions is the responsibility of the Accountant.
a. Wire Transfer Authority: The Accountant and Senior Accountant have
wire transfer authority not to exceed $2,100,000 for a single investment
transaction. The standard operating procedure is that all cash and
investment wire transfers made by the Accountant and Senior Accountant
are reviewed, approved and verified in advance by the Finance Manager,
and are reported in the Quarterly Investment Report to Council.
D. Prudence:
It is the understanding of the individuals holding positions with investment
responsibilities that the "prudent investor" rule applies. This means that
investments shall be made with judgment and care, under circumstances then
prevailing, which persons of prudence, discretion and intelligence exercise in
the management of their own affairs, not for speculation, but for investment,
considering the probable safety of their capital and income to be derived.
City of Campbell, California
Investment Policy Date: August 17, 2021
2. The City's overall investment program shall be designed and managed with a
degree of professionalism that is worthy of the public trust. The City
recognizes that no investment is totally riskless and that the investment
activities of the City are a matter of public record. Accordingly, while the intent
of the City is to hold purchased securities to maturity, the City recognizes that
occasional measured losses may be advisable in a diversified portfolio and
shall be considered within the context of the overall portfolio's return, provided
that (a) adequate diversification has been implemented, (b) the sale of a
security is in the best long-term interest of the City and (c) the City Manager
approves in writing.
E. Ethics and Conflicts of Interest:
Elected officials and employees involved in the investment process shall refrain from
personal business activity that could conflict with proper execution of the City's
investment program or could impair or create the appearance of an impairment of
their ability to make impartial investment decisions. Employees and investment
officials shall disclose to the City Manager any business interests they have in
financial institutions that conduct business with the City, and they shall subordinate
their personal investment transactions to those of the City. In addition, the City
Manager, the Finance Director and others with delegated investment authority shall
file a Statement of Economic Interests each year pursuant to California Government
Code Section 87203 and regulations of the Fair Political Practices Commission.
F. Conflict with State Statutes or Regulations
Any conflict between the City of Campbell Investment Policy and Government
Code Section 53600 et seq, shall be interpreted in favor of the Government
Code.
V. AUTHORIZED SECURITIES AND TRANSACTIONS
All investments and deposits of the City shall be made in accordance with California
Government Code Sections 16429.1, 53600-53609 and 53630-53686, except that pursuant
to California Government Code Section 5903(e), proceeds of bonds and any moneys set
aside or pledged to secure payment of the bonds may be invested in securities or obligations
described in the ordinance, resolution, indenture, agreement, or other instrument providing
for the issuance of the bonds. Any revisions or extensions of these code sections will be
assumed to be part of this Policy immediately upon being enacted. However, in the event
that amendments to these sections conflict with this Policy and past City investment
practices, the City may delay adherence to the new requirements when it is deemed in the
best interest of the City to do so. Percentage holdings limits listed in this section apply at the
time the security is purchased.
The City has further restricted the eligible types of securities and transactions to the
following:
1. United States Treasury bills, notes, bonds, or strips with a final maturity not exceeding
five years from the date of purchase.
Federal Agency debentures and mortgage -backed securities with a final maturity not
exceeding five years from the date of purchase issued by the Government National
City of Campbell, California
Investment Policy Date: August 17, 2021
Mortgage Association (GNMA). The aggregate investment in Federal Agency obligations
shall not exceed 75% of the City's total portfolio.
Federal Instrumentality (government sponsored enterprise) debentures, discount notes,
callable and step-up securities, with a final maturity not exceeding five years from the
date of purchase, issued by the following only: Federal Home Loan Banks (FHLB),
Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB) and
Federal Home Loan Mortgage Corporation (FHLMC). The aggregate investment in
Federal Instrumentality obligations shall not exceed 75% of the City's total portfolio.
4. Repurchase Agreements with a final termination date not exceeding one year
collateralized by U.S. Treasury obligations, Federal Agency securities, or Federal
Instrumentality securities listed in items 1, 2 and 3 above with the maturity of the
collateral not exceeding five years. For the purpose of this section, the term collateral
shall mean purchased securities under the terms of the City's approved Master
Repurchase Agreement. The purchased securities shall have a minimum market value
including accrued interest of 102% of the dollar value of the transaction. Collateral shall
be held in the City's custodian bank, as safekeeping agent, and the market value of the
collateral securities shall be marked -to -the -market daily. The aggregate investment in
repurchase agreements shall not exceed 10% of the City's total portfolio.
Repurchase Agreements shall be entered into only with broker/dealers that have
executed a City approved Master Repurchase Agreement with the City. Repurchase
counterparties shall be recognized as Primary Dealers with the Federal Reserve Bank of
New York, or shall have a primary dealer within their holding company structure.
Broker/dealers approved as Repurchase Agreement counterparties shall have a short-
term credit rating of at least A-1 or the equivalent and a long-term credit rating of at least
A or the equivalent. The Finance Director shall maintain a copy of the City's approved
Master Repurchase Agreement along with a list of the broker/dealers that have executed
a Master Repurchase Agreement with the City.
Prime Commercial Paper with a maturity not exceeding 270 days from the date of
purchase with the highest ranking or of the highest letter and number rating as provided
for by a Nationally Recognized Statistical Ratings Organization (NRSRO). The entity that
issues the commercial paper shall meet all of the following conditions in either sub-
paragraph a. or sub -paragraph b. below:
The entity shall (1) be organized and operating in the United States as a general
corporation, (2) have total assets in excess of five hundred million dollars
($500,000,000) and (3) have debt other than commercial paper, if any, that is rated
"A" or higher by a NRSRO.
The entity shall (1) be organized within the United States as a special purpose
corporation, trust, or limited liability company, (2) have program wide credit
enhancements, including, but not limited to, over collateral ization, letters of credit or
surety bond and (3) have commercial paper that is rated "A-V or higher, or the
equivalent, by a NRSRO.
Purchases of eligible commercial paper may not represent more than 10% of the
outstanding commercial paper of any single corporate issuer. No more than 5% of the
City's total portfolio may be invested in the commercial paper of any one issuer, and the
City of Campbell, California
Investment Policy Date: August 17, 2021
aggregate investment in commercial paper shall not exceed 25% of the City's total
portfolio.
6. Eligible Bankers Acceptances rated at least A-1 by Standard & Poor's, P-1 by Moody's,
or F1 by Fitch at the time of purchase by each service that rates the commercial paper,
with a maturity not exceeding 180 days from the date of purchase, issued by a state or
national bank that has combined capital and surplus of at least $250 million, whose
deposits are insured by the FDIC, and whose senior long-term debt is rated at least A by
Standard & Poor's, A2 by Moody's or A by Fitch at the time of purchase. No more than
5% of the City's total portfolio may be invested in banker's acceptances of any one
issuer, and the aggregate investment in banker's acceptances shall not exceed 30% of
the City's total portfolio.
Medium Term Notes issued by corporations organized and operating within the United
States or by depository institutions licensed by the United States or any state and
operating within the United States, with a final maturity not exceeding five years from the
date of purchase, and are rated in a rating category of "A" or its equivalent or better by at
least one NRSRO. No more than 5% of the City's total portfolio may be invested in
medium term notes of any one issuer and the aggregate investment in medium term
notes shall not exceed 30% of the City's total portfolio.
Non-negotiable Time Certificates of Deposit and savings deposits with a maturity not
exceeding five years, in state or nationally chartered banks or savings and loans with a
California branch office that are insured by the FDIC. Time Certificates of Deposit
exceeding the FDIC insured amount must be secured pursuant to California Government
Code Section 53652. No more than $1 million may be invested in non-negotiable time
certificates of deposit of any one issuer and the aggregate amount invested in non-
negotiable time certificates of deposit shall not exceed 25% of the City's total portfolio.
Certificates of Deposit at commercial bank, savings bank, or savings and loan
association that uses a private sector entity (Certificate of Deposit Account Registry
Service) that assists in the placement of certificates of deposit, provided that the
purchase of certificates of deposit do not, in total, exceed 30% of the City's funds that
may be invested for this purpose. The City shall choose a nationally or state chartered
commercial bank in California as the "selected" depository institution to invest the funds.
The selected depository institution may submit the funds to a CDARS for the benefit of
the City's account. The full amount of the principal and interest that may be accrued
during the maximum term of each certificate shall be insured by the FDIC.
10. State of California's Local Agency Investment Fund (LAIF), pursuant to California
Government Code Section 16429.1.
11. Mutual Funds registered under the Investment Company Act of 1940 that (1) are "no-
load" (meaning no commission or fee shall be charged on purchases or sales of shares);
(2) invest only in the securities and obligations authorized in this policy and (3) have a
rating of AAA by Standard and Poor's, Aaa by Moody's or AAA/V1+ by Fitch. No more
than 10% of the City's total portfolio may be invested in mutual funds of any one issuer,
and the aggregate investment in mutual funds shall not exceed 15% of the City's total
portfolio.
City of Campbell, California
Investment Policy Date: August 17, 2021
12. Money Market Mutual Funds registered under the Investment Company Act of 1940 that
(1) are "no-load" (meaning no commission or fee shall be charged on purchases or sales
of shares); (2) have a constant daily net asset value per share of $1.00; (3) invest only in
the securities and obligations authorized in this policy and (4) have a rating of at least two
of the following: AAA by Standard and Poor's, Aaa by Moody's or AAA/V1+ by Fitch. No
more than 10% of the City's total portfolio may be invested in money market funds of any
one issuer, and the aggregate investment in money market funds shall not exceed 15%
of the total portfolio.
13. Municipal and State Obligations with a minimum long-term rating of A/A-1 or higher by
Standard and Poor's and not exceeding 10% of the portfolio:
(a) Bonds Issued by the Local Agency (City of Campbell) including bonds payable solely
out of the revenue from a revenue -producing property owned, controlled, or operated
by the local agency or by a department, board, agency, or authority of the local
agency.)
(b) State Obligations including registered treasury notes or bonds of this State and any of
the other 49 states in addition to California, including bonds payable solely out of the
revenue from a revenue -producing property owned, controlled, or operated by a state
or by a department, board, agency, or authority of the any of the other 49 United
States, in addition to California.
(c) California Local Agency obligations including bonds, notes, warrants, or other
evidence of indebtedness of any local agency within this state, including bonds
payable solely out of the revenue from a revenue -producing property owned,
controlled, or operated by the local agency or by a department, board, agency, or
authority of the any of the local agency.
(d) No more than 5% of the portfolio may be invested in any single issuer.
14. Asset -Backed, Mortgage -Backed, Mortgage Pass -Through Securities, and
Collateralized Mortgage Obligations from Issuers Not Defined in Sections 1, 2, and 4 of
the Authorized Investments Section of This Policy, provided that:
(a) The securities are rated in a rating category of "AA" or its equivalent or better by a
NRSRO.
(b) No more than 20% of the total portfolio may be invested in these securities.
(c) No more than 5% of the portfolio may be invested in any single Asset -Backed or
Commercial Mortgage security issuer.
(d) The maximum legal final maturity does not exceed five (5) years.
15. Supranationals, provided that:
(a) Issues are US dollar denominated senior unsecured unsubordinated obligations
issued or unconditionally guaranteed by the International Bank for Reconstruction
and Development, International Finance Corporation, or Inter -American
Development Bank.
(b) The securities are rated in a rating category of "AA" or its equivalent or better by a
NRSRO.
(c) No more than 30% of the total portfolio may be invested in these securities.
(d) No more than 10% of the portfolio may be invested in any single issuer.
City of Campbell, California
Investment Policy Date: August 17, 2021
(e) The maximum maturity does not exceed five (5) years.
Note: Per state statute, the maximum combination of Mutual Funds and Money Market
Mutual Funds is 20% of the portfolio.
It is the intent of the City that the foregoing list of authorized securities and transactions is
strictly interpreted. Any deviation from this list must be preapproved by the City Council
writing.
16. Prohibited Investment Vehicles and Practices
a. State law notwithstanding, any investments not specifically described herein are
prohibited, including, but not limited to futures and options.
b. In accordance with Government Code, Section 53601.6, investment in inverse
floaters, range notes, or mortgage derived interest -only strips is prohibited.
c. Investment in any security that could result in a zero interest accrual if held to maturity
is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by
the U.S. Government that could result in a zero- or negative -interest accrual if held to
maturity are permitted.
d. Purchasing or selling securities on margin is prohibited.
e. The purchase of foreign currency denominated securities is prohibited.
f. Agencies that are not Qualified Institutional Buyers (QIB) as defined by the Securities
and Exchange Commission are prohibited from purchasing Private Placement
Securities. The SEC defines a QIB as having at least $100,000,000 in securities
owned and invested.
VI. PORTFOLIO MATURITIES AND LIQUIDITY
To the extent possible, investments shall be matched with anticipated cash flow
requirements and known future liabilities. The City will not invest in securities maturing more
than five years from the date of purchase, unless the City Council has granted authority to
make such an investment at least three months prior to the date of investment. The
weighted average final maturity of the City's portfolio shall at no time exceed 3 years.
VII. MONITORING AND REPORTING
A. The Finance Director shall routinely monitor the contents of the portfolio and shall file
with the City Council the Finance Manager's Investment Report at the first regularly
scheduled City Council meeting after 30 days from the end of the quarter. The
reports shall be prepared and submitted in accordance with California Government
Code Section 53646 and shall include the following on all invested monies:
➢ Type of Investment and Issuer
➢ Beginning Balances
Purchases During Quarter
➢ Maturities or Sales During the Quarter
Ending Balances
Maturity Date
➢ Weighted Average Final Maturity
➢ Call Provisions (if any)
City of Campbell, California
r
Investment Policy Date: August 17, 2021
Interest Rate
Weighted Average Yield
i Face Value or Purchase Cost
Market Value including source
Interest Earned During Quarter
Interest Earned to Maturity
Cash Flow Projection for the Following Quarter
Summary of Cash Invested to Total Cash Balances
y Comparative Statistics by Fiscal Year
➢ Reconciliation of Cash & Investments to General Ledger Balances
Y Investments under the Management of Contracted Parties
Statement of Compliance with the Investment Policy
Statement of Ability to Meet Obligations of Next Six Months
B. In addition to the Quarterly Investment Report, monthly transaction reports will be
submitted by the Finance Director to City Council within 45 days of the end of the
reporting period in accordance with California Government Code Section 53607.
Vill. SELECTION OF BROKER/DEALERS
The City shall transact business with securities broker/dealers after careful review of their
qualifications and creditworthiness. In selecting broker /dealers, the Finance Director or
designated staff member shall select broker/dealers representing primary dealers in
government securities that have established offices and order desks within the State of
California, or with such firms that have a primary dealer within their holding company
structure. Exceptions to this rule will be made only upon the joint written authorization of the
Finance Director and City Manager. Staff shall investigate broker/dealers wishing to do
business with the City to determine if they are adequately capitalized, are reputable, have
pending legal action against the firm or the individual broker, have established offices and
order desks within the State of California, and make markets in the securities appropriate to
the City's needs.
Before accepting funds or engaging in investment transactions with the City, the supervising
officer at each authorized broker/dealer shall submit and annually update a City approved
Broker/Dealer Information Request form that includes the firm's most recent audited financial
statement. The Finance Director, or his or her designee, shall maintain a list of approved
broker/dealers. Broker/dealers shall attest in writing that they have received and reviewed a
copy of this Investment Policy, and that they will comply with it and disclose potential conflicts
or risks to public funds that might arise out of business transactions between the firm and the
City of Campbell.
IX. DELIVERY, SAFEKEEPING AND COLLATERALIZATION
A. Delivery:
All investment transactions shall be conducted on a delivery -versus -payment
(DVP) basis.
B. Safekeeping:
The City shall contract with a bank or banks for the safekeeping of securities
which are owned by the City as a part of the investment portfolio. Staff shall
City of Campbell, California
Investment Policy Date: August 17, 2021
periodically review the performance and pricing of the third -party, safekeeping
agent services.
2. All investment securities (except the collateral for certificates of deposit in
banks, and/or savings and loans) purchased by the City shall be held in
third -party safekeeping by an institution designated as primary agent. The
primary agent shall issue a safekeeping receipt to the City listing the specific
instrument, rate, maturity and other pertinent information, and shall provide
monthly reports of activity and ending balances for all securities held on behalf
of the City.
C. Collateral ization:
Deposit -type securities (i.e. certificates of deposit) shall be collateralized
through the State of California collateral pool requirements for any amount
exceeding FDIC coverage in accordance with California Government Code
Section 53652 and/or 53651(m) (1). Collateral for certificates of deposit shall
be held in a trust company located in California, the trust department of a bank
located in California or the Federal Home Loan Bank of San Francisco.
2. Other securities shall be collateralized by the actual security held in third -party
safekeeping by the primary agent.
X. DIVERSIFICATION AND ELIGIBLE SECURITIES
The City will diversify investment instruments to avoid incurring unreasonable risks in
overinvesting in specific instruments, individual financial institutions or maturities. The
following portfolio maximums shall apply:
If the credit ratings of any security owned by the City are downgraded to a level below the
quality required by this investment policy, it will be the City's policy to review the credit
situation and make a determination as to whether to sell or retain such securities in the
portfolio.
If a security is downgraded, the Finance Director will use discretion in determining whether to
sell or hold the security based on its current maturity, the economic outlook for the issuer,
and other relevant factors.
If a decision is made to retain a downgraded security in the portfolio, its presence in the
portfolio will be monitored and reported quarterly to the City Council.
Authorized Securities and Transactions Maximum Portfolio
CA. Gov't.
Authorized Investment
Maximum
Authorized
Credit Rating Limit
Code
Maturity
Investment Limits -
Section
% of Portfolio
53601 (a)
City of Campbell Local Agency
5 years
None/5% Per
A/A-1 or Higher
Bonds
Issuer
53601 (c)
State Obligations
5 years
None/5% Per
P✓A-1 or Higher
City of Campbell, California
Investment Policy Date: August 17, 2021
CA. Gov't.
Authorized Investment
Maximum
Authorized
Credit Rating Limit
Code
Maturity
Investment Limits -
Section
% of Portfolio
Issuer
53601 (e)
California Local Agencies
5 years
None/5% Per
,A/A-1 or Higher
Issuer
53601(b)
United States Treasuries
5 years
None
None
53601(e)
Federal Agency Securities
5 years
75%
None
53601(e)
Federal Instrumentality
5 years
75%
None
53691(i)
Repurchase Agreements
1 year
10%
A-1/A
25%
53601(g)
Prime Commercial Paper
270 days
A/A-1 or higher
5% Per Issuer
53601(f)
Eligible Bankers Acceptances
180 days
5% per issuer/30%
Aggregate
A-1/P-1/F-1
536010)
Medium Term Notes
5 years
30%/ 5% per issuer
A/A-1 or Higher
25%
53601 n
()
Non-negotiable Certificates of
5 ears
y
$1 million per
-
Deposit
issuer
7.5% Aggregate
53601.8 (a)-
Certificates of Deposit through
5 years
Maximum Up to the
-
(h)
Account Registry Services
FDIC Insured Limit
Per Issuer
16429.1
State of California LAIF
AvMonths-
None
-
53601(k)
*Mutual Funds
None
15%
AAAm/Aaa/AAAV1+
53601(k)
'Money Market Mutual Funds
None
15%
AAAm/Aaa/AAAV1+
Asset -Backed, Mortgage -Backed,
53601(o)
Mortgage Pass -Through Securities,
5 years
20%
AA or higher
and Collateralized Mortgage
Obligations
53601(q)
Supranationals
5 years
30%
AA or higher
"Combined total not to exceed 20%
20%
per State
City of Campbell, California
Investment Policy Date: August 17, 2021
EXHIBIT A
GLOSSARY
Asset Backed Securities. - Securities that are supported by pools of assets, such as installment
loans or leases, or by pools of revolving lines of credits. Asset -backed securities are structured as
trusts in order to perfect a security interest in the underlying assets.
Banker's Acceptance. This is a negotiable time draft (bill of exchange) with a maturity of six
months or less drawn on and accepted by a commercial bank. Banker's Acceptances are usually
created to finance the import and export of goods, the shipment of goods within the United States
and storage of readily marketable commodities. Per State Law, cities may not invest more than 30%
of idle cash in Banker's Acceptances.
Certificate of Deposit (CD's). - is a receipt for funds deposited in a bank or savings and loan
association for a specified period of time at a specified rate of interest. The first $250,000 of a
certificate of deposit is guaranteed by the Federal Deposit Insurance Corporation (FDIC). CD's with
a face value in excess of $250,000 can be collateralized by Treasury Department Securities, which
must be at least 110% of the face value of the CD's, in excess of the first $250,000, or by first
mortgage loans which must be at least 150% of the face value of the CD balance in excess of the
first $250,000.
Commercial Paper. - Notes are unsecured promissory notes of industrial corporations, utilities and
bank holding companies. State law limits a city to investments in United States corporations having
assets in excess of five hundred million dollars with an "A" or higher rating. Per State law, cities may
not invest more than 25% of idle cash in commercial paper.
Delivery Versus Payment (DVP). - Delivery versus payment (DVP) is a securities industry
settlement method that guarantees the transfer of securities only happens after payment has been
made. DVP stipulates that the buyer's cash payment for securities must be made prior to or at the
same time as the delivery of the security.
Local Agency Investment Fund (L.A.I.F.). - The L.A.I.F. was established by the state of California
to enable treasurers to place funds in a pool for investments. There currently is a limitation of $65
million per agency subject to a maximum of 15 total transactions per month. The City of Campbell
uses this fund when interest rates are declining as well as for short-term investments and liquidity.
Medium Term Notes. - are corporate or depository institution debt securities meeting certain
minimum quality standards (as specified in the California Government Code) with a remaining
maturity of five years or less.
Money Market Mutual Fund. - Mutual funds that invest solely in money market instruments (short-
term debt instruments, such as Treasury bills, commercial paper, bankers' acceptances, repos and
federal funds).
Mortgage Backed Securities. - Mortgage -backed securities (MBS) are created when a mortgagee
or a purchaser of residential real estate mortgages creates a pool of mortgages and markets
undivided interests or participations in the pool. MBS owners receive a prorata share of the interest
and principal cash flows (net of fees) that are "passed through" from the pool of mortgages. MBS are
complex securities whose cash flow is determined by the characteristics of the mortgages that are
pooled together. Investors in MBS face prepayment risk associated with the option of the underlying
mortgagors to pre -pay or payoff their mortgage. Most MBS are issued and/or guaranteed by federal
CAM,,� City of Campbell, California
Investment Policy Date: August 17, 2021
agencies and instrumentalities (e.g., Government National Mortgage Association (GNMA), Federal
National Mortgage Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC)).
Mortgage Pass -Through Obligations. - Securities that are created when residential mortgages (or
other mortgages) are pooled together and undivided interests or participations in the stream of
revenues associated with the mortgages are sold.
Mutual Fund. - An investment company that pools money and can invest in a variety of securities,
including fixed -income securities and money market instruments. Mutual funds are regulated by the
Investment Company Act of 1940 and must abide by strict Securities and Exchange Commission
(SEC) disclosure guidelines.
Nationally Recognized Statistical Ratings Organization. - A nationally recognized statistical
ratings organization (NRSRO) is a credit rating agency that provides an assessment of the
creditworthiness of a firm or financial instrument(s) that is registered and approved by the Securities
and Exchange Commission (SEC). Not all credit rating organizations are NRSROs
Repurchase Agreements (REPOS). - is a contractual arrangement between a financial institution,
or dealer, and an investor. This agreement normally can run for one or more days. The investor
puts up his funds for a certain number of days at a stated yield. In return, he takes a given block of
securities as collateral. At maturity, the securities are repurchased and the funds repaid plus
interest.
Supranationals. - International institutions formed by two or more governments that transcend
boundaries to pursue mutually beneficial economic or social goals. There are three supranational
institutions that issue obligations that are eligible investments for California local agencies: the
International Bank for Reconstruction and Development (IBRD), International Finance Corporation
(IFC), and InterAmerican Development Bank (IADB).
U.S. Treasury Bills. Commonly referred to as T-Bills, these are short-term marketable securities
sold as obligations of the U.S. Government. T-Bills do not accrue interest but are sold at a
discount to pay face value at maturity.
U.S. Treasury Notes. These are marketable, interest -bearing securities sold as obligations of the
U.S. Government with original maturities of one to ten years. Interest is paid semi-annually.
U.S. Treasury Bonds. These are the same as U.S. Treasury Notes except they have original
maturities of ten years or longer.
U.S. Government Agency Issues. Are securities that are unconditionally backed by the full faith
and credit of the United States, including: Government National Mortgage Association (GNMA),
Farmers Home Administration (FmHA),Small Business Administration (SBA), General Services
Administration (GSA), Federal Housing Administration (FHA) and Housing and Urban Development
(HUD).
U.S. Government Instrumentality Issues. Are government sponsored enterprises that are backed
by the creditworthiness of the issuing agency, not the full faith and credit of the U.S. government.
They do carry an implied guarantee of government assistance to the organization should it
encounter financial difficulties. Issuers include: Federal National Mortgage Association (FNMA),
Federal Home Loan Bank (FHLB), Federal Farm Credit Banks (FFCB) and Federal Home Loan
Mortgage Corporation (FHLMC).