CC Resolution 13042 - Approval (FY) 2023-24 Investment Policy UpdateRESOLUTION NO. 13042
A RESOLUTION OF THE CITY COUNCIL OF THE CITYOF 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) 2023-24 Investment Policy as recommended is acceptable.
NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of
Campbell that the FY 2023-24 Investment Policy is hereby approved as submitted.
PASSED AND ADOPTED this 5th day of September, 2023, by the following roll
call vote:
AYES: Councilmembers: Lopez, Scozzola, Furtado, Landry, Bybee
NOES: Councilmembers: None
ABSENT: Councilmembers: None
APPROVED:
d�� —
Anne Bybee, Mayor
ATTEST:
MWO City Clerk
City of Campbell, California
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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, collateralization, 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 (excluding those debt issues subject to governing documents) 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
are:
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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 maintaining sufficient balances in
liquid investment products, such as the Local Agency Investment
Fund (LAIF) or other local government investment pools which offer
same day availability, or by investing in securities with active
secondary or resale markets.
3. Return: Return 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:
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
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the delegation of certain portions of the investment portfolio to one or more
external and qualified investment advisers or such other designee approved by
the Finance Sub -Committee. External investment advisors who are engaged b
by the City shall be registered under the Investment Advisers Act of 1940 and
shall assist in the management of the City's investment portfolio in a manner
consistent with the City's objectives. External investment advisers may be
granted discretion to purchase and sell investment securities in accordance with
this investment policy.
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:
1. 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 Assistant Finance Director. 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.
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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 Assistant Finance Director: The Assistant Finance
Director 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 Assistant Finance Director shall
present to the Finance Sub -Committee, recommended changes to the City's
Investment Policy. On a quarterly basis, the Assistant Finance Director 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 Assistant Finance Director 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: The Accountant is appointed by the
Finance Director and is subject to the direction and supervision of the Assistant
Finance Director. The Accountant carries out the specific instructions provided
by the Assistant Finance Director 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 has 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 are reviewed, approved and verified in advance by the
Assistant Finance Director, and are reported in the Quarterly Investment
Report to Council.
D. Prudence:
Pursuant to California Government Code, Section 53600.3, all persons
authorized to make investment decisions on behalf of the City are trustees and
therefore fiduciaries subject to the Prudent Investor Standard. This means that
all governing bodies of local agencies or persons authorized to make investment
decisions on behalf of those local agencies investing public funds pursuant to
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this chapter are trustees and therefore fiduciaries subject to the prudent investor
standard. When investing, reinvesting, purchasing, acquiring, exchanging,
selling, or managing public funds, a trustee shall act with care, skill, prudence,
and diligence under the circumstances then prevailing, including, but not limited
to, the general economic conditions and the anticipated needs of the Agency,
that a prudent person acting in a like capacity and familiarity with those matters
would use in the conduct of funds of a like character and with like aims, to
safeguard the principal and maintain the liquidity needs of the Agency. Within
the limitations of this section and considering individual investments as part of
an overall strategy, investments may be acquired as authorized by law.
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) that such losses are reported by internal City
staff and external investments advisors to the City Manager timely after they
occur.
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
In the instance of any conflict between the City of Campbell Investment Policy
and Government Code Section 53600 et seq, the more stringent requirement
shall apply.
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
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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.
2. 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
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.
5. 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:
a. 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.
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b. 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 collateralization, letters of credit or
surety bond and (3) have commercial paper that is rated "A-V or higher, or the
equivalent, by a NRSRO.
No more than 5% of the City's total portfolio may be invested in the commercial paper and
medium -term notes of any single issuer, and the aggregate investment in commercial
paper shall not exceed 25% of the City's total portfolio. '
6. Eligible Bankers Acceptances provided that 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.
7. 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.
8. 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.
9. 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 AAAA/l + 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.
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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 AAAN1+ 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 Elsewhere in the
Authorized Investments Section of This Policy, provided that:
(a) The securities are rated in a rating category of "AK 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
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 "AX 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.
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(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. Shares of Beneficial Interest Issued by a Joint Powers Authority (JPA) organized pursuant
to Section 6509.7 that invests in the securities and obligations authorized in subdivisions
(a) to (q), inclusive. Each share shall represent an equal proportional interest in the
underlying pool of securities owned by the joint powers authority and be rated AAA or
equivalent. To be eligible under this section, the joint powers authority issuing the shares
shall have retained an investment adviser that meets all of the following criteria:
(a) The adviser is registered or exempt from registration with the Securities and
Exchange Commission.
(b) The adviser has not less than five years of experience investing in the securities
and obligations authorized in subdivisions (a) to (q), inclusive.
(c) The adviser has assets under management in excess of five hundred million dollars
($500, 000, 000).
17. 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 settlement, 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 Assistant Finance Director's Investment Report at the first
regularly scheduled City Council meeting after 45 days from the end of the quarter.
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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)
➢ Interest Rate
➢ Weighted Average Yield
➢ 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
➢ Comparative Statistics by Fiscal Year
➢ Reconciliation of Cash & Investments to General Ledger Balances
➢ 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.
VIII. 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. If the City has engaged the services of an outside professional investment
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advisor, the investment advisor may use its own list of authorized broker -dealers to conduct
transactions on behalf of the City.
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
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. Collateralization:
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.
�- ov-cak, 41
City of Campbell, California
O O
sF Investment Policy Date: September 5, 2023
�RCNAR�
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/10% Per
A/A-1 or Higher
Bonds
Issuer
53601 (c)
State Obligations
5 years
None/10Issuer suer Per
A/A-1 or Higher
53601 (e)
California Local Agencies
5 years
None/10% Per
Issuer
A/A-1 or Higher
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
53601(j)
Medium Term Notes
5 years
30%/ 5% per
A/A-1 or Higher
issuer
25%
53601 n
()
Non-negotiable Certificates of
5 ears
y
$1 million per
-
Deposit
issuer
30% Aggregate
53601.8
Certificates of Deposit through
5 ears
y
Maximum Up to
-
(a)-(h)
Account Registry Services
the FDIC Insured
Limit Per Issuer
16429.1
State of California LAIF
N/A
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, and Collateralized
5 years
20%/5% per issuer
AA or higher
Mortgage Obligations
53601(q)
Supranationals
5 years
30%
AA or higher
°F °a""���� City of Campbell, California
O O
sue. Investment Policy Date: September 5, 2023
CA. Gov't.
Authorized Investment
Maximum
Authorized
Credit Rating Limit
Code
Maturity
Investment Limits -
Section
% of Portfolio
53601(p)
Shares of a joint powers authority
N/A
None
AAA or higher
*Combined total not to exceed
20% per State
20%
OVC4,1LO City of Campbell, California
O O
s� 0�PCHAA� Investment Policy Date: September 5, 2023
•
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 with
less than $100 million in assets under management 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 $75
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).
Mort -gage 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
U�.°F'°9416��r City of Campbell, California
O O
Investment Policy Date: September 5, 2023
• �RCHAR�
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).