CC Resolution 10632
RESOLUTION NO.:
10632
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 requires a statement of
Investment Policy be submitted to the City's legislative body annually for its
consideration at a public hearing; and
WHEREAS, there has been submitted to the City Council a statement of the
City's Investment Policy; and
WHEREAS, the Policy has been reviewed by the City Council;
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of
Campbell that the changes to the Investment Policy and related Administrative Policy
are approved as submitted.
PASSED AND ADOPTED the 2nd day of May, 2006 by the following roll call
vote:
AYES: Councilmembers Kennedy, Hernandez, Burr, Watson
NOES: Councilmembers None
ABSENT: Councilmembers Furtado
APPROVED:
, d..k----
Jeanette Watson, Mayor
A~~~
Anne Bybee, City Clerk
Attachment 2
Summary of Recommended Changes to the Investment
Policy of the City of Campbell
Staff is recommending minor, non-substantive changes to the Investment Policy for 2006. The
revisions, summarized below, include clarification of broker/dealers' primary dealer
qualifications and the addition of statutory requirements dealing with mutual funds and reporting.
V. Authorized Securities and Transactions - Pages 5-8
. In the Repurchase Agreements paragraph, we added firms having a primary dealer within
their holding company structure as eligible repurchase agreement counterparties. For
example, Merrill Lynch, one of the City's approved brokers is not a primary dealer. Merrill
Lynch Government Securities Inc. is the primary dealer within the holding company
structure.
. Following the paragraphs dealing with Mutual Funds and Money Market Mutual Funds, we
added a notation setting forth the statutory portfolio maximum of 20% for combined
investments in the funds.
VII. Monitoring and Reporting - Pages 8-9
. Added a reference to the governing statute.
VIII. Selection of Broker/Dealers and Financial Institutions - Pages 9-10
. Renamed this "Selection of Broker/Dealers," since only broker/dealers are dealt with in the
section.
. Revised the primary dealer qualifications (see above).
. Reworded the second paragraph for easier reading.
X. Diversification and Eligible Securities
. Added the notation regarding funds' portfolio maximums.
. Deleted the last paragraph as it duplicates language contained in the second paragraph of
Prudence on Page 5.
City of Campbell Investment Policy
Summary of Recommended Changes
May 2,2006
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CITY OF CAMPBELL
ADMINISTRA TIVE POLICIES AND PROCEDURES
Subject: Investment Policy
UJOS.Mav 2, 2006
Date: February 15,
I.
PURPOSE
It is the policy of the City of Campbell to invest public funds in a prudent manner which will provide
the A'laKimum security while meeting the daily cash flow needs and conforming to all statutes governing
the investment of public funds.
The purpose of this document is to identify the policies guiding prudent investment of the City and
Redevelopment Agency'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
of the City of Campbell and the Campbell Redevelopment Agency 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 and the Redevelopment (RD,'\) Agency (RDA) 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 and RDA adhere 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 anyone 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.
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CITY OF CAMPBELL
ADl\1INISTRA. TIVE POLICIES .t'\ND PROCEDURES
Subject: Investment Policy
UJ()$Mav 2. 2006
Date: February 15,
D. The City and Redevelopment Agency 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:
1.
Safety:
Safety of principal is the foremost objective of the City of Campbell.
Safety and the minimizing of risk associated with investing refet:s.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 the following (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.
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CITY OF CAMPBELL
ADl\1INISTRL\ TIVE POLICIES AND PROCEDURES
Subject: Investment Policy
UJO$.Mav 2. 2006
Date: February 15,
IV. STRUCTURE AND RESPONSffiILITY
A. DELEGATION OF AUTHORITY:
1. The City Council assumes direction over City and RDA 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 hislher responsibilities to other persons under
hislher control responsible for investment transactions, including designation of certain
portions of the 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.
C. RESPONSffiILITIES:
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 and the Campbell Redevelopment Agency. 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 monthly
basis, the City Council shall receive, review and accept the Monthly Investment Report
submitted by the ,\ccounting Manager 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
Accounting Manager. On an annual basis, this Sub-Committee shall review necessary
revisions to the established Investment Policy of the City of Campbell and the Campbell
Redevelopment Agency and make a recommendation to the City Council accordingly.
No less than once per fiscal year, the City's investment strategy wi11 be reviewed by the
Finance Sub-Committee. A summary of the investment strategy wi11 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 Monthly Investment Report to Council.
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CITY OF CAMPBELL
ADMINISTRA TIVE POLICIES ,"..NO PROCEDURES
Subject: Investment Policy
U#J$.Mav 2. 2006
Date: F ebrullry 15,
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 and RDA 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.
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 Monthly Investment Report to Council.
5.
Responsibilities of the Accounting Manager: The Accounting Manager is appointed
by the Finance Director and serves as the Investment Manager for the City and RDA
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 and RDA. This includes the custody and investment of City and RDA
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 Accounting Manager shall present to the Finance
Sub-Committee, recommended changes to the City's Investment Policy. On a monthly
basis, the Accounting Manager shall present to the City Council. via the City Manager,
a Monthly Investment Report. Refer to "Monitoring and Reporting" for additional
information.
a. Wire Transfer Authority: The Accounting 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 highlighted on the Daily Investment Transaction Form. The transaction
must also be reported in the Monthly 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 Accounting Manager.
The Accountant carries out the specific instructions provided by the Accounting
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 has wire transfer authority not to
exceed $1,500,000 for a single investment transaction. The standard operating
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CITY OF CAMPBELL
ADIVlINISTRA TIVE POLICIES AND PROCEDURES
Subject: Investment Policy
J()()$.Mav 2, 2006
Date: F cbruar)' 15,
procedure is that all cash and investment wire transfers made by the Accountant
are reviewed, approved and verified in advance by the Accounting Manager, and
are reported both on the Daily Investment Transaction Form and in the Monthly
Investment Report to Council.
D. Prudence:
1. It IS the understanding of the individuals holding positions with investment
responsibilities that the "prudent person" 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.
2.
The City's overall investment program shaH be designed and managed with a degree of
professionalism that is worthy of the public trust. The City recognizes that no
investment is totaHy 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 shaH be considered within the context of the overaH 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.7
E. Ethics and Conflicts of Interest:
Elected officials and employees involved in the investment process shaH 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 shaH disclose to the City Manager
any business interests they have in financial institutions that conduct business with the City and
the RDA, and they shaH subordinate their personal investment transactions to those of the City
and the RDA. In addition, the City Manager, the Finance Director and others with delegated
investment authority shaH 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
1. Any conflict between the City of CampbeH Investment Policy and Government Code
Section 53600 et seq, shaH be interpreted in favor of the Government Code.
V. AUTHORIZED SECURITIES AND TRANSACTIONS
AH investments and deposits of the City shaH 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
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES ,^...ND PROCEDURES
Subject: Investment Policy
J()()$.Mav 2, 2006
Date: February 15,
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.
The City has further restricted the eligible types of securities and transactions as follows:
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.
3. 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 or financial in:;titutioFl., that
have executed a City approved Master Repurchase Agreement with the City. Dealers 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. Dealers and financial
in:;titutionsBroker/dealers approved as Repurchase Agreement counterparties shall have a short-
term credit rating of at least A-lor the equivalent and a long-term credit rating of at least A or the
equi valent. The Finance Director shall maintain a copy of the City's approved Master Repurchase
Agreement along with a list of the broker/dealers and financial iflstitHtions that have executed a
Master Repurchase Agreement with the City.
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CITY OF CAMPBELL
ADl\UNISTRA TIVE POLICIES AND PROCEDURES
Subject: Investment Policy
UJ()$.Mav 2, 2006
Date: February 15,
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 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 (l) 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.
b. The entity shall (l) 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-I" 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 10% of the City's total portfolio
may be invested in the commercial paper of anyone issuer, and the aggregate investment in
commercial paper shall not exceed 25% of the City's total portfolio.
6. Eligible Bankers Acceptances rated at least A-I by Standard & Poor's, P-l by Moody's, or Fl 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 10% of the City's total portfolio may be invested in banker's
acceptances of anyone 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 rated at least
AA by Standard & Poor's, Aa2 by Moody's or AA by Fitch. The aggregate investment in medium
term notes shall not exceed 10% 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 anyone issuer and the
aggregate amount invested in non-negotiable time certificates of deposit shall not exceed 25% of
the City's total portfolio.
9. State of California's Local Agencv Investment Fund (LAIF), pursuant to California Government
Code Section 16429.1.
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CITY OF CAMPBELL
ADl\1INISTRLA.. TIVE POLICIES L\ND PROCEDURES
Subject: Investment Policy
~Mav 2, 2006
Date: February 15,
10. 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 AAAm by Standard
and Poor's, Aaa by Moody's or AAAN 1 + by Fitch. No more than 10% of the City's total portfolio
may be invested in mutual funds of anyone issuer, and the aggregate investment in mutual funds
shall not exceed 15% of the City's total portfolio.
11. 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 $1.00; (3) invest only in the securities and
obligations authorized in this policy and (4) have a rating of at least two of the following: AAAm
by Standard and Poor's, Aaa by Moody's or AAANl+ by Fitch. No more than 10% of the City's
total portfolio may be invested in money market funds of anyone issuer, and the aggregate
investment in money market funds shall not exceed 15% of the total portfolio.
Note: Per state statute, the maximum combination of Mutual Funds and Money Market Mutual Funds is
20% of the portfolio.
It is the intent of the City that the foregoing list of authorized securities and transactions is strictly
interpreted. Any deviation from this list must be preapproved by the City Council writing.
VI. PORTFOLIO MATURITIES AND LIQUIDITY
To the extent possible, investments shall be matched with anticipated cash flow requirements and
known future liabilities. The City will not invest in securities maturing more than five years from the
date of purchase, unless the City Council has granted authority to make such an investment at least
three months prior to the date of investment. The weighted average final maturity of the City's
portfolio shall at no time exceed 3 years.
VII. MONITORING AND REPORTING
A. The Finance Director shall routinely monitor the contents of the portfolio and shall file with the
City Council the Accounting Manager's Investment Report within 30 days of the end of the
quarter. The reports shall be prepared and submitted in accordance with California
Government Code Section 53646. The report and shall include the following on all invested
monies:
>- Type of Investment and Issuer
>- Beginning Balances
>- Purchases During Month
>- Maturities or Sales During the Month
>- Ending Balances
>- Maturity Date
>- Weighted Average Final Maturity
>- Call Provisions (if any)
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CITY OF CAMPBELL
AD1\lINISTRA TIVE POLICIES "A..ND PROCEDURES
Subject: Investment Policy
UJO$Mav 2. 2006
Date: Fcbrullr)" 15.
~ Interest Rate
~ Weighted Average Yield
~ Face Value or Purchase Cost
~ Market Value including source
~ Interest Earned During Month
~ Interest Earned to Maturity
~ Cash Flow Projection for the Following Month
~ Summary of Cash Invested to Total Cash Balances
~ Comparative Statistics by Fiscal Year
~ Reconciliation of Cash & Investments to General Ledger Balances
~ Schedule of Investments Beyond 5 (Five) Years
~ 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. Upon Council's approval of the Monthly Investment Report, a copy shall be distributed to the
"Elected" City Treasurer.
C. In accordance with California Government Code Section 53646, copies of the June and
December investment reports shall be provided to the California Debt and Investment
Advisory Commission (CDIAC) within 60 days of the close of those months. Additionally,
changes to this Investment Policy shall be provided to CDIAC within 60 days of City Council
approval.
Each time an investment transaction is made, an "Investment Transaction Record" form shall be
prepared by the Accountant and approved by the Accounting Manager. Copies of the form are to be
distributed to the City Manager, City Treasurer and Finance Director.
VIII. SELECTION OF BROKER-/-DEALERS ?ND FIN,A~NCLA.L INSTITUTIONS
,\.BrokerfDealers aRd FiRaReial IRstihltioRS:
I 1.
The City shall transact business with financial in:;titution:; and 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 financial in:;titution and rcco;znizcd ';ccuritic';authorized broker/dealer shall submit and annually
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CITY OF CAMPBELL
ADl\UNISTRl~,.. TIVE POLICIES AND PROCEDURES
Subject: Investment Policy
J()(M-Mav 2, 2006
Date: February 15,
update a City approved BrokerlDealer Infonnation Request fonn that includes the finn's most recent
audited financial statement. The Finance Director, or his or her designee, shall maintain a list of tHe
financial in~;titl:ltion and mco.;nized ~;ecuritiesapproved broker/dealers that have Docn approved by the
City, along with each firm'~; most recent Broker/Dealer hlformation ReqHe:;t form. Financial in~;titution~;
and recognized securities bBroker/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 in~;titutioR/finn and the City of
Campbell.
IX. SAFEKEEPING AND COLLA TERALIZA TION
A. Safekeeping:
1. The City shall contract with a bank or banks for the safekeeping of securities which are
owned by the City and/or RDA as a part of the investment portfolio. Staff shall
periodically review the perfonnance and pricing of the third-party, safekeeping agent
services.
2. All investment secuntIes (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 infonnation, and shall provide monthly reports of activity and ending balances
for all securities held on behalf of the City.
B. Collateralization:
1. 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. DIVERSIFICA TION AND ELIGIBLE SECURITIES
,\. DheFsifieatioR:
-h 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:
Authorized Investment
Maximum
Maturitv
Portfolio
Maximum
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CITY OF CAMPBELL
AD1\1.INISTRi'.. TIVE POLICIES AND PROCEDURES
Subject: Investment Policy
UJO&Mav 2, 2006
Date: February 15,
Eligible Bankers Acceptances
180 Days
75%
25%
10% per issuer
30%
10% per issuer
10%
25%
$1 million per issuer
15%':
10% per issuer
15%':
Federal Agency & Instrumentality Securities
Prime Commercial Paper
5 Years
270 Days
Medium Term Notes
Non-Negotiable Certificates of Deposit
5 Years
5 Years
Mutual Funds
n/a
Money Market Mutual Funds
n/a
* Per state statute. the maximum combination of Mutual Funds and Money Market Mutual Funds
is 20% of the portfolio.
2. lnve~;tmcnt officia\:; :;hall recognize that the investment portfolio is subject to public
review and evaluation. The overall program shall be de~;igAed and managcd with a degree
of profc~;:;ionali~;m worthy of the pl:Iblic trust.
01)..6-30
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CITY OF CAMPBELL
ADIVIINISTRl'i TIVE POLICIES AND PROCEDURES
Subject: Investment Poliey
J()(}$Mav 2. 2006
Date: February 15,
EXHIBIT A
GLOSSARY OF ELIGIBLE INVESTMENTS
Local Ae:encv 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 $40 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.
U.S. Treasurv 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. Treasurv 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. Treasurv Bonds. These are the same as U.S. Treasury Notes except they have original maturities of ten
years or longer.
U.S. Government Ae:encv 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 Instrumentalitv 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).
Banker's Acceptance. This is a negotiable time draft (bill of exchange) with a maturity of six months or less
I drawn on and accepted by a commercial bank. Banker's .'\cceptancc arcAcceptances 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 $100,000 of a certificate of deposit is
guaranteed by the Federal Deposit Insurance Corporation (FDIC). CD's with a face value in excess of $100,000
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 $100,000, or by first mortgage loans which must be at least 150% of the face value
of the CD balance in excess of the first $100,000.
Repurchase Ae:reements (REPOS). - is a contractual arrangement between a financial institution, or dealer,
and an investor. This agreement normally can run for one or more days. The investor puts up his funds for a
certain number of days at a stated yield. In return, he takes a given block of securities as collateral. At
maturity, the securities are repurchased and the funds repaid plus interest.
O-s..6-30
12
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CITY OF CAMPBELL
ADMINISTRA TIVE POLICIES AND PROCEDURES
Subject: Investment Policy
2f)()$.Mav 2, 2006
Date: February 15,
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.
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.
Monev 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).
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.
OSb - 30
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