CC Resolution 10124
,
RESOLUTION NO.
10124
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 9th day of December, 2002 by the following roll call
vote:
AYES:
Councilmembers
Dean, Burr, Kennedy, Furtado, Watson
NOES:
Councilmembers None
ABSENT:
Councilmembers None
APPROVED:
t?~e{S
J ~ette Watson, Mayor
AtzAL-
Anne Bybee, City Clerk
~ CITY OF CAMPBELL
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.OIlCH,..V.Q" Subject: Investment Policy Date: December 9, 2002
I. PURPOSE
It is the policy of the City of Campbell to invest public funds in a prudent manner which will provide
the maximum 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 (RDA) Agency 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, buying and holding until maturity, preservation of principal at the risk of yield, and
not "actively" trading the investment portfolio.
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
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9, 2002
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 refers 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 weighted average maturity of the portfolio to two 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 24-hour fund 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
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.OI(CHA~O. Subject: Investment Policy Date: December 9, 2002
IV. STRUCTURE AND RESPONSIBILITY
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. 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 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 Accounting Manager.
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 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.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9,2002
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.
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 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.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9, 2002
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 vanous 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
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. This standard of prudence shall be applied in the context of managing the City and
RDA's investment portfolio. If individuals having investment responsibilities act in
accordance with written policies/procedures and exercise due diligence in performing
their duties shall be relieved of personal responsibility in the event of principal or
interest losses to the portfolio, provided that the Finance Director, City Manager and
City Council are advised in writing in a timely fashion, and appropriate action is taken
to control adverse developments should they occur.
E. Ethics and Conflicts of Interest:
1. Those involved in the investment process shall refrain from personal business activity
that could conflict with proper execution of the investment program, or which could
impair their ability to make impartial investment decisions. A mandatory disclosure is
required of any material financial interests in financial institutions that conduct business
within this jurisdiction, and they shall further disclose any large personal
financiallinvestment positions that could be related to the performance of the City and
the RDA, particularly with regard to the time of purchases and sales.
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ii CITY OF CAMPBELL
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.()~('H ",~Q. Subject: Investment Policy Date: December 9, 2002
F. Conflict with State Statutes or Regulations
1. 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. MONITORING AND REPORTING
A. The Finance Director shall routinely monitor the contents ofthe portfolio and shall file with the
City Council the Accounting Manager's Investment Report within 30 days of the end of the
quarter. The report 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 Maturity
~ 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. 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. (See Exhibit
A.)
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9, 2002
VI. SELECTION OF BROKER / DEALERS AND FINANCIAL INSTITUTIONS
A. BrokerlDealers and Financial Institutions:
1. The City shall transact business with financial institutions 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. 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.
2. Before accepting funds or engaging in investment transactions with the City, the
supervising officer at each financial institution and recognized securities broker/dealer
shall submit a certification that the officer has reviewed the investment policies and
objectives and agrees to disclose potential conflicts or risks to public funds that might
arise out of business transactions between the institution/firm and the City of Campbell.
3. A current audited financial statement is required to be on file for each financial
institution and broker/dealer with which the City of Campbell invests.
VII. SAFEKEEPING AND COLLATERALIZATION
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 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.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9, 2002
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
5365l(m) (1). Collateral for certificates of deposit in savings and loans shall be held
with the Federal Home Loan Bank. Collateral for certificates of deposit in banks shall
be held in the City's name in the bank's trust department, (if a safekeeping agreement
has been executed) or, alternatively, in the San Francisco Federal Reserve Bank.
2. Other securities shall be collateralized by the actual security held in third-party
safekeeping by the primary agent.
VIII. DIVERSIFICATION AND ELIGIBLE SECURITIES
A. Diversification:
1. The City will diversify use of investment instruments to avoid incurring unreasonable
risks in overinvesting in specific instruments, individual financial institutions or
maturities.
2. Investment officials shall recognize that the investment portfolio is subject to public
review and evaluation. The overall program shall be designed and managed with a
degree of professionalism worthy of the public trust.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9, 2002
B. Eligible Investments & Criteria:
The following is a summary of the authorized investment instruments and limitations:
~ Location Guarantee Limits Maturitv
Local Agency Investment California State Fund Allowable limit On Demand
Fund (LAIF) (currently $40 Million
per agency)
U.S. Treasury Bills,
Notes & Bonds n/a U.S. Treasury 75% of Portfolio 5 Years *
U.S. Government Agency n/a U.S. Treasury 75% of Portfolio 5 Years *
Issues (e.g. F.N.M.A., or Government
G.N.M.A., etc.) Agency
Banker's Major banks & Accepting 30% of Portfolio 180 Days *
Acceptances reporting dealers Bank
with an A-I rating
or better
Certificates of Deposit California FDIC insured 25% of portfolio and 5 Years *
with banks or savings first $100,000. $1 Million in anyone
and loan associations Amounts above institution. The ratio of
FDIC insurance such deposits in Savings
shall be & Loans shall be such
collateralized that at any time deposits
per this policy shall not exceed 40% of
the totals in Banks and
Savings & Loans
Repurchase Major banks & Issuing Bank! 10% of Portfolio 15 Days*
Agreements reporting dealers collateralized must have signed
with an A-I rating Master Repurchase
or better Agreement
Commercial Domestic U.S. Corps. Corporation 25% of Portfolio 270 Days*
Paper meeting Gov't. Liquidity
Code requirements
and having an Al/Pl
rating or better
Mutual Funds
invested in securities and
obligations authorized by
subdivisions (a) through
(m) of Section 53601 of
the Calif. Government
Code unless further
restricted by the City's
Investment Policy
Diversified management
companies attaining
highest ranking by 2 out
of 3 largest, national
rating agencies having
an investment advisor
registered with the
S.E.C. and having five
years experience in
public entity investment
Fund assets
and net worth
(No stated
guarantee)
15% of Portfolio
5 Years *
*NOTE: Maximum term unless expressly authorized by the City Council three months prior to purchase.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9, 2002
EXHIBIT B
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. They are offered in three month, six month, and one-year maturities.
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. Include securities which fall into these categories: 1) Issues which are
unconditionally backed by the full faith and credit of the United States, 2) Issues which are conditionally backed
by the full faith and credit of the United States and 3) Issues which are not backed by the full faith and credit of
the United States.
Issues which are unconditionally backed by the full faith and credit of the United States include: Small
Business Administration (SBA), General Services Administration (GSA).
Issues which are not backed by the full faith and credit of the United States include: Federal National Mortgage
Association (FNMA), Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB) , Banks for
Cooperation (Co-ops), Federal Lands Banks (FLB), Federal Intermediate Credit Banks (FICB).
While all the above issues are not unconditionally backed by the full faith and credit of the United States, they
do in fact have defacto backing from the federal government, and it would be most unlikely that the government
would let any of these agencies default on its obligations.
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 Acceptance 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.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: December 9,2002
Glossary of Eligible Investments & Criteria - Continued
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
ofthe CD balance in excess of the first $100,000.
Repurchase A2reements (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.
Commercial Paper. - notes are unsecured promissory notes of industrial corporations, utilities and bank
holding companies. Notes are in bearer form starting at $100,000. 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.
Mutual Funds. - are investment companies that make investments on behalf of individuals and institutions
who share common financial goals. The portfolio must adhere to restrictions set forth in California Government
Code Section 53601 et al. regarding allowable investments and maturity lengths (unless further restricted by the
City's Investment Policy). The Code currently prohibits the utilization of mutual funds that invest in equity
securities (i.e., Corporate stocks and bonds, etc.). In effect the investor is delegating investment decisions to the
fund's professional money managers. An investor buys shares of the funds, each share representing an
ownership in all the funds underlying securities. These funds are very liquid, all or part of the share can be
cashed in at any time for the current value of the investment which is recalculated daily. The investors per share
calculation (known as "net asset value") can be determined by daily publication in financial section of most
major newspapers.
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