CC Resolution 9755
RESOLUTION NO. 9755
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 17th day of October, 2000 by the following roll call
vote:
AYES:
Councilmembers Dougherty, Furtado, Dean
NOES:
Councilmembers None
ABSENT:
Councilmembers Wa tson, Kennedy
APPROVED:
/
ATTEST:
()~~
Anne Bybee, City Clerk
. Kennedy, Mayor
by Matthew T. Dean,
Vice Mayor
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: October 17, 2000
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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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 secuntIes 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
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject: Investment Policy
Date: October 17, 2000
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 his/her responsibilities to other persons
under his/her 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: October 17, 2000
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: October 17, 2000
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 $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
financial/investment 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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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 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 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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VI. SELECTION OF BROKER / DEALERS AND FINANCIAL INSTITUTIONS
A. Broker/Dealers 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 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 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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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 in savings and loans shall be held
with the Federal Home Loan Banle 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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Subject: Investment Policy Date: October 17, 2000
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 $30 Million
per agency)
U.S. Treasury Bills,
Notes & Bonds nla U. S. Treasury ~% 75% of Portfolio 5 Years *
U. S. Government Agency nla 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 m Days *
Acceptances reporting dealers Bank 180
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 Bankl 10% of Portfolio 15 days*
Agreements reporting dealers collateralized must have signed
I with an A-I rating Master Repurchase
, or better Agreement
Commercial Domestic U.S. Corps. Corporation 15 % of Portfolio -lSQ Days*
Paper meeting Gov't. Liquidity 270
Code requirements
and having an AlIPl
rating or better
Mutual Funds Diversified management Fund assets 15 % of Portfolio 5 Years *
invested in securities and companies attaining and net worth
obligations authorized by highest ranking by 2 out (No stated
subdivisions (a) through of 3 largest, national guarantee)
(m) of Section 53601 of rating agencies having
the Calif. Government an investment advisor
Code unless further registered with the
restricted by the City's S.E.C. and having five
Investment Policy years experience in
public entity investment
*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: October 17, 2000
EXHIBIT B
GLOSSARY OF ELIGIBLE INVESTMENTS
Local Agency Investment Fund (L.A.I.F.). The L.A.J.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 $30 million per
agency subject to a maximum of 10 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. Treasury 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. 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. Treasurv 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. 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: October 17, 2000
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 of the CD balance in excess of the first $100,000.
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.
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 15% 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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