CC Resolution 9178
RESOLUTION NO. 9178
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, there has been submitted to the City Council the updated Investment Policy.
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 be approved as submitted.
PASSED AND ADOPTED this 7th day of January 1997, by the following roll call vote:
AYES: Councilmembers: Dougherty, Watson, Dean, Furtado, Conant
NOES: Councilmembers: None
ABSENT: Councilmembers: None
APPROVED:
;J~
ATTEST:
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Anne Bybee, City Clerk
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject:
INVESTMENT POLICY
Date:
JANUARY 7,1997
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 depositories, brokers/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: JANUARY 7, 1997
D. The City and Redevelopment Agency shall insure 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. Prequalifying the fInancial institutions and limiting
broker/dealer to primary dealers with order desks
located in California,
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, and
e. Limiting the weighted average maturity of the
portfolio to two years.
f. The physical security or safekeeping of the City's
investments is also an important element of safety.
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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Subject:
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
INVESTMENT POLICY
Date:
JANUARY 7, 1997
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 annually and modified and
approved annually. as neeessary to ensure its eonsisteney with eurrent laws
and rinandal trends.
C. RESPONSIBILITIES:
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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. This review
typically takes place in the Spring of each year, however, it can occur on an
"as needed" basis. No less than once per fiscal year, the City's investment
strategy will be presented to the Finance Sub-Committee. A summary of such
meetings will be distributed to the City Council. Should market activity
encourage revisions in the City's strategy, the Finance Sub-Committee shall
be advised accordingly.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Date:
Subject:
INVESTMENT POLICY
JANUARY 7, 1997
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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 wire transfer
authority for transfers up to and in excess of $5,000,000 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.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject:
INVESTMENT POLICY
Date: JANUARY 7, 1997
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 $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.
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject:
INVESTMENT POLICY
Date:
JANUARY 7, 1997
E. Ethics and Conflicts of Interest:
1. Those involved in the in vestment 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 perfonnance of the City and the RDA, particularly
with regard to the time of purchases and sales.
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 Monthly Investment Report
within 30 days of the end of the quarter. The report whieIt shall include the
following on all invested monies:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
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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
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject:
INVESTMENT POLICY
Date:
JANUARY 7, 1997
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.)
VI. SELECTION OF BROKERS. ;~>ul\ID/OR DEALERS AND INSTITUTIONS
A. Brokers/Dealers:
1. In selecting brokers or dealers, the Finance Director or designated staff
member shall select brokers representing primary dealers in government
securities that have established offices and order desks within the State of
California.
2. Before accepting funds or engaging in investment transactions with the City,
the supervising officer at each depository 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
firm/depository 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: JANUARY 7, 1997
B. Collateralization:
1. Deposit-type secuntIes (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 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 fmancial
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
B. Eligible Investments & Criteria:
Date: JANUARY 7, 1997
~
Local Age_ncy Investment
Fund (LAIF)
V.S. Treasury Bills,
Notes & Bonds
The following is a summary of the authorized investment instruments and limitations:
Location Guarantee Limits Maturity
CalIfornIa State Fund Allowable limit On Demand
(currently $20 Million On Demand
per agency)
50% of Portfolio
V.S. Government Agency
Issues (e.g. F.N.M.A.,
G.N.M.A., etc.)
Banker's
Acceptances
Certificates of Deposit
with banks or savings
and loan associations
Repurchase
Agreements
Commercial
Paper
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
nla
V.S. Treasury
5 Years *
50 % of Portfolio
5 Years *
nla
V. S. Treasury
or Government
Agency
Accepting
Bank
30 % of Portfolio
270 Days *
Major banks &
reporting dealers
wIth an A-I rating
or better
California
FDIC insured
first $100,000.
Amounts above
FDIC insurance
shall be
collateralized
per this policy
25 % of portfolio 5 years *
and $1 Million in
anyone institution.
Toe ratio of such
de120sits in Savings
& Loans shall be
such that at any time,
deposits shall not
exceed 40 % of the
totals in Banks and
Savings & Loans
10% of Portfolio 15 days*
must have signed
Master Repurchase
Agreement
15% of Portfolio 180 Days*
15 % of Portfolio 5 Years *
*:~UTE: Maximum term unless expressly authorized by the City Council to be exceeded. three months
pnor to purchase.
Major banks &
reporting dealers
WIth an A-I rating
or better
Domestic V. S. Corporation
meeting Gvrnnt. Liquidity
Code requirements
anq having an AlIPl
ratmg or oetter
Diversified Fund assets
manageJ;Ilent and net worth
comparues (No stated
attaining highest guarantee)
ranking by 2 out of
3 largest, national
rating agencies having
an investment advisor
registered with the
S.E.C. and.having five
years expenence m
public entity investment
Issuing Bank!
collateralized
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
Subject:
INVESTMENT POLICY
Date:
JANUARY 7, 1997
EXHmIT B
GLOSSARY OF ELIGIBLE INVESTMENTS
Local A~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 $lS 20 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. 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. Treasury Bonds. These are the same as U.S. Treasury Notes except they have original
maturities of ten years or longer.
U.S. Government A~ency 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 of 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 State
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: JANUARY 7, 1997
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 A~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.
Commercial Paper. - notes are unsecured promissory notes of industrial corporation, utilities
and bank holding companies. Notes are in bearer form starting at $100,000. State law limits
a city to investments in United State 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 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.
City of Campbell
Investment Transaction Record
To Be Used For Each Investment Transaction
Date:
Value @ Par:
Financial Institution:
Type of Investtnent:
Term:
Maturity Date:
Quarterly Interest Rate:
%
As of Date
Cost:
Daily Interest Rate:
%
As of Date
Was Collateral W aived? Yes
No
Interest Payable At:
Type of Collateral:
Collateral and/or Securities Held By:
L.A.I.F. Transaction $:
Source of Funds:
(Deposit Amount)
L.A.I.F. Transaction $:
Purpose:
(Withdrawal Amount)
L.A.I.F. Reference:
(Contact Person)
(Confirmation Number)
Early Withdrawal Penalties: No
Yes
Penalty Amount:
How was Transaction Handled?: Cash
Wire
Transfer
Other
Reference:
Other Quotations Received:
Institution
Type of Instrument
Interest Rate
Funds Invested By:
Approved By:
Date:
cc:
City Treasurer
City Manager
Finance Director
Revised 12196