CC Resolution 8778
RESOLUTION NO. 8778
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 21st day of February 1995, by the following roll call vote:
AYES: Councilmembers:
Watson, Dougherty, Conant, Wilkinson, Burr
NOES: Councilmembers:
None
ABSENT: Councilmembers:
None
APPROVED:
c:
- ~~~~
Uonald R. Burr, Mayor
ATTEST:
a~
Anne Bybee, City Clerk
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL
INVESTMENT POLICY February 21, 1995
I. PURPOSE
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,
and 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 and 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 accurately 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.
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:
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CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL February 21,1995
INVESTMENT POLICY
1.
Safety:
2.
Liquidity:
3.
Yield:
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 pnor 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.
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.
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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CI TV OF CAMPBELL
-
POLICIES AND PROCEDURES
SUBJECT:
DATE:
CITY OF CAMPBELL
INVESTMENT POLICY
February 21, 1995
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 as
necessary to ensure its consistency with current laws and financial trends.
C. RESPONSIBILITIES:
1. Responsibilities of the City Council: The City Council consists of a
Mayor and four Councilmembers 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 Councilmembers, 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.
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL February 21,1995
INVESTMENT POLICY
3. Responsibilities of the Finance Sub-Committee: 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 the role of 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.
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL February 21, 1995
INVESTMENT POLICY
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 "Reporting and Monitoring" 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 $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 judgement 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.
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL February 21, 1995
INVESTMENT POLICY
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.
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, which shall include the following:
1. Type of Investment
2. Beginning Balances
3. Purchases During the Month
4. Maturities or Sales During the Month
5. Ending Balances
6. Maturity Date
7. Interest Rate
8. Weighted Average Yield
9. Face Value or Purchase Cost
10. Market Value
11. Interest Earned During the Month
12. Interest Earned to Maturity
13. Cash Flow Projection for the Following Month
14. Summary of Cash Invested to Total Cash Balances
15. Comparative Statistics by Fiscal Year
16. Reconciliation of Cash & Investments to General Ledger Balances
17. Schedule of Investments Beyond 5 (Five) Years
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.)
CITY OF CAMPBELL
ADMINISTRATIVE
POLICIES AND PROCEDURES
SUBJECT:
CITY OF CAMPBELL
INVESTMENT POLICY
DATE:
February 21, 1995
VI. SELECTION OF BROKERS AND/OR DEALERS
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.
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.
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 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.
SUBJECT:
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
DATE:
CITY OF CAMPBELL
INVESTMENT POLICY
February 21, 1995
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.
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL February 21, 1995
INVESTMENT POLICY
B. Eligible Investments & Criteria:
The following is a summary of the authorized investment instruments and applicable limitations
to each. Exhibit B provides a description of these securities:
~ Location Guarantee Limits Maturitv
Local Agency Investment California State Fund $15 Million City On Demand
Fund (LAIF) $15 Million R.D.A. On Demand
U.S. Treasury Bills,
Notes & Bonds nla U.S. Treasury 50 % of Portfolio 5 Years *
U. S. Government Agency nla U.S. Treasury 50 % 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 270 Days *
Acceptances reporting dealers Bank
with an A-I rating
or better
Certificates of Deposit California FDIC insured 25 % of portfolio 5 years *
with banks or savings first $100,000. and $1 Million in
and loan associations Amounts above anyone institution.
FDIC insurance The ratio of such
shall be deposits in Savings
collateralized & Loans shall be
per this policy such that at any time,
deposits shall not
exceed 40 % of the
totals in Banks and
Savings & Loans
Repurchase Major banks & Issuing Bankl 10% of Portfolio Agreements
reporting dealers collateralized 15 days *
with an A-I rating
or better
Commercial Domestic U.S. Corporation 15 % of Portfolio
Paper meeting Gvmnt. Liquidity 180 Days *
Code requirements
and having an AlIP1
rating or better
Mutual Funds
invested in securities and
obligations authorized by
subdivisions (a) through
(m) of Section 53601 of
the California 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 5 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 to be exceeded.
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL February 21, 1995
INVESTMENT POLICY
EXHIBIT B
GLOSSARY OF ELIGIBLE INVESTMENTS
Local Aeencv 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 is a limitation
of $15 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. 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 Acceptances 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.
CITY OF CAMPBELL
ADMINISTRATIVE POLICIES AND PROCEDURES
SUBJECT: DATE:
CITY OF CAMPBELL February 21, 1995
INVESTMENT POLICY
Glossary of Eligible Investments & Criteria - Continued
Certificate of Deposit (CD's). This 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 Aereements (REPOS). This 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. These 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. - These 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 the financial section of most major newspapers.
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