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HomeMy WebLinkAboutResolution-1998-1663 RESOLUTION NO. 1663 SERIES OF 1998 TITLE: A RESOLUTION SETTING FORTH INVESTMENT POLICY AND GUIDELINES FOR INVESTMENT OF CITY FUNDS BY THE CITY TREASURER AND RESCINDING RESOLUTION NO. 1568. WHEREAS, under the City Charter of the City of Wheat Ridge, Colorado, the City Treasurer is vested as the custodian of all public funds belonging to the City; and WHEREAS, the City Council of the City of Wheat Ridge wishes to provide the City Treasurer with adequate policy and guidelines to be followed so that the city Council need not be reqUired to approve specific transactions. NOW, THEREFORE, BE IT RESOLVED, that the City Treasurer shall be responsible for investment of City funds within the following guidelines attached as Exhibit A. DONE AND RESOLVED this 27th day of April. 1998 ,) ATTEST ( , I _'j' \' J _.J 1.~/t,L,~ ,21),,,-,",,< Wanda Sang, City Clerk ,\ EXHIBIT A Wheat Ridge, Colorado Investment Policy I. Purpose and Scope The following investment policy addresses the methods, procedures and practices that must be exercised to ensure effective and judicious fiscal and investment management of the City's funds. This policy shall apply to the investment management of all financial assets and funds under control of the City except retirement funds, deferred compensation funds, and debt reserve funds. 1. Pooling of Funds: Except for cash in certain restricted and special funds, the City will consolidate cash balances from all funds to maximize investment earnings. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. n. Investment Objectives The City's principal investment objectives are: . Conformance with all applicable City, State, and Federal regulations. . Preservation of capital and safety of principal. 1. Safety of principal is the foremost objective of the investment policy Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. a. Credit Risk: The City will minimize credit risk, the risk ofloss due to the failure of the security is~uer or backer, by' . Limiting investments to the safest types of securities . Pre-qualitying the financial institutions, broker/dealers, intermediaries, and advisers with which the City will do business . Diversifying the investment portfolio so that potential losses on individual securities will be minimized. b Interest Rate Risk: The City will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates, by' . Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity · Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools. . Liquidity: The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands. Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. A portion of the portfolio also may be placed in money market mutual funds or local government investment pools which offer same-day liquidity for short-term funds. · Yield: The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economi.; cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Maintenance of sufficient liquidity to meet anticipated cash flow needs. III. Prudence The standard of prudence to be used for managing the City's assets is the "prudent investor" rule, which states that a prudent investor "shall exercise the judgement and care, under circumstances then prevailing, which men of prudence, discretion, and intelligence exercise in the management of the property of another, not in regard to speculation but in regard to the permanent disposition of funds, considering the probable income as well as the probable safety of their capital." (CRS 15- 1-304, Standard for Investments,) The City's overall investment program shall be designed'jlU1d managed with a degree of professionalism that is worthy of the public trust. The City recognizes that no investment is totally riskless and that the investment activities of the City are a matter of public record. Accordingly, the City recognizes that occasional measured losses are inevitable in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that adequate diversification has been implemented and that the sale of a security is in the best long- term interest of the City. IV Ethics and Conflicts ofInterest. Elected officials and employees 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 or create the appearance of an impairment of their ability to make impartial investment decisions. V. Eligible Investments and Transactions: All investments shall be made in accordance with Colorado Revised Statutes: CRS 11-10.5-101, et seq Public Deposit Protection Act; CRS 11-60-101, et seq. US Agency obligations; and CRS 11-47-101, et seq. Savings and Loan Association Public Deposit protection Act; CRS 24-75-601, et. seq. Funds-legal investments for Governmental units; CRS 24-75-603, et seq, Depositories; and CRS 24-75-701, et seq. Local Governments-Local Government Pooling. Any revisions or extensions of these sections of the CRS will be assumed to be part of this investment policy immediately upon being enacted. The Treasurer has further restricted the investment of City funds to the following types of securities and transactions: 1 US Treasury Obligations: Treasury Bills, Treasury Notes, and Treasury Bonds with maturities not exceeding five years from the date of purchase. 2. Federal Instrumentality Securities. Debentures, discount notes, and callable securities with maturities not exceeding five years from the date of purchase issued by the following only' Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB), Federal Home Loan Banks (FHLB), and Federal Home Loan Mortgage Corporation (FHLMC). 3 Prime Commercial Paper issued by US companies with maturities not exceeding 270 days from the date of purchase, which is rated at least A-I + by Standard and Poors, P-1 by Moody's. 4 Local Government Investment Pools authorized under CRS 24-75-701 which. 1) are "no- load" (i.e. no commission fees shall be charged on purchases or sales of shares); 2) limit assets ofthe fund to securities authorized in this Investment Policy; 3) have a maximum stated maturity and weighted average maturity in accordance with Federal Securities Law Regulation 2A-7, and 4) have a rating of AAAm by Standard and Poors or AAA by Moody's. 5 Time Certificates of Deposit or Savings Accounts in state or national banks which are state approved depositories per CRS 24-75-603, et seq (As evidenced by a certificate issued by the State Banking Board) and are insured by the FDIC Certificates of Deposit which exceed the FDIC insured shall be collateralized in accordance with the Colorado Public Deposit Protection Act. This collateral shall have a market value equal to or exceeding 102 percent of the difference between the insured amount and the City's total deposit of all funds with the institution. 6 Time Certificates of Deposit or Savings Account~ in state or federally charted savings and loans which are state approved depositories per CRS 24-75-603, et seq (As evidenced by a certificate issued by the State Banking Board) and are insured by the FDIC. Deposits which exceed the FDIC insured amount shall be collateralized in accordance with the Colorado Public Deposit Protection Act. This collateral shall have a market value equal to or exceeding 102 percent of the difference between the insured amount and the City's total deposit of all funds with the institution. 7 Money Market Funds authorized under CRS 24-'75-601, which are registered under the Investment Act of 1940 and have a maximum stated maturity and weighted average maturity in accordance with Federal Securities Regulation 2a-7. While the Public Deposit Protection Act allows municipalities to invest in derivatives, the Treasurer believes that the inherent risk that this type of financial instrument possesses is intolerable, and therefore explicitly states that derivatives are an unacceptable investment in this policy The City recognizes that securities other than those authorized in this Investment Policy may be held as of the date this Policy was adopted. However, all purchases after the date of Policy adoption shall be limited to the above items. VI. Investment Diversification It is the intent of the City to diversify the investments within the portfolio to avoid incurring unreasonable risks inherent in over investing in specific iustruments, individual financial institutions or maturities. The asset allocation in the portfolio should, however, be flexible depending upon the outlook for the economy, the securities market, and the City's anticipated cash flow needs. VII, Competitive Bidding The best yield to the City shall determine the acceptance of a purchase or sale of a security when other factors are held equal. Return, diversification, and the type of security shall be analyzed and incorporated into the selection of the appropriate security prior to the solicitation of a purchase offer or sale bid. The Treasurer shall endeavor to receive at least two quotes for any security purchased or sold. If the same purchase or sale price is received from different institutions, then preference may be given to a local institution. In rapidly changing markets, the Treasurer shall have the discretion to lock in yields with a sole institution, so long as it is in the best interests of the City. I VIII. Selection ofBrokerlDealers and Financial institutions acting as BrokerlDealers It shall be the policy of the City to purchase securities only from authorized institutions and firms. BrokerIDealers and other financial institutions shall be selected by the Treasurer on the basis of their expertise in public cash management and their ability to service the City's account. To be eligible, institutions must meet at least one of the following criteria: 1. Be recognized as a Primary Dealer by the Market Reports Division of the Federal Reserve Bank of New York, (Appendix I) 2, Report voluntarily to the Market Reports Division of the Federal Reserve Bank of New York, or 3. Security dealers which are not designated as Primary Dealers, but which are approved by the Treasurer Such dealers shall: a. Be located in Colorado, and have been in business for at least two years; b Have recent financial statements with an unqualified opinion, and not have a contingent liability that could materially affect the capital of the firm; c. Be in compliance with the minimum net capital requirements of the Securities Exchange Commission and the New York Stock Exchange. APPENDIX 1. LIST OF PRIMARY DEALERS RECOGNIZED BY THE MARKETS REPORTS DIVISION OF THE FEDERAL RESERVE BANK OF NEW YORK Aubrey G. Lanston & Co Inc. BancAmerica Robertson Stephens Bear, Stearns & Co., Inc, BT Alex Brown Incorporated BZW Securities Inc. Chase Securities Inc. CIBC Oppenheimer Corp. Citicorp Securities, Inc. Credit Suisse First Boston Corporation Daiwa Securities America Inc. Dean Witter Reynolds Inc. Deutsche Morgan Grenfell/C.J. Lawrence Inc Donaldson, Lufkin & Jenrette Securities Corporation Dresdner Kleinwort Benson North America LLC. Eastbridge Capital Inc. First Chicago Capital Markets, Inc. Fuji Securities Inc. Goldman, Sachs & Co. Greenwich Capital Markets, Inc. HSBC Securities, Inc. J P Morgan Securities, Inc. Lehman Brothers Inc. Merrill Lynch Government Securities Inc. Morgan Stanley & Co Incorporated Nationsbanc Montgomery Securities, Inc. Nesbitt Bums Securities Inc. The Nikko Securities Co International, Inc. Nomura Securities International, Inc. Paine Webber Incorporated Salomon Brothers Inc. Sanwa Securities (USA) Co ,L.P SBC Warburg Dillon Read Inc. Smith Barney Inc. UBS Securities LLC. Zions First National Bank