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Resolution No. 6921 1 2 3 4 5 6 7 RESOLUTION NO. 6921 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON AMENDING RESOLUTION NO. 6755 WHICH APPROVED THE ANNUAL STATEMENT OF INVEST- MENT POLICY OF THE CITY AND DELEGATED INVESTMENT AUTHORITY TO THE CITY TREASURER WHEREAS, pursuant to California Government Code Section 53646 (a) (2), 8 the City Treasurer shall annually render to the City Council an Annual Statement of 9 Investment Policy; 10 11 12 WHEREAS, pursuant to Resolution No. 6755, the City Council approved the Annual Statement oflnvestment Policy and delegated investment authority to the City Treasurer; and 13 14 WHEREAS, the City Council desires to amend said City Investment Policy 15 so that it comports with recent changes in the California Government Code concerning the 16 investment of surplus funds, the deposit of funds, annual statement of investment policy and 17 18 19 annual and quarterly reporting requirements. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: 20 SECTION 1: The City Council of the City of Vernon does hereby find and 21 22 determine that the recitals contained hereinabove are true and correct. 23 24 25 26 SECTION 2: The City Council ofthe City of Vernon hereby adopts the amended City investment policy, "Annual Statement of Investment Policy ofthe City of Vernon, California For The Year 1997," a copy of which is attached hereto and incorporated herein as Exhibit "A" to this Resolution. 27 28 , : 1 SECTION 3: The City Council of the City of Vernon hereby delegates to the 2 City Treasurer the Authority to implement said Annual Statement of Investment Policy and 3 select the instruments for the City's investment portfolio in accordance with said Statement of 4 5 6 7 of this Resolution and thereupon and thereafter the same shall be in full force and effect. Investment Policy. SECTION 4: The City Clerk of the City of Vernon shall certify to the passage 8 APPROVED AND ADOPTED this 18 Day of February, 1997. 9 10 11 12 13 14 ATTEST: :: ~ /~~ 17 BRUCE V. MALKENHORST, City Clerk 18 19 20 21 22 23 24 25 26 27 28 ---~~~~ LEONIS C. MALBURG, Mayor -2- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STATE OF CALIFORNIA ) ) COUNTY OF LOS ANGELES ) I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do hereby certify that the forgoing Resolution, being Resolution No. 6921, was duly adopted by the City Council of the City of Vernon at a regular meeting ofthe City Council duly held on Tuesday, February 18, 1997, and thereafter was duly signed by the Mayor of the City of Vernon. r< /h/~ BRUCE V. MALKENHORST, City Clerk . (SEAL) ANNUAL STATEMENT OF INVESTMENT POLICY OF THE CITY OF VERNON, CALIFORNIA FOR THE YEAR 1997 INTRODUCTION Monies not required for immediate expenditure by the City of Vernon shall be invested in compliance with governing provisions of law and this policy. The City will maintain adequate cash availability and strive for maximum yield on invested idle funds while insuring that principal invested is protected from loss. This Investment Policy shall be in compliance with Sections 53600.3, 53600.5, 53600.6, 53601, 53601.6, 53607, 53630, 53630.1, 53631.5 and 53635 of the Government Code of the State of California, relating to local agency finances. I. DELEGATION OF AUTHORITY; PRUDENT INVESTOR STANDARD Pursuant to Resolution No. 6755 of the City of Vernon, and Government Code Section 53607, the City Treasurer has been delegated investment authority for a one year period by the City Council. The City Treasurer and all persons and governing bodies of the City authorized to make investment decisions on behalf ofthe City are "trustees" and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing public funds, a trustee of the City shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the City, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the City. Within the limitations of this Investment Policy and Section 53600.3 of the Government Code and considering individual investments as part to an overall strategy, the City Treasurer is authorized to acquire investments as authorized by law. II. INVESTMENT CRITERIA When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the primary objective of a trustee of the City shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the City. The third objective shall be to achieve a return on the funds under its control. III. POLICIES AND OBJECTIVES The basic premise underlying the City's investment policy is to ensure that money is 1 EXHffiIT "A" always available when needed. It shall also be the policy of the City to diversify its investment portfolio to ensure the maximum safety of City assets. The City Treasurer and the Finance Department actively manage the City's portfolio of investments in order to take advantage of changing economic conditions. Through daily projected cash flow analysis, the City will attempt to fully invest all idle cash. Any persons authorized to make investment decisions on behalf of the City, shall be subject to daily oversight and monitoring by the City Treasurer and Finance Department in order to insure full and complete compliance with this Investment Policy and the Government Code of the State of California, relating to the deposit and investment of funds. IV. INSTRUMENTS AUTHORIZED FOR INVESTMENT The City, having money in a sinking fund of, or surplus money in, its treasury not required for the immediate needs of the City may invest any portion of the money that it deems wise or expedient in those investments set forth below. If the City purchases or obtains any securities prescribed in Section IV, in a negotiable, bearer, registered, or nonregistered format, the City shall require delivery of the securities to the City, including those purchased for the City by financial advisors, consultants, or managers using the City's funds, by book entry, physical delivery, or by third party custodial agreement. The transfer of securities to the counterparty bank's customer book entry account may be used for book entry delivery. For purposes of this Section IV "counterparty" means the other party to the transaction. A counterparty bank's trust department or separate safekeeping department may be used for the physical delivery of the security ifthe security is held in the name of the City. Where this Section IV does not specify a limitation on the term or remaining maturity at the time of the investment, no investment shall be made in any security, other than a security underlying a repurchase or reverse repurchase agreement authorized by Section 53601 of the Government Code, that at the time of the investment has a term remaining to maturity in excess of five years, unless the City has granted express authority to make that investment either specifically or as a part of an investment program set forth in another section of this Investment Policy approved by the City: (a) Bonds issued by the City, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the City or by a department, board, agency, or authority of the City. (b) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. (c) Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out ofthe revenues from a revenue-producing property owned, 2 EXHmIT "A" . . controlled, or operated by the state or by it department, board, agency, or authority of the state. (d) Bonds, notes, warrants, or other evidences of indebtedness of any local agency within this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority ofthe local agency. (e) Obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks, the Federal Home Loan Bank Board, the Tennessee Valley Authority, or in obligations, participations, or other instruments of, or issued by, or fully guaranteed as to principal and interest by, the Federal National Mortgage Association; or in guaranteed portions of small Business Administration notes; or in obligations, participations, or other instruments of, or issued by, a federal agency or a United States government-sponsored enterprise. (f) Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers acceptances. Purchases of bankers acceptances may not exceed 270 days maturity or 40 percent of the City's surplus money that may be invested pursuant to this Section IV. However, no more than 30 percent of the City's surplus funds may be invested in the bankers acceptances of anyone commercial bank pursuant to this section. (g) Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided for by Moody's Investors Service, Inc., or Standard and Poor's Corporation. Eligible paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000) and having an "A" or higher rating for the issuer's debt, other than commercial paper, if any, as provided for by Moody's Investors Service, Inc., or Standard and Poor's Corporation. Purchases of eligible commercial paper may not exceed 180 days maturity nor represent more than 10 percent of the outstanding paper of an issuing corporation. Purchases of commercial paper may not exceed 15 percent of the City's surplus money that may be invested pursuant to this Section IV. An additional 15 percent, or a total of30 percent of the City's surplus money, may be invested pursuant to this subsection. The additional 15 percent may be so invested only if the dollar-weighted average maturity of the entire amount does not exceed 31 days. "Dollar weighted average maturity" means the sum of the amount of each outstanding commercial paper investment multiplied by the number of days to maturity, divided by the total amount of outstanding commercial paper. (h) Negotiable certificates of deposits issued by a nationally or state-chartered bank or a state or federal association (as defined by Section 5102 of the Financial Code) or by a state-licensed branch of a foreign bank. Purchases of negotiable certificates of deposit may not exceed 30 percent of the City's surplus money which may be invested pursuant to this Section IV. (i) (1) Investments in repurchase agreements or reverse repurchase agreements of any securities authorized by and pursuant to the conditions set forth in section 53601, subsection (i) of the Government Code. 3 EXHIBIT "A" (j) Medium-term notes of a maximum of five years maturity issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment under this subsection (j) shall be rated in a rating category of "A" or its equivalent or better by a nationally recognized rating service. Purchases of medium-term notes may be not exceed 30 percent of the City's surplus money which may be invested pursuant to this Section IV. (k) (1) Shares of beneficial interest issued by diversified management companies that invest in the securities and obligations as authorized by subsections (a) to (j), inclusive, or subsections (m) or (n) of this Section IV and that comply with the investment restrictions of Article 1 (commencing with Section 53600 of the Government Code) and Article 2 (commencing with Section 53630 of the Government Code). However, notwithstanding these restrictions, a counterparty to a reverse repurchase agreement is not required to be a primary dealer of the Federal Reserve Bank of New York if the company's board of directors finds that the counterparty presents a minimal risk of default, and the value of the securities underlying a repurchase agreement may be 100 percent of the sales price if the securities are marked to market daily. (2) Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C Sec. 80a-1, et seq.). (3) If investment is in shares issued pursuant to paragraph (1), the company shall have met either ofthe following criteria: (A) Attained the highest ranking or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations. (B) Retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations authorized by subsections (a) to (j), inclusive, or subsections (m) or (n) and with assets under management in excess of five hundred million dollars ($500,000,000). (4) Ifinvestment is in shares issued pursuant to paragraph (2), the company shall have met either ofthe following criteria: (A) Attained the highest ranking or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations. (B) Retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years' experience managing money market mutual funds with assets under management in excess of five hundred million dollars ($500,000,000). (5) The purchase price of shares of beneficial interest purchased pursuant to this subsection shall not include any commission that the companies may charge and shall not exceed 20 percent of the City's surplus money that may be invested pursuant to this subsection. However, no more than 10 percent of the City's surplus funds may be invested in shares of beneficial interest of any one mutual fund pursuant to paragraph (1). 4 EXHIBIT "A" (1) Notwithstanding anything to the contrary contained in this Section IV, Section 53601 and Section 53635 of the Government Code, or any other provision oflaw, moneys held by a trustee or fiscal agent and pledged to the payment or security of bonds or other indebtedness, or obligations under a lease, installment sale, or other agreement of a local agency, or certificates of participation in those bonds, indebtedness" or lease installment sale, or other agreements, may be invested in accordance with the statutory provisions governing the issuance of those bonds, indebtedness, or lease installment sale, or other agreement, or to the extent not inconsistent therewith or if there are no specific statutory provisions, in accordance with the ordinance, resolution, indenture, or agreement of the local agency providing for the issuance. (m) Notes, bonds, or other obli~ations that are at all times secured by a valid first priority security interest in securities of the types listed by Section 53651 of the Government Code as eligible securities for the purpose of securing local agency deposits having a market value at least equal to that required by Section 53652 of the Government Code for the purpose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank which is not affiliated with the issuer of the secured obligation, and the security interest shall be perfected in accordance with the requirements of the Uniform Commercial Code or federal regulations applicable to the types of securities in which the security interest is granted. (n) Any Mortgage pass-through security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable pass-through certificate, or consumer receivable-backed bond of a maximum of five years maturity. Securities eligible for investment under this subsection shall be issued by an issuer having an "A" or higher rating for the issuer's debt as provided by a nationally recognized rating service and rated in a rating category of "AA" or its equivalent or better by a nationally recognized rating service. Purchase of securities authorized by this subsection may not exceed 20 percent of the City's surplus money that may be invested pursuant to this Section IV. The City shall not invest any funds pursuant to this Section IV in inverse floaters, range notes, or mortgage derived interest-only strips. The City shall not invest any funds pursuant to this Section IV in any security that could result in zero interest accrual if held to maturity. However, the City may hold prohibited instruments until their maturity dates. The limitation in this Section IV shall not apply to local agency investments in shares of beneficial interest issued by diversified management companies registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1, and following) that are authorized for investment pursuant to subsection (k) of Section 53601 of the Government Code. 5 EXHIBIT "A" , .. .. . . V. TRADING ACCOUNT INVESTMENT PROGRAM Notwithstanding Section IV of this Investment Policy, the City deems it prudent to invest a portion of its surplus funds in securities with the intent of selling them prior to maturity in order to achieve a better than average return on the funds under its control. Securities purchased pursuant to this investment program may at the time of the investment have a term remaining to maturity in excess of five years. The securities shall consist of obligations for which the faith and credit ofthe United States is pledged for the payment of principal and interest or be obligations, participations, or other instruments of, or issued by, a federal agency or a United States government-sponsored enterprise, or be one of the instruments more particularly described below. The City Treasurer shall satisfy the primary objective of the City Investment Policy to safeguard the principal of the funds under its control by ONLY authorizing the sale of securities at a gain or at a minimal loss. The City Treasurer shall satisfy the secondary objective of the City Investment Policy to meet the City's liquidity needs by maintaining the major portion of City surplus funds and funds on deposit and in the custody of the City in short term and liquid investments. This portfolio investment strategy comports with the City's capital expenditure horizon for its Light and Power Department enterprise and all other City enterprises. The City shall confine investments made pursuant to this trading account investment program to the following instruments: a. United States Treasury notes, bonds, bills, certificates of indebtedness, zero coupon bonds, stripped treasury bonds or similar or related instruments, or those securities for which the faith and credit of the United States are pledged for the payment of principal and interest. b. Obligations issued by banks for cooperatives, federal land banks, federal intermediate credit banks, federal home loan banks', the Federal Home Loan Bank Board, the Tennessee Valley Authority, or in obligations, participations, or other instruments of, or issued by, or fully guaranteed as to principal and interest by, the Federal National Mortgage Association; or in guaranteed portions of Small Business Administration notes, or in obligations, participations, or other instruments of, or issued by, a federal agency or a United States government-sponsored enterprise. The City's Finance Department shall monitor daily the investment activity commenced pursuant to this trading account investment program. If a security cannot be liquidated at a gain or minimal loss, then the City shall hold such security in its investment portfolio. The City shall not continue with this trading account investment program if at anytime the aggregate loss on the sale of securities can be described as other than minimal, 6 EXHIBIT "A" .4 including those securities which have been transferred to the City's investment portfolio to avoid realization of such a loss. The trading account investment program shall not at any time purchase securities which on a cost basis exceed 20% of the City's surplus funds. VI. REPORTS OF INVESTMENT ACTIVITIES AND POLICY The City Treasurer shall annually render to the City Council and the Finance Committee of the City a statement of investment policy, which the City shall consider at a public meeting. Any changes in this investment policy shall also be considered by the City Council of the City at a public meeting. The City Treasurer shall render a quarterly report to the City Administrator and City Council. The quarterly report shall be so submitted within 30 days following the end of the quarter covered by the report. This report shall include the tyep of investment, issuer, date of maturity par and dollar amount invested on all securities, investments and moneys held by the City and shall additionally include a description of any of the City's funds, investments, or programs, that are under the management of contracted parties, including lending programs. With respect to all securities held by the City and under management of any outside party that is not also a local agency or the State of California Local Agency Investment Fund, the report shall also include a current market value as of the date ofthe report, and shall include the source ofthis same valuation. The quarterly report shall state compliance of the portfolio to the statement of investment policy, or manner in which the portfolio is not in compliance. The quarterly report shall include a statement denoting the ability of the City to meet its budgeted expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available. In the quarterly report, a subsidiary ledger of investments may be used in accordance with accepted accounting practices. The authority of the City Council to invest or to reinvest funds of the City, or to sell or exchange securities so purchased has been delegated for a one-year period by the City Council to the City Treasurer, who shall thereafter assume full responsiblity for those transactions and shall make a monthly report of those transactions to the City Council. 7 EXHIBIT "A"