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Home My WebLink About(1994, 01/24) - F-1 - AmendedF -1 STATEMENT OF INVESTMENT POLICY PURPOSE: G To set forth the City's policy concerning :e :vestment of temporarily idle funds. It is the policy of the City to invest funds not required, -for immediate expenditures. Investments will be in compliance with governing provisions of law and the policy contained herein Primary investment goals are security of principal, adequate liquidity maintenance, and high yield, in that order. Investments shall be placed in securities as outlined /below. The balance between various investment instruments may change ,,in order to provide the City with the best combination of high yield, liquidity, and a consideration for other factors, such as placement of an appropriate percentage of available investment funds locally. INVESTMENT AUTHORITY: Under the direction of the City M delegated to the Director of Finance, City's investment program. LIQUIDITY: Sufficient funding to accoa to be maintained in immec Agency Investment Fund, instruments. An analysis serve as the basis for deterr ACCEPTABLE the investment authority has been responsible for administration of the d& at least an average of two week's warrants is available investments, such as the State Local turing certificates of deposit, or similar liquid cash flow must be conducted at least weekly to ing appropriate maturities for investments. INSTRUMENTS: The following are es of investments made by the City and the guidelines for investing in each. In all cases, investments shall be made in the context of the Prudent Man" e, which states, in part, that F -1 • 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 as well as the probable income to be derived." In this light, the City of Newport Beach does not purchase or sell securities on margin. Additionally, any institution which holds either the collateral or the investment instruments themselves in safekeeping for the City must maintain at least $500,000,000 in assets. Certificates of DeDOSit City funds will be invested only in fully collateralized certificates of deposit with FDIC insured institutions. Government securities having, a market value of 110% of the total amount of investment are acceptable,:as collateral. As an alternative, first trust deeds having a value of 150% of the total amount of investment are acceptable as collateral if approved by the Finance Director on a case by case basis. Noncollateralized CD investments may be made in amounts • less than $100,000 so long as they are fully insured by the FDIC. Not more than 10% of the City's investment ;portfolio shall be invested in certificates of deposit with any one institution:' CD's will not be placed for a period of longer than one year. Additionally, the issuer must agree to early maturity under emergency circumstances. Further/ an institution must meet the following criteria to be considered by the City: The institution must maintain at least $200 million in assets ($100 million for fully insured CD's of $100,00 or less). The institution must have be4* in business at least three years. The institution must have dnet worth to asset ratio of at least 4 %. The institution must be Ibcated in California. 2 r' F -1 i The institution must place and maintain on file 'with the City an audited financial statement not more than one year old: Interest shall be paid to the City on a monthly basis. 3 l Negotiable Certificates of Deposit As a matter of policy, the City invests in'Negotiable Certificates of Deposit only with the largest U.S. Banks, so as to inure security and a large, well- established secondary market. Ease of subsequent marketability is further ascertained prior to initial investment by examining eurrentiy quoted bids by primary dealers and the acceptability of the issuer by these dealers. No one issuer shall exceed more than 10% of the portfolio, and maturity shall not exceed one year. Bankers Acceptances The City shall invest only in Bankers Acceptances written by the 100 largest banks in the world. "e case of foreign banks, the Bankers Acceptances must be written by their U.S. branches. Maximum maturity shall be nine months. No more than 25% of a City's overall investment portfolio shall be placed in Bankers Acceptances. U.S. Treasury ues The City y invest in treasury notes, bills and bonds. Safekeeping documenta ' n of these instruments in an acceptable an secure account in the City's nam is required. Average maturity of these instruments shall be no more than five ears from date of investment. No more than 25% of these securities or 10% of a City's overall portfolio, whichever is less, shall have maturity greater thin fi e years. There shall be no investments with maturity greater than ten 3 F -1 • Federal Agency Securities Securities of this type that are acceptable for the City's investments are Federal Home Loan Bank notes, Federal National Mortgage Association notes, Federal Farm Credit Bank notes, and Federal Intermediate Credit Bank debentures. Security requirements and maturity limitations are the same as those for U.S. Treasury issues. Commercial Paper / The City shall only invest in commercial paper issued byMarge, exceptionally well- established firms with the highest Moody's or Stan )1ard & Pooes ratings A1 /Pl). Commercial paper shall be used solely as a short term investment not to exceed 180 days. Security requirements are the same as those listed above. Repurchase Agreements ( Repos) Repos shall be used solely as a short -term investment not to exceed 30 days. The • institution from which the City purchases a Aepo must isolate and specifically identify to the City's safekeeping account adequate collateral of the type and magnitude specified under the Certificates of Deposit section above. The amount of this collateral must be sufficient to compensate for fluctuating market conditions. Repos will only be purchased from the 10 largest banks in California. Passbook Savings Accounts Savings accounts may be u as a repository for customer deposits, or for similar purposes. Consistent 'tii the requirements for CD investments, funds deposited in savings accoun must either be FDIC insured or collateralized. 4 F -1 Local Agency Investment Fund (LAIF) (State of California) State Regulation limits any one City's investment in this fund to $15 million at any one time, and prohibits more than 10 transactions (deposits or withdrawals) per month. Beyond that there are no local restrictions to Newport Beach's participation in LAIF. County Investment Funds Both Orange and Los Angeles Counties provide a service similar to LAIF for municipal and other government entities. Both of these Funds are available to Newport Beach. Except for their own restrictions concerning deposits, withdrawals, and other aspects of participation, there are no additional local limits on City investments with these Funds. Medium Term Notes Investments of this type will normally only be in corporations rated in the top three note categories by two of the three largest nationally - recognized rating services. Maximum term to maturity shall normally be two years, and it shall never exceed five years. No more than 20% of the City's investment funds shall be placed in securities of this type. r Asset /Investment ManagementAgreements j The City may employ the s ces of asset /investment management companies. Such companies must ha a history of producing no losses and relatively high net returns. They mus also be well established and exceptionally reputable. Members of the staffs f such companies who will have primary responsibility for managing the Ci 's investments must have a working familiarity with the special requiremen and constraints of investing municipal funds in general and this City's funds ' particular. They must contractually agree to conform to all provisions of verrung law and the collateralization and other requirements contained he 5 F -1 • Safekeeping /Third Party Custodians Cash and securities in the City's portfolio which are being managed by private sector asset /investment management companies wi not be in the custody of those companies. The City will contract separate with major banks or other well- established, reputable financial instituti which provide custodial services to maintain custody of cash and securi ' in this category. In the case of a major financial institution, the City ay have an asset/ investment management relationship, and a custodial lationship, with the same entity. However, the services must be provided y separately managed departments within that entity, and the City's po lio must be completely separate and distinct from the assets of the instituti and from all other portfolios managed by the institution. REPORTING REQUIREMENTS: The City Council shall receive a etailed monthly listing of all investments in the City portfolio. The report m show'the type of investment, institution, date of maturity, amount of deposit /' vestment, and rate of interest. • Adopted - Ap ' 6,1959 Amended - N vember 9,1970 Amended - F bruary 11, 1974 Amended - _bruary 9,1981 Amended October 27,1986 Rewritte - October 22, 1990 Amend - January 28,1991 Amend - January 24,1994 P