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Home My WebLink About(1991, 01/28) - F-1 - AmendedSTATEMENT OF INVESTMENT POLICY INTRODUCTION F -1 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 Investment authority has been delegated to the Director of Finance, who is responsible for administration of the City's investment program. LIQUIDITY Sufficient funding to accommodate at least an average of two week's warrants is to be maintained in immediately available investments, such as the State Local Agency Investment Fund, maturing certificates of deposit, or similar liquid instruments. An analysis of cash flow must be conducted at least weekly to serve as the basis for determining appropriate maturities for investments. ACCEPTABLE INVESTMENT INSTRUMENTS The following are types 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" rule, which states, in part, 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 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. F-1 STATEMENT OF INVESTMENT POLICY - Page 2 Certificates of Deposit City funds will be invested only in fully cullaterized certificates of deposit with FDIC insured institutions. Government securities having a market value of 1108 of the total amount of investment are acceptable as collateral. As an alternative, first trust deeds having a value of 1508 of the total amount of investment are acceptable as collateral if approved by the Finance Director on a case by case basis. Noncollater- alized CD investments may be made in amounts less than $100,000 so long as they are fully insured by the FDIC. No more than 108 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 critria to be considered by the City: The institution must maintain at least $200 million in assets 100 million for fully insured CD's of $100,000 or less). The institution must have been in business at least three years. The institution must have a net worth to asset ratio of at least 48. The institution must be located in California. 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. Neqotiable 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 insure security and a large, well - established secondary market. Ease of subsequent marketability is further ascertained prior to initial investment by examining currently quoted bids by primary dealers and the acceptability of the issuer by these dealers. No one issuer shall exceed more than 108 of the portfolio, and maturity shall not exceed one year. STATEMENT OF INVESTMENT POLICY - Page 3 F -1 Bankers Acceptances The City shall invest only in Bankers Acceptances written by the 100 largest banks in the world. In the case of foreign banks, the Bankers Acceptances must be written by their U.S. branches. Maximum maturity shall be nine months. No more than 258 of the City's overall investment portfolio shall be placed in Bankers Acceptances. U.S. Treasury Issues The City may invest in treasury notes, bills and bonds. Safekeeping documentation of these instruments in an acceptable an secure account in the City's name is required. Average maturity of these instruments shall be no more than five years from date of investment. No more than 258 of these securities or 108 of the City's overall portfolio, whichever is less, shall have maturity greater than five years. There shall be no investments with maturity greater than ten years. 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 by large, exceptionally well - established firms with the highest Moody's or Standard & Poors ratings (A1 /P1). 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 Repo 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. F-1 STATEMENT OF INVESTMENT POLICY - Page 4 Passbook SayinQ$ Accounts savings accounts may be used as a repository for customer deposits, or for similar purposes. Consistent with the requirements for CD investments, funds deposited in savings accounts must either be FDIC insured or collateralized. Local Agency Investment Fund (LAIF) (State of California) state Rgulation limits any one City's investment in this fund to $10 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 Corporate Notes Investments of this type will 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 10% of the City's investment funds shall be placed in securities of this type. Asset /Investment Management Agreements The City may employ the services of asset /investment management companies. Such companies must have a history of producing no— losses and relatively high net returns. They must also be well established and exceptionally reputable. Members of the staffs of such companies who will have primary responsibility for managing the City's investments must have a working familiarity with the special requirements and constraints of investing municipal funds in general and and this City's funds in particular. They must contractually agree to conform to all provisions of governing law and the collateralization and other requirements contained herein. STATEMENT OF INVESTMENT POLICY - Page 5 F -1 REPORTING REQUIREMENTS The City Council shall receive a detailed monthly listing of all investments in the City portfolio. The report must show the type of investment, institution, date of maturity, amount of deposit /investment, and rate of interest. Adopted - April 6, 1959 Amended - November 9, 1970 Amended - February 11, 1974 Amended - February 9, 1981 Amended - October 27, 1986 Rewritten - October 22, 1990 Amended - January 28, 1991 0