HomeMy WebLinkAbout2013-63 - Finding Consistency with Stated Investment Objectives and Amending City Council Policy F-1, Statement of Investment Policy, to Align Policy with State Code, Allow for Greater Investment Diversification, and Provide Greater Clarity to the InvestmRESOLUTION NO. 2013-63
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH FINDING CONSISTENCY WITH
STATED INVESTMENT OBJECTIVES AND AMENDING
CITY COUNCIL POLICY F -1, STATEMENT OF
INVESTMENT POLICY, TO ALIGN POLICY WITH STATE
CODE, ALLOW FOR GREATER INVESTMENT
DIVERSIFICATION, AND PROVIDE GREATER CLARITY
TO THE INVESTMENT ADVISORS
WHEREAS, the City Council of the City of Newport Beach ( "City ") through
City Council Policy F -1 adopted a Statement of Investment Policy; and
WHEREAS, City Council Policy F -1 requires the Director of
Finance /Treasurer to review the Investment Policy with the Finance Committee at least
annually to ensure its consistency with the overall objectives of preservation of principal,
liquidity and return, and its relevance to current law and financial and economic trends;
and
WHEREAS, the Finance Committee reviewed changes to the written
Statement of Investment Policy at its July 22, 2013 meeting and found consistency with
the stated objectives; and
WHEREAS, the Finance Director shall review the Investment Policy with the
City Council at a public meeting if there are changes recommended to the Investment
Policy; and
WHEREAS, the Director of Finance/Treasurer has reviewed the written
Statement of Investment Policy and recommends changes to better align policy with State
Code, allow for greater investment diversification, and provide greater clarity to the
investment advisors; and
WHEREAS, the City Manager reviewed the recommended revisions
suggested by the Director of Finance /Treasurer and recommends the City Council amend
the City's written Statement of Investment Policy.
NOW, THEREFORE, the City Council of the City of Newport Beach resolves
as follows:
Section 1: After considering the City's written Statement of Investment
Policy at a public meeting, and reviewing all associated written and oral testimony, the
City Council finds the City's written Statement of Investment Policy is consistent with the
overall objectives of preservation of principal, liquidity and return, and is relevant to
current law and financial and economic trends.
Section 2: City Council Policy F -1, Statement of Investment Policy is
hereby amended in its entirety and replaced with the attached Statement of Investment
Policy, which is incorporated by reference into this resolution. This amendment will align
the policy with State Code, allow for greater investment diversification, and provide
greater clarity to the investment advisors.
Section 3: The City Council finds this action is not subject to the California
Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
Section 4: This resolution shall take effect immediately upon its adoption
by the City Council, and the City Clerk shall certify the vote adopting the resolution.
ADOPTED this 13th day of August 2013.
ATTEST:
Eeilani 1. Brown, City Clerk
46�1 .
Keith D. Curry, Mayor
Attachment: Amended Statement of Investment Policy
F -1
STATEMENT OF INVESTMENT POLICY
PURPOSE:
The City Council has adopted this Investment Policy (the Policy) in order to establish
the scope of the investment policy, investment objectives, standards of care, authorized
investments, investment parameters, reporting, investment policy compliance and
adoption, and the safekeeping and custody of assets.
This Policy is organized in the following sections:
A. Scope of Investment Policy
1. Pooling of Funds
2. Funds Included in the Policy
3. Funds Excluded from the Policy
B. Investment Objectives
1. Safety
2. Liquidity
3. Yield
C. Standards of Care
1. Prudence
2. Ethics and Conflicts of Interest
3. Delegation of Authority
4. Internal Controls
D. Banking Services
E. Broker /Dealers
F. Safekeeping and Custody of Assets
G. Authorized Investments
1. Investments Specifically Permitted
2. Investments Specifically Not Permitted
3. Exceptions to Prohibited and Restricted Investments
H. Investment Parameters
1. Diversification
2. Maximum Maturities
3. Credit Quality
4. Competitive Transactions
1. Portfolio Performance
J. Reporting
K. Investment Policy Compliance and Adoption
1. Compliance
2. Adoption
1
F -1
A. SCOPE OF INVESTMENT POLICY
1. Pooling of Funds
All cash shall be pooled for investment purposes. The investment income
derived from the pooled investment shall be allocated to the contributing
funds, net of all banking and investing expenses, based upon the
proportion of the respective average balances relative to the total pooled
balance. Investment income shall be distributed to the individual funds
not less than annually.
2. Funds Included in the Policy
The provisions of this Policy shall apply to all financial assets of the City
as accounted for in the City's Comprehensive Annual Financial Report,
a) General Fund
b) Special Revenue Funds
c) Capital Project Funds
d) Enterprise Funds
e) Internal Service Funds
f) Trust and Agency Funds
g) Permanent Endowment Funds
h) Any new fund created unless specifically exempted
If the City invests funds on behalf of another agency and, if that agency
does not have its own investment policy, this Policy shall govern the
agency's investments.
3. Funds Excluded from this Policy
Bond Proceeds - Investment of bond proceeds will be made in accordance
with applicable bond indentures.
B. INVESTMENT OBJECTIVES
The City's funds shall be invested in accordance with all applicable City policies
and codes, State statutes, and Federal regulations, and in a manner designed to
accomplish the following objectives, which are listed in priority order:
1. Safety
Preservation of principal is the foremost objective of the investment
program. Investments of the City shall be undertaken in a manner that
seeks to ensure the preservation of capital in the overall portfolio. The
objective shall be to mitigate credit risk and interest rate risk. To attain this
objective, the City shall diversify its investments by investing funds
PJ
F -1
among several financial institutions and a variety of securities offering
independent returns.
a) Credit Risk
The City shall minimize credit risk, the risk of loss due to the
failure of the security issuer or backer, by:
• Limiting investments in securities that have higher credit
risks, pre - qualifying the financial institutions,
broker /dealers, intermediaries, and advisors with which the
City will do business
• Diversifying the investment portfolio so as to minimize the
impact any one industry/ investment class can have on the
portfolio
b) Interest Rate Risk
To minimize the negative impact of material changes in the market
value of securities in the portfolio, the City shall:
• Structure the investment portfolio so that securities mature
concurrent with cash needs to meet anticipated demands,
thereby avoiding the need to sell securities on the open
market prior to maturity
• Invest in securities of varying maturities
2. Liquidity
The City's investment portfolio shall remain sufficiently liquid to enable
the City to meet all operating requirements which might be reasonably
anticipated without requiring a sale of securities. 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 LAIF
which offer same -day liquidity for short -term funds.
3. Yield
The City's investment portfolio shall be designed with the objective of
attaining a benchmark rate of return throughout budgetary and economic
cycles, commensurate with the City's investment risk constraints and the
liquidity characteristics of the portfolio. Return on investment is of
secondary importance compared to the safety and liquidity objectives
described above. The core of investments is limited to relatively low risk
securities in anticipation of earning a fair return relative to the risk being
assumed.
C. STANDARDS OF CARE
1. Prudence
3
F -1
The standard of prudence to be used for managing the City's investment
program is California Government Code Section 53600.3, the prudent
investor standard, which states that "when investing, reinvesting,
purchasing, acquiring, exchanging, selling, or managing public funds, a
trustee 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 agency, 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 agency."
The City's overall investment program shall be designed and managed
with a degree of professionalism that is worthy of the public trust. The
City recognizes that no investment is totally without risk and that the
investment activities of the City are a matter of public record.
Accordingly, the City recognizes that occasional measured losses may
occur 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.
The Finance Director and authorized investment personnel acting in
accordance with established procedures and exercising due diligence shall
be relieved of personal responsibility for an individual security's credit
risk or market price changes, provided that deviations from expectations
are reported in a timely fashion to the City Council and appropriate action
is taken to control adverse developments.
2. Ethics and Conflicts of Interest
Elected officials and employees involved in the investment process shall
refrain from personal business activity that could conflict with proper
execution of the City's investment program, or could impair or create the
appearance of an impairment of their ability to make impartial investment
decisions. Employees and investment officials shall subordinate their
personal investment transactions to those of the City. In addition, City
Council members, the City Manager, and the Finance Director shall file a
Statement of Economic Interests each year as required by California
Government Code Section 87203 and regulations of the Fair Political
Practices Commission.
3. Delegation of Authority
Authority to manage the City's investment program is derived from the
Charter of the City of Newport Beach section 605 (j). The Finance Director
CI
F -1
shall assume the title of and act as City Treasurer and with the approval of
the City Manager appoint deputies annually as necessary to act under the
provisions of any law requiring or permitting action by the City Treasurer.
The Finance Director may then delegate the authority to conduct
investment transactions and to manage the operation of the investment
portfolio to other specifically authorized staff members. No person may
engage in an investment transaction except as expressly provided under
the terms of this Policy.
The City may engage the support services of outside investment advisors
with respect to its investment program, so long as it can be demonstrated
that these services produce a net financial advantage or necessary
financial protection of the City's financial resources. Such companies must
be registered under the Investment Advisors Act of 1940, be weIl-
established and exceptionally reputable. Members of the staff 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
this City's funds in particular. These firms must insure that the portion of
the portfolio under their management complies with various
concentration and other constraints specified herein, and contractually
agree to conform to all provisions of governing law and the
collateralization and other requirements of this Policy. Selection and
retention of broker /dealers by investment advisors shall be at their sole
discretion and dependent upon selection and retention criteria as stated in
the Uniform Application for Investment Advisor Registration and related
Amendments (SEC Form ADV 2A),
4. Internal Controls
The Finance Director is responsible for establishing and maintaining a
system of internal controls. The internal controls shall be designed to
prevent losses of public funds arising from fraud, employee error, and
misrepresentation by third parties, unanticipated changes in financial
markets, or imprudent action by City employees and officers. The internal
structure shall be designed to provide reasonable assurance that these
objectives are met. The concept of reasonable assurance recognizes that (1)
the cost of a control should not exceed the benefits likely to be derived,
and (2) the valuation of costs and benefits requires estimates and
judgments by management.
D. BANKING SERVICES
Banking services for the City shall be provided by FDIC insured banks approved
to provide depository and other banking services. To be eligible, a bank shall
5
lei
qualify as a depository of public funds in the State of California as defined in
California Government Code Section 53630.5 and shall secure deposits in excess
of FDIC insurance coverage in accordance with California Government Code
Section 53652.
E. BROKER /DEALERS
In the event that an investment advisor is not used to purchase securities, the
City will select broker /dealers on the basis of their expertise in public cash
management and their ability to provide service to the City's account.
Each approved broker /dealer must possess an authorizing certificate from the
California Commissioner of Corporations as required by Section 25210 of the
California Corporations Code.
To be eligible, a firm must meet at least one of the following criteria:
1. Be recognized as Primary Dealers by the Federal Reserve Bank of New
York or have a primary dealer within their holding company structure, or
2. Report voluntarily to the Federal Reserve Bank of New York, or
3. Qualify under Securities and Exchange Commission (SEC) Rule 15c3 -1
(Uniform Net Capital Rule).
F. SAFEKEEPING AND CUSTODY OF ASSETS
The Finance Director shall select one or more banks to provide safekeeping and
custodial services for the City. A Safekeeping Agreement approved by the City
shall be executed with each custodian bank prior to utilizing that bank's
safekeeping services.
Custodian banks will be selected on the basis of their ability to provide services
for the City's account and the competitive pricing of their safekeeping related
services.
The purchase and sale of securities and repurchase agreement transactions shall
be settled on a delivery versus payment basis. All securities shall be perfected in
the name of the City. Sufficient evidence to title shall be consistent with modern
investment, banking and commercial practices.
All investment securities, except non - negotiable Certificates of Deposit, Money
Market Funds and local government investment pools, purchased by the City
will be delivered by book entry and will be held in third -party safekeeping by a
City approved custodian bank, its correspondent bank or its Depository Trust
Company (DTC) participant account.
0
F -1
All Fed wireable book entry securities owned by the City shall be held in the
Federal Reserve system in a customer account for the custodian bank which will
name the City as "customer."
All DTC eligible securities shall be held in the custodian bank's DTC participant
account and the custodian bank shall provide evidence that the securities are
held for the City as "customer."
G. AUTHORIZED INVESTMENTS
All investments and deposits of the City shall be made in accordance with
California Government Code Sections 16429.1, 53600 -53609 and 53630 - 53686.
Any revisions or extensions of these code sections will be assumed to be part of
this policy immediately upon being enacted. The City has further restricted the
eligible types of securities and transactions. The foregoing list of authorized
securities and transactions shall be strictly interpreted. Any deviation from this
list must be pre- approved by resolution of the City Council. In the event an
apparent discrepancy is found between this Policy and the Government Code, the
more restrictive parameter(s) will take precedence.
1. Investments Specifically Permitted
a) United States Treasury bills, notes, or bonds with a final maturity
not exceeding five years from the date of trade settlement. There is
no limitation as to the percentage of the City's portfolio that may be
invested in this category.
b) Federal Instrumentality (government- sponsored enterprise)
debentures, discount notes, callable and step -up securities, with a
final maturity not exceeding five years from the date of trade
settlement. There is no limitation as to the percentage of the
portfolio that can be invested in this category.
c) Federal Agency Obligations for which the full faith and credit of
the United States are pledged for the payment of principal and
interest and which have a final maturity not exceeding five years
from the date of trade settlement. There is no limitation as to the
percentage of the portfolio that can be invested in this category.
d) Mortgage - backed Securities, Collateralized Mortgage Obligation
(CMO ) and Asset - backed Securities limited to mortgage - backed
pass- through securities issued by a US government agency, or
consumer receivable pass - through certificates or bonds with a final
maturity not exceeding five years from the date of trade
7
F -1
settlement. Securities eligible for investment under this
subdivision shall be issued by an issuer whose debt is rated at least
"A" or the equivalent by a Nationally Recognized Statistical Rating
Organization (NRSRO)_ The security itself shall be rated at least
"AAA" or the equivalent by an NRSRO. No more than five percent
(5 %) of the City's total portfolio shall be invested in any one issuer
of mortgage - backed and asset - backed securities listed above, and
the aggregate investment in mortgage - backed and asset - backed
securities shall not exceed twenty percent (20 %) of the City's total
portfolio.
e) Medium -Term Notes 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, with a final maturity not exceeding five years from
the date of trade settlement, and rated at least "A" or the equivalent
by an NRSRO. No more than five percent (5 %) of the City's total
portfolio shall be invested in any one issuer of medium -term notes,
and the aggregate investment in medium -term notes shall not
exceed thirty percent (30 %) of the City's total portfolio.
f) Municipal. Bonds: including bonds issued by the City of Newport
Beach, 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.
State of California registered warrants or treasury notes or bonds,
including bonds payable solely out of the revenues from a revenue -
producing property owned, controlled, or operated by the state or
by a department, board, agency, or authority of the state.
Registered treasury notes or bonds of any of the other 49 states in
addition to California, including bonds payable solely out of the
revenues from a revenue producing property owned, controlled, or
operated by a state or by a department, board, agency, or authority
of any of the other 49 states, in addition to California.
Bonds, notes, warrants, or other evidences of indebtedness of a
local agency within California, 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 of the local agency.
F -1
In addition, these securities must be rated at least "A" or the
equivalent by a NRSRO with maturities not exceeding five years
from the date of trade settlement. No more than five percent (5 %)
of the City's total portfolio shall be invested in any one municipal
issuer. In addition, the aggregate investment in municipal bonds
may not exceed thirty percent (30 %) of the portfolio.
g) Non- negotiable Certificates of Deposit and savings deposits with a
maturity not exceeding two years from the date of trade settlement,
in FDIC insured state or nationally chartered banks or savings
banks that qualify as a depository of public funds in the State of
California as defined in California Government Code Section
53630.5. Deposits exceeding the FDIC insured amount shall be
secured pursuant to California Government Code Section 53652.
No one issuer shall exceed more than five percent (5 %) of the
portfolio, and investment in negotiable and nonnegotiable
certificates of deposit shall be limited to thirty percent (30 %) of the
portfolio combined.
h) Negotiable Certificates of Deposit only with a nationally or state -
chartered bank, a savings association or a federal association (as
defined by Section 5102 of the Financial Code), a state or federal
credit union, or by a federally licensed or state - licensed branch
of a foreign bank whose senior long -term debt is rated at least
"A ", or the equivalent, or short -term debt is rated at least "A -1"
or the equivalent by an NRSRO and having assets in excess of $10
billion, so as to ensure security and a large, well- established
secondary market. Ease of subsequent marketability should be
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
five percent (5 %) of the portfolio, and maturity shall not exceed two
years. Investment in negotiable and non - negotiable certificates of
deposit shall be limited to thirty percent (30 %) of the portfolio
combined.
i) Prime Commercial Paper with a maturity not exceeding 270 days
from the date of trade settlement that is rated "A -1 ", or the
equivalent, by an NRSRO. The entity that issues the commercial
paper shall meet all of the following conditions in either sub-
paragraph i. or sub - paragraph ii. below:
0
F -1
i. The entity shall (1) be organized and operating in the United
States as a general corporation, (2) have total assets in excess
of $500,000,000 and (3) have debt other than commercial
paper, if any, that is rated at least "A" or the equivalent by
an NRSRO.
ii. The entity shall (1) be organized within the United States as
a special purpose corporation, trust, or limited liability
company, (2) have program wide credit enhancements,
including, but not limited to, over coIlateralization, letters of
credit or surety bond and (3) have commercial paper that is
rated at least "A -1" or the equivalent, by an NRSRO.
iii. No more than five percent (5 %) of the City's total portfolio
shall be invested in the commercial paper of any one issuer,
and the aggregate investment in commercial paper shall not
exceed twenty five percent (25%) of the City's total portfolio.
j} Eligible Banker's Acceptances with a maturity not exceeding 180
days from the date of trade settlement, drawn on and accepted by a.
commercial bank whose senior long -term debt is rated at least "A"
or the equivalent by an NRSRO at the time of purchase. Banker's
Acceptances shall be rated at least "A -1. ", or the equivalent at the
time of purchase by an NRSRO. If the bank has senior debt
outstanding, it must be rated at least "A" or the equivalent by an
NRSRO. The aggregate investment in banker's acceptances shall
not exceed forty percent (40 %) of the City's total portfolio, and no
more than five percent (5 %) of the City's total portfolio shall be
invested in banker's acceptances of any one bank.
k) Repurchase Agreements and Reverse Repurchase Agreements with
a final termination date not exceeding 30 days collateralized by U.S.
Treasury obligations or Federal Instrumentality securities listed in
items 1 and 2 above with the maturity of the collateral not
exceeding ten years. For the purpose of this section, the term
collateral shall mean purchased securities under the terms of the
City's approved Master Repurchase Agreement. The purchased
securities shall have a minimum market value including accrued
interest of one hundred and two percent (102 %) of the dollar value
of the funds borrowed. Collateral shall be held in the City's
custodian bank, as safekeeping agent, and the market value of the
collateral securities shall be marked -to -the- market daily.
10
F -1
Repurchase Agreements and Reverse Repurchase Agreements shall
be entered into only with broker /dealers and who are recognized
as Primary Dealers with the Federal Reserve Bank of New York, or
with firms that have a Primary Dealer within their holding
company structure. Primary Dealers approved as Repurchase
Agreement counterparties shall have a short -term credit rating of at
least "A -1" or the equivalent and a long -term credit rating of at
least "A" or the equivalent. Repurchase agreement counterparties
shall execute a City approved Master Repurchase Agreement with
the City. The Finance Director shall maintain a copy of the City's
approved Master Repurchase Agreement and a Iist of the
broker/ dealers who have executed same.
In addition, the City must own assets for more than 30 days before
they can be used as collateral for a reverse repurchase agreement.
No more than ten percent (10 %) of the portfolio can be involved in
reverse repurchase agreements.
1) State of California's Local Agency Investment Fund (LAIF),
pursuant to California Government Code Section 16429.1.
m) County Investment Funds: Los Angeles County provides a service
similar to LAIF for municipal and other government entities
outside of Los Angeles County, including the City. Investment in
this pool is intended to be used as a temporary repository for short -
term funds used for liquidity purposes. The Finance Director shall
maintain on file appropriate information concerning the county
pool's current investment policies, practices, and performance, as
well as its requirements for participation, including, but not limited
to, limitations on deposits or withdrawals and the composition of
the portfolio. At no time shall more than five percent (5 %) of the
City's total investment portfolio be placed in this pool.
n) Money Market Funds registered under the Investment Company
Act of 1940 that (1) are "no- load" (meaning no commission or fee
shall be charged on purchases or sales of shares); (2) have a
constant net asset value per share of $1.00; (3) invest only in the
securities and obligations authorized in the applicable California
statutes and (4) have a rating of at least AAA or the equivalent by
at least two NRSROs. The aggregate investment in money market
funds shall not exceed twenty percent (20 %) of the City's total
portfolio and no more than ten percent (10 %) of the City's total
portfolio shall be invested in any one fund.
11
=I
2. Investments Specifically Not Permitted
Any security type or structure not specifically approved by this policy is
hereby prohibited. Security types, which are thereby prohibited include,
but are not limited to: "exotic" derivative structures such as range notes,
dual index notes, inverse floating rate notes, leveraged or de- leveraged
floating rate notes, interest only strips that are derived from a pool of
mortgages and any security that could result in zero interest accrual if
held to maturity, or any other complex variable or structured note with an
unusually high degree of volatility risk.
The City shall not invest funds with the Orange County Pool.
1 Exceptions to Prohibited and Restricted Investments
The City shall not be required to sell securities prohibited or restricted in
this policy, or any future policies, or prohibited or restricted by new State
regulations, if purchased prior to their prohibition and /or restriction.
Insofar as these securities provided no notable credit risk to the City,
holding of these securities until maturity is approved. At maturity or
liquidation, such monies shall be reinvested as provided by this policy.
H. INVESTMENT PARAMETERS
1, Diversification
The City shall diversify its investments to avoid incurring unreasonable
risks inherent in over - investing in specific instruments, individual
financial institutions or maturities. As such, no more than five percent
(5 %) of the City's portfolio may be invested in the instruments of any one
issuer, except governmental issuers, investment pools and Money Market
Funds. This restriction does not apply to any type of Federal
Instrumentality or Federal Agency Security listed in Sections G1 b and Gl
c above. Nevertheless, the asset allocation in the investment portfolio
should be flexible depending upon the outlook for the economy, the
securities markets and the City's anticipated cash flow needs.
2. Maximum Maturities
To the extent possible, investments shall be matched with anticipated cash .
flow requirements and known future liabilities. The City will not invest in
securities maturing more than five years from the date of trade settlement,
unless the City Council has by resolution granted authority to make such
an investment at least three months prior to the date of investment.
3. Credit Quality
12
F -1
The City shall not purchase any security rated "A1" and / or "A +" or
below if that security has been placed on "credit watch" for a possible
downgrade by an NRSRO.
Each investment manager will monitor the credit quality of the securities
in their respective portfolio. In the event a security held by the City is the
subject of a rating downgrade which brings it below accepted minimums
specified herein, or the security is placed on negative credit watch, where
downgrade could result in a rate drop below acceptable levels, the
investment advisor who purchased the security will immediately notify
the Finance Director. The City shall not be required to immediately sell
such securities. The course of action to be followed will then be decided
on a case by case basis, considering such factors as the reason for the rate
drop, prognosis for recovery or further drop, and market price of the
security. The City Council will be advised of the situation and intended
course of action.
4. Competitive Transactions
Investment advisors shall make best effort to price investment
transactions on a competitive basis with broker /dealers selected
consistent with their practices disclosed in form ADV 2A filed with the
SEC. Where possible, at least three broker /dealers shall be contacted for
each transaction and their bid or offering prices shall be recorded. If there
is no other readily available competitive offering, the investment advisor
shall make their best efforts to document quotations for comparable or
alternative securities. If qualitative characteristics of a transaction,
including, but not limited to, complexity of the transaction, or sector
expertise of the broker, prevent a competitive selection process,
investment advisors shall use brokerage selection practices as described
above.
I. PORTFOLIO PERFORMANCE
The investment portfolio shall be designed to attain a market rate of return
throughout budgetary and economic cycles, taking into account prevailing
market conditions, risk constraints for eligible securities, and cash flow
requirements. The performance of the City's investments shall be compared to
the total return of a benchmark that most closely corresponds to the portfolio's
duration, universe of allowable securities, risk profile, and other relevant
characteristics. When comparing the performance of the City's portfolio, its rate
of return will be computed consistent with Global Investment Performance
Standards (GIPS).
J. REPORTING
13
F -1
Monthly, the Finance Director shall produce a treasury report of the investment
portfolio balances, transactions, risk characteristics, earnings, and performance
results of the City's investment portfolio available to City Council and the public
on the City's Website. The report shall include the following information:
1. Investment type, issuer, date of maturity, par value and dollar amount
invested in all securities, and investments and monies held by the City;
2. A description of the funds, investments and programs;
3. A market value as of the date of the report (or the most recent valuation as
to assets not valued monthly) and the source of the valuation;
4. A statement of compliance with this Policy or an explanation for non-
compliance
K. INVESTMENT POLICY COMPLIANCE AND ADOPTION
1. Compliance
Any deviation from the policy shall be reported to Finance Committee as
soon as practical, but no later than the next scheduled Finance Committee
meeting. Upon recommendation of the Finance Committee, the Finance
Director shall review deviations from policy with the City Council.
2. Adoption
The Finance Director shall review the Investment Policy with the Finance
Committee at least annually to ensure its consistency with the overall
objectives of preservation of principal, liquidity and return, and its
relevance to current law and financial and economic trends.
The Finance Director shall review the Investment Policy with City Council
at a public meeting if there are changes recommended to the Investment
Policy.
This Policy was endorsed and adopted by the City Council of the City of
Newport Beach on October 9, 2012. It replaces any previous investment
policy or investment procedures of the City.
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
14
Amended - January 24,1994
Amended - January 9,1995
Amended - April 22,1996
Corrected - January 27,1997
Amended - February 24,1997
Amended - May 26,1998
Reaffirmed - March 22,1999
Reaffirmed - March 14, 2000
Amended & Reaffirmed - May 8, 2001
Amended & Reaffirmed - April 23, 2002
Amended & Reaffirmed - April 8, 2003
Amended & Reaffirmed - April 13, 2004
Amended & Reaffirmed - September 13, 2005
Amended - August 11, 2009
Amended & Reaffirmed - August 10, 2010
Amended & Reaffirmed - September 28, 2010
Reaffirmed - June 28, 2011
Amended & Reaffirmed - October 9, 2012
Amended - August 13, 2013
F -1
15
STATE OF CALIFORNIA }
COUNTY OF ORANGE
CITY OF NEWPORT BEACH }
I, Leilani I. Brown, City Clerk of the City of Newport Beach, California, do hereby certify that the
whole number of members of the City Council is seven; that the foregoing resolution, being Resolution
No. 2013 -63 was duly and regularly introduced before and adopted by the City Council of said City at a
regular meeting of said Council, duly and regularly held on the 13`h day of August, 2013, and that the same
was so passed and adopted by the following vote, to wit:
Ayes: Gardner, Petros, Hill, Selich, Henn, Mayor Curry
Nays: None
Absent: Daigle
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the official seal of
said City this 141" day of August, 2013.
City Clerk —�
Newport Beach, California
(Seal)