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22 - Council Policy & Statement of Investment Policy
ITEM 22 TO: Members of the Newport Beach City Council FROM: Dave Kiff, Deputy City Manager SUBJECT: Council Policy Revisions for 2000 and Reaffirmation of City's Statement - -o Investment Policy RECOMMENDED ACTION: (a) Approve the proposed revisions to Council Policies A -2, A-4, A -6, D -2, E -2, F -2, F -5 and G -3; and; (b) Reaffirm Policy F -1 (Statement on Investment Policy); EXECUTIVE The City Council's Council Poling Manual tells City staff and the Council how to SUMMARY: address many common issues that arise in the city. The Policy Manual reflects the wishes of the Council regarding dozens of issues - from appointing commissioners to trimming trees - that are important to address in a consistent manner year after year. The Policy Manual directs the City Manager to conduct a review of the Manual at least once a year during the first quarter of the calendar year. This Agenda Item includes suggested changes to the Manual from the 2000 review and includes the text of the City's Statement of Investment Policy. Per a State of California requirement enacted after the 1994 Orange County bankruptcy, the item asks the Council to reaffirm this latter policy as it adopts changes to other policies identified above. BACKGROUND: This agenda item contains two distinct parts: • The annual review of the City Council's Council Policy Manual; and • The annual reaffirmation of the City's Statement of Investment Policy (Council Policy F -1) as required by California law. Policy Manual Changes Policy Manual Review. Council Policy D -3 directs the City Council to review the more than 100 "council policies" in the Council Policy Manual sometime during the first quarter of each calendar year. These policies instruct the Council and City staff on how to process a variety of different issues -- from airport and annexations to voice mail and water service outside the City limits. This year, the policies proposed for change are: A -2 - Board and Commission Appointments A-4 - Community Service Recognition Awards A -6 - Open Meeting Policies Newport Beach City Council Page 2 BACKGROUND: D -2 - Annexation Guidelines (cont'd) E -2 - Council Meetings Agenda Distribution to the Public by Mail F -2 - Reserves/ Designations of Fund Balance F -5 - Purchasing Authority for Goods and Services G -3 - Preservation of Views Attachment A describes these proposed changes briefly. Attachment B includes the Strikeout and Insert version of the policies proposed for change. Reaffirmation of City s Reaffirmation of City's Investment Policy. Following the County of Orange's Investment Policy bankruptcy in late 1994, the State Legislature adopted SB 564 (Johnston) which requires each local agency to consider its Statement of Investment Policy (the City Council's Policy F -1) annually. The law reads as follows: — Government Code § 53646 -- (a) The treasurer or chief fiscal officer shall annually render to the legislative body of the local agency and any oversight committee a statement of investment policy, which the legislative body of the local agency shall consider at a public meeting. Any changes in the policy shall also be considered by the legislative body of the local agency at a public meeting. The Administrative Services Department does not recommend any changes to the Statement of Investment Policy at this time, but offers the policy in full (provided within Attachment B) as a part of the City's obligations under SB 564 Qohnston). The Council's review of this policy at a public meeting (the March 14, 2000 City Council Meeting) completes this obligation. ATTACHMENTS: Attachment A - Council Policy Summary Attachment B - Strike -out and Underline Version of Council Policies A -2, A-4, A -6, D -2, E -2, F -2, F -5, and G -3. 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OE W G C > cO ma m 8 0 4 n9S E ¢ On ;on OJOxUw O 2 � nc � c .a L O m YQ `V � 9 � � 1 j . OU� Q er_ p °J'3in O N N g y y y y y y y y a a z W v W a 0 n a v u N 2 N a m c Q R J v n m ¢ r 2 E A 9 m O N N >� � <ai n' wm �C ry�w N i c@ p o C� nm . m `q m 4 LL -+ Z d m dd N 4 d m m m W W W W q+ y 2 (( rn nr w W W m q q .6 1q m m NN Nm m 3m W N Q ry N omm Ix cn ¢ m a ° = Q �ry o _m N¢ _ $ < T mm 4. .-m tz M 05 IL o U m O Vamv o a d O °c N u S m m p x Q `0 x m 1! OE W G C > cO ma m 8 0 4 n9S E ¢ On ;on OJOxUw O 2 � nc � c .a L O m YQ `V � 9 � � 1 j . OU� Q er_ p Mj BOARD AND COMMISSION APPOINTMENTS Service on City Boards and Commissions is one of the principal means by which citizens can participate in the conduct of City government. The number of citizens qualified for such service always exceeds the number of appointments that periodically can be made by the Council. On or before December 31 of each year, the City Clerk shall prepare a list of all appointive terms of Boards, Commissions and Committees which will expire during the next calendar year, with the name of the incumbent appointee, the date of appointment, the date the term expires, and the necessary qualifications for the position. Also, the City Clerk shall list all Boards, Commissions and Committees whose members serve at the pleasure of the City Council, and the necessary qualifications of each position. The City Clerk shall further maintain a file of Candidates for Board and Commission appointments, which shall be reviewed each year by the City Clerk to insure that those applicants are still available for appointment. Applications shall be retained in the active file for two (2) full years; thereafter they will be destroyed. Two months prior to a scheduled vacancy, the City Clerk shall prepare and submit to the various newspapers, information relating to the vacancy including meeting dates and times, Board or Commission functions, and the method of obtaining and submitting applications and establishing the third Wednesday prior to June 1 as the last date to submit applications. The City Clerk shall notify each applicant of the receipt of their application. Within twenty days after an unscheduled vacancy occurs on a Board or Commission, a special vacancy notice shall be posted in the City Clerk's office, and other locations as directed by City Council. Additionally the City Clerk shall prepare and submit to the various newspapers information relating to the vacancy including meeting dates and times, and Board or Commission application procedure. Final appointment (other than emergency appointments) shall not be made for at least 10 working days after the posting of notice. If an unscheduled vacancy occurs within one year from the expiration of the term, the City Council has the discretion to appoint a replacement to serve the balance of the unexpired term plus one full term of four years. Periodically, situations may arise wherein due to the occurrence of a number of simultaneously scheduled Board or Commission vacancies, it may be appropriate to 1 I A -2 make certain adjustments in the advertising and recruitment procedures, which are regularly utilized to fill these vacancies. In these cases, the City Council may make the following adjustments by majority vote at a regular public meeting: A. The two -month period prior to the occurrence of a scheduled vacancy, which is established for advertising purposes, may be extended to three months. B. The last date to submit applications for a vacancy may be changed from the third Thursday prior to June, to no sooner than the third Thursday prior to May 1. C. The period established for the ad -hoc Appointments Committee's recommendation to the Council of candidates, may be extended from at least two weeks, to at least four weeks prior to the date of appointment. When vacancies occur, the City Council shall make every effort to appoint the best - qualified person to serve the interest of Newport Beach. The City Council shall only appoint persons who have filed an application for appointment with the City Clerk no later than five (5) days prior to the date on which the City Council nominates candidates for positions. The application shall serve as a basis for determining if the person is a qualified elector of the City, has no conflict of interest that would prevent the applicant from serving, and otherwise satisfies the criteria for appointment specified in the City Charter and any relevant ordinance or Council policy. The City Council prefers that members of Boards and Commissions represent different geographical areas of the City, but residence is a consideration only when applicants are otherwise equally qualified. To afford the maximum opportunity for citizen service, no person shall be eligible for appointment to any one City Board or Commission for more than two consecutive four year terms, exclusive of a prior appointment to fill an unexpired term. Appointees shall serve on only one standing City Board, Commission or Committee at any time, with the exception of individuals who serve on committees as representatives from other City Boards, Commissions or Committees (i.e. a Planning Cormnissioner may be seated on the Economic Development Committee as a representative of the Planning Commission). At such time when an appointment to a Board or Commission is necessary, the Mayor will establish an ad -hoc Appointments Committee composed of three Councilmembers. The Committee's duties are as follows: 2 A -2 A. Review all applications for position to City Boards and Commissions. The ad- hoc Appointments Committee will review applicant answers to all questions contained in the application; B. Conduct any necessary interviews with individual applicants; and C. At least two weeks prior to the date of appointment, recommend to the full City Council at a regular public meeting, two or more candidates for each Board or Commission vacancy. Members of the Council may wish to interview the recommended candidates further prior to final selection by the Council. By requiring two or more candidates for each vacancy, it is the intent of the City Council that at least two separate individuals should be considered for each vacancy, i.e., if there are two vacancies, at least four separate individuals will be considered. The ad -hoc Appointments Committee, in conducting their review of applications and interviews with the individual applicants, shall attempt to determine if there exists a potential conflict of interest, which might interfere with the performance of the applicant's duties in an impartial manner free from bias. It is generally recognized that from time to time it is possible for any individual to have a conflict on any one given issue. The ad -hoc Appointments Committee, however, shall endeavor to avoid recommending appointments of applicants with a substantial conflict of interest, which would require repeated disqualification from voting on issues that are likely to come before the Board or Commission. PROCEDURE FOR VOTING ON APPOINTMENTS TO CITY COMMISSIONS, BOARDS AND COMMITTEES A. The Council will vote on all appointments and seats on each Board/ Commission simultaneously. The voting will be by paper ballot and the City Clerk will tabulate and announce the results, including the vote tally. B. Each member of the Council will cast the number of votes as indicated on the paper ballot for each seat from the list of the nominees. In order to be appointed, the nominees must receive at least four votes. C. For boards /commissions with two vacancies, if two of the nominees receive four or more votes, they will be automatically appointed. 3 q A -2 D. If there is a tie vote, ballots will be distributed to the Council Members to vote for the tying candidates only. E. In the event that no one receives four votes, nominees receiving zero or one vote will be dropped and the Council will cast two votes from the list of the remaining nominees and the determination will be made as previously stated. The City Clerk shall also be responsible for the following functions associated with Board and Commission as well as Citizens' Advisory Committee appointments: A. Preparation of letters for the Mayor's signature notifying successful candidates of their appointment, and accempany h of nt „a left B. Preparation of letters for the Mayor's signature notifying unsuccessful candidates for appointment. C. Preparation of letters for the Mayor's signature thanking outgoing members for their service and coordination with the Purchasing Agent in the preparation of formal Certificates of Appreciation. Once the final appointments are made by the City Council, the ad -hoc Appointments Committee will be dissolved. Adopted - June 28,1965 Amended - August 15,1966 Amended - September 26,1966 Amended - June 10, 1968 Amended - July 12,1976 Amended - September 12,1977 Amended - November 28,1977 Amended - December 19,1977 Amended - June 26,1978 Amended - March 12,1979 Amended - July 27,1981 Formerly A -4 Amended - November 23,1981 Amended - January 24,1994 Amended - February 26,1995 Amended - August 12,1996 Amended - February 24,1997 Amended - March 22,1999 Amended - July 12,1999 Amended - September 27,1999 Amended - March 14,2000 4 ti W] COMMUNITY SERVICE RECOGNITION AWARDS The Mayor is authorizes{ to select the mode and style of recognition awards, and to allow for suitable preparations, and shall be responsible for assessing the merits of various civic contributions and approving appropriate language for recognition resolutions. Consistent with the procedure, the following conduct or service shall be a basis for Council recognition and shall be honored with an official resolution describing the service of the person or organization: A. Noteworthy financial or service contributions to the civic affairs of the community by private citizens or organizations; B. Outstanding bravery or meritorious service in a time of crisis; C. Retirement or the end of employment for appointed municipal officials and staff executives; D. Special contributions by employees or Board and Commission members for effective or extraordinary service during employment or term of appointment. Elected officials who have concluded a term of office will be honored as follows: A. The Mayor, upon conclusion of term of office, will receive a mounted gavel plaque. B. A City Council Member, upon conclusion of term of office shall receive an appreciation plaque. BOARD AND COMMISSION MEMBERS l- -Board and Commission Members, upon conclusion of their term of office, shall receive a Certificate of Appreciation appropriately framed from the City Council for their service. 1 \t A -4 SERVICE OF EMPLOYEES, BOARD AND COMMISSION MEMBERS A. Employees, Board and Commission Members and Council Members, shall receive service pins for each five -year increment of service with the City. Since time limitations do not always permit official Council action, the Mayor is authorized to issue City seals, keys to the City or other suitable recognition symbols on behalf of the City to honor citizens, organizations or visiting dignitaries under such circumstances as the Mayor may deem appropriate. Adopted - October 28,1968 Amended - November 27,1978 Amended - February 9,1981 Amended - October 22,1990 Amended - January 24,1994 Amended - February 26,1996 Corrected - April 22,1996 Formerly A -7 2 1� OPEN MEETING POLICIES PURPOSE ►M• The Newport Beach City Council and certain Boards, Commissions and Committees are required to comply with the Ralph M. Brown Act (Brown Act). The Brown Act requires public entities to deliberate, and take action, in open session. The City Council has adopted these rules to ensure compliance with the Brown Act and to promote full citizen participation in the discussions and decisions of their elected and appointed representatives. POLICY A. Regular Meetings. The City Council shall hold regular meetings on the second and fourth Tuesdays of each month except in December when the only meeting will be held on the second Tuesday. The meetings shall be held in the Council Chambers of the City Hall, 3300 Newport Boulevard in the City of Newport Beach. The regular meeting shall begin at 4:00 p.m. for Study Session, Closed Session to follow immediately thereafter, recess after the report of Closed Session items, and reconvene at 7:00 p.m. The City Council may hold a regular meeting, special meeting, or adjourned regular or special meeting at another location within the City, or locations outside the jurisdiction of the City provided appropriate notice is given pursuant to, and the location of the meeting is consistent with, the Brown Act. When the day for any regular meeting falls on a legal holiday, no meeting shall be held on such holiday, but a regular meeting shall be held at the same hours on the following business day. B. All regular, special and adjourned meetings of the City Council, Boards, Commissions, and Committees created by the Charter or formal action of the City Council and which have continuing subject matter jurisdiction shall be called, noticed and conducted in compliance with the Brown Act. C. Regular City Council Meeting Agenda. 1. Staff shall provide the City Clerk with the title and recommendation of all items to be placed on a regular Council meeting agenda no later than 5:00 p.m. on two Fridays before the next regular City Council meeting. The City Clerk shall prepare this regular meeting agenda of all such matters 1 ME under the direction of the City Manager. This agenda shall be delivered to ............... the City Council Members on the WQdiiE 4� .. Thou preceding the Tuesday Council meeting to which it pertains. The agenda and staff reports will be available for the public and media at the office of the City Clerk in no event later than 8:30 a.m. on the Friday preceding the meeting, except for supplemental agenda items which will be available in no event later than 5:00 p.m. on the Friday preceding the meeting. The City Clerk shall insure delivery of all supplemental staff reports to the Central Library before close of business on Friday. 2. Members of the City Council may place items on the agenda for discussion by submitting a title or topic sufficient to satisfy the requirements of the Brown Act on or before 5:00 p.m. on the Thursday preceding the meeting at which the item is to be discussed. These items will appear under the section of the agenda titled, "Matters which Council members would like placed on a future agenda for discussion, action, or report (non- discussion item)." The City Manager shall prepare a supplemental agenda listing all discussion items if the discussion item was received after the cutoff time for the regular meeting agenda. 3. The regular meeting agenda shall contain a brief description of each item of business to be transacted or discussed and a statement that members of the public may offer testimony as to any matter on the agenda and may speak on non - agenda items during the public comment section of the agenda. The regular and supplemental agenda shall be posted on the bulletin board outside the main entrance of City Hall, at least 72 hours before each regular meeting, and the City Clerk shall maintain records of the name of the person posting the agenda, and the date and time of posting. 4. As a general rule, members of the City Council will ask that a matter be scheduled for a report and /or discussion prior to requesting the matter be placed on the agenda for action. However, the Council may, given appropriate circumstances, vote to place a matter on a future regular meeting agenda for action without prior discussion or report. 2 \ 1� M CLOSED SESSION AGENDA The closed session agenda shall be prepared and posted by the City Attorney. The closed session agenda shall strictly conform to the format specified in the Brown Act. The City Attorney shall prepare a written report, or give an oral report, of any action taken in closed session that is required to be reported in open session by the Brown Act and that report shall be available for inspection and /or copying at the meeting during which the closed session is held. COUNCIL CORRESPONDENCE The City Clerk is authorized to open and examine all mail or other written communications addressed to the City Council and to immediately give a copy to the City Manager. The City Manager shall give immediate attention to administrative business referred to in the communication that does not require Council action and may be promptly concluded or shall prepare a staff report for the next available Council meeting. ORDER OF BUSINESS The agenda for regular meetings of the City Council shall contain the following items in the order listed: Study Session; Closed Session (See separate closed session agenda); Closed Session Report (if applicable); Recess; Reconvene at 7:00 p.m.; Pledge of Allegiance; Invocation; Roll Call; 3 c, VAVrA Approval of Minutes; Waiver of reading in full of ordinances and resolutions; Special presentations; City Council announcements or items which Council members would like placed on a future agenda for discussion, action or report (non- discussion item); Consent Calendar items which shall include: A. Ordinances for introduction; B. Resolutions for adoption; C. Contracts and agreements, D. City committee reports; E. Miscellaneous actions (For example: Planning Commission actions, if appropriate; budget amendments; acceptance of public works, and permit applications); Disposition of Items Removed from the Consent Calendar; Public Hearings; Public Comments; Continued Business; Current Business; Motion for Reconsideration; Continued Closed Session, if necessary (report if applicable); and Adjournment. The order of business shall not be changed except by majority vote of the City Council. 4 `�r ►M. PREPARATION OF MINUTES The City Clerk shall have the exclusive responsibility for preparation of the minutes, and any directions for changes in the minutes shall be made only by majority action of the City Council. READING OF MINUTES Unless the reading of the minutes of a Council meeting is ordered by a majority vote of the Council, such minutes may be approved without reading if the City Clerk previously furnished each Council member with a copy. Adopted - November 13,1967 Amended - March 28,1994 Amended - June 13,1977 Amended - June 27,1994 Amended - October 25,1977 Amended - December 12,1994 Amended - February 9,1981 Amended - February 26,1996 Amended - December 9,1996 Amended - May 26,1998 Amended - November 8,1999 (eff.1/1/2000) 0 D -2 ANNEXATION GUIDELINES The City of Newport Beach's Sphere of Influence shows both City territory and the unincorporated County territory that may be considered for annexation to the City. In evaluating a proposed annexation, City staff shall present a report to the City Council which shall include , the following information: A. A Statistical Summary. All relevant data such as land area, population, dwelling units, street miles, park and open space acreage, and assessed valuation, to provide a summary of the area's characteristics. B. Land Use and Planning. Boundaries, topography and natural features, existing land use, general plans, and zoning to provide a detailed overview of the existing and planned physical characteristics of the area and to provide a comparison to areas within the City. C. A Plan of Services. Administration and facilities for public services such as such as police, fire, sewers, water, and schools, that exist today or are planned for the future. The Plan should also show the level of services to be provided compared to levels provided within the City. D. Traffic and Circulation. Roadways and traffic volumes within the area and their relation to those within the City. E. C -As-A Fiscal Imoact Analysis. The Analysis shall include initial initial "start- up" costs, other one -time costs, and continuing annual expenses to the City by each Department to serve the area. It shall also include one -time F. Reventies. One -tip and continuing additional revenues by each budget account to be received by the City as a result of annexation. The Analysis shall show the costs and benefits associated with the proposed annexation. GF. Demographics. A quantitative description of the population and their attribu as may be found in census and other similar data. 14G. Boundaries. Opportunity to realign boundaries that more closely approximate logical man -made or natural physical barriers. D -2 iH. Safe . Ability to better control fire, police, public health and safety oriented problems that cross municipal boundaries. JI. Service. Ability to eliminate awkward and irregular boundaries causing difficulty and inefficiencies in supplying utilities and City services. Ability to add residents whern, in terms of social, ethnie, eu4tural, eeenon�& and palitieal interests and habits already are related to the City. EI. Control. Ability to protect City taxpayers against future costs incurred to correct prior improper land development. MK. Public Facilities. Ability to provide space for specialized public uses, which are inappropriate in central locations. NL. Blight Elimination. Ability to eliminate existing or potential land uses and improvements considered a blighting or deteriorating influence. 9M. Preehisien Incorporation. Probability of the ell .,t:^ opportunity Likelihood of County areas to incorporate to the detriment of existing cities. PN. Image. Ability to increase City stature by annexation of land and /or improvements with exceptional characteristics. O rest Benefit n 1 sis Ability on the basis of Best benefit analysis to predure- government considered and . sales taxes, licenses; per dt serviee eharges� and ethee.- sifnilair and typical taxes and fees. These are to be consider-ea as "benefits" in tw est benefit analysis An example of serviees whiEh reflect Best to governmental ageneies are: St-eet - t +terra ce t-- , pie4up, libraries ,park fi-eand police - preteetie , sehaels, floed C-efftrel floe facilities, Adopted - February 27,1967 Amended - February 14,1972 Amended - October 26,1987 Amended - January 24,1994 Amended - March 9,1998 Amended - March 22,1999 2 E -2 COUNCIL MEETINGS AGENDA DISTRIBUTION TO THE PUBLIC BY MAIL The agenda of City Council meetings will be mailed to any business, organization or individual upon furnishing the City Clerk's office with stamped, self- addressed envelopes. The City Clerk shall specify type, size and postage required. Any person may obtain a copy of the agenda and all or a portion of the associated backup material from the City Clerk upon payment of the direct cost of dulication, ........................ .............. � ......gar . Adopted - December 17,1973 Amended - March 13,1978 Amended - February 9,1981 Amended - October 12,1982 Amended- November 12,1985 Reaffirmed - January 24,1994 Amended - June 13,1994 1 �P STATEMENT OF INVESTMENT POLICY PURPOSE F -1 To set forth the City's policy concerning the investment 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 yield, in that order. Investments shall be placed only in securities as outlined below. The balance between various investment instruments may change in order to provide the City with the best combination of yield, liquidity, and a consideration for other factors, such as placement of an appropriate percentage of available investment funds locally. It shall be the main responsibility of the City Council, in adopting this policy and reviewing the investment holdings on a monthly basis, to preserve the investment principal. INVESTMENT AUTHORITY Under the direction of the City Manager, the investment authority has been delegated to the Director of Administrative Services, who is responsible for administration of the City's investment program. This authority shall be renewed annually as part of the review and update of this Policy. In addition to the monthly investment report that is submitted to the City Council, the Administrative Services Director shall provide more detailed investment information to the City Council as requested. The City Council shall be briefed directly by the City's investment advisors on a quarterly basis whenever possible. Sections 53600 -53601 of the California Government Code provide basic investment limits and guidelines for government entities. In the event an apparent discrepancy is found between this policy and Sections 53600 - 53601, the more restrictive parameters will take precedence. LIQUIDITY Sufficient funding to accommodate at least two- week's projected cash outflow 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. At no time shall the liquid cash on 1 F -1 hand be less than 5 percent of the City's total investment portfolio. For purposes of this policy, cash on hand includes all cash and investments accessible within 48 hours. 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: "When investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, 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. Within the limitations of this section and considering individual investments as part to (sic) an overall investment strategy, a trustee is authorized to acquire investments as authorized by law." 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. A. Certificates of Deposit Only fully collateralized certificates of deposit with FDIC insured institutions will be utilized in investment of City funds. Government securities having a market value of 110 percent of the total amount of investment are acceptable as collateral. As an alternative, first trust deeds having a value of 150 percent of the total amount of investment are acceptable as collateral if approved by the Administrative Services 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 percent 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. Further, an institution must meet the following criteria to be considered by the City: 6 F -1 1. The institution must maintain at least $1 billion in assets ($100 million for fully insured CD's of $100,000 or less). 2. The institution must have been in business at least three years. 3. The institution must have a net worth to asset ratio of at least 6 percent. 4. The institution must place and maintain on file with the City an audited financial statement not more than one year old. 5. Interest shall be paid to the City on a monthly basis. B. Negotiable Certificates of Deposit As a matter of policy, the City invests in Negotiable Certificates of Deposit only with U.S. Banks whose underlying securities are rated A -1 or P -1 by one of the top two rating agencies and having assets in excess of $10 billion, 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 10 percent of the portfolio, and maturity shall not exceed one year. The California Government Code Section 53601 limits investment in negotiable certificates of deposit to 30 percent of the portfolio. C. Bankers Acceptances The City may 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 30 percent of the City's overall investment portfolio shall be placed in Bankers Acceptances. D. U.S. Treasury Issues The City may invest in treasury notes, bills and bonds. Safekeeping documentation of these instruments in an acceptable and secure account in the 3 ?3 F -1 City's name is required. Maximum maturity of any U.S. Treasury issue shall be five years. E. 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, or any other U. S. Government Agency security. Security requirements and maturity limitations are the same as those for U.S. Treasury issues. F. Commercial Paper The City may only invest in commercial paper issued by large, exceptionally well - established firms with the highest Moody's or Standard & Poor's ratings (Al /P1). Commercial paper shall be used solely as a short -term investment not to exceed 180 days. Additionally, not more than 15% of the portfolio shall be invested in commercial paper with a maturity beyond 30 days. Another 15% may be invested in commercial paper with a maturity of less than 30 days. Security requirements are the same as those listed above. Investment in commercial paper of any one issuer shall not exceed 10 percent of the portfolio. G. Repurchase Agreements ( Repos) and Reverse Repurchase Agreements Repos and reverse 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 deliver adequate collateral to the City's safekeeping account (either directly or through a third party safekeeping agent), consisting of U.S. Treasury or Agency securities at the rate of 102 percent of the face value of the repo. The amount of this collateral must be sufficient to compensate for fluctuating market conditions. Repos will only be purchased from Primary Dealers. Assets must be owned by the City for more than 30 days before they can be used as collateral for a reverse repurchase agreement. No more than 10% of the portfolio can be involved in reverse repos. 4 F -1 H. Passbook Savings 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. I. Local Agency Investment Fund (LAIF) (State of California) State Regulation limits any one City's investment in this fund to $20 million at any one time, and prohibits more than 10 transactions (deposits or withdrawals) per month. Investment in this Pool is intended to be used as a temporary repository for short -term funds used for liquidity purposes. At no time shall more than 10 percent of the City's total investment portfolio be placed in this Pool with the exception that 25 percent of the portfolio may be placed in the Pool for a period not to exceed 30 days. J. 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. Investment in these pools is intended to be used as a temporary repository for short -term funds used for liquidity purposes. At no time shall more than 10 percent of the City's total investment portfolio be placed in either of these Pools. K. 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 for individual securities shall not exceed five years, and not more than 15% of the portfolio shall be invested in medium term notes of maturity greater than 2 years. No more than 30 percent of the City's investment funds shall be placed in securities of this type. L. Asset - backed Securities Investment in asset - backed securities is limited to those collateralized with consumer receivables, rated "AAA," or the equivalent, by Moody's Investor 5 F -1 Services or Standard & Poor's, Inc., and which have a final, stated maturity of five years or less from the date of purchase. M. Municipal Bonds Municipal bonds rated AAA, or AA and insured, are acceptable investments for the City. Not more than 15% of the portfolio shall be in investments 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 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. At no time shall more than 35 percent of the City's total investment portfolio be placed in any investment management account. It is the intent of this policy, for diversification purposes, that no more than 20 percent of the City's total investments will be placed in any investment manager's account. In order to implement this requirement, the City's portfolio assets will be reallocated annually to its investment managers. SAFEKEEPING /THIRD PARTY CUSTODIANS Cash and securities in the City's portfolio, which are being managed by private sector asset/ investment management companies, will not be in the custody of those companies. The City will contract separately with major banks or other well - established, reputable financial institutions, which provide custodial services to maintain custody of cash and securities in this category. In the case of a major financial institution, the City may have an asset/ investment management relationship, and a custodial relationship, with the same entity. However, the services must be provided by separately managed departments within that entity, and the City's portfolio must be completely separate and distinct from the assets of the institution and from all other portfolios managed by the institution. r� av F -1 RATING AGENCY CHANGES In the event a security held by the City is the subject of a rate drop which brings it below accepted minimums specified herein, the investment advisor who purchased the security will immediately notify the Administrative Services Director or Deputy Director of that fact. 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 by e -mail or fax. REPORTING REQUIREMENTS In addition to the Monthly Investment Report, the City Council shall receive a detailed quarterly listing of all investments in the City portfolio. The report must show the type of investment, issuer, date of maturity, par and dollar amount of deposit/ investment, and rate of interest. Quarterly reports from outside investment managers must also include market valuation of assets under their management and the source of that valuation, and shall also include a statement of compliance with investment policy. Current ratings of non - government securities, either Moody's or Standard & Poor's, will be included. In his report to Council, the Director of Administrative Services shall include a statement denoting the ability of the City to meet its expenditures for the next six months, and shall also include a statement of compliance with investment policy for assets under his direct management. In addition, the City Council shall be notified whenever 5 percent or more of the total portfolio is invested, withdrawn, or moved from one Investment Advisor or Pool to another. 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 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 7 _-1 RESERVES/ DESIGNATIONS OF FUND BALANCE PURPOSE F -2 To establish City Council policy for the administration of financial reserves and fund balances. DISCUSSION A. Background. Prudent financial management dictates that some portion of the funds available to the City be reserved for future use. Future uses are categorized as either pre - planned projects or unforeseen financial emergencies. B. Structure and Funding of Reserves. This Policy establishes Reserve Accounts or designated Fund Balance levels for moneys being held in reserve. In addition, the sources and eventual use of Reserve Funds are set forth. It is the policy of the City Council that each Reserve identified herein is to be fully funded as part of the annual budget process. If operational or other considerations require the City Council to temporarily override this policy during any fiscal year, the City Manager will recommend to the City Council a plan to restore any Reserves falling below required minimum levels. Reserve levels will be restored as soon as practical, but in not more than 5 years. Each of the City's fiscal reserves is established and maintained for one of four purposes listed in general order of importance below. If the reserve requirements of this policy are unmet in any fiscal year, the City Manager will recommend funding prioritization to the City Council as part of the Budget. C. Use of Reserves. Governing parameters regarding use of funds in Reserve Accounts is established by Council Policy F -3. The City Council decides whether to appropriate funds from Reserve Accounts. Even though a project or other expenditure qualifies as a proper use of Reserves, the Council may decide that it is more beneficial to use current year operating funds or bond proceeds instead, thereby retaining the Reserve funds for future use. Reserve Funds will not be spent for any function other than the specific purpose of the Reserve Account from which they are drawn without a separate City Council Resolution approving that specific action. 1 2� F -2 D. Categories of Reserves. 1. Accounting Reserves. Generally accepted governmental accounting practices require identification of generic reserve funds for certain purposes. These accounts represent the unspendable portions of fund balance, such as inventories and long term receivables, as well as funds that are legally restricted by some external source, such as debt service reserves and encumbrances. Reserving funds for a contract awarded in one year but not completed until a succeeding year is one example of an accounting reserve for encumbrance. 2. Contingency Reserves. Contingency Reserves represent funds for unexpected financial emergencies. One example requiring the use of this Reserve is the adverse impact of natural disasters such as earthquake or flooding on revenue availability, as well as increased demand for City services. Other examples are unexpected loss or reduction of a key revenue source; special projects, programs, or price changes mandated by another government entity; and emergency capital projects needed to deal with unforeseen structural failure. 3. Designated Reserves. These Reserves are designated for known or anticipated events. Such events require large, non - recurring financial outlay, such as the replacement of systems and equipment or major capital improvements. 4. Stabilization Reserves. Stabilization Reserves enhance the orderly management of the Operating Budget by stabilizing revenues and expenditures, which fluctuate beyond the ability of City staff to control or predict. One example is the annual change in retirement contribution rates mandated by the Public Employee Retirement System (PERS). Other examples are changing prices for utilities and fuel, as well as the volatility in certain special program funding. These Reserves provide stability by "smoothing out" year to year volatility in the City's finances. FUNCTION AND ADMINISTRATION OF RESERVE ACCOUNTS Reserves are identified below by fund, category and specific function. The specific numbers of accounts where these Reserves are physically located change from time to time as the overall account structure is updated and modified. However, the Fund Balance Statement, which is available for ready reference in the City's Annual Budget 2 �G� F -2 document, identifies balances, past -year activity, and projected current year activity for each of these Reserves. A. General Fund. 1. Accounting Reserves. a. Reserve for Inventories. The value of inventories purchased by the City but not yet issued to the operating Departments is reflected in this account. b. Reserve for Debt Service. Funds are placed in this Reserve at the time debt is issued. The provisions governing the Reserve are established in the Bond Indenture, and the Reserve itself is controlled by the Trustee. C. Reserve for Long Term Receivables. This Reserve is used to identify and segregate that portion of the City's financial assets which are not due to be received for an extended period, so are not available during the budget year. d. Reserve for Encumbrances. This Reserve accommodates spending for contracts or other items, which are legally committed but not expended by fiscal year end. 2. Contingency Reserve. This Reserve has a target balance of one - twelfth (1/12) of General Fund operating expenditures. The City Council authorizes expenditures from this Reserve. 3. Designated Reserves. a. Coital Improvement. Generally accepted governmental accounting practices do not provide for the depreciation of assets of Governmental Funds such as the General Fund. Therefore, special procedures are required to set aside money (a "sinking fund ") for replacement or renovation of fixed assets such as, but not limited to, City Hall and Police Department buildings, Fire Stations, and Library Branches. 3 3p F -2 The Capital Improvement Reserve will accumulate funds only for infrastructure items financed through the General Fund. Infrastructure assets of Enterprise Funds, as well as those of Governmental Fund, for which non - general fund money is available, are not components of this Reserve. Funds from this Reserve are restricted to replacement or acquisition of periodic, major projects or improvements typically exceeding .7% of the annual General Fund Operating Budget (not including capital projects). Projects for which this Reserve is intended generally have the effect of extending the useful lives of infrastructure items. The City Manager will update the status of items of the General Fund infrastructure inventory on an annual basis. Included as part of the City Manager's budget proposal will be a plan to fund this Reserve at a level of not more than one hundred percent (100%) of the replacement cost of each asset by the year in which replacement is anticipated. b. Senior Citizen Site. This Reserve is established by Council Policy I -5, which specifies that ten percent (10 %) of revenue collected from rental of facilities at the Oasis Center be set aside for equipment replacement and /or refurbishment at the Center. C. Park Fees. This Reserve contains Park Fees collected by the construction permit process. Use of Park Fees is governed by Council Policy I -1, which limit their expenditure to park, open space, and recreational facilities. d. Off Street Parking. Newport Beach Municipal Code 12.44.025 establishes this Reserve and governs its administration. Fifty percent (50%) of parking meter revenue collected in designated areas is set aside for acquisition, development, and improvement of off street parking facilities within those areas. e. Neighborhood Enhancement Reserve. Newport Beach Municipal Code 12.44.027 establishes this account and governs its administration. Funds for the Neighborhood Enhancement Reserve are derived from designated parking meters and used for enhancement of services to designated areas. 0 5t F -2 f. Helicopter Replacement. Each year the Police Department will budget operating funds sufficient for the orderly replacement of police helicopter assets. These funds will be transferred to the Helicopter Replacement Reserve until eventually appropriated by the City Council for a replacement helicopter. g. Paramedic Program (Hoag). This Reserve was established by the City in conjunction with a--debt issuance agreements with Hoag Hospital. In addition to the original amount(s) deposited to this reserve, effective July 1, 2000, any execess revenues generated bX this program, after accounting for General City Overhead of 15 percent, shall be deposited to this reserve account for future paramedic related purposes, to a maximum of $250,000. Funds in this reserve account may be used for any paramedic related purpose as directed by the City Council. Target level for this reserve is 25% of the annual budget for operations and capital expenditures. h. Recreational Instruction Reserve. City Council Policy I -2 establishes reserves for surfboard replacement and refurbishment, development of tennis courts, and development of new recreational activities. The Policy requires twenty percent (20 %) of gross annual revenues derived from specified recreational classes be set aside. 4. Stabilization Reserve. The Stabilization Reserve has a target balance of two percent (2 %) of the budgeted expenditures within the General Fund. Each year, the City Manager will analyze uncontrollable revenues and expenditures. When expenditures are required from this Reserve, the City Manager will note the reasons in the preliminary and final budget. The Stabilization Reserve may have subdivisions. B. Water Fund. (City Council Policy L -20 contains additional information concerning budgeting and rate setting within the Water Fund.) 1. Contingency Reserve. I F -2 a. Water System Reserve. This Reserve is used for emergency repair to the water system. The target level for this Reserve is 25% of the annual budget for operations and capital expenditures. 2. Designated Reserves. a. Future Water Infrastructure Reserve. This Reserve is used for large designated projects that are part of the water distribution system. System replacement/ upgrade and most improvement/ major maintenance projects are funded within that amount. However, certain large -scale projects are projected on a ten -year horizon, which is updated and refined each year. The purpose of this Reserve is to set aside partial funding for those projects in advance. Included as part of the City Manager's annual budget proposal will be a plan to fund this Reserve at a level of not more than one hundred percent (100 %) of the projected cost of planned projects by the year in which contract award is anticipated. Projected future costs notwithstanding, a minimum of five percent (5 %) of the annual budget for operations and capital expenditures will be set aside to this reserve each year. The City Council must approve the ultimate fund transfer from this Reserve to a designated Water Enterprise Fund Capital Project Account as part of the Budget process. C. Wastewater Fund. 1. Contingency Reserve. a. Wastewater System Reserve. This Reserve is used for emergency repair to the Wastewater system. The target level for this Reserve is 33% of the annual budget for operations and capital expenditures. 2. Designated Reserve. a. Future Wastewater Infrastructure Reserve. This Reserve is used for large designated projects that are part of the City's Wastewater system. Funds are reserved for large -scale future projects, which cannot be accommodated within the annual budget of the year in R F -2 which they are planned. In the years prior to estimated contract award, the City Manager's budget proposal will include a plan to set money aside in this Reserve sufficient to accumulate not more than one hundred percent (100 %) of the projected cost of such projects. rA �4 F -2 D. Internal Service Funds. Internal Service Funds receive moneys from departmental operating budgets. There are two Internal Service Funds: the Equipment Maintenance and Replacement Fund, and the Insurance Reserve Fund. One of the functions of Internal Service Funds is to act as reserve accounts. 1. Equipment Maintenance and Replacement Fund. The Equipment Maintenance and Replacement Fund receives operating moneys from the Departments to provide equipment maintenance and to fund the regular replacement of major pieces of equipment (mostly rolling stock) at their economic obsolescence. a. Equipment Maintenance Account. In order to provide adequate funds for unexpected extraordinary costs due to damage or mechanical failure to a large piece of equipment, five percent (5 %) of the total annual budget for equipment maintenance is retained in the Fund. b. Equipment Replacement Account. Departmental operating funds are charged amounts sufficient for the replacement of rolling stock in accordance with Council Policy F -9. Equipment replacement needs vary from year to year; therefore the year -end Fund balance will fluctuate. It will increase substantially in the years preceding major purchases or when an unusually large percentage of the fleet is scheduled for replacement. The City Manager annually determines and adjusts the rates for collection of funds from the Departments based on pricing, future replacement schedules, and other variables. 2. Insurance Reserve Fund. The operating budgets of City's Departments are charged for Liability, Workers' Compensation, and Compensated Absences. a. Liability and Workers' Compensation Accounts. These accounts each serve three purposes: Payment of insurance premiums; 0 �5 F -2 Payment of the deductible (self- insured retention) for liability or workers' compensation claims; Reserve for future claims. i. Collection of Funds. Each year, the City Manager will determine and adjust the internal collection rates from the Departments. ii. Short Term Expenditures. The Budget will account for projected expenditures during the coming year. iii. Future Costs. Money will be set aside each year to accommodate projected long term cash outflow. The annual funding level will be sufficient to offset the estimated cost of known claims. Resolution of most claims fall within a three - year window. At this time, the target fund balance each year is fifty percent (50 %) of the estimated overall liability for known or anticipated claims, based on the City's general experience in the past. 3. Compensated Absences. a. Background. Employee benefits such as accumulated flex leave, vacation leave, and sick leave, have a cash value. Accounting practices require that the book value of the City's compensated absences liability reflect the cash outflow as if all absences were cashed out immediately. Much of this cash outflow will never occur, since the benefits will be taken in the form of time off, rather than cash. Additionally, the cash outflow could occur all at once only if the City dissolved and made full payment for all accumulated leave amounts. The largest portion of leave -to -cash conversion is at an employee's retirement. That amount can be estimated with reasonable accuracy. b. Policy and Practice. The City will fund an appropriate amount, but not the entire long -term book liability, for compensated absences. VJ 3�� F -2 i. Each year, the City Manager will project the amount of expected short -term cash liability for compensated absences and budget expenditures from the Compensated Absences Account. ii. The City Manager will establish a target closing balance that will fund not less than twenty -five percent (25 %) of the long- term liability for compensated absences. Adopted - January 24,1994 Amended - April 10, 1995 Amended - April 27,1998 f[U PURCHASING AUTHORITY FOR GOODS AND SERVICES PURPOSE F -5 To establish the policy for the authority to purchase goods and services or capital outlay items for the City and for the payment of such items. POLICY It shall be the policy of the City to adhere to the 'Purchasing Procedures" and the "Procedures for Processing Payables" as prepared by the Administrative Services Department and adopted by the City Council. By reference to those procedures, they become part of this Policy Manual. Adopted - January 24, 1994 Corrected - February 26, 1996 Formerly F -14 1 G -3 PRESERVATION OF VIEWS The purpose of this policy is to identify the importance of views lost to excessive plant growth. The objectives of this policy are to: A. Preserve and promote the aesthetic and environmental benefits provided by trees and the preservation of views of the surrounding locale, recognizing views can be enhanced and framed by properly maintained trees. B. By example, City will endeavor to maintain all City -owned plants in a manner to maximize public and private view planes. Exceptions can be trees that in themselves enhance either the overall beauty of the area or are included in Preservation of Special Trees list of Council Policy G- 1(Retention or Removal of City Trees). (,G+. Special requests for view trimming of City trees shall not be honored to protect the tree trimming cycle /schedule unless deemed necessary by the General Services Director or the resident complies with the provisions of the Tree Trimming Standards /Supplemental Trimming section of Council Policy G -1. I In an effort to preserve views in the 200 blocks of Carnation, Jasmine, Larkspur, Marigold, and Orchid Avenues, the planting of parkway trees is prohibited. Definitions to clarify this policy are: A. Unreasonable Obstruction of View. A tree, shrub, hedge or other vegetation should be maintained on public property in the City in such a manner as to not unreasonably obstruct the view from other property. B. Views. "View" means a range of sight including pleasing vistas or prospects or scenes. Views include, but are not limited to, the sight of geologic features, bays, oceans, skylines, bridges and parks. Adopted —July 22, 1991 Amended — January 24,1994 Formerly I -12