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Council Policy Manual Update for 2004 <br />April 13, 2004 <br />Page 2 <br />• <br />Statement of Investment Policy (F -1) <br />Regardless of changes, this policy needs to be re- certified by the City Council every <br />year, and we accomplish that as part of this process. We also routinely ask our <br />Investment Advisers to review the Policy each year and recommend changes. They <br />almost always provide valuable input, usually due to a subtle change in law or <br />regulation; or as a result of new or refined investment vehicles. The only proposed <br />change this year involves the limiting parameters defining permitted Commercial Paper <br />investments. The net substantive impact of the change will be minimal, but the wording <br />needs to be revised to bring our Policy more in line with current rating standards and <br />terminology. <br />Reserves /Designation of Fund Balance (F -2) <br />The recommended changes in this policy are in three areas. First, the nature of the link <br />between Stabilization Reserves and the fluctuations in market value of investments is <br />described in more detail. Second, a Designated Reserve is established within the Tide <br />and Submerged Lands Fund to act as the repository for funds the City is setting aside to <br />deal with the expense of abandoning oil wells when they are no longer economically <br />productive. Based on the estimated life spans of the wells, a certain amount of money <br />is budgeted into this Reserve each year to deal with this eventual expense. Third, <br />certain Reserves (primarily Accounting Reserves) which had previously only been <br />described within the General Fund have also been included in the Water and <br />Wastewater Enterprise Funds. <br />Budget Adoption and Administration (F -3) <br />There are three recommended changes to this Policy as well. The first recommends <br />language that will set forth City Policy concerning posting of transactions as abatements <br />of revenues and expenditures. In short, this is an accounting practice that should be <br />used on a v ery I imited a nd s elective b asis. T he s econd p roposal a dds a p aragraph <br />describing policy for the financial administration and budgeting of Special Assessment <br />Districts. Third, language is added that will extend the limit of authority of the City <br />Manager to approve changes to Public Works projects under certain urgent situations. <br />Among other things, the Policy revision calls for City Council notification and convening <br />a special meeting if a Council Member so desires. <br />Ackerman Trust (F -16) <br />The changes proposed for this Policy are fairly substantial. Intermediate transactions <br />have now been completed, and the City's procedures for administering the funds in the <br />Trust have matured. The thrust of the modifications to the Policy is to establish annual <br />fiscal procedures and expenditure limits which will insure the long -term viability of the <br />Trust. The actual calculation is a bit complex, involving the five -year moving average of <br />annual earnings, but, in short, the rules provide that annual spending for scholarships <br />and library support will be limited to actual earnings less inflation. The inflationary <br />portion of earnings will be added to the principal amount. This insures that funds in the <br />Trust will increase so as to remain constant with the economy in relative magnitude. <br />