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92-2793 Ordinance ORDINANCE NO. 92-2793 AN ORDINANCE OF THE CIlY OF MIAMI BEACH, FLORIDA, AMENDING ORDINANCE NO. 87.2588 PROVIDING FOR THE INVESTMENT OF SURPLUS FUNDS, PROVIDING FOR A REPEALER, SEVERABILIlY AND AN EFFECTIVE DATE. Whereas, the City Commission adopted Ordinance 87-2588 which specified the permitted investments for City funds, and, Whereas, the City Commission wishes to make additional investment options available for use by the City, NOW, THEREFORE, BE IT ORDAINED BY THE CIlY COMMISSION OF THE CIlY OF MIAMI BEACH, FLORIDA: Section 1. That Ordinance 87-2588 be amended by adding subsection (f) to Section 1 of the Ordinance to read as follows: ill commercial paper issued by any corporation organized under the laws of any State with a rating of A-lor P-I from a recognized financial rating agency: however. in no event shall the City purchase more than ten percent (10%) of its total of investment of surplus funds in anyone corporations commercial paper. Section 2. All Ordinances or parts of Ordinances in conflict herewith be and the same are hereby repealed. Section 3. If any section, subsection, clause or provision of this Ordinance is held invalid, the remainder shall not be affected by such invalidity. Section 4. This Ordinance shall take effect on the 26th day of SeptemblYr1992. Passed and Adopted this 16th day of September 1992. Attest: r-?1k-.~ ~~~ City Clerk 1st reading 9/2/92 2nd reading 9/16/92 FO APPROVED LEGAL DEPT. By~77~ ry; ?/t.-- Date CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH FLORIDA 33139 CITY OF MIAMI BEACH COMMISSION MEMORANDUM NO. TELEPHONE: (305) 673-7010 FAX: (305) 673-7782 52/-92rr~ OFFICE OF THE CITY MANAGER DATE: September 16, 1992 TO: Mayor Seymour Gelber and Members of the City Commission FROM: Roger M. CarttoP J J ~ !:) I City Manager v"vtIl.(J~ SUBJECT: Ordinance amending the Investment Policy by adding commercial paper as an authorized investment Administrative Recommendation: The Administration recommends that the City Commission adopt this Ordinance on first reading and call a public hearing for September 16, 1992. Back~round: The City has invested its surplus funds primarily in certificates of deposit from local banking institutions and in U. S. Treasury securities over the past several years. With the decline in interest rates and the lack of demand for funds by the banks, the rates of return that have been achieved over the past year have been well below expectations. Corporations still have the demand for funds and the rates available on high grade corporate commercial paper are higher than that available on the investments that are currently used. High grade paper is the short term commercial paper issued by major corporations. Examples of such corporations would be General Motors Acceptance Corp., Ford Motor Credit, General Electric Credit Corp. and Citicorp Bank. There is an opportunity for the City to improve its return with the addition of high grade commercial paper as an authorized investment. Analysis: The City averages approximately $65,000,000 on an annual basis for cash management investm{;onts: The current decline in interest rates over the last year has resulted in the reduction of $1,300,000 in interest earnings for the City. The decline in interest rates has also been coupled with a decline in demand for funds in our banking community which has caused rates paid on certificates of deposit to be offered at lower z AGENDA ITEM R-3-(3 ~ - I G - C, 2- DATE rates than are offered on U. S. Treasury Bills. High grade commercial paper placed by major corporations is currently being offered at approximately 15 basis points or .15% over Treasury rates. This would produce $100,000 over the income that the City of Miami Beach would earn with existing investment practices. Conclusion: This expansion of the investment options available to the City has the potential of producing an extra $100,000 in income to the City and in conjunction with the FY 93 Proposed Budget should be adopted. 3