C7D-Amend City�s Investment Policy Add Israeli Bonds As Authorized InvestmentsCOMMISSION ITEM SUMMARY
Condensed Title:
A Resolution of the Mayor and City Commission of the City of Miami Beach, Florida,
amending the City's investment policy and procedures, as adopted by Resolution No. 95-
21726 and amended by Resolutions No. 97-22315 and No. 2007-26602 by adding Israeli
bonds as authorized investments, adding maximum percentage per issuer and replacing the
investment committee with the investment advisor.
Key Intended Outcome Supported:
Improve the City's overall financial health and maintain overall bond rating.
Supporting Data (Surveys, Environmental Scan, etc.): As required by the Florida
Legislature, Florida Statutes 218.415. ·
Issue: I Should the Mayor and City Commission approve the Resolution?
Item Summary/Recommendation:
The Administration recommends that the Mayor and City Commission amend the City's
Investment Policy and Procedures, as adopted by Resolution No. 95-21726 and amended by
Resolutions No. 97-22315 and No. 2007-26602 by adding Israeli bonds as authorized
investments, adding maximum percentage per issuer and replacing the investment committee
with the investment advisor.
Adviso Board Recommendation:
Financial Information:
Amount Account Approved
Source of Funds: N/A
OBPI
Total
Ci Clerk's Office Le islative Trackin
Patricia Walker, Chief Financial Officer
Si n-Offs:
Department Director
JMG
T:\AGENDA\2012\January 11\Regular\lnvestment Policy Change FY12-Summary Memo.docx
(9 MIAMIBEACH 117
AGENDA ITEM C. 7 [)
DATE /-// -12...
~ MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
TO:
FROM:
DATE:
SUBJECT:
COMMISSION MEMORANDUM
Mayor Matti Bower and Members of the City Commission
Jorge M. Gonzalez, City Manager ex
January 11, 2012 u
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, AMENDING THE CITY'S
INVESTMENT POLICY AND PROCEDURES, AS ADOPTED BY
RESOLUTION NO. 95-21726 AND AMENDED BY RESOLUTIONS
NO. 97-22315 AND NO. 2007-26602 BY ADDING ISRAELI BONDS
AS AUTHORIZED INVESTMENTS, ADDING MAXIMUM
PERCENTAGE PER ISSUER AND REPLACING THE INVESTMENT
COMMITTEE WITH THE INVESTMENT ADVISOR.
ADMINISTRATION RECOMMENDATION
Adopt the Resolution.
KEY INTENDED OUTCOME SUPPORTED
Improve the City's overall financial health and maintain overall bond rating.
BACKGROUND
On November 18, 1987, the City passed and adopted Ordinance No. 87-2588 which amended
the Code of the City of Miami Beach by creating Chapter 18A entitled "Investment of Surplus
Funds." This Chapter authorized the City to invest and reinvest any surplus public funds in such
investments as US Government obligations, banker's acceptances, certificate of deposits,
obligations issued by any state or territory of the United States, and other types of investment
instruments.
On September 16, 1992, the City amended Ordinance No. 87-2588 by passing and adopting
Ordinance No.92-2793 which added commercial paper rated A-1 and P-1 from Moody's and
Standard & Poor's as another allowable investment.
The City again amended Chapter 18A on March 15, 1997 by passing and adopting Ordinance
No. 97-3074 which added corporate notes and bonds, money markets and mutual funds, fixed
income mutual funds, mortgage-backed securities, external managed investment funds, and
interest rate swaps agreements to the list of allowable investments instruments.
118
Commission Memorandum
Investment Policy
January 11, 2012
Page 2 of 3
The City's Investment Policy and Procedures were officially adopted in writing on September 27,
1995 with the passage and adoption of Resolution No. 95-21726. This was a result of the
passing of Chapter 218.415 of the Florida Statutes that required the adoption of a formal written
investment policy by local governments.
On March 5, 1997, the City passed and adopted Resolution No. 97-22315 which adopted the
percentages of the City's funds which may be invested in each investment category.
The last amendment to the Investment Policy was done in 2007 by the request of then Mayor
David Dermer who wanted to add certain investments that the City should not invest in. He
wanted to incorporate the State's "Protecting Florida's Investment Act" to the City's policy. This
Act prohibited the investment of public funds managed by the City in any "Scrutinized
Companies" with active business operations in Sudan or Iran, as listed by the State Board of
Administration (SBA) on a quarterly basis. Thus, this Act was incorporated into the City's
Investment Policy by the adoption and passage of Resolution No. 2007-26602 on July 11, 2007.
ANALYSIS
The State of Florida, in the passing of Chapter 218.415, has allowed the investment in Israeli
bonds. Chapter 218.415( 16) specifically states that "(t)hose units of local government electing
to adopt a written investment policy ... may by resolution invest and reinvest any surplus public
funds in their control or possession in: .... (f) rated or unrated bonds, notes, or instruments
backed by the full faith and credit of the government of Israel."
Due to the State allowing investments in Israeli bonds, the City recommends the addition of
Israeli bonds to the list of authorized investments in the City's Investment Policy and Procedure.
In addition, we recommend the removal of Section L-lnvestment Committee from the Investment
Policy and replacing it with Investment Advisor. The City has for several years now had
Cutwater Investor Services Corp. ("Cutwater") (formally known as MBIA Municipal Investors
Services Corporation) as its Investment Advisor. They have provided the City with numerous
investment opportunities especially in a market of declining interest rates. They also had the
foresight of advising us not to investment in the Florida Local Government Investment Pool
which froze all deposits/withdrawals in November 2007 that resulted in many governments from
retrieving 100% of their investments.
Cutwater continuously works with the City Administration to refine our investment strategies and
assist us in insuring the fiscally responsible and prudent investment of all City funds. They have
recently made recommendations to modify the City's Policy that will assist us in maintaining a
strong portfolio of investments as well as update the language and terminology to conform the
policy to current government industry best practices. Cutwater has recommended the addition
of a maximum percentage per issuer for each type of investment which will reduce the risk of
over-investing in any one particular issuer.
The City's Investment Policy has been reviewed by our Investment Advisors and the City, and
we have made other minor changes to bring it into a more current status. The revised
Investment Policy and Procedures are included herein as Exhibit A.
119
Commission Memorandum
Investment Policy
January 11, 2012
Page 3 of 3
At the December 6, 2011, meeting of the Finance and Citywide Projects Committee, the
Committee voted to recommend approval of the proposed revisions to the City's Investment
Policy and Procedures and that the Policy be updated, at a maximum, every five years to more
accurately reflect conditions in the market.
CONCLUSION
The Administration recommends that the Mayor and City Commission amend the City's
Investment Policy and Procedures, as adopted by Resolution No. 95-21726 and amended by
Resolutions No. 97-22315 and No. 2007-26602 by adding Israeli bonds as authorized
investments, adding maximum percentage per issuer and replacing the investment committee
with the investment advisor.
JMG/PDW
120
RESOLUTION NO.-----
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, AMENDING THE CITY'S
INVESTMENT POLICY AND PROCEDURES, AS ADOPTED BY
RESOLUTION NO. 95-21726 AND AMENDED BY RESOLUTIONS
NO. 97-22315 AND NO. 2007-26602 BY ADDING ISRAELI BONDS
AS AUTHORIZED INVESTMENTS, ADDING MAXIMUM
PERCENTAGE PER ISSUER AND REPLACING THE INVESTMENT
COMMITTEE WITH THE INVESTMENT ADVISOR.
WHEREAS, the City of Miami Beach has followed investment policies and
procedures established by the Finance Department, as presented to the Mayor and
Commission in 1985, as an informational item; and
WHEREAS, effective October 1, 1995, all local governmental entities in the
State of Florida were required to adopt an investment policy as required by Chapter
218.415 of the Florida Statutes; and
WHEREAS, the Mayor and City Commission adopted Resolution No. 95-21726
on September 27, 1995, which adopted said policy for the City of Miami Beach; and
WHEREAS, the Mayor and City Commission adopted Resolution No. 97-22315
on March 5, 1997, which increased the number of authorized investments options and
added the percentage of the City's funds which may be invested in said additional
categories; and
WHEREAS, the Mayor and City Commission adopted Resolution No. 2007-
26602 on July 11, 2007, which incorporated in the City's Investment Policy the State's
"Protecting Florida's Investment Act", prohibiting the investment of public funds managed
by the City in any "Scrutinized Companies" with active business operations in Sudan or
Iran, as listed by the State Board of Administration (SBA) on a quarterly basis; and
WHEREAS, the Mayor and City Commission have determined that Israeli
Bonds be added to the list of authorized investment options in addition to adding a
maximum percentage by issuer and replacing the investment committee with the
investment advisor.
NOW, THEREFORE, BE IT DULY RESOLVED THAT THE MAYOR AND
CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the amended
City of Miami Beach Investment Policy and Procedure, attached hereto and incorporated
herein as exhibit "A", be approved and adopted by the Mayor and City Commission.
PASSED and ADOPTED this -----day of _____ .2012.
MAYOR
ATTEST: APPROVED AS TO
FORM & LANGUAGE
CITY CLERK
121
'" CUTION
"J.. .... (L-
\,.. J
Date
EXHIBIT A
CITY OF MIAMI BEACH
INVESTMENT POLICY
AND PROCEDURE
CITY OF MIAMI BEACH
INVESTMENT POLICY AND PROCEDURE
122
SUBJECT
CITY OF MIAMI BEACH
INVESTMENT POLICY AND PROCEDURE
TABLE OF CONTENTS
Background ............................................................................................ .
General Overview .................................................................................... .
Investment Objectives .............................................................................. .
Investment Ethics..................................................................................... 2
Investment Process.................................................................................. 2
Authorized Investment............................................................................... 3
Prohibited Investments............................................................................. .. 6
Maturity & Liquidity Requirements.................. .. . .. . .. . .. . .. .. .. .. . .. . .. . .. .. .. .. . .. . .. . .. .. 7
Portfolio Composition................................................................................ 7
Custodial Account.................. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Master Repurchase Agreement.................. .. . .. .. .. .. . .. . .. . .. . .. . .. .. .. .. . .. . .. . .. . .. . .. ... 8
Investment Transaction Authority.................................... .. .. .. .. .. .. .. .. .. .. . .. . .. .. .. 8
Internal Controls........................................................................................ 8
Investment GommitteeAdvisor... ........... ... ... ......... ... ... ... ... ...... ... ......... ... ... ... ... ... ...... .... 9
Investment Reporting................................................................................. 10
Recordkeeping and Performance Measurement.............................................. 10
Pension Investments................................................................................. 11
Bond Funds............................................................................................. 11
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I. Background
The Florida Legislature passed CS/SB 2090 (CS/HB 1795) on May 4, 1995. Among other provisions of
this legislation each local government entities required to create, adopt and maintain comprehensive
investment policies, incorporating fourteen required elements.
The City has operated under investment guidelines adopted by Resolution 95-21726 on September 27
1995. Due to the amendment of City Code Section 18A-1, these policies have been amended
accordingly.
II. General Overview
The City of Miami Beach has established policies relating to the investment of excess funds. Excess
funds are defined as funds not required to meet short term expenditures of the City. Excess funds are
placed in two general categories of investments. The first category is "cash management investments".
Cash management investments are defined as investments whose terms are less than five~ years.
Those funds placed in cash management investments include all daily operating fundsoapital projects
fw:IEI&, debt service funds and various deposits. The second category is "long termfl city investments".
Long term city investments are investments whose terms are five...af more than one years. The policy
governing long term city investments is set forth below after the description of cash management
investment policy.
Ill. Cash Management Investment Policy
Short term expenditures are defined as all daily operating expenditures excluding payroll and debt
service which are invested based on their payment cycle. For short term expenditures, the City
maintains an overnight ft.~nds sweep a continuous investment program. a Municipal NOW account.
collateralized by P:full P:faith and credit instruments of the U.S. Government and its Agencies . held by
the State of Florida, with the City designated as collateral beneficiary. The City complies with the State
of Florida "Public Deposits Law" Chapter 280 Florida Statutes. Chapter 280 insures the City against
investment principal loss on certificates of deposits and demand deposits in excess of $.:1-0250,000 per
institution. FDIC insurance covers demand deposits up to $.:1-0250,000 per institution. The City will
utilize only financial institutions qualified under Chapter 280, a listing of which is received by the City
and reviewed on a quarterly basis. The City also complies with Chapter 280 by filing all required
reports annually with the State.
This investment policy shall be reviewed no longer than five (5) years from the last review date or at the
time of any significant accounting pronouncement or change in the City's market treasury services.
124
A. Investment Objectives
The City of Miami Beach's investment objectives are set forth below in order of importance:
1. Safety of capital
2. Return en Liquidity of capital
3. Liquidity ofReturn on capital
Investment returns are important and can make a significant contribution to the City's operations
and capital projects. Therefore, every effort is made to select the most advantageous
investment vehicle and term of investment to maximize earnings. However, safety and liquidity,
in that order, take precedence over the return. In this regard, the City has delineated, through
ordinance, certain permissible types of investments, with a view to meeting the criteria se-t_out
above.
B. Investment Ethics
The City of Miami Beach selects all investments by means of a bidding process. In no case
does the City invest funds or place idle funds in financial institutions as compensating or
courtesy balances. The standard of prudence to be applied by the investment officer shall be
the "prudent person" rule, which states: "Investments shall be made with judgment and care,
under circumstances then prevailing, which persons of prudence, discretion and intelligence
exercise in the management of their own affairs, not for speculation, but for investment.
considering the probable safety of their capital as well as the probable income derived." The
"prudent person" rule shall be applied in the context of managing the overall portfolio.
The investment officer and staff, acting in accordance with the written procedures and
exercising due diligence, shall not be held personally responsible for a specific security's credit
risk or market price changes, provided that these deviations are reported immediately and that
appropriate action is taken to control adverse developments.
C. Investment Process
The formal bidding process for investment instruments consists of the following procedures
(Steps #1 through #4 are performed by Investment Advisor):
1. M.M.aintain a bid list of approximately five major financial institutions qualified under
Chapter 280 and two major brokerage firms. This bid list is adjusted periodically to
125
delete bidders who are non-responsive or non-competitive over a period of time,
replacing such institution(s) with other qualified institutions which have expressed an
interest to bid on City funds. Qualified institutions are defined as financial institutions
governed by Chapter 280 of the Florida Statutes with a branch location in Miami-Dade
County, Florida.
Brokerage houses must maintain an office in Miami-Dade County, Florida and are
selected based on the amount of equity in the firm, number of years the firm has been in
operation and reputation.
2. Place telephone calls requesting a bid from each institution on the bid list either on the
day of the transaction or the afternoon immediately preceding the transaction date.
3. Receive and note all bids on a standard form designated for this purpose and retain on
file for each transaction.
4. Select the highest winning bid
5. Transfer funds in exchange for evidentiary receipt from winning bidder.
The purpose of this process is to ~ prevent influence being experienced by either
City personnel or the financial institution in the selection of the institution chosen for the
purchase of City investments.
D. Authorized Investments
The City has established a list of authorized types of investments. The authorized cash
management investments are descried in Chapter 18A of the City Code and are further
limited as follows:
1. Time Deposits
Duration N/A
Maximum % of Portfolio 100%
Maximum per Issuer 25%
Ma*iffl~Ffl % ef GeffleiAee .~sset GFG~JE! ~GG%
2. Certificates of Deposit
Duration 1-3 yrs
126
3.
Maximum % of Portfolio
Maximum per Issuer
Maximum % of combined Asset Group
U. S. Treasury Bills
Duration
100%
25%
100%
N/A
Maximum % of Portfolio 100%
Maximum % of Combined Asset Group 100%
4. U. S. Treasury Notes
Duration
Maximum % of Portfolio
Maximum % of Combined .A.sset Group
0-7 yrs
100%
100%
5. U.S. Government Agency and Instrumentality Securities
Duration 0-7 yrs
Maximum % of Portfolio 50%
Combined Asset Group 50%
Maximum per Issuer 40%
Maximum% of
6. Rated or unrated bonds. notes. or instruments backed by the full faith and credit of the
government of Israel.
Duration 0-7 yrs
~M~a~x~im~u~m~~~o~o~f~P~o~rt~fo~li~o~ _____________ 5%
~M~a~x~im~u~m~p~e~r~ls~s~u~e~r _________________ 5%
eZ. Obligations issued by any state or territory of the United States, which are fully insured
or rated in one of the two highest rating categories by both Moody's Investors Service,
Inc. and Standard and Poor's Corporation or their successors.
7§.
Duration 7-10 yrs
Maximum % of Portfolio
Maximum per Issuer
Maximum % of Combined /\sset Group
Fixed Term Repurchase Agreements
Duration
Maximum % of Portfolio
Maximum per Issuer
Maximum % of Combined /',sset Group
Overnight Repurchase Agreements
50%
10%
50%
0-3 yrs
20%
25%
100%
127
Duration N/A
Maximum % of Portfolio 100%
Maximum Qer Issuer 25%
Maximum % of Combined Asset Group N/A
109. Bankers Acceptances
Duration N/A
Maximum % of Portfolio 20%
Maximum Qer Issuer 20%
Maximum % of Combined Asset Group 30%
110. Commercial Paper with a rating of A-1 or P-1 only, rated by Moody's or Standard &
Poor's
Duration N/A
Maximum % of Portfolio 20%
Maximum Qer Issuer 1 0%
Maximum % of Combined Asset Group 30%
1 ~.:t. Corporate notes, corporate bonds, medium term notes, Yankee notes, and Yanke9"
oowith temms of one year or less rated by 2 of 3 designated rating agencies in one of
the l'.vo highest rating categoriesas follows:
Maturity
Maximum % of Portfolio.:t
Maximum per Issuer
0-21%_m
20%
5%
Maximum % of Combined Asset Group~
a. Moody's AA3 higher
b. Standard & Poor's AA-or higher
c. Fitch AA-or higher
12~. Corporate notes, corporate bonds, medium team-term notes, Yankee notes, and Yankee
OOfiEI& with terms Gf-in excess of one year with a maximum of 5.0 years rated by 2 of 3
designated rating agencies as follows: in one of the two highest rating categories.
Duration d-7 ..1:§ yrs
Maximum% of Portfolio 20%
Maximum Qer Issuer 5%
Maximum % of combined Asset Group 30%
a. Moody's AA3 higher
b. Standard & Poor's AA-or higher
c Fitch AA-or higher
128
Formatt_t!~' .. !ndent: Hanging: 0.5'' .
[---·-·----,
Formatted: Indent: Hanging: 0.5'' I
1 ~-Money market mutual/trust funds which substantially conform with this policy as follows: •
Duration N/A
Maximum % of Portfolio
Maximum per Issuer
100%
50%
Maximum % of combined /\sset Group 100%
a. State of Florida Local Government Surplus Funds Trust Fund
b. Mutual/trust funds sponsored by the Florida League of Cities
c. Private money market mutual funds backed entirely by "Full Faith and
Credit" U.S. Government Securities not to exceed 25%
d. Intergovernmental investment pools rated "AAAm" authorized pursuant to
Florida State Statutes. 163.01, F.S.
14§. Fixed income mutual funds sponsored by the Florida League of Cities which
substantially conform with this policy as follows:
Duration N/A
Maximum % of Portfolio 25%
Maximum per Issuer 25%
Maximum % of combined Asset Group 25%
1a§. Mortgage-backed securities collateralized by first mortgages (or deeds of trust) and•
asset-backed securities collateralized by consumer or business receivables with a
maximum duration of 3.0 years at time of purchase and structured as either
collateralized mortgage obligations or unstructured pass-through securities and rated by
2 of 3 designated rating agencies as follows:
Group 50%
Maturity
Maximum % of Portfolio
Maximum per Issuer
a.
b.
c.
Moody's
Standard & Poor's
Fitch
3-5 yrs
15%
20%Maximum % of combined 1\sset
AAA3 higher
AA-or higher
AA-or higher
1eZ. Externally managed funds requiring specific approval by Commission with investment§. •
limited to City policy and rating criteria"
129
[Fc;;;----------,
Formatted: Indent: Hanging: 0.5'' ;
r----------------------------------------------.----
l Formatted: Indent: Hanging: 0.5" -----·---------~----~----·--· --·'.
Duration
Maximum % of Portfolio
1~-7 yrs
100:W%
20% Maximum % of combined /\sset Group
17~. Interest rate Swap agreements between the City and a counter party to pay/receive a-
fixed interest rate payment in exchange for a variable rate payment over a specified term
with the requirement that all "Swap" agreements be approved by City Commission prior
to execution.
Duration N/A
Maximum % of Portfolio 10%
Maximum % of combined 1\sset Group 20%
All repurchase agreements are fully collateralized and the collateral is held in the City's name by
a third party custodian. Repurchase agreements must be collateralized at minimum mark-to-
market value of 102% in U.S. Government securities.
Derivatives (defined as a financial instrument the value of which depends on, or is derived from
the value of one or more underlying assets or index of asset values) shall be utilized only if
specifically authorized as part of the investment plan and the Finance DirectorChief Financial
Officer or his designee has sufficient understanding/expertise to invest in derivatives. All
proposed derivative investments (including "SWAPS") will be analyzed by the City's Financial
Advisor and will be presented to the Finance and Citywide Projects Committee and the City
commission for approval. Repurchase Agreements (an agreement between an investor and a
security dealer whereby dealer agrees to buy back the security at a specified price in the future)
will be limited to transactions in which the proceeds will be used to provide liquidity. Any
investment which is not issued in "Book Entry Only" form is physically held by the City in a
secure vaulted area and surrendered only when invested funds and earnings are received by
the City at maturity.
E. Prohibited Investments
Funds to be invested in cash management investments may not be invested in the following:
Common Stock Private Placements
Preferred Stock
Convertible Bonds
Venture Capital
Options and Futures
Warrants
Unregistered or Restricted Stock
Margin Trading
Limited Partnerships
Oil and Gas Wells
10 or PO strips or inverse floater
mortgage backed securities
130
Foreign Exchange Commodities
Short Selling
Real Estate
Any Inverse Floating Rate Securities
_in a~diti()n t() thE! a!)ove prohibited investments, funds should not be invested in any scrutinized·
companies with active business operations in Sudan or Iran as listed by the State Board of
Administration (SBA) on a quarterly basis, which is outlined in the Protecting Florida's
Investment Act (F.S. 215.442 and 215.473).
F. Maturity and Liquidity Requirements
The City selects investments whose terms compliment the need to make the majority
expenditures set forth below.
1. Biweekly Payrolls
2. Periodic Debt Service Payments
3. Capital Project Needs
For each expenditure event, investments are selected whose maturities occur at a date close to
the date that funds will be needed. Investments also are selected based on the highest yield for
the particular type of investment. In the case of capital projects, in which the exact date that
expenditures will need to be made is unknown, the City selects several investments with varying
maturities so that monies are available each month to cover all capital expenditures. Any
unused capital investment funds are then placed in investments of one year or more to
maximize return potential.
/\s mentioned earlier, the City maintains an overnight investment program of approximately $9,000,000,
which provides ft:Jnds needed to cover daily operating expenses, exclt:Jding items #'s 1 a aeove.
Interest yields on these investments are competitive thot:Jgh somewhat lower than longer term
instrt:Jments.
G. Portfolio Composition
Diversity of investment types is highly desirable. To promote diversity, no security or individual
cusip shall exceed 5% of the City funds. Such diversity is necessary in cases where securities
are traded frequently and not held to maturity and where volatile securities are traded.
H. Custodial Account
131
All City investments, except for swap agreements, must be held in an independent custodial
account within the trust department of a major financial institution with a branch located in
Miami-Dade County, Florida. The custodian will not be utilized to buy or sell investments for the
City. All City investments must be registered in the City's name in book entry form evidenced by
transaction tickets maintained by the custodian with a copy provided to the City. Physical
possession of securities by the City should be avoided. The investment held by the custodian
must be reconciled monthly to the City's general ledger. The City will carry investments at cost
but will maintain a record of portfolio market value each month. However, investments are
recorded at fair value in the annual financial statements in accordance with GASB Statement
#31.
I. Treasury Management Services Master Repurchase Agreement
A "Treasury Management Services Master RepurohasAgreemenf' has been developed,
reviewed and accepted by the City and is part of the contract established with the City's main
depository bank. This agreement is a standard Public Securities Association ("PSA") form
agreement offering all recommended protection to the City. This agreement is scheduled to be
in effect for the duration of the contract with the City's main depository.
J. Investment Transaction Authority
The Finance OireoterChief Financial Officer has designated the Treasury Manager as the
individual responsible for managing the City's investments. The Treasury Manager discusses
investments with upcoming maturities with the Assistant Finance Director and the Fffian.Ge
GireotefChief Financial Officer if! there is a question as to new maturity target dates or type of
investment vehicle to be used. Based on these discussions, the Treasury Manager executes
the transaction and completes an "Investment Transaction Report" for each investment
transaction. Funds related to each investment are transferred according to authorized funds
transfer procedures and limits established under the provisions of the City's contract with its
main depository bank.
K. Internal Controls
The City has established a number of internal controls to prevent loss of funds by fraud,
employee error, misrepresentation by third parties, or imprudent actions by employees of the
City. The internal controls are as follows:
132
1. Investment transactions authority is limited to specific persons within the Finance
Department.
2. Wire transfer of funds authority is restricted to specific individuals with specific
dollar limits within the Finance Department. All non-repeat type wire transfers
require confirmation authorization by a second individual specified in wire
authority documents executed with the City's main depository.
3. All investment transactions require the approval of the Treasury Manager in
consultation with the Assistant Finance Director or Chief Financial Officer.
4. A monthly report is prepared by the Assistant finanse Direstarlnvestment
Advisor and distributed to the finanse DirestarTreasury Manager early in the
subsequent month for review. In addition a Financial Analyst in the Finance
Department receives a copy of this report and reconciles these investments with
the City's general ledger on a monthly basis.
5. An Jl.ssaunt Clerk IIA Financial Analyst Ill in the Finance Department reconciles
the City's general depository account on a monthly basis by comparing the City's
general ledger with the applicable bank account statements. The reconciliation
of the general depository account would reveal any difference in investment
transaction recording and the actual movement of funds.
6. Each month, the Assistant finanse DirestarFinancial Analyst Ill and the Treasury
Manager reconciles investments reflected in the custodial statements with the
City's records.
7. Each year both internal auditors and the City's external auditors review existing
internal controls as well as investment transactions by examining data on a
random basis.
L. Investment CommitteeAdvisor
The City engages the services of an investment advisor with regard to the management of its
investment program. Investment Advisors shall be registered with the Securities Exchange
Commission under the Investment Advisors Act of 1940. Advisors shall be selected usmg the
City's authorized purchasing procedures for selection of professional services and shall be
133
subject to the provisions of this Investment Pol1cy. Under no circumstances shall the advisor
take custody of any City funds or securities.
/\n investment committee will be established to exercise oversight responsibility concerning
types of investments and maturity of investments. The Committee •Nill consist of the follov:ing
individuals:
---F-inance Directof-Or his/her designee
Chairman of the Capital Improvements/Finance Committee
City Manager-ef-h.is/her Designee
City's Financial /\dvisor
Five members of the local banking/investment community
The committee will meet at least quarterly to discuss investment objectives, terms and choice of
investment alternatives ror the ~:~pcoming quarter. The Committee will assist in establishing
tirnelines for expenditure of capital project funds and for investment of any extraordinary rece$1
~eview portfolio perrormance for the previsions quarter and composition of the
investment~
M. Investment Reporting
As discussed previously, the Finance Department maintains several types of information and
reports on investments. The records relating to investments are as follows:
1. Investment Transaction Report - A recording/approval form for each investment
transaction, regarding both active and matured investments. This form also
indicates all bids obtained where applicable.
2. Investment bid sheet, where applicable, for each investment.
3. Investment be§-Monthly Statement-a document listing, in chronological maturity
order, pertinent information on each investment.
4. Investments by Banks/F1:1nas report generatea monthly ana reconciled 'l':ith tho
City's general leelgerlnvestment monthly statement is reconciled with the City's
general lodger.
5. Annual summary of average investment returns (which are included in the
monthly Investments Statements) which is subjected to external audit for
reasonableness of average stated yield for the fiscal year.
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N. Recordkeeping and Performance Measurement
Comprehensive records of each investment transaction are maintained in the Finance
Department. These records include bid sheets where applicable, investment transaction
reports, investment bank advices, the aAfl!lal-monthly investment ~statements, and a quarterly
compilation of total returns for the preceding fiscal quarter by City fund type (e.g., General Fund,
Capital Projects, Enterprise, Internal Service). Annually, the City's external auditors review the
calculation of investment yields prepared by the Finance Department for comparison to indices
and comparative data maintained by the external auditors. They then determine the
reasonableness of the average yield calculated by the Finance Department. If no problem is
indicated, the Finance Department then compares its average annual yield to yields of
surrounding local governments when such information becomes available.
While yield is not the primary concern of the City's investment manager, it should be noted that
the City has consistently enjoyed an average yield competitive with other major local
governmental entities while assuming lower risk.
0. Pension Investments
The City does not manage the cash or investments of the City's fGI,ff-two pension systems. Each
pension system has elected or appointed members to its pension Board of Trustees who exercise
oversight over money managers engaged to manage pension fund investments in accordance with
policies and guidelines established by each pension system. The Boards, therefore, have oversight
authority over investments for pension systems and the City does not actively participate in this
process.
P. Bond Funds
Notwithstanding anything to the contrary contained in City Code Chapter 18A or these investment
guidelines the provisions pertaining to investment of monies under all ordinances, resolutions, trust
indentures and agreements adopted or entered into by the City in connection with bonds issued by the
City or other dept incurred by the City will control and supersede the provisions herein contained with
respect to the investment of such monies.
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