HomeMy WebLinkAbout1995 City of Huntington Beach Investment Policy - Resolution MEETING ASSISTANCE NOTICE-AMERICAN'S WITH DISABILITIES ACT
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ACTION
AGENDA
CITY COUNCIL/REDEVELOPMENT AGENCY
CITY OF HUNTINGTON BEACH
MONDAY, MARCH 4, 1996
5:00 P.M. - Room B-8
6:30 P.M. - Council Chamber
5:00 P.M. Room B-8
Call City Council/Redevelopment Agency Meeting to Order
Roll Call: Harman, Leipzig, Bauer, Sullivan, Dettloff, Green, Garofalo
[Present, Bauer--Absent]
Study Session - City Council and Investment Advisory Committee
Roll Call - Investment Advisory Committee:
Phil Inglee, Harry Gagen, Warren Hall, Gloria Winscott, Nicole Grau, Bob Winchell
[Present, Winchell--Absent]
Call Closed Session of City Council/Redevelopment Agency
Closed Session - City Council pursuant to Government Code Section 54957.6 to meet with its
designated representatives William Osness, Personnel Director and Daniel Cassidy, Esq., Liebert,
Cassidy & Frierson regarding labor relations matters -meet&confer re: the following
employee organizations: MSOA, POA, PMA, MEA, MEO, HBFA, &SCLEA. (120.80)
Closed Session - City Council pursuant to Government Code Section 54956.9(b)(1)to confer
with its attorney regarding pending litigation - Regulation of Tow Truck Companies and
Operators (A point has been reached where, in the opinion of the legislative body of the local
agency, on the advice of its legal counsel, based on existing facts and circumstances, there is a
significant exposure to litigation against the local agency.) Number of Potential Cases - 1.
(120.80)
LOCAL AGENCY INVESTMENT FUND
A VOLUNTARY INVESTMENT PROGRAM
FOR LOCAL G0 E.RINMENT`ADMINIS*TERED
BY THE:CAL IEO NIA STATE TREASURER
MATT FONG
r
T H E F UND
THE LOCAL AGENCY INVESTMENT FUND
The Local Agency Investment and (LAIF), a voluntary program, created by
statute, began under the Jesse Uiiiuh Administration`in 1`:977 as an investment alternative
for California's local_governments and special districts The enabling legislation for the
LAIF is Section 16429: ,2,3:.of the California Government Code
This program 'offers participating agencies the"opportunity to participate in a
major portfolio which daily invests hundreds of millions of dollars; using the in estment
expertise of the Treasurer's Office Investment staff at no additional cost to_the taxpayer.
This in-house management team is prised of civil sery com ants who have individually
worked for the'State Treasurer`s Office for over 20 years
The LAIF is part of the Pooled'Morley Investment Account (PMIA} The PMIA
began in 1953 and has oversight proynded by the Pooled Money Investment Board
(PMIB) and an m house Investment Committee: The PMIB Board members are the
State Treasufer, Director of Finance, and;State Controller
The LAIF has oversight by the Local Investment Advisory Board ,The'LAIF
Board consists of five members-as designated by Statute `The Chairman is the State
Treasurer, or his designated representative. Two members.,qualified by training and
nt°or inance;.and two members who are Treasurers,
experience in the field'of investrtme
finance or fiscal officers or.business-managers,:employed by any County. City or local
district or municipal corporation of this state, are appointed by the State Treasurer. The
term of each appointment is two years, or at the.`pleasure of the appointing authority.
All securities are purchased under the authority of the Government Code Section
16430 and 16480.4. The State Treasurer's Office takes delivery of all securities pur-
chased on a delivery versus payment basis to a third party custodian. All investments
are purchased at market, and market valuation is conducted quarterly.
1
I
I•
Additionally, the PMIA has Policies, Goals and Objectives for the portfolio to
make certain that our goals of Safety, Liquidity and Yield are not jeopardized and
prudent management prevails These policies are formulated by investment staff and
Ireviewed by both the PNIlB and the Local Investment Advisory Board on an annual
basis.
The State Treasurer's Office is audited by.the. Bureau of.State Audits on an an-
nual basis The resulting opinion is included in the subsequent Pooled Money monthly
report following its publication The Bureau of State Audits also has a continuing
audit process, throughout the dear All :investment and LAIF_claims are audsted on a
daily bans by the State Controller's Office as well as,an in house audit process involy-
ing three separate divisions
t has been determined that the=Mate of Californ�$`cannot declare bankruptcy „
under k'ederal regulations, thereby;allowing the Government bode Section I6429.3 to
stand `I'hts Section states that "money placed with the state treasurer for deposit in the
7,7
LAIF shall not be subieet to iMpou' ha ent or seizure.by_W state o ictal or state
agency:. ..
The LAIF has grown 66: m 293 participants:and $468 million in 1977 to 2,366
participants ,and'$`'10.2"b111io z in 9g6
2
, - r
BOARD MEMBERS
THE LOCAL AGENCY THE POOLED MONEY
ADVISORY BOARD INVESTMENT BOARD
Chairperson: State Treasurer Chairperson: State Treasurer
Matt Fong Matt Fong
Designated
Chairperson: Patricia A. Beal Member: State Controller
Administrator Kathleen Connell
Local Agency
Investment Fund
Member: Director of Finance
Current Russell S. Gould
Board Members: Peggy Eckroth
Executive Vice President
Autumn Capital Investment
Services
Patricia Elliott
Manager, Financial Resources
Eastern Municipal Water District
Karen Hornung
City Treasurer
City of San Bruno
Les Wells
Vice President
Investment Division
The Bank of California
3
Council/Agency Meeting Held: /U —/&— qJ
Deferred/Continued to:
Approved ❑ Conditionally Approved ❑ Denied ,/City Clerk's Signature
Council Meeting Date: October 16, 1995 Department ID Number: TR 95-004
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SUBMITTED'SYf DONALD L. WATSON, City Treasurer
PREPARED BY: DONALD L. WATSON, City Treasurer
SUBJECT: 1995 INVESTMENT POLICY /51—,�✓
Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s)
Statement of Issue: Pursuant to California Government Code. the Treasurer of the local
agency shall render an annual statement of investment policy to the legislative body for
acceptance.
The City Treasurer; with the assistance of the Investment Advisory Board, has prepared a
new investment policy that is in an easier to read format and includes some changes to the
existing policy.
Funding Source: Not applicable.
Recommended Action: That the City Council/Redevelopment Agency adopt the attached
Resolutions for the City of Huntington Beach as the Investment Policy for the ,year 1995/96.
Alternative Action(s): Continue,existing policy or modify as desired.
jl� x_li
• y,11,311 �11;1
RE-QUEST FOR COUNCIL/REDEVELOPMENT HGENCY ACTION
MEETING DATE: October 16, 1995 DEPARTMENT ID NUMBER: TR'95-004
Analysis: The attached Resolutions for 1995 have been reviewed by the city's Investment
Advisory Board and are a more in depth policy for city investments.
Environmental Status: Not applicable.
Attachment(s):
City Clerk's
Page Number
1 Resolutions and proposed investment policy for 1995/96
- -. 10106/95 9:27 AM .
RESOLUTION NO. 6716
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF HUNTINGTON BEACH
APPROVING THE ANNUAL FISCAL YEAR 1995/1996
INVESTMENT POLICY
WHEREAS, the City Council of the City of Huntington Beach is required
to approve an annual statement of investment policy; and
The duly eiected City Treasurer has recommended approval of the City of
Huntington Beach Investment Policy, attached hereto and incorporated herein by
this reference; and
The duly appointed Investment Advisory Board has reviewed the City
Treasurer's recommended policy and also recommends approval thereof; and
The policy is consistent with California Government Code §53600, et.
seq., attached hereto and incorporated herein by this reference.
NOW, THEREFORE, the City Council of the City of Huntington Beach
hereby approves and adopts the attached City of Huntington Beach Investment
Policy for Fiscal Year 1995/1996 so long as applied in a manner consistent with
state and local law as amended from time to time.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at
a regular meeting thereof held on the 16th day of octobe<r 1995.
Mayor
Aiii EST: APPROVED AS TO CORM:
REVIEWED AND APPROVED: INITIATED AND APPROVED:
City Administr or City Treasurer
Res. No. 6716
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, CO\INIE BROCKWAY, the duly elected, qualified City Clerk of
the City of Huntington Beach, and ex-oficio Clerk of the City Council of said
City, do hereby certify that the whole number of members of the City Council of
the City-of Huntington Beach is seven.; that the foregoing resolution was passed
and adopted by the affirmative vote of at least a majority of all the members of said
City Council at a regular meeting thereofheld on the 16th of October, 199-5 the
following vote:
AYES: Councilmembers: Harman, Bauer, Sullivan, Leipzig, Dettloff,
Green, Garofalo
NOES: Councilmembers: None
ABSENT: Councilmembers: None
y
City Clerk and ex-of-Mcio Clerk of the
City Council of the City of Huntington
Beach, California
RESOLUTION NO. 268
A RESOLUTION OF THE REDEVELOPMENT AGENCY
OF THE CITY OF HUNTINGTON BEACH
APPROVING THE ANNUAL FISCAL YEAR 1995/1996
INVESTMENT POLICY
WHEREAS, the City Council of the City of Huntington Beach is required
to approve an annual statement of investment policy, and the Redevelopment
Agency of the City of Huntington Beach, by virtue of Resolution No. 1 applies
City policies, rules and regulations wherever practicable; and
The duly elected City Treasurer has recommended approval of the City of
Huntington Beach Investment Policy, attached 'hereto and .incorporated herein by
this reference; and
The duly appointed Investment Advisory Board has reviewed the City
Treasurer's recommended policy and also recommends approval thereof; and
The policy is consistent with California Government Code §53600, et.
seq., attached hereto and incorporated herein by this reference.
NOW, THEREFORE, the Redevelopment Agency of the City of
Huntington Beach hereby approves and adopts the attached City of Huntington
Beach Investment Policy for Fiscal Year 1995/1996 so long as applied in a
manner consistent with state and local law as amended from time to time.
PASSED AND ADOPTED by the Redevelopment Agency of ti e City of
H.unLngton Beach.at.a.regular meeting thereof held on the 16th day of
Qctl-zber 1995.
al;rman,
A i i ES i : APPROVED AS TO FORM:
Agency Secretary ZY K Agency Counsel I o- s-?
��-�- 5s
REVIEWED AND APPROVED: INITIATED AND APPROVED:
hief Admi istrative Officer City Treasurer
5; 2
Res. No. 268
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF HUNTINGTON BEACH )
I, CON-INIE BROCKWAY, Clerk of the Redevelopment Agency of
the City of Huntington Beach, California, DO FIEEREBY CERTIFY that the
foregoing resolution was duly adopted by the Redevelopment Agency of the City
of Huntington Beach at a meeting of said Redevelopment Agency held on the 16th
day of October. 1995, and that it was so adopted by the following vote:
AYES: Members:
Hagan, Bauer, Sullivan, Leipzig, Dettloff, Green, Garofalo
NOES: Members:
\Tore
ABSENT: Members:
None
Y
Clerk of the Redevelopment Agency
of the City of Huntington Beach, Ca.
G/reso1uti/resbkpg2
CITY OF HUNTINGTON BEACH IN VESTI TENT POLICY
1.0 Purpose:
This policy is intended to provide guidelines for the prudent investment of the city's cash
balances, and outline the policies to assist maximizing the efficiency of the city's cash
management system.
2.0 Police:
The investment practices and policies of the City of Huntington Beach are based upon
state law and prudent money management. The primary goals of these practices are:
A. To assure compliance with all Federal, State, and local laws governing the
investment of mone�,s under the control of the City Treasurer.
B. To protect the principal moneys entrusted to this oFnce.
C. To generate the maximum amount of investment income within the
parameters of prudent risk management.
3.0 Scope:
This im-estment policy applies to all financial assets of the Cin, of Huntington Beach.
These funds are accounted for in the city's Comprehensiye Annual Financial Report
and include:
3.1 Funds
The City Treasurer is responsible for investing the unexpended cash in the City Treasury,
except for the employee's retirement funds, which are administered separately and those
funds which are managed separately by trustees appointed under indenture agreements.
The City Treasurer will strive to maintain the le,,,,el of investment of these idle funds as
close as possible to 100%.
These funds are described in the city's annual financial report and include:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Capital Project Funds
3.1.4 Enterprise Funds
3.1.5 Trust and Agency Funds
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3.1.6 Any new fund created by the legislative body, unless
specifically exempted
This investment policy applies to all transactions involving the financial assets and related
activity of the foregoing funds.
4.0 Prudence:
The standard of prudence to be used by the City Treasurer shall be the "prudent person"
standard. This shall be applied in the context of managing an overall portfolio.
The "Prudent Person Rule" provides, pursuant to Probate Code Section 16040:
When investing; reinvesting, purchasing, acquiring, exchanging.
selling and managing trust propem-.the trustee shall act with the
care, skill, prudence, and diligence under the circumstances then
prevailing. including but not limited to the general economic
conditions and the anticipated needs of the trust and its
_ beneficiaries; that a prudent person acting in a-like capacity and
familiar with such matters would use in the conduct of an enterprise
of like character and with like aims to accomplish the purposes of
the trust as determined from the trust instrument. In the course of
administering the trust pursuant to this standard, individual
investments shall be considered as part of an overall investment
strategl.
4.1 Investment officers acting in accordance with -written procedures and the investment
policy and exercising due diligence shall be relieved of personal responsibility for an
individual security's credit risk or market price changes; provided deviations from
expectations are reported to the City Council in a timely fashion and appropriate action is
taken to control adverse developments.
�.0 Obiective:
Consistent wiih this aim, investments are made under the terns and conditions of
California Government Code Section 53600, et seq. Criteria for selecting investments and
the absolute order of priority are:
5.1 Safety: Safety of principal is the foremost objective of the investment program.
Investments of the City of Huntington Beach shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio. To attain this objective,
diversification is required in order that potential losses on individual securities do not
exceed the income generated from the remainder of the port olio.
5.2 Liquidity: The City of Huntington Beach's investment portfolio will remain sufficiently
liquid to enable the City of Huntington Beach to meet all operating requirements which
might be reasonably anticipated. Liquidity is essential to the safety of principal.
5.3 Return on Investments: The City of Huntington Beach's investment portfolio shall be
designed with the objective of attaining a rate of return throughout budgetary and
economic cycles, commensurate with the City of Huntington Beach's investment risk
constraints and the cash flow characteristics of the portfolio.
6.0 Investment Advisorw Board:
By City Charter, the City Treasurer is the custodian of all public funds of the City of
Huntington Beach. The City Council may appoint Huntington Beach residents,
professional, and non professional people, to serve on an Investment Advisory Board for
the purpose of advising the City Treasurer on an investment program and at least
quarterly, review the investment portfolio for compliance with the adopted investment
policy. Exceptions- Items to the Investment Policy that require City Council approval
will first be reviewed by the Investment Advisory Board.
7.0 Delegation of Authority:
NVithin the City Treasurer's office, the responsibility for the day to day investment of the
City funds is delegated to the Senior Deputy City Treasurer in the absence of the City
Treasurer. The City Treasurer shall be responsible for all transactions undertaken and
shall establish a system of controls to regulate the activities of subordinate officials.
8.0 Ethics and Conflicts of Interest:
In addition to state and local statutes relating to conflicts of interest, all persons involved
in the investment process shall refrain from personal business activity that could conflict
with proper execution of the investment program, or which could impair their ability to
make impartial investment decisions. Employees and investment officials shall disclose to
the City Council any material financial interests in financial institutions that conduct
business within this jurisdiction, and they shall further disclose any large personal
financial/investment positions that could be related to the performance of the City of
Huntington Beach, particularly with regard to the time of purchases and sales.
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9.0 Authorized Financial Dealers and Institutions:
To provide for the optimum yield in the investment of city funds, the city's investment
procedures shall encourage competitive bidding on transactions from approved
brokers/dealers.' In order to be approved by the city, the dealer must be a "primary"
dealer or regional dealer that qualifies under Securities and Exchange Commission Rule
]5C3-I (Uniform Net Capitol Rule). The institution must have an office in California.
The dealer must be experienced in institutional trading practices and familiar with the
California Government Code as related to investments appropriate for the city; and, other
criteria as may be established in the investment procedures. All broker/dealers who desire
to become qualified bidders for investment transactions must annually submit a
"Broker/Dealer Application" and related documents relative to eligibility.
10.0 Authorized & Suitable Investments: Investments not specifically listed below are
deemed inappropriate and prohibited:
Direct Investments Investments made directly by the Cite Treasurer in the name of
the City of Huntington Beach.
A. BANKERS ACCEPTANCES, maximum 25% of portfolio (up to 40% with
Council approval). Maximum term 180 days (270 days with Council
approval).
These are time drafts drawn on a bards by an exporter or importer to obtain funds to pay
for specific merchandise. By its acceptance, the bank becomes primarily liable for the
payment of the draft at its maturity. An acceptance is a high-grade negotiable
instrument. Acceptances are purchased in various denominations for 30, 60, or 90 days,
but no longer than 270 days. The interest is calculated on a 360-day discount basis
similar to treasury bills Local agencies may not invest more than 40% of their surplus
moneN-in bankers acceptance.
B. NEGOTIABLE CERTIFICATES OF DEPOSIT, maximum 30% of portfolio.
Maximum term three (3) years, (lip to five (5) years with Council approval).
Unsecured obligations of the financial institution, bank or savings and loan, bought at
par value with the promise to pay face value plus accrued interest at maturity. They are
high-grade negotiable instruments, paying a higher interest rate than regular certificates
� ' So long as the requiirements of California Government Code Section 53601.5 are adhered to.
of deposit. The primary market issuance is in multiples of $1,000,000, the secondary
market usually trades in denominations of S500,000, although smaller lots are
occasionally available.
C. COMMERCIAL PAPER, maximum 15% of portfolio. Maximum term 180
days; plus additional 15% of portfolio if the dollar-weighted average
maturity of the entire amount does not exceed 31 days.
Short-term unsecured promissor}, note issued by a corporation to raise working capital.
These negotiable instruments are purchased at a discount to par value or at par value
Nvith interest bearing. Commercial paper is issued by corporations such as General
Motors Acceptance Corporation; IBM, BankAmerica, etc.
Local agencies are permitted by State law to invest in commercial paper of "prime"
quality of the highest ranking or of the highest letter and numerical ratings as provided
by Moody's Investor's Service, Inc.; or Standard and Poor's Corporation. Purchases of
eligible commercial paper may not exceed 180 days maturity nor exceed 30% of the
local agency's surplus funds.
D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY
NVITHIN THE STATE OF CALIFORNIA.
Bonds, notes, warrants, issued by the local agency, including bonds payable solely out of
the revenues from a revenue producing propem o«ned, controlled, or operated by the
local agency or by a department,board, agency, or authority of the local agency.
E. OBLIGATION'S OF THE UNITED STATES TREASURY. United
States Treasury Notes, bonds,bills or certificates of indebtedness, or those for which the
faith and credit of the United States are pledged for the payment of principal and
interest.
F. FEDERAL AGENCIES
Debt instruments issued by agencies of the Federal government. Though not general
obligations of the U.S. Treasury, such securities are sponsored by the government and,
therefore, have high safer,ratings. The following are authorized:
• Federal Intermediate Credit Bank (FICB'S)
Loans to lending institutions used to finance the short-term and intermediate needs of
farmers, such as seasonal production. They are usually issued monthly in minimum
denominations of S3,000 with a 9-month maturity. Interest is payable at maturity and is
calculated on a 360-day; 30-day month basis.
• Federal Land Bank (FLB'S)
Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds
are issued at irregular times for various maturities ranging from a few months to ten
years. The minimum denomination is $1,000. They carry semi-annual coupons.
Interest is calculated on a 360-day, 30-day month basis.
• Federal Home Loan Bank (FHLB'S)
Issued by the Federal Home Loan Bank System to help finance the housing industry.
The notes and bonds provide liquidity and home mortgage credit to savings and loan
associations, mutual savings banks, cooperative banks, insurance companies, and
mortgage-lending institutions. They are issued irregular]N- for various maturities. The
minimum denomination is $5.000. The notes are issued with maturities of less than one
year and interest is paid at maturity. The bonds are issued NNith various maturities and
cam semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis.
Federal National Mortgage Association (F\'MA'S)
To assist the home mortgage market by purchasing mortgages insured by the Federal
Housing Administration and the Farmers Home Administration. as -well as those
guaranteed by the Veterans Administration. They are issued about four times a year for
mararities ranging from a few months to eight years. They are issued in minimum
denominations of$10,000. They cam? semi-annual coupons. Interest is computed on a
360 day, 30-day month basis. FNMA is a publicly held corporation listed on the
n"SE.
• Small Business Administration (SBA'S)
Securities/Loans guaranteed by Federal government to provide financial assistance
Ouough direct loans and loan guarantees to small businesses.
• Government National Mortgage Association (G\MA'S)
Securities guaranteed by GNTIvZQ, and issued by mortgage bankers, commercial banks,
savings and loan associations, and other institutions. Security holder is protected by full
faith and credit of the U.S. Government. Ginnie Mae buys FH-A and VA mortgages and
auctions them to private lenders which pool these mortgages and sell pass-through
certificates. Each month, principal and interest payments from the pool pass through to
investors.
6
• Tennessee Valley Authorities (TVA'S)
A U.S. Corporation created in the 1930's, to electrifies the Tennessee Valley area;
currently a major utility headquanered in Knoxville, Tennessee. TVA's securities are
highly liquid and are widely accepted.
S Student Loan Association Notes (Sallie Mae's) -
A. U.S. Corporation and instrumentality of the U.S. government. Through its
borroi-ings, funds are targeted for loans to students in higher education institutions.
SLMA's securities are highly liquid and are widely accepted.
G. REPURCHASE AGREEMENT
Short-term agreement between a seller and a buyer (investor) of U.S. Government
securities, whereby the seller agrees to repurchase the securities at an agreed upon price
and, at a stated time. The city may utilize repurchase agreements on a daily basis. The
bank or dealer sells securities to the city, agreeing to buy them back the next day. Thus,
the cin•utilizes a temporary surplus of cash to enhance interest earnings.
H. REVERSE-REPURCHASE AGREEMENTS
A reverse-repurchase is exactly what the name implies. Reverse-repurchase agreements are the sale of
securities by the city under an agreement to "repurchase" the securities on or before a specified date and
for a specified amount. This investment shall be utilized to provide short term liquidity, but only NN-ith
specific council approval on each transaction.
I. 'MEDIUNI-TERM CORPORATE NOTES, maximum 20% ofportfolio (30%
,with Council approval).
Unsecured-promissory notes issued by a corporation orgaruzed and operating in the
United States. These are negotiable instruments and are traded in the secondary market.
?�`edium term corporate notes can be defined as extended maturin•commercial paper.
.Local agencies are restricted by the Government Code to investments in corporations
rated in the top three note categories by a nationally-recognized rating service. Further
restrictions are a maximum term of five vears to maturity and total investments in
medium term corporate notes may not exceed 30%of the local agency's surplus funds.
Refer to Section 11.0 regarding Government Code Provisions.
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J. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable
certificates of deposit)
Time deposits of a bank or savings and loan. They are purchased in various
denominations with maturities ranging from 30 to 360 days. The interest is calculated
on a 360-day, actual day month basis and is payable monthly. Refer to Section 11.0
regarding Government Code Provisions.
K. OBLIGATIONS OF THE STATE OF CALIFOR.NI.A
Registered state warrants or treasury notes or bonds of this state, including bonds
payable solely out of the revenues from a revenue-producing property owner,
controlled,or operated by the state or by a department, board, agency,or authority
of the state.
Indirect Investments - Funds deposited into authorized accounts which are
managed by other agencies according to published guidelines.
L. MUTUAL FUNDS, maximum 1 5% of porfolio. (Requires City Council
approval for each transaction,)
Local agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies that invest in securities and obligations otherwise eligible for local
agency investment. In addition; to be eligible as an investment the company must: (1) attain the
highest ranking or rating prodded by not less than two of the three largest national rating
sen7ices; and (2) have an investment adNisor registered with the SEC who has at least five years
experience with investing public n-pe investments with a portfolio of at least five hundred
million. Finally, the purchase price of the shares may not include commission and only a certain
stated percentage of the City's money may be invested.
M. THE LOCAL AGENCY LN-VESTMENT FUND (LAIF)
Is a special fund of the California State Treasury through which any local government
may pool investments. The city may invest up to S20,000,000 per agency in this fund.
Currently the city has established two (2) agency funds: The City of Huntington Beach
Cin> Fund, and the Ciry of Huntington Beach Redevelopment Agency Funds.
Investments in LAIF are highly liquid and may be convened to cash within 24 hours.
Investment with LAIF are secured by the full faith and credit of the State of California.
N. THE ORANGE COUNTY LOCAL AGENCY INVESTMENT POOL
(OCIP) Is a special fund of the Counn, of Orange through which any local city or
agency may, with approval of their governing body and the County Treasurer, deposit
excess funds in the County. Treasury for reinvestment by the Treasurer. Investments
8
with OCIP are made in accordance with GoN'ernment Code Section 53635.2 As of
November 29, 1994, the Cite Treasurer suspended any additional deposits into OCIP.
The suspension will remain until new policies, procedures, and pending legislation are
in effect and approved by Cin.Council.
Portfolio Adjustments - Should an investment percentage-of-portfolio limitation be
exceeded due to an incident such as fluctuation in portfolio size, the affected securities
may be held to maturity to avoid losses. When no loss is indicated, the Treasurer shall
consider reconstructing the portfolio basing his decision on the expected length of time the
portfolio will be unbalanced. If this occurs, the City Council shall be notified.
11.0 Collateralization:
Under provisions of the California Government Code, California banks, and savings and
loan associations are required to secure the city's deposits by pledging government
securities with a value of I10 % of principal and accrued interest. California law also
allows financial institutions to secure city deposits by pledging first trust deed mortgage
notes having a value of 150% of city's total deposits. Collateral will always be held by an
independent third party. A clearly marked evidence of ownership (safekeeping receipt)
must be supplied to the city and retained:
The City Treasurer, at his discretion, may waive the collateral requirement for deposits
whl.ch are fully insured up to 5100,000 by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation. The right of collateral substitution
is granted.
12.0 Safekeepine and Custodv:
All city investments shall have the City of Huntington Beach as its registered owner, and
all interest and principal payments and withdrawals shall indicate the City of Huntington
Beach as the payee.
All securities shall be safe kept with the city itself or with a qualified financial institution,
contracted by the city as a third parry. All agreements and statements will be annually
reviewed by external auditors. All securities shall be acquired by the safekeeping
institution on a "Delivery-Vs-Payment" (DVP) basis. The DVP basis does not apply to
So long as the rcqu#ments of California Government Code Section 53601.5 are adhered to.
9
Repurchase Agreements. Due to the "overnight" nature of the daily repurchase
agreement, it would be impossible to utilize DVP without incurring additional costs and
unreasonable demands of the bank. However, collateral is provided for the city's
investment security by having the bank set aside collateral (in the city's name) at the
Federal Reserve Bank in Los Angeles. This is provided for in the Master Repurchase
Agreement that must be signed by both parties.
13.0 Diversification:
The city's investment portfolio will be diversified to avoid incurring unreasonable and
avoidable risks associated with concentrating investments in specific security types,
maturity segment, or in individual financial institutions. The City will utilize Moody's
Securities, Sheshunoff Bank in savings and loan ratings, or other such services to
determine financially sound institutions to do business with.
Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be
mitigated by investing in only very safe securities and by diversifying the investment
portfolio so that the failure of any one issuer would not unduly harm the city's cash flow.
Market risk, defined as the risk of market value fluctuations due to overall changes in the
general level of interest rates, shall be mitigated by structuring the portfolio so that
securities mature at the same time that maior cash outflows occur, thus eliminating the
need to sell securities prior to their maturity. It is explicitly recognized herein, however,
that in a diversified portfolio, occasional measured losses are inevitable and must be
considered within the context of overall investment return.
The city's investment portfolio will remain sufficiently liquid to enable the city to meet all
operating requirements which might be reasonably anticipated
14.0 Maximum Maturities:
To the extent possible, the City of Huntington Beach will attempt to match its investments
with anticipated cash flow requirements. Unless matched to a specific cash flow, the city
will not directly invest in securities maturing more than five (f) years from the date of
purchase, unless, the legislative body has granted express authority to make that
investment either specifically, or as a part of an investment program approved by the City
Council.
10
15.0 Internal Control:
The external auditors shall annually review the investments and the investment policy.
This review will provide internal control by assuring compliance with policies and
procedures. Additionally, account reconciliation and verification of general ledger
balances relating to the purchasing or maturing of investments shall be performed by the
Finance Department. To provide further protection of city finds, written procedures
prohibit the wiring of any city funds without the authorization of at least two of the three
designated city officials:
1. City Treasurer
2. Senior Deputy City Treasurer
3. Director of Finance
16.0 Performance Standards:
This investment policy shall be reviewed at least annually by the Investment Advisory
Board and' the City Council to ensure its consistency with the overall objective of
preservation of principal, liquidity, and return, and its relevance to current law and
financial and economic trends. All financial assets of al] other funds shall be administered
in accordance with the provisions of this policy.
The moneys entrusted to the City Treasurer will be an actively managed portfolio. This is,
the City Treasurer and staff will observe, review, and react to changing conditions that
affect the portfolio.
16.1 Market Yield (Benchmark):
The investment portfolio shall be managed to attain a market-average rate of return
throughout budQetary and economic cycles, taking into account the city's investment risk
constraints and cash flow. Market average Ali]] be determined b% year-end average rates
of return from a combination of indices: Local Agency Investment Fund (LAIF), and 1-
vear Treasuries.
While the city will not make investments for the purpose of trading or speculation as the dominant
criterion, the City Treasurer shall seek to enhance total portfolio return by means of ongoing
portfolio management. The prohibition of highly speculative investments precludes pursuit of
gain or profit through unusual risk and precludes investments primarily directed at gains or profits
11
from conjectural fluctuations in market prices. The City Treasurer will not directly pursue any
investments that are leveraged or deemed derivative in nature. However, as long as the original
investments can be justified by their ordinary earning power, trading in response to changes in
market value is a requirement of on going portfolio management.
17.0 Reporting:
The City Treasurer shall submit a monthly investment report to the City Council, City
Administrator, and City Finance Director and the Investment Advisory Board. This report
Aill include the following elements:
17.1 Type of investment
17.2. Institution
17.3 Purchase Date
17.4 Date of maturity
71.5 Amount of deposit or cost of the investment
17.6 Face value of the investment
17.7 Current market value of securities
17.8 Rate of interest
17.9 Interest earnings
17.10 Statement relating the report to the Statement of investment Policy
17.11 Statement availability of funds to meet the next 30 days' obligations
This monthly report shall be placed on the City Council Agenda for Council and public
review.
18.0 Investment Policv Adoption:
By virtue of a resolution of the City Council of the City of Huntington Beach, the Council
shall acknowledge the receipt and filing of this annual statement of investment policy for
the respective fiscal year.
12
02/27/1996 CITY OF HUNTINGTON BEACH
PORTFOLIO MASTER SUMMARY CI?Y
JANUARY 31, 1996 ACCRUAL
AVERAGE ---YIELD TO MATURITY---
PERCENT OF AVERAGE DAYS TO 360 365
INVESTMENTS BOOK VALUE PORTFOLIO TERM MATURITY EQUIVALENT EQUIVALENT
------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements..... .. .. . . . ... . . . . . . ...$ 4,500,000.00 7.99 1 0 5.375 5.450
Bankers Acceptances........... . . . . . . . . .. . . . ..5 1,963,147.50 3.49 124 88 5.410 5.485
Commercial Paper - Discount... . . . . . ... . . . . . ..$ 993,583.33 1.77 42 15 5.536 5.612
Federal Agency Issues - Coupon. ... . . .. .. . . ...$ 4,838,145.12 8.60 1,826 1,052 5.945 5.926
Local Agency Investment Funds. . ..... .. . . . . . ..5 39,999,779.08 71.06 1 1 5.620 5.698
Medium Term Notes. . . .. ....... . . . .. .... .. . . . ..5 3,993,257.72 7.09 1,107 226 7.059 7.157
------------------------------------------------------------------------------
TOTAL INVESTMENTS and AVERAGES.. . . . . . . ..$ 56,287,912.75 100.00% 241 ill 5.7139., 5.792%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
CASH
Passbook/Checking Accounts. ..... .... . . . . . . . ..$ 0.00 0.000 0.000
(not included in yield calculations)
Accrued Interest at Purchase... . . . . . . . . . ... . .5 27,500.00
----------------------------------------------------------------------------
TOTAL CASH and PURCHASE INTEREST.... .. . . ... ..$ 27,500.00
TOTAL CASH and INVESTMENTS... . ... . . . . . . ....$ 56,315,412.75
------------------------------------------------------------------------------
MONTH ENDING FISCAL FISCAL
TOTAL EARNINGS JANUARY 31 YEAR TO DATE YEAR ENDING
Current Year S 283,722.54 $ 1,049,865.34
AVERAGE DAILY BALANCE $ 57,694,821.16 $ 53,459,759.79
EFFECTIVE RATE OF RETURN 5.79% 5.836
Current Budget $ 275,000.00 $ 1,100,000.00 $ 3,300,000.60
"42��
I certify that this report accurately reflects all City and Redevelopment Agency
DAN T. VILLELLA pooled investments and is in conformity with all State laws and the investment
CITY TREASURER policy statement filed with the City Council on Oct. 16,1995. A copy of this
/ policy is available at the office of the City Clerk. The investment program
herein shown provides sufficient cash flow liquidity to meet next month's
DATE estimated expenditures.
02/27/1996 CITY OF HUNTINGTON BEACH PM - 2
INVESTMENT PORT70LIO DETAILS - INVESTMENTS CITY
SA.WARY 31, 1996 ACCRUAL
'ESTMENT AVERAGE PURCHASE STATED --- YTM --- MATURITY DAYS
NUMBER ISSUER BALANCE DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
96-081 Sanwa Bank - Los Angeles 01/31/96 4,500,000.00 4,500,000.00 4,500,000.00 5.375 5.375 5.450 02/01/96 0
AVERAGES 5,968,548.39
BANKERS ACCEPTANCES
2742 Bank of America 12/18/95 975,835.00 1,000,000.00 982,547.50 5.370 5.503 5.579 05/28/-96 117..
2743 Bank of America 01/05/96 987,312.50 1,000,000.00 991,250.00 5.250 5.317 5.391 04/01/96 60
----------------- -------------- -------------- -------------- ------ ------ ------
SUBTOTALS and AVERAGES 2,508,140.72 1,963,147.50 1,973,797.=0
2,000,000.00 5.410 5.485 68
COMMERCIAL PAPER - DISCOUNT
2746 General Electric 01/05/96 993,583.33 1,000,000.00 997,708.33 5.500 5.536 5.612 02/16/96 15
AVERAGES 865,379.03
FEDERAL AGENCY ISSUES - COUPON
2736A A. W. Dougherty Co. 04/20/94 197,368.42 197,368.42 197,368.42 6.835 6.741 6.835 04/20/99 1,174
2734 Federal Home Loan Bank 08/26/93 2,000,000.00 2,000,000.00 1,850,000.00 5.190 5.109 5.180 08/26/98 937
2735 Federal Home Loan Bank 11/18/93 1,000,000.00 1,000,000.00 920,000.00 5.300 5.227 5.300 11/18/98 1,021
2737A Federal Home Loan Bank 04/14/94 640,776.70 640,776.70 640,776.70 6.780 6.687 6.780 04/14/99 ;1.168
2739 Tennessee Valley Authority 05/31/94 1,000,000.00 1,000,000.00 1,000,000.00 7.318 7.218 7.318 05/31/99 1,215
----------------- -- ---- -------------- -------------- ------ ------ ------
SUBTOTALS and AVERAGES 4,838,145.12 4,838,145.12 4,608,145.12
4,838,145.12 5.845 5.926 1,052
LOCAL AGENCY INVESTMENT FUNDS
982 Laif City 20,000,000.00 20,000,000.00 20,000,000.00 5.698 5.620 5.699 1
2206 LAIF-Redevelopment Agency 19,999,779.08 19,999,779.08 19,999,779.08 5.698 5.620 5.698 1
2703 Orange County Invest Pool - 0.00 0.00 0.00 0.001 0.001 0.001 1
2703-A Orange County Invest Pool - 0.00 0.00 0.00 0.001 0.001 0..001 1'
----------------- -------------- -------------- -------------- ------ ------ _ ------
SUBTOTALS and AVERAGES 40,100,166.21 39,999,779.08 39,999,779.08
39,999,779.08 5.620 5.698 1
MEDIUM TERM NOTES
2721 Ford Motor Credit Corp. 05/01/91 2,000,000.00 2,000,000.00 2,010,000.00 8.875 8.761 8.383 05/02/96 91
2745 Gen Mtr Accept Corp 01/10/96 1,993,257.72 2,000,000.00 1,993,257.72 5.000 5.352 5.427 01/27/97 361
----------------- -------------- -------------- -------------- ------ ------ ------
SUBTOTALS and AVERAGES 3,414,441.70 3,993,257.72 4,003,257.72
4,000,000.00 7.059 7.157 226
-----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS and AVG. $ 56,287,912.75 56,082,687.75
57,694,821.16 56,337,924.20 5.713% 5.792% ill
02/27/1996 CITY OF Hui?I?:GTON -EACH
PORTFOLIO MASTER ICTIESTMENT ACTIVITY BY TYPE CITY
JANUARY 1, 1996 - JANUARY 31, 1996 ACCRUAL
STATED TRANSACTION PURCHASES SALES/MATURITIES
TYPE INVESTMENT k ISSUER RATE DATE OR DEPOSITS OR WITHDRAWALS BALP_:CE
----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
96-060 Sanwa Bank - Los Angeles 5.000 01/02/1996 11,000,000.00
96-061 Sanwa Bank - Los Angeles 5.500 01/02/1996 11,550,000.00
01/03/1996 11,550,000.00
96-062 Sanwa Bank - Los Angeles 5.SOO O1/03/1996 11,300,000.00
O1/04/1996 11,300,000.00
96-063 Sanwa Bank - Los Angeles 5.375 01/04/1996 10,975,000.00
01/05/1996 10,975,OCO.00
96-064 Sanwa Bank - Los Angeles 5.000 Ol/05/1996 8,000,000.00
01/08/1996 8,000,000.00
96-065 Sanwa Bank - Los Angeles 5.375 01/08/1996 7,200,000.00
01/09/1996 7,200,000.00
96-066 Sanwa Bank - Los Angeles 5.375 01/09/1996 7,100,000.00
O1/10/1996 7,100,000.00
96-067 Sanwa Bank - Los Angeles 5.125 01/10/1996 5,700,000.00
01/11/1996 5,700,000.00
96-068 Sanwa Bank - Los Angeles 5.125 01/11/1996 5,000,000.00
01/12/1996 5,000,000.00
96-069 Sanwa Bank - Los Angeles 5.063 01/12/1996 5,000,000.00
O1/16/1996 5,000,000.00
96-070 Sanwa Bank - Los Angeles 5.313 01/16/1996 6,000,000.00
O1/17/1996 6,000,000.00
96-071 Sanwa Bank - Los Angeles 5.563 01/17/1996 4,700,000.00
01/13/1996 4,700,000.00
96-072 Sanwa Bank - Los Angeles 5.313 01/18/1996 4,000,000.00
O1/19/1996 4,000,000.00
96-073 Sanwa Bank - Los Angeles 5.125 01/19/1996 3,000_,000.00
01/22/1996 3,000,000.00
96-074 Sanwa Bank - Los Angeles 5.313 01/22/1996 2,600,000.00
01/23/1996 2,600,000.00
96-075 Sanwa Bark - Los Angeles 5.250 01/23/1996 3,800,000.00
01/24/1996 3,800,000.00
96-076 Sanwa Bank - Los Angeles 5.125 01/24/1996 4,000,000.00
01/25/1996 4,000,000.00
96-077 Sanwa Bank - Los Angeles 5.125 01/25/1996 5,600,000.00
01/26/1996 5,600,000.00
96-078 Sanwa Bank - Los Angeles 5.125 01/26/1996 6,000,000.00
O1/29/1996 6,000,000.00
96-079 Sanwa Bank - Los Angeles 5.375 01/29/1996 5,000,000.00
01/30/1996 5,000,000.00
96-080 Sanwa Bank - Los Angeles 5.375 01/30/1996 4,000,000.00
01/31/1996 4,000,000.00
96-081 Sanwa Bank - Los Angeles 5.375 01/31/1996 4,500,000.00
SUBTOTALS and ENDING BALANCE 125,025,000.00 131,525,000.00 4,500,000.00
02/27/1996 CITY C7 HUNTINGTON BEACH 4
PORTFOLIO MASTER I:WEST?ENT ACTIVITY BY TYPE CI-y
JANUARY 1, 1_996 - .;ANUARY 31, 1996 AC=<UAL
STATED TRANSACTION PURCHASES SALES/MATURITIES
TYPE INVESTMENT # ISSUER RATS DATE OR DEPOSITS OR WITHDRAWALS BALANCE
----------------------------------------------------------------------------------------------------------------------------------
BANKERS ACCEPTANCES
2741 Bank of America 5.570 01/22/1996 992,573.33
2743 Bank of America 5.230 01/05/1996 987,312.50
SUBTOTALS and ENDING BALANCE 987,312.50 992,573.33 1,953,147.5C
COMMERCIAL PAPER - DISCOUNT
2746 General Electric 5.500 O1/OS/1996 993,583.33 993,583.33
FEDERAL AGENCY ISSUES - COUPON
4,338,145.12
LOCAL AGENCY INVESTMENT FUNDS (Monthly Summary)
982 Laif City 5.698 286,642.47 286,642.47
2206 LAIF-Redevelopmenc Agency 5.698 276,375.91 276,375.91
2703 Orange County Invest Pool -77% 0.001
2703-A Orange County Invest Pool -23. 0.001
SUBTOTALS and ENDING BALANCE 563,018.38 563,018.38 39,999,779.03
MEDIUM TERM NOTES
2745 Gen Mtr Accent Corp 5.000 01/10/1996 1,992,860.00 3,993,257.72
------------------------------------------------------------------------
TOTALS 129,561,774.21 1331080,591.71 56,237,912.75
**** - Indicates incomplete recording of maturity redemption..
02/27/1996
PM - 5
CITY OF HUNTINGTON BEACH CITY
INVESTMENT ACTIVITY SUMMARY
OCTOBER 1995 through JANUARY 1996
YIELD TO MATURITY MANAGED NUMBER OF NUMBER OF AVERAGE
MONTH NUMBER OF TOTAL 360 365 POOL SECURITIES SECURITIES AVERAGE DAYS TO
END YEAR SECURITIES INVESTED EQUIV EQUIV RATE PURCHASED MATURED/SOLD TERM MATURITY
-------------------------------------------------------------------------------------------------------------------
October 95 11 50,737,924.20 5.823 5.903 5.784 21 24 247 117
November 95• 11 49,337,924.20 5.849 5.930 5.805 19 19 254 116
December 95 13 59,306,332.53 5.660 5.739 5.743 22 20 214 95
January 96 15 56,237,912.75 5.713 5.792 5.698 24 22 241 111
---------------------------------------------------------------------------------------------------
AVERAGES 13 $ 54,C55,023.42 5.7616 5.841a 5.7599.1 22 21 239 110
02/27/1996
CITY OF HUNTINGTON BEACH CITY
DISTRIBUTION OF INT ESTMENTS BY TYPE
OCTOBER 1995 through JANUARY 1996
MONTH ------------------------------------------------ TYPES OF INVESTMENTS ------------------------------------------------
END YEAR RPA SCD BAC COM CPI FAC FAD LP.I TRC TRD MTN NCB BCD MCI MD1 PA1 GN1
------------------------------------------------------------------------------------------------------------------------------------
October 95 7.8 9.5 78.3 3.9
November 95 5.1 9.8 81.1 4.1
December 95 18.4 3.3 8.1 66.9 3.3
January 96 8.0 3.5 1.8 8.6 71.1 7.1
----------------------------------------------------------------------------------------------------------------------
AVERAGES 9.8% 1.7% 0.4% 9.0% 74.4% 4.6%
RPA - Repurchase Agreements SCD Certificates of Deposit
BAC - Bankers Acceptances COM - Commercial Paper - Discount
CPI - Commercial Paper - Interest Bearing FAC - Federal Agency Issues - Coupon
FAD - Federal Agency Issues - Discount LA1 - Local Agency Investment Funds
TRC - Treasury Securities - Coupon TRD - Treasury Securities - Discount
MTN - Variable CD's NC3 - Negotiable CD's
BCD - Certificates of Deposit - Bank MCI - Medium Term Notes
MD1 - Miscellaneous Securities - Discount PA-1 - Mutual Funds / Passbook
r-*N1 - Mortgage Backed Securities
02/27/1996 ;,v, _ ,
CITY OF HUNTINGTON BEACH CITY
INTEREST EARNINGS SUN9ARY
JANUARY 31, 1996
MONTH ENDING FISCAL
JANUARY 31, 1996 YEAR TO DATE
CD/Coupon/Discount Investments:
Interest Collected $ 33,165.48 $ 278,415.79
PLUS Accrued Interest at End of Period 194,832.35 194,832.35
LESS Accrued Interest at Beginning of Period ( 145,381.74) ( 182,507.63).
------------------ ------------------
Interest Earned during Period $ 87,616.09 290,740.51
------------------ ------------------
------------------ ------------------
ADJUSTED by Premiums and Discounts 397.72 397.72
ADJUSTED by Capital Gains or Losses 0.00 0.00
------------------ ------------------
Earnings during Period 83,013.81 S 291,138.23
------------------ ------------------
------------------ ------------------
Mortgage Backed Securities:
Interest Collected $ 0.00 $ -0.00
PLUS Accrued Interest at End of Period -11,849.30 -111,849-30
LESS Accrued Interest at Beginning of Period ( -11,849.30) ( -11,849.30)
------------------ ------------------
Interest Earned during Period $ 0.00 0.00
------------------ ------------------
------------------ ------------------
ADJUSTED by Premiums and Discounts 0.00 0.00
ADJUSTED by Capital Gains or Losses 0.00 0.00
------------------ ------------------
Earnings during Period 0.00 S 0.00
------------------ ------------------
------------------ ------------------
Cash/Checking Accounts:
Interest Collected $ 563,018.38 $ 563,018.38
PLUS Accrued Interest at End of Period 620,754.05 620,754.05
LESS Accrued Interest at Beginning of Period ( 988,063.70) ( 425,045.32)
------------------ ------------------
Interest Earned during Period $ 195,708.73 $ 758,727.11
TOTAL Interest Earned during Period $ 293,324.82 $ 049,467.62
TOTAL Ajustments from Premiums and Discounts $ 397.72 $ 397.72
TOTAL Capital Gains or Losses $ 0.00 S 0.00
------------------ ------------------
TOTAL Earnings during Period $ 283,722.54 $ L,049,865.34
•,, CITY OF HUNTINGTON BEACH
- P.O. BOX 711
CALIFORNIA 92648
CITY TREASURER'S OFFICE
CITY OF HUNTINGTON BEACH
OFFICE OF THE CITY TREASURER
BANKER/SAVINGS AND LOAN QUESTIONNAIRE AND CERTIFICATION
1. Name of Firm
2. Address
(Local) (National Headquarters)
3. Telephone No. ( ) ( )
(Local) (National Headquarters)
4. Primary Representative: Manager:
Name Name
Title Title
Telephone No. ( ) Telephone No. ( )
5. What are the Total Assets of the Bank/Savings and Loan?
6. What is the current Net Worth Ratio?
7. What was the Net Worth Ratio for the Previous Year?
8. What is your required Capital Ratios?
A. Tangible Capital Ratio
B. Core Capital Ratio
C. Risk-Based Capital Ratio
9. What is the date of your Fiscal Year-End?
A. Has there been a year during the past three years in which the Bank/Savings and
Loan did not make a profit?
10. Have you read the California Government Code Section 53630 through 53684 pertaining
to all of the State's requirements governing the deposit of moneys by Local Agencies
which includes cities ( ) YES ( ) NO
11. The City Treasurer will waive collateral for the amount covered by FDIC insurance only.
.Amounts above the insurance coverage must be collateralized. Where is the collateral for
Time Deposits of the Bank/Savings and Loan held?
12. Has there been a period during the past five years when Time Deposits of the
Bank/Savings and Loan have not been fully collaterialized? If yes, explain.
13. How many years of related experience does the Primary Contact(s) have?
14. What other banking services would you'be interested in providing the City of Huntington
Beach?
15. What transaction documents and reports would we receive?
16. What information would you provide to our Investment Officer?
17. Please provide your Contract of Deposit of Moneys pre-signed and sealed by your
institution, as well as, any signature cards that you may require.
18. Please provide your Wiring Instructions.
19. Please provide your Banks/Savings and Loan most recent certified financial statement. In
addition, an audited financial statement must be provided within 120 days of your fiscal
year-end.
Note: If you wish to provide more complete answers than space permits, please reference
question numbers on an attachment.
--CERTIFICATION--
We hereby certify that we have personally read City of Huntington Beach's Investment Policy and
the California Government Codes pertaining to the investments of the City of Huntington Beach
and have implemented reasonable procedures and a system of controls designed to preclude
imprudent investment activities arising out of transactions conducted between our firm and the
City of Huntington Beach. All sales personnel will be routinely informed of City of Huntington
Beach's investment objectives, horizon, outlook, strategies and risk constraints whenever we are
so advised. We pledge to exercise due diligence in informing City of Huntington Beach's
investment officers of all foreseeable risks associated with financial transa,;t")ns conducted with
our firm. We attest to the accuracy of our responses to your questionnaire.
NOTE: Completion of Questionnaire is only part of City of Huntington Beach's
Certification process and DOES NOT guarantee that the applicant will be approved to do
business with the City of Huntington Beach.
SIGNED: DATE:
Signature please
Please print
COMPLIANCE
OFFICER: DATE:
Signature please
Please print
r~
CITY OF HUNTINGTON BEACH
P.O. BOX 711 CALIFORNIA 92648
CITY TREASURER'S OFFICE
CITY OF HUNTINGTON BEACH
OFFICE OF THE CITY TREASURER
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1. Name of Firm
2. Address
(Local) (National Headquarters)
3. Telephone No. ( ) Telephone No. ( )
(Local) (National Headquarters)
4. Primary Representative Manager/Partner-in-Charge
Dame Name
Title Title
Telephone No. Telephone No.
No. of Yrs. in Agency Sales No. of Yrs. in Agency Sales
Number of years with firm Number of years with firm
Name of secondary sales person Tele. No.
5. Are you a Primary Dealer in U.S. Government Securities? ( ) YES ( )NO
6. Are you a Regional Dealer in U.S. Government Securities? ( ) YES ( )NO
7. Are you a Broker instead of a Dealer, i.e. You DO NOT own positions of Securities?
( ) YES ( ) PTO
8. What is the net capitalization of your Firm?
9. What is the date of your Firm's fiscal year-end?
10. Is your Firm owned by a Holding Company? If so, what is its name and net capitalization?
11. Please provide your Wiring and Delivery instructions
12. Which of the following instruments are offered regularly by your local desk?
( ) T-Bills ( ) Treasury Notes/Bonds ( ) Discount Notes ( ) NCD'S
( ) Agencies (specify)
( ) BA's (Domestic) BA's (Foreign) ( ) Commercial Paper ( ) Mid-Term Notes
13. Which of the above does your Firm specialize in Marketing?
14. Please identify your most directly comparable City Local Agencies with whom you have
dealt with regarding the sale or purchase of securities listed in No. 12.
Entitv Contact Person Telephone No. Client Since
15. What reports, transactions, confirmations and paper trail would we receive?
16. Please include samples of research reports or market information that your firm regularly
provides to local agency clients.
17. What precautions are taken by your Firm to protect the interest of the public when dealing
with government agencies as investors.
18. Have you or your Firm been censored or punished in any way by a Regulatory State or
Federal Agency for improper or fraudulent activities, related to the sale of securities
including but not limited to those listed in No. 12?
( ) YES ( )NO
19. If yes, please explain
20. Attach certified documentation of your capital adequacy and financial solvency. In
addition, an audited financial statement must be provided within 120 days of your fiscal
year-end.
Note: If you wish to provide more complete answers than space permits, please reference
question numbers on an attachment.
--CERTIFICATION--
We hereby certify that we have personally read the City of Huntington Beach's Investment Policy
and the California Government Codes pertaining to the investments of the City of Huntington
Beach, and have implemented reasonable procedures and a system of controls designed to
preclude imprudent investment activities arising out of transactions condua.d between our firm
and the City of Huntington Beach. All sales personnel will be routinely informed of City of
Huntington Beach's investment objectives, horizon, outlook, strategies, and risk constraints
whenever we are so advised. We pledge to exercise due diligence in informing.City,of
Huntington Beach's investment officers of all foreseeable risks associated with financial
transactions conducted with our firm. We agree to advise you of any disciplinary action against
persons serving your account. We attest to the accuracy of our responses to your questionnaire.
NOTE: Completion of Questionnaire is only part of City of Huntington Beach's
Certification process and DOES NOT guarantee that the applicant will be approved to do
business with the City of Huntington Beach.
SIGNED: DATE:
Manager-Signature
Manager- Please print
COMPLIANCE DATE:
OFFICER: Signature
Telephone No.:
Please print
5__QMARY OF INVESTMENT PORT. OLIO
ACTIVITY FOR JANUARY, 1996
The following is a summary of investment transactions for the month of Januai-y, 1996:
End of period City Portfolio Balance $56,287,912.75
Interest Received for Period 283,722.54
Earned Interest Yield Average 5.792%
Average Maturity I I I days
During the month of January, the city's portfolio decreased from $59,806,332.53 to $56,287,912.75, for a
difference of$3,518,419.77. The yield on the Treasurer's portfolio increased from 5.739%, December's
ending rate, to 5.792%, January•'s ending rate. The city's General Account Bank Balance on January 31,
1996 was $2,827,568.5.1.
Interest Received
Total current month $ 283,722.54
Total year to date $1,049,865.34
Transaction Summary Value
Number of securities purchased 22 $129,561,774.21
Number of securities matured/sold 21 $133,080,591.71
Percent of Available Funds Invested 94.98%
Summary of Changes in Investment Portfolio
January, 1996
Beginning of + OR - End of Month Percent Policy %
Month This Month of Portfolio Allowable
Repurchase $11,000,000.00 <$6,500,000.00> $4,500,000.00 7.99% N/A
Agreements
Bankers $1,968,408.33 <$5;260.83> $1,963,147.50 3.49% 25%
Acceptances
Federal Agency $4,838,145.12 - 0 - $4,838.145..12 8.60% N/A
Issues
Commercial - 0 - $993,583.33 $993,583.33 1.77% 15%
Paper
Local Agency $39,999,779.08 - 0 - $39,999,779.08 71.06% N/A
Investment Fund
Medium Term $2,000,000.00 $1,993,257.72 $3,993,257.72 i.09% 20%
Notes
TOTALS $59,806,332.53 $56,287,912.75 100.00%
I certify that this report accurately reflects all City and Redevelopment Agency pooled investments and is in
conformity with all State laws and the City of Huntington Beach Investment Policy statement adopted by the
City Council on October 16, 1995. The investment program herein shown provides sufficient cash flow
liquidity to meet next month's estimated expenditures.
1 ow
Council/Agency Meeting Held: 1.6 —I(--RS�-
Deferred/Continued to:
Approved ❑ Conditionally Approved ❑ Denied aCity Clerk's Signature
Council Meeting Date: October 16, 1995 Department ID Number: TR 95-004
CITY OF HUNTINGTON BEACH
REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION
SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
SUBMITTED BY: DONALD L. WATSON, City Treasurer 6-11�11-< ;-I
PREPARED BY: DONALD L. WATSON, City Treasurer
SUBJECT: 1995 INVESTMENT POLICY
Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s)
Statement of Issue: Pursuant to California Government Code, the Treasurer of the local
agency shall render an annual statement of investment policy to the legislative body for
acceptance.
The City Treasurer, with the assistance of the Investment Advisory Board, has prepared a
new investment policy that is in an easier to read format and includes some changes to the
existing policy.
Funding Source: Not applicable.
Recommended Action: That the City Council/Redevelopment Agency adopt the attached
Resolutions for the City of Huntington Beach as the Investment Policy for the year 1995/96.
Alternative Action(s): Continue existing policy or modify as desired.
REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION
MEETING DATE: October 16, 1995 DEPARTMENT ID NUMBER: TR 95-004
Analysis: The attached Resolutions for 19,95 have been reviewed by the city's Investment
Advisory Board and are a more in depth policy for city investments.
Environmental Status: Not applicable.
Attachment(s):
City Clerk's'
Page Number
. 1 Resolutions and proposed investment policy for 1995/96
0014573.01 -2- 10/06/95 9:27 AM
RESOLUTION NO. 6716
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF HUNTINGTON BEACH
APPROVING THE ANNUAL FISCAL YEAR 1995/1996
INVESTMENT POLICY
WHEREAS, the City Council of the City of Huntington Beach is required
to approve an annual statement of investment policy; and
The duly elected City Treasurer has recommended approval of the City of
Huntington Beach Investment Policy, attached hereto and incorporated herein by
this reference; and
The duly appointed Investment Advisory Board has reviewed the City
Treasurer's recommended policy and also recommends approval thereof; and
The policy is consistent with California Government Code §53600, et.
seq., attached hereto and incorporated herein by this reference.
NOW, THEREFORE, the City Council of the City of Huntington Beach
hereby approves and adopts the attached City of Huntington Beach Investment
Policy for Fiscal Year 1995/1996 so long as applied in a manner consistent with
state and local law as amended from time to time.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at
a regular meeting thereof held on the 16th day of october , 1995.
//1�-711-,
Mayor
ATTEST: APPROVED AS TO FORM:
City Clerk
REVIEWED AND APPROVED: INITIATED AND APPROVED:
City Administr or City Treasurer
5/fy9596 1
Res. No. 6716
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, CONNIE BROCKWAY, the duly elected, qualified City Clerk of
the City of Huntington Beach, and ex-officio Clerk of the City Council of said
City, do hereby certify that the whole number of members of the City Council of
the City of Huntington Beach is seven; that the foregoing resolution was passed
and adopted by the affirmative vote of at least a majority of all the members of said
City Council at a regular meeting thereof held on the 16th of October, 1995 the
following vote:
AYES: Councilmembers: Harman, Bauer, Sullivan, Leipzig, Dettloff,
Green, Garofalo
NOES: Councilmembers: None
ABSENT: Councilmembers: None
&Zz�
City Clerk and ex-officio Clerk of the
City Council of the City of Huntington
Beach, California
G/resoluti/resbkpg
RESOLUTION NO. 268
A RESOLUTION OF THE REDEVELOPMENT AGENCY
OF THE CITY OF HUNTINGTON BEACH
APPROVING THE ANNUAL FISCAL YEAR 1995/1996
INVESTMENT POLICY
WHEREAS, the City Council of the City of Huntington Beach is required
to approve an annual statement of investment policy, and the Redevelopment
Agency of the City of Huntington Beach, by virtue of Resolution No. 1 applies
City policies, rules and regulations wherever practicable; and
The duly elected City Treasurer has recommended approval of the City of
Huntington Beach Investment Policy, attached hereto and incorporated herein by
this reference; and
The duly appointed Investment Advisory Board has reviewed the City
Treasurer's recommended policy and also recommends approval thereof; and
The policy is consistent with California Government Code §53600, et.
seq., attached hereto and incorporated herein by this reference.
NOW, THEREFORE, the Redevelopment Agency of the City of
Huntington Beach hereby approves and adopts the attached City of Huntington
Beach Investment Policy for Fiscal Year 1995/1996 so long as applied in a
manner consistent with state and local law as amended from time to time.
PASSED AND ADOPTED by the Redevelopment Agency of the City of
Huntington Beach at a regular meeting thereof held on the 16th day of
October , 1995.
Chairman
ATTEST: APPROVED AS TO FORM:
Agency SecretaryG f Agency Counsel (o- �-
REVIEWED AND APPROVED: INITIATED AND APPROVED:
hief Admi istrative Officer City Treasurer
5/fy9596 - 2
Res. No. 268
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF HUNTINGTON BEACH )
I, CONNIE BROCKWAY, Clerk of the Redevelopment Agency of
the City of Huntington Beach, California, DO HEREBY CERTIFY that the
foregoing resolution was duly adopted by the Redevelopment Agency of the City
of Huntington Beach at a meeting of said Redevelopment Agency held on the 16th
day of October, 1995, and that it was so adopted by the following vote:
AYES: Members:
Harman, Bauer, Sullivan, Leipzig, Dettloff, Green, Garofalo
NOES: Members:
None
ABSENT: Members:
None
Clerk of the Redevelopment Agency
of the City of Huntington Beach, Ca.
G/resoluti/resbkpg2
CITY OF HUNTINGTON BEACH INVESTMENT POLICY
1.0 Purpose:
This policy is intended to provide guidelines for the prudent investment of the city's cash
balances, and outline the policies to assist maximizing the efficiency of the city's cash
management system.
2.0 Policv:
The investment practices and policies of the City of Huntington Beach are based upon
state law and prudent money management. The primary goals of these practices are:
A. To assure compliance with all Federal, State, and local laws governing the
investment of moneys under the control of the City Treasurer.
B. To protect the principal moneys entrusted to this office.
C. To generate the maximum amount of investment income within the
parameters of prudent risk management.
3.0 Scope:
This investment policy applies to all financial assets of the City of Huntington Beach.
These funds are accounted for in the city's Comprehensive Annual Financial Report
and include:
3.1 Funds
The City Treasurer is responsible for investing the unexpended cash in the City Treasury,
except for the employee's retirement funds, which are administered separately and those
funds which are managed separately by trustees appointed under indenture agreements.
The City Treasurer will strive to maintain the level of investment of these idle funds as
close as possible to 100%.
These funds are described in the city's annual financial report and include:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Capital Project Funds
3.1.4 Enterprise Funds
3.1.5 Trust and Agency Funds
1
3.1.6 Any new fund created by the legislative body, unless
specifically exempted
This investment policy applies to all transactions involving the financial assets and related
activity of the foregoing funds.
4.0 Prudence:
The standard of prudence to be used by the City Treasurer shall be the "prudent person"
standard. This shall be applied in the context of managing an overall portfolio.
The"Prudent Person Rule" provides, pursuant to Probate Code Section 16040:
When investing, reinvesting, purchasing, acquiring,exchanging,
selling and managing trust property,the trustee shall act with the
care, skill, prudence, and diligence under the circumstances then
prevailing, including but not limited to the general economic
conditions and the anticipated needs of the trust and its
beneficiaries, that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise
of like character and with like aims to accomplish the purposes of
the trust as determined from the trust instrument. In the course of
administering the trust pursuant to this standard, individual
investments shall be considered as part of an overall investment
strategy.
4:1 Investment officers acting in accordance with written procedures and the investment
policy and exercising due diligence shall be relieved of personal responsibility for an
individual security's credit risk or market price changes, provided deviations from
expectations are reported to the City Council in a timely fashion and appropriate action is
taken to control adverse developments.
5.0 Obiective:
Consistent with this aim, investments are made under the terms and conditions of
California Government Code Section 53600, et seq. Criteria for selecting investments and
the absolute order of priority are:
5.1 Safety: Safety of principal is the foremost objective of the investment program.
Investments of the City of Huntington Beach shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio. To attain this objective,
diversification is required in order that potential losses on individual securities do not
exceed the income generated from the remainder of the portfolio.
2
5.2 Liquidity: The City of Huntington Beach's investment portfolio will remain sufficiently
liquid to enable the City of Huntington Beach to meet all operating requirements which
might be reasonably anticipated. Liquidity is essential to the safety of principal.
5.3 Return on Investments: The City of Huntington Beach's investment portfolio shall be
designed with the objective of attaining a rate of return throughout budgetary and
economic cycles, commensurate with the City of Huntington Beach's investment risk
constraints and the cash flow characteristics of the portfolio.
6.0 Investment Advisory Board:
By City Charter, the City Treasurer is the custodian of all public funds of the City of
Huntington Beach. The City Council may appoint Huntington Beach residents,
professional, and non professional people, to serve on an Investment Advisory Board for
the purpose of advising the City Treasurer on an investment program and at least
quarterly, review the investment portfolio for compliance with the adopted investment
policy. Exceptions: Items to the Investment Policy that require City Council approval
will first be reviewed by the Investment Advisory Board.
7.0 Delegation of Authority:
Within the City Treasurer's office, the responsibility for the day to day investment of the
City funds is delegated to the Senior Deputy City Treasurer in the absence of the City
Treasurer. The City Treasurer shall be responsible for all transactions undertaken and
shall establish a system of controls to regulate the activities of subordinate officials.
8.0 Ethics and Conflicts of Interest:
In addition to state and local statutes relating to conflicts of interest, all persons involved
in the investment process shall refrain from personal business activity that could conflict
with proper execution of the investment program, or which could impair their ability to
make impartial investment decisions. Employees and investment officials shall disclose to
the City Council any material financial interests in financial institutions that conduct
business within this jurisdiction, and they shall further disclose any large personal
financial/investment positions that could be related to the performance of the City of
Huntington Beach, particularly with regard to the time of purchases and sales.
3
9.0 Authorized Financial Dealers and Institutions:
To provide for the optimum yield in the investment of city funds, the city's investment
procedures shall encourage competitive bidding on transactions from approved
brokers/dealers.' In order to be approved by the city, the dealer must be a "primary"
dealer or regional dealer that qualifies under Securities and Exchange Commission Rule
15C3-1 (Uniform Net Capitol Rule). The institution must have an office in California.
The dealer must be experienced in institutional trading practices and familiar with the
California Government Code as related to investments appropriate for the city; and, other
criteria as may be established in the investment procedures. All broker/dealers who desire
to become qualified bidders for investment transactions must annually submit a
"Broker/Dealer Application" and related documents relative to eligibility.
10.0 Authorized & Suitable Investments: Investments not specifically listed below are
deemed inappropriate and prohibited:
Direct Investments Investments made directly by the City Treasurer in the name of
the City of Huntington Beach.
A. BANKERS ACCEPTANCES, maximum 25% of portfolio (up to 40% with
Council approval). Maximum term 180 days (270 days with Council
approval).
These are time drafts drawn on a bank by an exporter or importer to obtain funds to pay
for specific merchandise. By its acceptance, the bank becomes primarily liable for the
payment of the draft at its maturity. An acceptance is a high-grade negotiable
instrument. Acceptances are purchased in various denominations for 30, 60, or 90 days,
but no longer than 270 days. The interest is calculated on a 360-day discount basis
similar to treasury bills Local agencies may not invest more than 40%of their surplus
money in bankers acceptance.
B. NEGOTIABLE CERTIFICATES OF DEPOSIT, maximum 30% of portfolio.
Maximum term three (3) years, (Up to five (5) years with Council approval).
Unsecured obligations of the financial institution, bank or savings and loan, bought at
par value with the promise to pay face value plus accrued interest at maturity. They are
high-grade negotiable instruments, paying a higher interest rate than regular certificates
' So long as the requirements of California Government Code Section 53601.5 are adhered to.
4
of deposit. The primary market issuance is in multiples of$1,000,000, the secondary
market usually trades in denominations of $500,000, although smaller lots are
occasionally available.
C. COMMERCIAL PAPER, maximum 15% of portfolio. Maximum term 180
days; plus additional 15% of portfolio if the dollar-weighted average
maturity of the entire amount does not exceed 31 days.
Short-term unsecured promissory note issued by a corporation to raise working capital.
These negotiable instruments are purchased at a discount to par value or at par value
with interest bearing. Commercial paper is issued by corporations such as General
Motors Acceptance Corporation, IBM,BankAmerica,etc.
Local agencies are permitted by State law to invest in commercial paper of "prime"
quality of the highest ranking or of the highest letter and numerical ratings as provided
by Moody's Investor's Service, Inc., or Standard and Poor's Corporation. Purchases of
eligible commercial paper may not exceed 180 days maturity nor exceed 30% of the
local agency's surplus funds.
D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY
WITHIN THE STATE OF CALIFORNIA.
Bonds, notes,warrants, issued by the local agency, including bonds payable solely out of
the revenues from a revenue producing property owned, controlled, or operated by the
local agency or by a department,board, agency, or authority of the local agency.
E. OBLIGATIONS OF THE UNITED STATES TREASURY. United
States Treasury Notes, bonds,bills or certificates of indebtedness, or those for which the
faith and credit of the United States are pledged for the payment of principal and
interest.
F. FEDERAL AGENCIES
Debt instruments issued by agencies of the Federal government. Though not general
obligations of the U.S. Treasury, such securities are sponsored by the government and,
therefore, have high safety ratings. The following are authorized:
• Federal Intermediate Credit Bank(FICB'S)
Loans to lending institutions used to finance the short-term and intermediate needs of
farmers, such as seasonal production. They are usually issued monthly in minimum
denominations of$3,000 with a 9-month maturity. Interest is payable at maturity and is
calculated on a 360-day, 30-day month basis.
5
• Federal Land Bank (FLB'S)
Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds
are issued at irregular times for various maturities ranging from a few months to ten
years. The minimum denomination is $1,000. They carry semi-annual coupons.
Interest is calculated on a 360-day, 30-day month basis.
• Federal Home Loan Bank (FHLB'S)
Issued by the Federal Home Loan Bank System to help finance the housing industry.
The notes and bonds provide liquidity and home mortgage credit to savings and loan
associations, mutual savings banks, cooperative banks, insurance companies, and
mortgage-lending institutions. They are issued irregularly for various maturities. The
minimum denomination is$5,000. The notes are issued with maturities of less than one
year and interest is paid at maturity. The bonds are issued with various maturities and
carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis.
• Federal National Mortgage Association (FNMA'S)
To assist the home mortgage market by purchasing mortgages insured by the Federal
Housing Administration and the Farmers Home Administration, as well as those
guaranteed by the Veterans Administration. They are issued about four times a year for
maturities ranging from a few months to eight years. They are issued in minimum
denominations of$10,000. They carry semi-annual coupons. Interest is computed on a
360 day, 30-day month basis. FNMA is a publicly held corporation listed on the
NYSE.
• Small Business Administration (SBA'S)
Securities/Loans guaranteed by Federal government to provide financial assistance
through direct loans and loan guarantees to small businesses.
• Government National Mortgage Association (GNMA'S)
Securities guaranteed by GNMA and issued by mortgage bankers, commercial banks,
savings and loan associations, and other institutions. Security holder is protected by full
faith and credit of the U.S. Government. Ginnie Mae buys FHA and VA mortgages and
auctions them to private lenders which pool these mortgages and sell pass-through
certificates. Each month,principal and interest payments from the pool pass through to
investors.
6
• Tennessee Valley Authorities (TVA'S)
A U.S. Corporation created in the 1930's, to electrify the Tennessee Valley area;
currently a major utility headquartered in Knoxville, Tennessee. TVA's securities are
highly liquid and are widely accepted.
• Student Loan Association Notes (Sallie Mae's)
A. U.S. Corporation and instrumentality of the U.S. government. Through its
borrowings, funds are targeted for loans to students in higher education institutions.
SLMA's securities are highly liquid and are widely accepted.
G. REPURCHASE AGREEMENT
Short-term agreement between a seller and a buyer (investor) of U.S. Government
securities, whereby the seller agrees to repurchase the securities at an agreed upon price
and, at a stated time. The city may utilize repurchase agreements on a daily basis. The
bank or dealer sells securities to the city, agreeing to buy them back the next day. Thus,
the city utilizes a temporary surplus of cash to enhance interest earnings.
H. REVERSE-REPURCHASE AGREEMENTS
A reverse-repurchase is exactly what the name implies. Reverse-repurchase agreements are the sale of
securities by the city under an agreement to "repurchase" the securities on or before a specified date and
for a specified amount. This investment shall be utilized to provide short term liquidity, but only with
specific council approval on each transaction.
I. MEDIUM-TERM CORPORATE NOTES, maximum 20% of portfolio (30%
with Council approval).
Unsecured promissory notes issued by a corporation organized and operating in the
United States. These are negotiable instruments and are traded in the secondary market.
Medium term corporate notes can be defined as extended maturity commercial paper.
Local agencies are restricted by the Government Code to investments in corporations
rated in the top three note categories by a nationally-recognized rating service. Further
restrictions are a maximum term of five years to maturity and total investments in
medium term corporate notes may not exceed 30%of the local agency's surplus funds.
Refer to Section 11.0 regarding Government Code Provisions.
7
J. TIME DEPOSITS-CERTIFICATES OF DEPOSIT (non-negotiable
certificates of deposit.)
Time deposits of a bank or savings and loan. They are purchased in various
denominations with maturities ranging from 30 to 360 days. The interest is calculated
on a 360-day, actual day month basis and is payable monthly. Refer to Section 11.0
regarding Government Code Provisions.
K. OBLIGATIONS OF THE STATE OF CALIFORNIA
Registered state warrants or treasury notes or bonds of this state, including bonds
payable solely out of the revenues from a revenue-producing property owner,
controlled,or operated by the state or by a department,board, agency,or authority
of the state.
Indirect Investments - Funds deposited into authorized accounts which are
managed by other agencies according to published guidelines.
L. MUTUAL FUNDS, maximum 15% of portfolio. (Requires City Council
approval for each transaction)
Local agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies that invest in securities and obligations otherwise eligible for local
agency investment. In addition, to be eligible as an investment the company must: (1) attain the
highest ranking or rating provided by not less than two of the three largest national rating
services; and (2) have an investment advisor registered with the SEC who has at least five years
? experience with investing public type investments with a portfolio of at least five hundred
million. Finally, the purchase price of the shares may not include commission and only a certain
stated percentage of the City's money may be invested.
M. THE LOCAL AGENCY INVESTMENT FUND (LAIF)
Is a special fund of the California State Treasury through which any local government
may pool investments. The city may invest up to $20,000,000 per agency in this fund.
Currently the city has established two (2) agency funds: The City of Huntington Beach
City Fund, and the City of Huntington Beach Redevelopment Agency Funds.
Investments in LAIF are highly liquid and may be converted to cash within 24 hours.
Investment with LAIF are secured by the full faith and credit of the State of California.
N. THE ORANGE COUNTY LOCAL AGENCY INVESTMENT POOL
(OCIP) Is a special fund of the County of Orange through which any local city or
agency may, with approval of their governing body and the County Treasurer, deposit
excess funds in the County Treasury for reinvestment by the Treasurer. Investments
8
with OCIP are made in accordance with Government Code Section 53635.2 As of
November 29, 1994, the City Treasurer suspended any additional deposits into OCIP.
The suspension will remain until new policies, procedures, and pending legislation are
in effect and approved by City Council.
Portfolio Adjustments - Should an investment percentage-of-portfolio limitation be
exceeded due to an incident such as fluctuation in portfolio size, the affected securities
may be held to maturity to avoid losses. When no loss is indicated, the Treasurer shall
consider reconstructing the portfolio basing his decision on the expected length of time the
portfolio will be unbalanced. If this occurs, the City Council shall be notified.
11.0 Collateralization:
Under provisions of the California Government Code, California banks, and savings and
loan associations are required to secure the city's deposits by pledging government
securities with a value of 110 % of principal and accrued interest. California law also
allows financial institutions to secure city,deposits by pledging first trust deed mortgage
notes having a value of 150% of city's total deposits. Collateral will always be held by an
independent third party. A clearly marked evidence of ownership (safekeeping receipt)
must be supplied to the city and retained.
The City Treasurer, at his discretion, may waive the collateral requirement for deposits
which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation. The right of collateral substitution
is granted.
12.0 Safekeeping and Custody:
All city investments shall have the City of Huntington Beach as its registered owner, and
all interest and principal payments and withdrawals shall indicate the City of Huntington
Beach as the payee.
All securities shall be safe kept with the city itself or with a qualified financial institution,
contracted by the city as a third party. All agreements and statements will be annually
reviewed by external auditors. All securities shall be acquired by the safekeeping
institution on a "Delivery-Vs-Payment" (DVP) basis. The DVP basis does not apply to
Z So long as the requirements of California Government Code Section 53601.5 are adhered to.
9
Repurchase Agreements. Due to the "overnight" nature of the daily repurchase
agreement, it would be impossible to utilize DVP without incurring additional costs and
unreasonable demands of the bank. However, collateral is provided for the city's
investment security by having the bank set aside collateral (in the city's name) at the
Federal Reserve Bank in Los Angeles. This is provided for in the Master Repurchase
Agreement that must be signed by both parties.
13.0 Diversification:
The city's investment portfolio will be diversified to avoid incurring unreasonable and
avoidable risks associated with concentrating investments in specific security types,
maturity segment, or in individual financial institutions. The City will utilize Moody's
Securities, Sheshunoff Bank in savings and loan ratings, or other such services to
determine financially sound institutions to do business with.
Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be
mitigated by investing in only very safe securities and by diversifying the investment
portfolio so that the failure of any one issuer would not unduly harm the city's cash flow.
Market risk, defined as the risk of market value fluctuations due to overall changes in the
general level of interest rates, shall be mitigated by structuring the portfolio so that
securities mature at the same time that major cash outflows occur, thus eliminating the
need to sell securities prior to their maturity. It is explicitly recognized herein, however,
that in a diversified portfolio, occasional measured losses are inevitable and must be
considered within the context of overall investment return.
The city's investment portfolio will remain sufficiently liquid to enable the city to meet all
operating requirements which might be reasonably anticipated.
14.0 Maximum Maturities:
To the extent possible, the City of Huntington Beach will attempt to match its investments
with anticipated cash flow requirements. Unless matched to a specific cash flow, the city
will not directly invest in securities maturing more than five (5) years from the date of
purchase, unless, the legislative body has granted express authority to make that
investment either specifically, or as a part of an investment program approved by the City
Council.
10
15.0 Internal Control:
The external auditors shall annually review the investments and the investment policy.
This review will provide internal control by assuring compliance with policies and
procedures. Additionally, account reconciliation and verification of general ledger
balances relating to the purchasing or maturing of investments shall be performed by the
Finance Department. To provide further protection of city funds, written procedures
prohibit the wiring of any city funds without the authorization of at least two of the three
designated city officials:
1. City Treasurer
2. Senior Deputy City Treasurer
3. Director of Finance
16.0 Performance Standards:
This investment policy shall be reviewed at least annually by the Investment Advisory
Board and the City Council to ensure its consistency with the overall objective of
preservation of principal, liquidity, and return, and its relevance to current law and
financial and economic trends. All financial..assets of all other funds shall be administered
in accordance with the provisions of this policy.
The moneys entrusted to the City Treasurer.will be an actively managed portfolio. This is,
;the City Treasurer and staff will observe, review, and react to changing conditions that
affect the portfolio.
16.1 Market Yield (Benchmark):
The investment portfolio shall be managed to attain a market-average rate of return
throughout budgetary and economic cycles, taking into account the city's investment risk
constraints and cash flow. Market average will be determined by year-end average rates
of return from a combination of indices: Local Agency Investment Fund (LAIF), and 1-
year Treasuries.
While the city will not make investments for the purpose of trading or speculation as the dominant
criterion, the City Treasurer shall seek to enhance total portfolio return by means of ongoing
portfolio management. The prohibition of highly speculative investments precludes pursuit of
gain or profit through unusual risk and precludes investments primarily directed at gains or profits
11
from conjectural fluctuations in market prices. The City Treasurer will not directly pursue any
investments that are leveraged or deemed derivative in nature. However, as long as the original
investments can be justified by their ordinary earning power, trading in response to changes in
market value is a requirement of on going portfolio management.
17.0 Reporting:
The City Treasurer shall submit a monthly investment report to the City Council, City
Administrator, and City Finance Director and the Investment Advisory Board. This report
will include the following elements:
17.1 Type of investment
17.2. Institution
17.3 Purchase Date
17.4 Date of maturity
71.5 Amount of deposit or cost of the investment
17.6 Face value of the investment
17.7 Current market value of securities
17.8 Rate of interest
17.9 Interest earnings
17.10 Statement relating the report to the Statement of Investment Policy
17.11 Statement availability of funds to meet the next 30 days' obligations
This monthly report shall be placed on the City Council Agenda for Council and public
review.
18.0 Investment Policy Adoption:
By virtue of a resolution of the City Council of the City of Huntington Beach, the Council
shall acknowledge the receipt and filing of this annual statement of investment policy for
the respective fiscal year.
12
tj CITY OF HUNTINGTON BEACH
ie" INTER-DEPARTMENT COMMUNICATION
HUNTINGTON BEACH
TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS
FROM: DONALD L. WATSON, City Treasurer
SUBJECT: STUDY SESSION OF FEBRUARY 27, 1995
DATE: , FEBRUARY 24, 1995
Attached are five(5) documents that will be references during the Monday, February 27,
1995 study session.
The documents are:
1) Existing investment policy
2) Proposed new format and expanded investment policy
3) Proposed Citizens Investment Advisory Board
4) Background on Professional Advisors
5) Portfolio Master Summary for January, 1995
If you have any questions prior to the study session, please call me at 536-5200.
Attachments
cc: lichael T, Uberuaga
,. REQUES'► FOR CITY COUNCIL ACTION
Date 10/17/94
HONORABLE MAYOR AND CITY COUNCIL MEMBERS
Submitted to: APPROVED BY CITY COU,'!'C:
DONALD L. WATSON, City Treasurer .���
Submitted by: /�..- /0 _ -7 19�
DONALD L. WATSON, City Treasurer
Prepared by: tY.
Crry CL K O
Subject: CITY TREASURER EWESTMENT POLICY RESOLUTION FOR 1994
Consistent with Council Policy? J Yes [ J New Policy or Exception 441 ` (o 4
Statement of Issue, Recommendation, Analysis, Funding Source,Alternative Actions, Attachments:
STATEMENT OF ISSUE
Pursuant to California Government Code Section 53646, the Treasurer of the local agency shall
render an annual statement of investment policy to the legislative body for acceptance.
RECOMMENDATION
Adopt the attached Resolution as the Investment Policy for the City of Huntington Beach for the year
1994.
ANALYSIS
The attached Resolution for 1994 is similar to prior Resolution No. 6521 submitted for 1995
adoption. _
FUNDIIVG SOURCE
None.
ALTERNATIVE ACTION
Do not approve Resolution.
ATTACHMENT
Copy of Resolution.
1/
RESOLUTION NO. 6641
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF HUNTINGTON BEACH
ACKNOWLEDGING THE RECEIPT AND FILING
OF THE ANNUAL STATEMENT OF INVESTMENT
POLICY FOR THE YEAR 1994/95
WHEREAS, in 1984 California Govemment Code Section 53646 was amended to
require the treasurer of a local agency to render an annual statement of investment policy to
the legislative body, and a monthly report containing specified information regarding
investments and deposits to the chief executive officer and legislative body; and
Such statute is mandatory for all local agencies; and
Pursuant to Title 5, Division 2, Chapter 4, Article 1, commencing with California
Govemment Code Section 53600 et seq., the City Treasurer declares the annual statement of
investment policy for the City of Huntington Beach to be as follows:
1. Practices and Policy Statement-The investment practices and policies of the
City of Huntington Beach are based upon state law and prudent money management. The
primary goals of these practices are:
A. To assure compliance with all Federal, State, and local laws governing
the investment of moneys under the control of the City Treasurer.
B. To protect the principal moneys entrusted to this office.
C. To generate the maximum amount of investment income within the
parameters of prudent risk management.
The City of Huntington Beach operates its pooled idle cash investments under the
.Prudent Man Rule (California Civil Code Section 261, et seq.) which states that "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
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speculation, but for investment, considering the probable safety of their capital as well as the
probable income to be derived." This affords a broad spectrum of investment opportunities as
long as the investment is deemed prudent and is permissible under currently effective state
legislation and other imposed legal restrictions. The City Treasurer will strive to maintain the
level of investment of idle funds as close as possible to 100 percent. Consistent with this aim,
investments are made under the terms and conditions of California Govemment Code Section
53600, et seq. Criteria for selecting investments and the absolute order of priority are:
A. Safety;
B. Liquidity; and
C. Yield
2. Types of Instruments - under the provisions of the City's investment policy and
in accordance with the California Govemment Code Section 53601.
The legislative body of a local agency having money in a sinking fund
of, or surplus.money in, its treasury not required for the immediate
necessities of the local agency may invest any portion of the money
which it deems wise or expedient in the following; provided, however,
that where this section does not specify a limitation on the term or
remaining maturity at the time of the investment, no investment shall be
made in any security, other than a security underlying a repurchase or
reverse repurchase agreement authorized by this section, which at the
time of the investment has a term remaining to maturity in excess of
five years, unless the legislative body has granted express authority to
make that investment either specifically, or as a part of an investment
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program approved by the legislative body no less than three months
prior to the investment.
The City may invest in the following:
A. Bankers acceptances, maximum 40% of portfolio. Maximum term 270
days. .
B. Negotiable certificates of deposit, maximum 30% of portfolio. Maximum
term five (5) years.
C. Commercial paper, maximum 15% of portfolio. Maximum term 180 days;
plus additional 15% of portfolio if the dollar-weighted average maturity of
the entire amount does not exceed 31 days.
D. Bonds issued by the City.
E. Obligations of the United States Treasury.
F. Federal Agency, obligations of:
Federal Intermediate Credit Bank (FICB'S)
Federal Land Bank (FLB'S)
Federal Home Loan Bank (FHLB'S)
Federal National Mortgage Association (FNMA'S)
Small Business Administration (SBA'S).
Government National Mortgage Association (GNMA'S)
Tennessee Valley Authorities(TVA'S)
Student Loan Association Notes (Sallie Mae's)
G. Obligations of the State of California or of any local agency within the
State of California:
The Local Agency Investment Fund (LAIF) is a special fund of the
California State Treasury through which any local government
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WiinvesVI 05194
may pool investments. The City may invest up to $20,000,000
per agency in this fund. Currently the City has established two
(2) agency funds: The City of Huntington Beach General Fund,
and the City of Huntington Beach Redevelopment Agency Funds.
Investments in LAIF are highly liquid and may be converted to
cash within 24 hours. Investments with LAIF are secured by the
full faith and credit of the State of California.
H. The County of Orange Local Agency Investment Pool (COLAIF)
is a special fund of the County of Orange through which any local
city or agency may, with approval of their governing body and the
County Treasurer, deposit excess funds in the County Treasury
for reinvestment by the Treasurer. Investments with COLAIF are
security by the full faith and credit of the County of Orange and
all investments are made in accordance with Govemment Code
Section 53635.
I. Repurchase Agreement.
J. Reverse-Repurchase Agreements shall be utilized only with specific
council approval on each transaction.
K. Medium-Term Corporate Notes, maximum 30% of portfolio. Maximum
term five (5) years.
L. Mutual Funds, maximum 15% of portfolio.
M. Time Deposits (non-negotiable certificates of deposit.)
- 3. Collateral for Deposits - Under provisions of the California Govemment Code,
California banks, and savings and loan associations are required to secure a city's deposits by
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6/krinvesVl015194
pledging government securities with a value of 110 percent of a city's deposit. California law
also allows financial institutions to secure city deposits by pledging first trust deed mortgage
notes having a value of 150% of city's total deposits.
The City Treasurer, at his discretion, may waive the collateral requirement for deposits
which are'fully insured up to $100,000 by the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation.
4. Unauthorized Investments - Investments not described herein, including but not
limited to, common stock, purchasing on margin or other speculative issues deemed imprudent
are prohibited from use in this portfolio.
5. Swaooino of Securities -A swap is the movement from one security to another
and may be done for a variety of reasons, such as to increase yield, lengthen or shorten
maturities, to take a profit, or to increase investment quality.
6. Portfolio Adiustments - Should an investment percentage-of-portfolio limitation
be exceeded due to an incident such as fluctuation in portfolio size, the affected securities may
be held to maturity to avoid losses: When no loss is indicated-, the Treasurer shall consider
reconstructing the portfolio basing his decision in part on the expected length of time the
portfolio will be unbalanced.
7. Qualified Dealers -The City shall transact business only with banks and savings
and loans, and with registered investment securities dealers. Investment staff shall investigate
dealers which wish to do business with the City in order to determine if they are adequately
capitalized and make markets in securities appropriate to the City's needs.
8. Delegation of Authority - Within the City Treasurer's office, the responsibility for
the day to day investment of the City funds is delegated to the Senior Deputy City Treasurer in
the absence of the City Treasurer.
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9. Policy Review-This investment policy shall be reviewed at least annually to
ensure its consistency with the overall objective of preservation of principal, liquidity, and
return, and its relevance to current law and financial and economic trends.
In accordance with this resolution of the City Council of the City of Huntington Beach,
the City Treasurer is responsible for investing the unexpended cash in the City Treasury,
except for the employee's retirement funds, which are administered separately and those
funds which are managed separately by trustees appointed under indenture agreements. All
financial assets of all other funds shall be administered in accordance with the provisions of
this policy.
The moneys entrusted to the City Treasurer will be an actively managed portfolio. This
is, the City Treasurer and staff will observe, review, and react to changing conditions that
affect the portfolio. This shall be viewed as a full-time responsibility by the City Treasurer and
staff.
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NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington
Beach that the foregoing annual statement.of investment policy, as required by California
Government Code Section 53646(a), and submitted by the Huntington Beach City Treasurer,
is accepted and.approved.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the 17th day of , 1994. - -
Mayor
ATTEST: APPROVED AS TO FORM:
City Clerk CityA6oney� �y
REVIEWED AND APPROVED: INITIATED AND APPROVED.
ity Administra or City Treasurer.
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WiinvesV1 DISJ94
Res. No. 6641
STATE OF CALIFORNIA. )
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
L CONNM BROCKWAY, the duly elected, qualified City Clerk of
the City of Huntington Beach, and ex-officio Clerk of the City Council of said
City, do hereby certify that the whole number of members of the City Council of
the City of Huntington Beach is seven; that the foregoing resolution was passed
and adopted by.the affirmative vote of at least a majority of all the members of said
City Council at a regular meeting thereof held on the 17th day of October, 1994,
by the following vote:
AYES: Councilmembers:
Silva, Bauer, Moulton-Patterson, Winchell, Leipzig, Sullivan
NOES: Councilmembers:
None
ABSENT: Councilmembers:
Robitaille
City Clerk and ex-officio C erk
of the City Council of the City
of Huntington Beach, California
CITY OF HUNTINGTON BEACH INVESTMENT POLICY
1.0 Purpose:
This policy is intended to provide guidelines for the prudent investment of the city's cash
balances, and outline the policies for maximizing the efficiency of the city's cash
management system.
2.0 Policv:
The investment practices and policies of the City of Huntington Beach are based upon
state law and prudent money management. The primary goals of these practices are:
A. To assure compliance with all Federal, State, and local laws governing the
investment of moneys under the control of the City Treasurer.
B. To protect the principal moneys entrusted to this office.
C. To generate the maximum amount of investment income within the
parameters of prudent risk management.
3.0 Sco e:
This investment policy applies to all financial assets of the City of Huntington Beach.
These funds are accounted for in the city's Comprehensive Annual Financial Report
and include:
3.1 Funds
The City Treasurer is responsible for investing the unexpended cash in the City Treasury,
except for the employee's retirement funds, which are administered separately and those
funds which are managed separately by trustees appointed under indenture agreements.
The City Treasurer will strive to maintain the level of investment of these idle funds as
close as possible to 100%.
These funds are described in the city's annual financial report and include:
3.1.1 General Fund
3.1.2 Special Revenue Funds
3.1.3 Capital Project Funds
3.1.4 Enterprise Funds
3.1.5 Trust and Agency Funds
3.1.6 Any new fund created by the legislative body, unless
specifically exempted
This investment policy applies to all transactions involving the financial assets and related
activity of the foregoing funds.
4.0 Prudence:
The standard of prudence to be used by the City Treasurer shall be the "prudent person"
standard. This shall be applied in the context of managing an overall portfolio.
The "Prudent Person Rule"states as per excerpts of California Civil Code Section 2261.
In investing, reinvesting, purchasing, acquiring, exchanging, selling and managing property
for the benefit of another, a trustee shall exercise the judgment and care, under the
circumstances then prevailing, which persons of prudence, discretion and intelligence
exercise in the management of their own affairs, not in regard to speculation, but in regard
to the permanent disposition of their funds, considering the probable income, as well as
the probable safety of their capital. Investment officers acting in accordance with written
procedures and the investment policy and exercising due diligence shall be relieved of
personal responsibility for an individual security's credit risk or market price changes,
provided deviations from expectations are reported in a timely fashion and appropriate
action is taken to control adverse developments.
5.0 'Obiective:
Consistent with this aim, investments are made under the term and conditions of California
Government Code Section 53600, et seq. Criteria for selecting investments and the
absolute order of priority are:
5.1 Safety: Safety of principal is the foremost objective of the investment program.
Investments of the City of Huntington Beach shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio. To attain this objective,
diversification is required in order that potential losses on individual securities do not
exceed the income generated from the remainder-of the portfolio.
5.2 Liquidity: The City of Huntington Beach's investment portfolio will remain
sufficiently liquid to enable the City of Huntington Beach to meet all operating
requirements which might be reasonably anticipated.
5.3 Return on Investments: The City of Huntington Beach's investment portfolio
shall be designed with the objective of attaining a rate of return throughout budgetary and
economic cycles, commensurate with the City of Huntington Beach's investment risk
constraints and the cash flow characteristics of the portfolio.
6.0 Investment Advisory Board:
By City Charter, the City Treasurer is the custodian of all public funds of the City of
Huntington Beach. The City Council may appoint citizens and/or professional people to
serve on an Investment Advisory Board for the purpose of advising the City Treasurer on
an investment program and assuring it is consistent with the adopted investment policy.
7.0 Delegation of Authoritv:
Within the City Treasurer's office, the responsibility for the day to day investment of the
City funds is delegated to the Senior Deputy City Treasurer in the absence of the City
Treasurer.
8.0 Ethics and Conflicts of Interest:
All persons involved in the investment process shall refrain from personal business activity
that could conflict with proper execution of the investment program, or which could
impair their ability to make impartial investment decisions. Employees and investment
officials shall disclose to the City Council any material financial interests in financial
.institutions that conduct business within this jurisdiction, and they shall further disclose
any large personal financiaUinvestment positions that could be related to the performance
of the City of Huntington Beach, particularly with regard to the time of purchases and
sales.
9.0 Authorized Financial Dealers and Institutions:
To provide for the optimum yield in the investment of city funds, the city's investment
procedures shall be designed to encourage competitive bidding on transactions from
approved brokers/dealers. In order to be approved by the city, the dealer must be a
`primary" dealer or regional dealer that qualifies under Securities and Exchange
Commission Rule 15C3-1 (Uniform Net Capitol Rule), unless a comprehensive credit and
capitalization analysis reveals that the firm is adequately financed to conduct public
business; the institution must have an office in California; the dealer must be experienced
in institutional trading practices and familiar with the California Government Code as
related to investments appropriate for the city; and, other criteria as may be established in
the investment procedures. All broker/dealers who desire to become qualified bidders for
investment transactions must annually submit a `Broker/Dealer Application" and related
documents relative to eligibility.
10.0 Authorized & Suitable Investments:.
A. BANKERS ACCEPTANCES, maximum 40% of portfolio. Maximum term
270 days.
B. NEGOTIABLE CERTIFICATES of deposit, maximum 30% of portfolio.
Maximum term five (5) years.
C. COMMERCIAL PAPER, maximum 15% of portfolio. Maximum term 180
days; plus additional 15% of portfolio if the dollar-weighted average
maturity of the entire amount does not exceed 31 days.
D. BONDS ISSUED BY THE CITY.
E. OBLIGATIONS OF THE UNITED STATES TREASURY.
F. FEDERAL AGENCY OBLIGATIONS OF:
• Federal Intermediate Credit Bank (FICB'S)
• Federal Land Bank (FLB'S)
• Federal Home Loan Bank(FHLB'S)
• Federal National Mortgage Association (FNMA'S)
• Small Business Administration(SBA'S)
• Government National Mortgage Association (GNMA'S)
• Tennessee Valley Authorities (TVA'S)
• Student Loan Association Notes (Sallie Mae's)
G. OBLIGATIONS OF THE STATE OF CALIFORNIA or of any local agency
within the State of California:
THE LOCAL AGENCY INVESTMENT FUND (LAIF) is a special fund of the
California State Treasury through which any local government may pool
investments. The city may invest up to $20,000,000 per agency in this fund.
Currently the city has established two (2) agency funds: The City of Huntington
Beach General Fund, and the City of Huntington Beach Redevelopment Agency
Funds. Investments in LAIF are highly liquid and may be converted to cash within
24 hours. Investment with LAIF are secured by the full faith and credit of the
State of California.
H. THE ORANGE COUNTY LOCAL AGENCY INVESTMENT POOL (OCIP)
is a special fund of the County of Orange through which any local city or agency
may, with approval of their governing body and the County Treasurer, deposit
excess funds in the County Treasury for reinvestment by the Treasurer.
Investments with OCIP are secured by the full faith and credit of the County of
Orange and all investment are made in accordance with Government Code Section
53635.
I. REPURCHASE AGREEMENT.
J. REVERSE-REPURCHASE AGREEMENTS shall be utilized only with specific
council approval on each transaction.
K. MEDIUM-TERM CORPORATE NOTES, maximum 30% of portfolio.
L. MUTUAL FUNDS, maximum 15% of portfolio.
M. TIME DEPOSITS (non-negotiable certificates of deposit.)
Portfolio Adjustments - Should an investment percentage-of-portfolio limitation be
exceeded due to an incident such as fluctuation in portfolio size, the affected securities
may be held to maturity to avoid losses. When no loss is indicated, the Treasurer shall
consider reconstructing the portfolio basing his decision in part on the expected length of
time the portfolio will be unbalanced.
11.0 Collateral ization:
Under provisions of the California Government Code, California banks, and savings and
loan associations are required to secure the city's deposits by pledging government
securities with a value of 110 % of principal and accrued interest. California law also
allows financial institutions to secure city deposits by pledging first trust deed mortgage
notes having a value of 150% of city's total deposits. Collateral will always be held by an
independent third party. A clearly marked evidence of ownership (safekeeping receipt)
must be supplied to the city and retained.
The City Treasurer, at his discretion, may waive the collateral requirement for deposits
which are fully insured*up to $100,000 by the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation. The right of collateral substitution
is granted.
12.0 Safekeeping and Custody:
All city investments shall have the City of Huntington Beach as its registered owner, and
all interest and principal payments and withdrawals shall indicate the City of Huntington
Beach as the payee.
All securities shall be safe kept with the city itself or with a qualified financial institution,
contracted by the city as a third party. All securities shall be acquired by the safekeeping
institution on a `Delivery-Vs-Payment"(DVP) basis. The DVP basis for delivery applies
also to the delivery and safekeeping of repurchase agreement collateral.
13.0 Diversirication:
The city's investment portfolio will be diversified to avoid incurring unreasonable and
avoidable risks associated with concentrating investments in specific security types,
maturity segment, or in individual financial institutions.
Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be
mitigated by investing in only very safe securities and by diversifying the investment
,portfolio so that the failure of any one issuer would not unduly harm the city's cash flow.
Market risk, defined as the risk of market value fluctuations due to overall changes in the
general level of interest rates, shall be mitigated by structuring the portfolio so that
securities mature at the same time that major cash outflows occur, thus eliminating the
need to sell securities prior to their maturity. It is explicitly recognized herein, however,
that in a diversified portfolio, occasional measured losses are inevitable and must be
considered within the context of overall investment return.
The city's investment portfolio will remain sufficiently liquid to enable the city to meet all
operating requirements which might be reasonably anticipated.
14.0 Maximum Maturities:
To the extent possible, the City of Huntington Beach will attempt to match its investments
with anticipated cash flow requirements. Unless matched to a specific cash flow, the city
will not directly invest in securities maturing more than five (5) years from the date of
purchase, unless, the legislative body has granted express authority to make that
investment either specifically, or as a part of an investment program approved by the City
Council.
15.0 'Internal Control:
The external auditors shall annually review the investment policy. This review will
provide internal control by assuring compliance with policies and procedures.
Additionally, account reconciliation relating to the purchasing or maturing of investments
shall be performed by the Finance Department. To provide further protection of city
funds, written procedures prohibit the wiring of any city funds without the authorization of
at least two of the three designated city officials:
1. City Treasurer
2. Senior Deputy City Treasurer
3. Director of Finance
16.0 Performance Standards:
This investment policy shall be reviewed at least annually by City Council to ensure its
consistency with the overall objective of preservation of principal, liquidity, and return,
and its relevance to current law and financial and economic trends. All financial assets of
all other funds shall be administered in accordance with the provisions of this policy.
The moneys entrusted to the City Treasurer will be an actively managed portfolio. This is,
the City Treasurer and staff will observe, review, and react to changing conditions that
affect the portfolio.
16.1 Market Yield (Benchmark):
The investment portfolio shall be managed to attain a market-average rate of return
throughout budgetary and economic cycles, taking into account the city's investment risk
constraints and cash flow. Market average will be determined by year-end average rates
of return from a combination of indices: Local Agency Investment Fund (LAIF), Orange
County Investment Pool (OCIP) and 1-year Treasuries.
While the city will not make investments for the purpose of trading or speculation as the
dominant criterion, the City Treasurer shall seek to enhance total portfolio return by
means of ongoing portfolio management. The prohibition of speculative investments
precludes pursuit of gain or profit through unusual risk and precludes investments
primarily directed at gains or profits from conjectural fluctuations in market prices. The
City Treasurer will not directly pursue any investments that are leveraged or deemed
'derivative in nature. However, as long as the original investments can be justified by their
ordinary earning power, trading in response to changes in market value is a requirement of
on going portfolio management.
17.0 Reporting:
The City Treasurer shall submit a monthly investment report to the City Council, City
Administrator, and City Finance Director. This report will include the following elements:
17.1 Type of investment
17.2. Institution
17.3 Purchase Date
17.4 Date of maturity
71.5 Amount of deposit or cost of the investment
17.6 Face value of the investment
17.7 Current market value of securities
17.8 Rate of interest
17.9 Interest earnings
17.10 Statement relating the report to the Statement of Investment Policy
17.11 Statement availability of funds to meet the next 30 days' obligations
18.0 Investment Policv Adoption:
By virtue of a resolution of the City Council of the City of Huntington Beach
acknowledging the receipt and filing of the annual statement of investment policy for the
respective fiscal year.
PROFESSIONAL ADVISORS:
PURPOSE:
To provide professional advice and guidance in matters relating to the investment of city funds.
TYPES OF PORTFOLIO MANAGEMENT:
• ADVISORY - Advice only
• DISCRETIONARY - City Treasurer is consulted on possible investment to be executed
• NON-DISCRETIONARY - Portfolio Manager has sole control-no input from the city
REQUIREMENTS/QUALIFICATIONS/GUIDELINES:
• Be a registered investment advisor as defined and regulated by the S.E.C. (Securities and
Exchange Commission)
• Free of conflicts of interest which could adversely affect the city
• Knowledge of management of public funds
• Independence in professional attitude and ideas
• Knowledge of Government codes
• Knowledge of investment instruments and services available
• A good reputation/Honesty and integrity
• Prior performance record/have local references
• Analytical ability/Ability to evaluate risk and suitability of investments for the city
FEES:
Recent surveys reflect a myriad of fee schedules based on a number of services available from
which the city would choose, i.e.: reporting requirements, custodial agreements, safekeeping
agreements, number of meetings to attend, analytical reviews, etc.
These fees range from a low of.10 basis points to a high of.30 basis points.
Based on a portfolio size of$25 million
.10 basis points= $25,000
.30 basis points = $75,000
�- Y
Based on a portfolio size of$50 million
.10 basis points= $50,000
.30 basis points = $150,000
Based on a portfolio size of$75 million
.10 basis points = $75,000
.30 basis points= $225,000
Based on a portfolio size of$100 million
.10 basis points= $100,000
.30 basis points= $300,000
OTHER CONSIDERATIONS:
• DESCRIPTION OF SERVICES/DUTIES
• FREQUENCY OF MEETINGS
• TERMS OF AGREEMENT
• SCHEDULE FOR M'LEMENTING SERVICES
• HOW TO MEASURE RESULTS
• TERMINATION CLAUSE
02/21/1995 CITY OF HUNTINGTON BEACH PM - 1
PORTFOLIO MASTER SUMMARY CITY
JANUARY 31, 1995 ACCRUAL
AVERAGE ---YIELD TO MATURITY---
PERCENT OF AVERAGE DAYS TO 360 365
INVESTMENTS BOOK VALUE PORTFOLIO TERM MATURITY EQUIVALENT EQUIVALENT
------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements........................$ 7,800,000.00 11.44 1 0 4.437 4.499
Federal Agency Issues - Coupon...............$ 8,988,456.33 13.18 1,623 1,312 6.369 6.458
Local Agency Investment Funds................$ 49,407,645.31 72.45 1 1 4.256 4.315
Medium Term Notes............................$ 2,000,000.00 2.93 1,828 456 8.761 8.883
------------------------------------------------------------------------------
TOTAL INVESTMENTS and AVERAGES.............$ 68,196,101.64 100.00% 268 187 4.688% 4.753%
MONTH ENDING FISCAL FISCAL
TOTAL EARNINGS JANUARY 31 YEAR TO DATE YEAR ENDING
Current Year $ 126,220.23 $ 978,832.44
Current Budget $ 250,000.00 $ 1,000,000.00 $ 3,000,000.00
Last Year Actual $ 506,054.30 $ 1,973,933.43 $ 5,602,803.32
�G7n� �;,3�� I certify that this report accurately reflects all City and Redevelopment Agency
DONALD L. WATSON pooled investments and is in conformity with all State laws and the investment
CITY TREASURER policy statement filed with the City Council on Oct. 17,1994. A copy of this
policy is available at the office of the City Clerk. The investment program
herein shown provides sufficient cash flow liquidity to meet next month's
DATE estimated expenditures.
02/21/1995 CITY OF HUNTINGTON BEACH PM - 2
INVESTMENT PORTFOLIO DETAILS - INVESTMENTS CITY
JANUARY 31, 1995 ACCRUAL
INVESTMENT _ PURCHASE STATED --- YTM --- MATURITY DAYS
NUMBER ISSUER DATE BOOK VALUE FACE VALUE MARKET VALUE RATE 360 365 DATE TO MAT
----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
95-080 Sanwa Bank - Los Angeles 01/31/95 7,800,000.00 7,800,000.00 7,800,000.00 4.438 4.437 4.499 02/01/95 0
FEDERAL AGENCY ISSUES - COUPON
2734 Federal Home Loan Bank 08/26/93 2,000,000.00 2,000,000.00 1,855,625.00 5.180 5.109 5.180 08/26/98 1,302
2735 Federal Home Loan Bank 11/18/93 1,000,000.00 1,000,000.00 920,000.00 5.300 5.227 5.300 11/18/98 1,386
2736 Federal Home Loan Bank 04/20/94 1,000,000.00 1,000,000.00 973,750.00 6.835 6.741 6.835 04/20/99 1,539
2737 Federal Home Loan Bank 04/14/94 988,456.33 1,000,000.00 955,729.56 6.780 7.016 7.113 04/14/99 1,533
2740 Federal Home Loan Mort Corp 10/06/94 2,000,000.00 2,000,000.00 1,975,000.00 7.110 7.013 7.110 10/06/97 978
2738 Tennessee Valley Authority 05/26/94 1,000,000.00 1,000,000.00 980,000.00 6.980 6.884 6.980 05/26/98 1,210
2739 Tennessee Valley Authority 05/31/94 1,000,000.00 1,000,000.00 981,250.00 7.318 7.218 7.318 05/31/99 1,580
SUBTOTALS and AVERAGES 8,988,456.33 9,000,000.00 8,641,354.56 6.369 6.458 1,312
LOCAL AGENCY INVESTMENT FUNDS
982 Laif City 4,369,134.07 4,369,134.07 4,369,134.07 5.612 5.535 5.612 1
2206 LAIF-Redevelopment Agency 1,433,460.98 1,433,460.98 1,433,460.98 5.612 5.535 5.612 1
2703 Orange County Invest Pool -77% 33,575,888.70 33,575,888.70 33,575,888.70 5.380 5.306 5.380 1
2703-A Orange County Invest Pool -23% 10,029,161.56 10,029,161.56 10,029,161.56 0.001 0.001 0.001 1
SUBTOTALS and AVERAGES 49,407,645.31 49,407,645.31 49,407,645.31 4.256 4.315 1
MEDIUM TERM NOTES
2721 Ford Motor Credit Corp. 05/01/91 2,000,000.00 2,000,000.00 2,010,000.00 8.875 8.761 8.883 05/02/96 456
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TOTAL INVESTMENTS and AVERAGES $ 68,196,101.64 68,207,645.31 67,858,999.87 4.688% 4.753% 187
02/21/1995 CITY OF HUNTINGTON BEACH PM - 3
PORTFOLIO MASTER INVESTMENT ACTIVITY BY TYPE CITY
JANUARY 1, 1995 - JANUARY 31, 1995 ACCRUAL
STATED TRANSACTION PURCHASES SALES/MATURITIES
TYPE INVESTMENT # ISSUER RATE DATE OR DEPOSITS OR WITHDRAWALS BALANCE
----------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
95-060 Sanwa Bank - Los Angeles 4.750 01/03/1995 11,200,000.00
95-061 Sanwa Bank - Los Angeles 4.438 01/03/1995 10,200,000.00
O1/04/1995 10,200,000.00
95-062 Sanwa Bank - Los Angeles 4.375 01/04/1995 10,100,000.00
O1/05/1995 10,100,000.00
95-063 Sanwa Bank - Los Angeles 4.375 01/05/1995 10,000,000.00
O1/06/1995 10,000,000.00
95-064 Sanwa Bank - Los Angeles 4.375 01/06/1995 7,500,000.00
O1/09/1995 7,500,000.00
95-065 Sanwa Bank - Los Angeles 4.375 01/09/1995 7,850,000.00
O1/10/1995 7,850,000.00
95-066 Sanwa Bank - Los Angeles 4.500 01/10/1995 8,100,000.00
O1/11/1995 8,100,000.00
95-067 Sanwa Bank - Los Angeles 4.375 01/11/1995 8,200,000.00
O1/12/1995 8,200,000.00
95-068 Sanwa Bank - Los Angeles '4.375 01/12/1995 8,000,000.00
O1/13/1995 8,000,000.00
95-069 Sanwa Bank - Los Angeles 4.375 01/13/1995 8,300,000.00
O1/17/1995 8,300,000.00
95-070 Sanwa Bank - Los Angeles 4.375 01/17/1995 7,550,000.00
O1/18/1995 7,550,000.00
95-071 Sanwa Bank - Los Angeles 4.375 01/18/1995 7,700,000.00
O1/19/1995 7,700,000.00
95-072 Sanwa Bank - Los Angeles 4.375 01/19/1995 8,600,000.00
O1/20/1995 8,600,000.00
95-073 Sanwa Bank - Los Angeles 4.375 01/20/1995 7,100,000.00
O1/23/1995 7,100,000.00
95-074 Sanwa Bank - Los Angeles 4.375 01/23/1995 7,300,000.00
O1/24/1995 7,300,000.00
95-075 Sanwa Bank - Los Angeles 4.375 01/24/1995 6,725,000.00
O1/25/1995 6,725,000.00
95-076 Sanwa Bank - Los Angeles 4.375 01/25/1995 6,400,000.00
O1/26/1995 6,400,000.00
95-077 Sanwa Bank - Los Angeles 4.375 01/26/1995 6,300,000.00
O1/27/1995 6,300,000.00
95-078 Sanwa Bank - Los Angeles 4.375 01/27/1995 5,500,000.00
O1/30/1995 5,500,000.00
95-079 Sanwa Bank - Los Angeles 4.438 01/30/1995 5,700,000.00
O1/31/1995 5,700,000.00
95-080 Sanwa Bank - Los Angeles 4.438 01/31/1995 7,800,000.00
SUBTOTALS and ENDING BALANCE 154,925,000.00 158,325,000.00 7,800,000.00
02/21/1995 CITY OF HUNTINGTON BEACH PM - 4
PORTFOLIO MASTER INVESTMENT ACTIVITY BY TYPE CITY
JANUARY 1, 1995 - JANUARY 31, 1995 ACCRUAL
STATED TRANSACTION PURCHASES SALES/MATURITIES
TYPE INVESTMENT # ISSUER RATE DATE OR DEPOSITS OR WITHDRAWALS BALANCE
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FEDERAL AGENCY ISSUES - COUPON
8,988,456.33
LOCAL AGENCY INVESTMENT FUNDS
982 Laif City 5.612
2206 LAIF-Redevelopment Agency 5.612
2703 Orange County Invest Pool -77% 5.380 10,029,161.56
2703-A Orange County Invest Pool -23% *0.001 10,029,161.56
SUBTOTALS and ENDING BALANCE 10,029,161.56 10,029,161.56 49,407,645.31
MEDIUM TERM NOTES
2,000,000.00
------------------------------------------------------------------------
TOTALS 164,954,161.56 168,354,161.56 68,196,101.64
02/21/1995 _ PM - 5
CITY OF HUNTINGTON BEACH CITY
INVESTMENT ACTIVITY SUMMARY
OCTOBER 1994 through JANUARY 1995
YIELD TO MATURITY MANAGED NUMBER OF NUMBER OF AVERAGE
MONTH NUMBER OF TOTAL 360 365 POOL SECURITIES SECURITIES AVERAGE DAYS TO
END YEAR SECURITIES INVESTED EQUIV EQUIV RATE PURCHASED MATURED/SOLD TERM MATURITY
-------------------------------------------------------------------------------------------------------------------
October 94 0 0.00 0.000 0.000 0.000 0 0 0 0
November 94 12 64,655,960.01 5.831 5.912 5.763 19 19 283 208
December 94 12 71,595,868.20 2.231 2.261 0.650 21 21 256 183
January 95 13 68,196,101.64 4.688 4.753 4.315 20 20 268 187
• ---------------------------------------------------------------------------------------------------
AVERAGES 9 $ 51,111,982.46 3.187% 3.231% 2.682% 15 15 202 145
02/21/1995 PM - 6
CITY OF HUNTINGTON BEACH CITY
DISTRIBUTION OF INVESTMENTS BY TYPE
OCTOBER 1994 through JANUARY 1995
MONTH ------------------------------------------------ TYPES OF INVESTMENTS ------------------------------------------------
END YEAR RPA SCD BAC COM CPI FAC FAD LA1 TRC TRD MTN NCB BCD MCI MD1 PA1 GN1
------------------------------------------------------------------------------------------------------------------------------------
October 94
November 94 2.8 13.9 80.2 3.1
December 94 15.6 12.6 69.0 2.8
January 95 11.4 13.2 72.5 2.9
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AVERAGES 7.5% 9.9!k 55.4% 2.2%
RPA - Repurchase Agreements SCD - Certificates of Deposit
BAC - Bankers Acceptances COM - Commercial Paper - Discount
CPI - Commercial Paper - Interest Bearing FAC - Federal Agency Issues - Coupon
FAD - Federal Agency Issues - Discount LA1 - Local Agency Investment Funds
TRC - Treasury Securities - Coupon TRD - Treasury Securities - Discount
MTN - Variable CD's NCB - Negotiable CD's
BCD - Certificates of Deposit - Bank MCI - Medium Term Notes
MD1 - Miscellaneous Securities - Discount PA1 - Mutual Funds / Passbook
GN1 - Mortgage Backed Securities
02/21/1995 PM - 7
CITY OF HUNTINGTON BEACH CITY
ACCRUED INTEREST DETAILS
JANUARY 31, 1995
MONTH ENDING FISCAL .
JANUARY 31, 1995 YEAR TO DATE
CD/Coupon/Discount Investments:
Interest Collected $ 30,289.83 $ 208,758.39
PLUS Accrued Interest at End of Period 263,810.61 263,810.61
LESS Accrued Interest at Beginning of Period ( 200,363.63) ( 146,207.16)
--------------- ---------------
Interest Earned during Period $ 93,736.81 326,361.84
ADJUSTED by Premiums and Discounts 233.44 926.21
ADJUSTED by Capital Gains or Losses 0.00 0.00
--------------- ---------------
Earnings during Period 93,970.25 $ 327,288.05
--------------- ---------------
--------------- ---------------
Mortgage Backed Securities:
Interest Collected $ 0.00 $ 0.00
PLUS Accrued Interest at End of Period 646.25 646.25
LESS Accrued Interest at Beginning of Period ( 646.25) ( 646.25)
--------------- ---------------
Interest Earned during Period $ 0.00 0.00
ADJUSTED by Premiums and Discounts 0.00 0.00
ADJUSTED by Capital Gains or Losses 0.00 0.00
--------------- ---------------
Earnings during Period 0.00 $ 0.00
Cash/Checking Accounts:
Interest Collected $ 0.00 $ 77,301.64
PLUS Accrued Interest at End of Period 406,656.50 406,656.50
LESS Accrued Interest at Beginning of Period ( 374,406.52) ( -167,586.25)
--------------- ---------------
Interest Earned during Period $ 32,249.98 $ 651,544.39
TOTAL Interest Earned during Period $ 125,986.79 $ 977,906.23
TOTAL Ajustments from Premiums and Discounts $ 233.44 $ 926.21
TOTAL Capital Gains or Losses $ 0.00 $ 0.00
--------------- ---------------
TOTAL Earnings during Period $ 126,220.23 $ 978,832.44