HomeMy WebLinkAboutRes. 2019-15, SA-RDA 076, FA-69, HA-91 Statement of Investment PolicySTAFF REPORT
CITY OF PALM DESERT
FINANCE DEPARTMENT
MEETING DATE: April 11, 2019
PREPARED BY: Thomas Metz, Deputy City Treasurer
REQUEST: ADOPT RESOLUTIONS, APPROVING THE PALM DESERT
"STATEMENT OF INVESTMENT POLICY", AS AMENDED: 1) CITY
COUNCIL RESOLUTION NO. 2019 - 15 ; 2) SUCCESSOR
AGENCY RESOLUTION NO. SA -RDA - 076 3) FINANCING
AUTHORITY RESOLUTION NO. FA - 69 4) HOUSING
AUTHORITY RESOLUTION NO. HA - 91
Recommendation
Waive further reading and adopt:
1. The Palm Desert "Statement of Investment Policy", as amended: 1) City
Council Resolution No. 2019 - 15 ; 2) Successor Agency Resolution No.
SA -RDA - 076 ; 3) Financing Authority Resolution No. FA - 69 ; and 4)
Housing Authority Resolution No. HA - 91
Strateqic Plan Obiective
Not applicable.
Committee Recommendation
At its March 26, 2019 meeting, the Audit, Investment & Finance Committee ("Finance
Committee") voted unanimously to recommend that the City Council adopt the proposed
changes to the Statement of Investment Policy as drafted.
Background Analvsis
California Government Code section 53646(a)(2) authorizes the treasurer of a local agency
to submit the agency's investment policy to the governing body for review and adoption.
Proposed policy changes may be considered at that time.
Staff is recommending a number of changes that include:
➢ Lowering the total portfolio concentration limit for California State and Local Agency
debt from 100 percent to 25 percent.
April 11, 2019 — Staff Report
Amendments to Statement of Investment Policy
Page 2 of 2
Lowering the total portfolio concentration limit for negotiable certificates of deposit
from 39 percent to 15 percent.
➢ Lowering the total portfolio concentration limit for medium -term notes from 30
percent to 25 percent.
➢ Eliminating banker's acceptance as an authorized investment.
➢ Eliminating the requirement that no more than 45 percent of the portfolio may be
invested in commercial paper and medium -term notes.
➢ Restoring the CA Govt Code language on not holding more than 10 percent of any
issuer's commercial paper.
Placing a 10 percent concentration limit on the medium -term notes of any issuer.
Updating the maximum balance per Local Agency Investment Fund ("LAIF" ) account
to $65 million.
Requiring the City Council to adopt bylaws for the Finance Committee.
These changes are described in more detail in Exhibit 'A". Deletions are represented by
striker; additions are represented by
These revisions will align the City's investment policy with California Government Code
provisions, recent LAIF policy changes, California Debt and Investment Advisory
Commission guidelines, and Government Finance Officers Association Best Practices.
Fiscal Analvsis
The recommended concentration limit changes should enhance the City's ability to
generate investment income while ensuring that it is done in a prudent manner.
LEGAL REVIEW DEPT, REVIEW FINANCIAL REVIEW CITY MANAGER
NIA
Robefl W. Hargreaves Jaa t Moore an. Moore Lauri Aylaian
City Attorney Director of Finance ❑hector of Finance City Manager
ATTACHMENTS: Resolution No. 2019 - 15
Resolution No. SA -RDA - 076
Resolution No. FA - 69
Resolution No. HA - 91
Revised 2919 Statement of Investment Policy
Exhibit "A" -- Proposed Changes to 2019 Investment Policy
RESOLUTION NO. 2019 - 15
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT,
APPROVING THE PALM DESERT STATEMENT OF INVESTMENT POLICY,
AS AMENDED
WHEREAS, pursuant to California Government Code Section 53646, the Treasurer of the
City of Palm Desert (hereafter referred to as the "city treasurer") has proposed a Statement of
Investment Policy for consideration by the City Council of the City of Palm Desert, California
(hereafter referred to as the "City Council'), which is attached hereto, and incorporated herein by
reference; and
WHEREAS, pursuant to Palm Desert Municipal Code Section 3.08.020, the City Council
has delegated the authority to invest all public funds that the City holds, to the city treasurer.
NOW, THEREFORE BE IT RESOLVED, by the City Council, as follows:
Section 1. The City of Palm Desert Statement of Investment Policy is hereby approved
and adopted.
Section 2. The authority to invest and reinvest all public funds that the City of Palm
Desert holds, and to sell or exchange the securities so purchased, in compliance with the terms of
the approved Statement of Investment Policy, is hereby delegated to the city treasurer.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Palm Desert City
Council, held on this 11th day of April, 2019, by the following vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
RACHELLE D. KLASSEN, CITY CLERK
CITY OF PALM DESERT, CALIFORNIA
APPROVED AS TO FORM:
ROBERT W. HARGREAVES, CITY ATTORNEY
BEST, BEST & KRIEGER, LLP
SUSAN MARIE WEBER, MAYOR
RESOLUTION NO. FA-69
A RESOLUTION OF THE PALM DESERT FINANCING AUTHORITY
APPROVING THE PALM DESERT STATEMENT OF INVESTMENT POLICY,
AS AMENDED
WHEREAS, pursuant to California Government Code Section 53646, the treasurer has
proposed a Statement of Investment Policy for consideration by the Palm Desert Financing
Authority (hereafter referred to as the "Financing Authority'), which is attached hereto, and
incorporated herein by reference; and
WHEREAS, pursuant to Palm Desert Municipal Code Section 3.08.020, the Agency Board
has delegated the authority to invest all public funds that the Agency holds, to the treasurer.
NOW, THEREFORE BE IT RESOLVED, by the Financing Authority, as follows:
Section 1. The Palm Desert Statement of Investment Policy is hereby approved and
adopted.
Section 2. The authority to invest and reinvest all public funds that the Financing
Authority holds, and to sell or exchange the securities so purchased, in compliance with the terms
of the approved Statement of Investment Policy, is hereby delegated to the treasurer.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Palm Desert
Financing Authority, held on this 11 `h day of April, 2019, by the following vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
RACHELLE D. KLASSEN, SECRETARY
PALM DESERT FINANCING AUTHORITY
APPROVED AS TO FORM:
ROBERT W. HARGREAVES, CITY ATTORNEY
BEST, BEST & KRIEGER, LLP
SUSAN MARIE WEBER, PRESIDENT
RESOLUTION NO. HA- 91
A RESOLUTION OF THE PALM DESERT HOUSING AUTHORITY
APPROVING THE PALM DESERT STATEMENT OF INVESTMENT POLICY,
AS AMENDED
WHEREAS, pursuant to California Government Code Section 53646, the treasurer has
proposed a Statement of Investment Policy for consideration by the Palm Desert Housing
Authority (hereafter referred to as the "Housing Authority'), which is attached hereto, and
incorporated herein by reference; and
WHEREAS, pursuant to Palm Desert Municipal Code Section 3.08.020, the Agency Board
has delegated the authority to invest all public funds that the Agency holds, to the treasurer.
NOW, THEREFORE BE IT RESOLVED, by the Housing Agency, as follows:
Section 1. The Palm Desert Statement of Investment Policy is hereby approved and
adopted.
Section 2. The authority to invest and reinvest all public funds that the Housing Agency
holds, and to sell or exchange the securities so purchased, in compliance with the terms of the
approved Statement of Investment Policy, is hereby delegated to the treasurer.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Palm Desert
Housing Authority, held on this 11 th day of April, 2019, by the following vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
RACHELLE D. KLASSEN, SECRETARY
PALM DESERT HOUSING AUTHORITY
APPROVED AS TO FORM:
ROBERT W. HARGREAVES, CITY ATTORNEY
BEST, BEST & KRIEGER, LLP
SUSAN MARIE WEBER, CHAIR
RESOLUTION NO. SA -RDA 076
A RESOLUTION OF THE SUCCESSOR AGENCY TO THE PALM DESERT
REDEVELOPMENT AGENCY APPROVING THE PALM DESERT STATEMENT
OF INVESTMENT POLICY, AS AMENDED
WHEREAS, pursuant to California Government Code Section 53646, the treasurer has
proposed a Statement of Investment Policy for consideration by the Successor Agency to the
Palm Desert Redevelopment Agency (hereafter referred to as the "Successor Agency'), which is
attached hereto, and incorporated herein by reference; and
WHEREAS, pursuant to Palm Desert Municipal Code Section 3.08.020, the Agency Board
has delegated the authority to invest all public funds that the Agency holds, to the treasurer.
NOW, THEREFORE BE IT RESOLVED, by the Successor Agency, as follows:
Section 1. The Palm Desert Statement of Investment Policy is hereby approved and
adopted.
Section 2. The authority to invest and reinvest all public funds that the Successor Agency
holds, and to sell or exchange the securities so purchased, in compliance with the terms of the
approved Statement of Investment Policy, is hereby delegated to the treasurer.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Successor Agency
to the Palm Desert Redevelopment Agency, held on this 111h day of April, 2019, by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
RACHELLE D. KLASSEN, SECRETARY
SUCCESSOR AGENCY TO THE
PALM DESERT REDEVELOPMENT AGENCY
APPROVED AS TO FORM:
ROBERT W. HARGREAVES, CITY ATTORNEY
BEST, BEST & KRIEGER, LLP
SUSAN MARIE WEBER, CHAIR
CITY OF PALM DESERT
STATEMENT OF
INVESTMEN I POLICY
CALENDAR YEAR 2018 2019
PREPARED BY THE CITY TREASURER'S OFFICE
Thomas J. Metz, J.D., M.B.A.
Deputy City Treasurer
REVIEWED AND APPROVED BY
Janet M. Moore
City Treasurer
Administrative Policy No. FIN002
(Revision No. 29 2 T)
Adopted by the City Council on 1�.nane 8,,20 _ .
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted: 618117
TABLE OF CONTENTS
OVERVIEW PAGE
1.0 Policy......................................................................................................... 1
2.0 Scope........................................................................................................ 1
3.0 Prudence...................................................................................................1
4.0 Objectives.................................................................................................2
INVESTMENT AUTHORITY
5.0 Delegation of Authority..............................................................................3
6.0 Investment Procedures.............................................................................4
7.0 Ethics and Conflicts of Interest..................................................................4
INVESTMENTS
8.0 Authorized Financial Dealers and Institutions...........................................4
9.0 Authorized and Suitable Investments........................................................7
10.0 Prohibited investments........................................................................... 12
11.0 Investment Pools/Mutual Funds.............................................................. 12
PORTFOLIO MANAGEMENT
12.0 Collateral ization ......................................................................................13
13.0 Safekeeping and Custody....................................................................... 13
14.0 Diversification .....................
15.0 Maximum Maturities................................................................................ 14
16.0 Basic Investment Strategy............................................................ 14
17.0 Portfolio Rebalancing.............................................................................. 14
18.0 Credit Downgrading................................................................................ 15
19.0 Bond Proceeds....................................................................................... 15
20.0 Internal Controls...................................................................................... 16
PERFORMANCE MEASUREMENT
21.0 Performance Standards.......................................................................... 16
22.0 Portfolio Benchmark................................................................................ 16
23.0 Reporting................................................................................................17
LEGAL REQUIREMENTS
24.0 Investment Policy Adoption..................................................................... 27
APPENDICES 4-P
A: List of Authorized Financial Institutions................................................... 18
B; C- 000ary.................................................................................................. 19
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted: 618117
1.0 Policy
It is the policy of the City of Palm Desert, the Successor Agency to the Palm
Desert Redevelopment Agency, the Palm Desert Housing Authority, the
Palm Desert Financing Authority, and the Palm Desert Recreational
Facilities Corporation (hereafter referred to collectively as the "City") to: (1)
comply with applicable law governing the investment of public monies under the
City Treasurer's control; (2) protect the principal monies entrusted to the City;
and (3) maxi ip profit w4hin tho parametero of prvdznt rick mcnggernent
achieve a market rate -of -return.
2.0 Scope
This is 'innv ctment pv4oy aha!I Apply to all-4nanoial aaceto of the City of Palm
Beoort co cocountod for in the-Cato,I'o Comorohonsivo Annual Pinanoial Roger
in ing, W not limitod to, the-#oltewing funds=
I cr rcsr stl =r:PA
2. Epcoial Rovonuo Funds-.
?. C\oat Service F+; n�s-.
T Gapital D ejc/jt FNnd.
5. ER orprico Fungi
6. lntornal Sorvioo Fungi
7. Trust st d Agency Fug
TNa pc!Iley &,r nc� c \`r f►;nds 14e"i the Cc�;fornia PNbljn Employe
Ptet+rern/j,nt gyotam or fundo of the D ►�f ►��ic�d Cernticn7iXion Plan.
"hwiJIUMMIMaWN Q wul apply to all funds over which the Treasurees Office
fiduciary responsibility and direct management control.
3.0 Prudence
Pursuant to California Government Code Section 53600.3, the GO y Troacufaf
and thro Do it- DT, Troacuror (fhrorosftor oolleGti e crrc� to Qc "Iryicrltmont
Off JM _' t officers, as trustees of public monies, shall adhere to the
"Prudent Investor Standard" when managing the City's investment portfolios.
They shall invest "...with 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 agency, that a prudent person acting
in a like capacity and familiarity with those matters would use in the conduct of
funds of a like character and with like aims, to safeguard the principal and
maintain the liquidity needs of the agency."
Investment officers who follow the provisions of this policy and who exercise due
diligence shall be relieved of personal responsibility for a security's credit risk or
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Palm Desert Treasury Policies and Procedures
No. 2: "Statement of investment Policy"
Revision No. 20
Adopted: 618117
market price risk; provided that they report substantial deviations from
expectations to the City Manager and to the Audit, Investment & Finance
Committee ("Finance Committee") in a timely manner, and that they take
appropriate action to control adverse developments.
"Substantial deviations" shall be defined as either a decline of 10 percent or more
in the market value of a security due to issuer default or a credit risk downgrade,
or the sale of a security prior to maturity at 10 percent or more below its
acquisition cost.
4.0 Objectives
The City's investment objectives, in order of priority, shall be:
4.0.1 Safety. Safety of principal shall be the foremost objective. Investments
shall be made with the aim of avoiding capital losses due to issuer
default; broker default; or market value erosion. Principal shall be
preserved by mitigating:
Credit Risk, the risk of loss due to the failure of the issuer of the
security, shall be mitigated by investing in only the highest quality
securities; by diversifying investments; and by pre -qualifying securities
brokers and public depositories; and
Market Risk, the risk of loss due to a decline in bond prices because of
rising market interest rates, shall be mitigated by structuring the
portfolios s❑ that issues mature concurrently with the City's anticipated
cash requirements, thereby eliminating the need to sell securities
prematurely on the open market.
It is recognized, however, that in a diversified portfolio, occasional
measured losses are inevitable, and must be considered within the
context of overall investment return.
4.0.2 Liquidity. An adequate percentage of the portfolios shall be maintained
in liquid, short-term securities that can be converted to cash, if
necessary, to meet disbursement requirements. Since all cash
requirements cannot be anticipated, the portfolios should consist largely
of relatively low -duration securities with active secondary markets.
Tho Cite oha)l aock to minimizs liquidity risk by ' ivWinr itc im`NtmcRt
portfolio into tw&-sep&rato portfOlIeLx the tiW,;dity nsrffelio and the
lns,,omo Portfolio. The ! , uidity D^o ohs.!I oonoiot of short tefm
+rwcc:mcn+r the matureNn cnc yter-- i ps.,�rper✓- ct,sdl t o to onca e
that* thoro is uiffioient ligvWity to fund 12 mcntho cf City m(pe did ures
Tho lnoomc portfolio ohall conoiot cf Icng tcfm invcNmonto thpt m&\k�.-ro
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Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 618117
in one to fivo yoara. Ito p6:rp"e chQII be tc mpatimiza -refit withiR the
paam"cro cf pre�,L\nt rick mttrimont.
1 'q" -�rtf !io in•..%c&monto ohali ho in ohort torm ncooto inohading, bNt
net limitrC tc, a mmcrciQI pn r rvj;ureh;ace Rgrcemento, n�^�e#+able
a-,NVic&Soo of dopooit, th❑ Etato of California ! ecel Age-ncy lnx� -mcnt
Fcn� ("! AIF"), and California loc&l Sevice-nrrvent imve-2Amont pools.
Tho Liqul-dity Poi# 10 sha I bo jub4�vd3d into primary and oecen&ry.
oub Forffelioo. Tho p6nery ciob portfolio chall oontair he egeil,«
three mentho' of City oxponditcrcc whioh cha'I bo inxe&ted-ei her in ! AIF
sr in a lec_I cCnncy imti"�rnerk-pool. All =--oto ohall-m-aturo in 00 days
or loco. Tho 000endary 6hell centcin an cmoNnt aka
nino monthc' of City i+-rvo whioh may be invested On short-term
axotc that are lad&e`d in oga`cl am3unt3, on a monthly-baoic, otartRg
four montho owt. All &,\occ+z cha"l have Al to '360 day ma&-jritioo.
Since not all possible cash demands can be anticipated, an amount
equal to the City's annual expenditures shall be invested in securities
that mature in less than one year.
4.0.3 Yield. Yield shall be considered only after the basic requirements of
safety and liquidity have been met. Whenever possible and in a manner
consistent with the objectives of safety and liquidity, a yield higher than
the market rate of return shall be sought.
5.0 Delegation of Authority
California Government Code Sections 53607 and 53608 authorize the legislative
body of a local agency to invest, deposit, and provide for the safekeeping of the
local agency's funds or to delegate those responsibilities to the treasurer of the
local agency.
Citv of Palm Desert Municipal Code Section 3.08.010 delegates the authority to
invest, deposit, and provide for the safekeeping of City public monies to the City
Treasurer.
Citv of Palm Desert Municipal Code Section 2.16.010 authorizes the City Director
of Finance to serve ex officio as City Treasurer. The City Treasurer shall be
responsible for all investment transactions that are executed on behalf of the
City. The City Treasurer and the D puty City Troyer their designee shall
have exclusive authority to buy and sell securities on behalf of the City.
but • City Troasury mivy vw3cv 3 �nvs,-mnnt transactions may
x®J a on behalf of the City only if the City Treasurer has previously
authorized the tmn,"cticnc them. It the City Treasurer is unavailable, then the
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Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 618117
Assistant Finance Director must authorize t-1 o invostment#a ."Ltic r them prior
to execution.
6.0 Investment Procedures
The City Treasurer shall establish written procedures for the operation of the
City's investment program that are consistent with the provisions of this policy.
The procedures shall include reference to: safekeeping, PSA repurchase
agreements, banking service contracts, and collateral/depository agreements.
Such procedures shall include explicit delegation of authority to persons
responsible for investment transactions. No person may engage in an
investment transaction except as provided under the terms of this policy and
under the procedures that the City Treasurer establishes.
7.0 Ethics and Conflicts of Interest
Investment officers shall not conduct any personal business activity that could
conflict with the proper execution of the City's investment program or impair their
ability to make impartial investment decisions. They shall disclose to the City
Council any material financial interest in financial institutions that conduct
business within the City's jurisdiction. They shall also disclose any personal
investment positions that could be related to the performance of the City's
investment portfolios.
Investment officers shall subordinate their personal investment transactions to
those of the City, particularly with regard to the timing of securities purchases
and sales, and shall avoid transactions that might impair public confidence.
Investment officers and their immediate relatives shall not accept or solicit any
gifts, gratuities, honorariums, or favors from persons or entities who provide or
who are seeking to provide financial services to the City.
8.0 Authorized Financial Dealers and Institutions
The City TroacNror shall rna�ntain an &\s:th3riz fiot (oce Pogo 1 p-) of cli
hr^koro that the Fir vn3r C'G'n±*o and tho City C'3unoil havo
ace-+herizecl to trsnoGat ooGu4#ea 1-%mir: �s--with tho City. This 110t zhe4-4e
providod to all m&mbcro of tho rite Ceineil and tiv Financ3 Cemmittee. After
review by the Finance Committee, the City Council shall review and approve the
securities brokers that are authorized to do business with the City. Authorized
securities brokers are listed in Aooendix A of this policy.
Only primary government securities dealers ("primary dealers') that
regularly report to the Federal Reserve Bank of New York shall be eligible
for inclusion on the City's authorized list.
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Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
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The only exception to the foregoing shall be that tho Finanoa Comm -Woo arc! the
City Council may, at them its discretion, accept, review, and approve Requests for
Information ("RFI") from secondary brokers that: (1) have been in existence for
more than five years; (2) have a net capital position in excess of $100 million; (3)
are licensed as brokers by the State of California; and (4) are headquartered or
have a branch office in California.
The total number of primary dealers and secondary brokers on the authorized list
shall not exceed four at any time. The City shall accept and review new broker
applications only when there is an immediate need to fill a vacancy on the
authorized list. In all cases, the City shall only accept RFIs from and transact
business with the institutional securities sales departments of primary dealers
and secondary brokers. The City shall not transact business with an authorized
securities firm until all of the documentation that both parties require has been
executed and delivered.
All brokers who wish to apply for inclusion on the authorized list must, at a
minimum, provide the City Treasurer with a copy of the following documents,
unless otherwise noted:
8.0.1 Completed "Primary Dealer Request for Information" (signed original
only).
8.0.2 The firm's most recent Annual Report and Securities and Exchanqe
Commission ("SEC") Form 10-K or 20-F.
8.0.2 The firm's National Association of Securities Dealers ("NASD") Form BD
-- Uniform Application for Broker -Dealer Reqistration or, in the case of an
investment department within a commercial bank, SEC Form MSD.
8.0.3 The firm's current NASD Form B❑ Status Report.
8.0.4 NASD Form U-4 -- Uniform Application for Securities Industry
Registration or Transfer for each employee would who might be trading
with the City.
8.0.5 Current NASD Form U-4 Status Report on each employee who might be
trading with the City.
8.0.6 A resume from each of the firm's employees who might be trading with
the City.
8.0.7 The firm's delivery and wiring instructions.
8.0.8 An executed corporate resolution that identifies employees who are
authorized to trade, and who might be trading with the City.
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Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "statement of Investment Policy" Adopted: 618117
8.0.9 The firm's current investment policy.
In addition to the above documents, secondary brokers must also submit:
8.0.10 The firm's most recent SEC Form X-17 A-5 or, in the case of an
investment department within a commercial bank, SEC Consolidated
Reports of Condition and Income for A Bank With Domestic and Foreign
Offices -- FFIEC 031.
Investment officers shall investigate all broker applicants in order to determine if
they: (1) are adequately capitalized; (2) are subject to pending legal action
(either the firm or the trader); (3) make markets in securities that are appropriate
for the City's needs; (4) are licensed as a broker by the State of California
Department of Corporations; and (5) are a member of the National Association of
Securities Dealers, Broker applicants shall be required to provide state or local
government references from within California.
Any broker that has made a political contribution within any consecutive four-year
period following January 1, 1996 in an amount that exceeds the limits in
Municipal Securities Rulemaking Board ("MSRB") Rule G-37, to any member of
or candidate for the City Council, the RDA Successor Agency — Palm Desert
Board, the Housing Authority Commission, or the Finance Committee shall be
ineligible to transact business with the City.
Tho FinaneiR Cemmit.vv wnd the City
Council shall rn consider the submitted documents, along with the
Investment officers's recommendations, and decide if any new brokers should be
added to the authorized list. If, in the City's opinion, a broker's RFI is missing,
incomplete, late (submitted after the specified deadline), or contains false or
misleading information, or if the broker has not submitted all of the documents
that the City requires, then the City shall automatically reject that broker's RFI,
and the broker shall not be eligible to submit another RFI to the City for three
years.
The City Treasurer shall provide all authorized brokers with a copy of the City's
investment policy and any amendments as they occur.
Tho Cit • Troaajror oho maintain an :emu+hvrizc: list �:rao Ps\o 18) Qf After
revie uncil shail._reyiew and appr_oyq all
commercial banks, savings associations, and federal associations (as defined by
California Financial Code Section 5142), and trust companies that tho Fin&PGe
Ccmmittoo nc! the City Cvvn6l hnvv-& are authorized as public depositories of
City monies, in the form of checking, savings, and money market accounts, and
certificates of deposit. This list s#a!I bo prcvkied to a1_I mombaro of tho Ci
Counoll and tho F=incnoa Committees Authdfi d fin-dWdtd fhsbfft its
Appendix A of ftiis j 696V.
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Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 618117
The City shall only deposit public monies in financial institutions that have:
8.0.11 At least $5 billion in total assets.
8.0.12 A core capital -to -total assets ratio of at least five percent.
8.0.13 Favorable statistical ratings from a nationally recognized rating service,
as determined by the City Treasurer.
8.0.14 A federal or a state charter.
8.0.15 A branch office within Riverside County.
8.0.16 A "satisfactory" overall rating in their most recent evaluation by the
appropriate federal financial supervisory agency, in terms of meeting
the credit needs of California communities, pursuant to federal law.
Under no circumstances shall the City's deposits in a financial institution exceed
the total shareholders' equity of that institution.
9.0 Authorized and Suitable Investments
The City Tros,GNror shall- City Council has authorized the City Treasurer's
YG to invest in the following financial instruments pursuant to California
,.� .,
Government Code section 53600, et se under t e term:n
s and coricdiilons'kated
e1`ii: fed securities mil ature within five years unless the City
Council has approved longer maturities for the investment of bond reserve, bond
gponaiL, and other funds.
% of
No. Type of Investment Portfolio
Authorized
1. United States Treasury bills, 100%
notes, bonds, or certificates of
indebtedness, or those for
which the full faith and credit of
the United States are pledged
for the payment of principal and
interest.
Other Restrictions
Maximum maturity: 5 Years
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Palm desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 618117
% of
No. Type of Investment Portfolio Other Restrictions
Authorized
2. Federal Agency or United 100% Maximum maturity: 5 years
States government -sponsored
enterprise ("GSE") obligations, No more than 30% of the
participations, or other portfolio may be invested in
instruments, including those any one issuer (excluding the
issued by or fully guaranteed as proceeds of tax-exempt
to principal and interest by bonds).
Federal Agencies or by GSE.
3, California State and Local 100% Maximum maturity. 5 Years
Agency debt obligations that 2S°!a
are general obligation bonds or Rated "A" or higher by S&P or
revenue bonds that are issued by Moody's.
by the state or local agency or
by a department, board,
agency, or authority of the state
or a local agency.
4 Banker's AGGeptanGes("QA") 4G% Rated "A 1"or highor by SW
j=6od "y commoroial bank -,it. or -LP 1"by Nloody'o.
Ma-x+mum ma�+rity: 1 M &^yc
No msm than 2C11_ cf toe
poeli lio may 1►o imi93�ad-ip
any ono PA irnlor.
5. Commercial Paper ("CP") 25% Maximum maturity: 270 days
(Non -Pooled Fund) issued by
general corporations organized Rated "A-1" by S&P or "P-1 "
and operating in the United by Moody's.
States with assets exceeding
$500 million. No more than 10% of the
outstanding CP of any one
issuer may be purchased.
No more than 10% of the
portfolio may be invested in
the commercial paper aPA
rnedi m }arm of any
Im
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted: 618117
% of
No. Type of Investment Portfolio Other Restrictions
Authorized
one issuer.
Na naoro then 150/- of the
Wfclio may be invQFty� in
aommoroial paper ans+
medium norm netcL\
Asset -backed commercial
paper is ineligible for
purchase.
6. Negotiable Certificates of 340/1 Maximum maturity: 5 years
Deposit ("NCD") issued by a 150/0
nationally- or state -chartered Long-term debt rated "AA-"
bank, a savings association, a higher by S&P or by Moody's.
federal association, or by a
state -licensed branch of a
foreign bank.
7. Time Certificates of Deposit 15% Maximum maturity: 1 year
("TCD") issued by qualified
public depositories. TCDs exceeding the FDIC
limit must be collateralized.
TCDs must be centralized at
one location for each bank or
S&L.
If TCD is uncollateralized,
then no more than 90 percent
of the FDIC limit may be
invested per TCD.
Issuing public depository must
meet qualifying criteria on
Pages 6 and 7 of this S01P.
Page 9
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 618117
% of
No. Type of Investment Portfolio Other Restrictions
Authorized
8. Repurchase Agreement ("RP") 20% Maximum maturity: 30 days
sold by authorized brokers.
Collateral must be United
States Treasury, Federal,
Agency, or GSE obligations.
Zero coupon and stripped
coupon instruments are not
acceptable as collateral.
Collateral must be valued at
102% of cost and adjusted
weekly.
City must have first lien and
security interest in all
collateral.
City's custodian must hold
collateral.
An authorized broker must file
a Public Securities
Association (PSA) Master
Repurchase Agreement with
the City treasurer, and the
City Attorney must review the
agreement, prior to the
transaction of RP business
with that broker.
9. Medium -Term Notes issued by 3% Maturity maturity: 5 years
Corporations organized and 25%
operating in the United States, Rated "A" or higher by S&P or
or by depository institutions by Moody's.
operating in the United States
and licensed by the United No more than 10% of the
States or by any state. portfolio may be invested in
the sommcNr6al papar aad
medium -term notes of any
Page 10
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
No. Type of Investment
% of
Portfolio
Authorized
10. Money Market Mutual Funds
20%
("MMF") that are registered with
(excluding
the SEC under the Investment
bond
Act of 1940.
proceeds)
Revision No. 20
Adopted: 618117
Other Restrictions
one issuer.
No me than 'IE% cf the
yertfolio may ll�c invc--�c� in
❑ommomial FpFc�- c+a�
mc�ium +ic�rm ncte�
Either rated "AAA" by S&P,
"Aaa" by Moody's, or "AAA-V-
1 +" by Fitch (2 of 3), or retains
an investment advisor
registered or exempt from
registration with SEC, with at
least 5 years of experience
managing a MMF with $500
million or more in assets.
MMF must have dollar -
weighted average maturity of
90 days or less.
MMF must buy securities that
mature in 13 months or less.
No commission may be
charged.
Up to
11. State of California Local maximum City Council and
Agency Investment Fund (currently Redevelopment Agency
("LAI F" ) that is managed by the $60,000=000 approved participation in LAI F
State Treasurer's Office. $66',OUO,'000 on 12/12/81 in Resolution No.
per account) 81-181.
(except for
bond trustee
accounts
which have
no deposit
limit)
Page 11
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
No. Type of Investment
12. Structured Notes in the form of
callable securities or "STRIPS"
issued by the United States
Treasury or by Federal
Agencies or government -
sponsored enterprises ("GSE")
13. Local Government Investment
Pools "LGIP" and Joint
Powlllllllllllpy ("J PA")
Pools
10.0 Prohibited Investments
Revision No. 20
Adopted: 618117
% of
Portfolio Other Restrictions
Authorized
20% Maximum maturity: 5 years
75% M"-� mcc� abovo eritcria fcr
(excluding MMFc (c .ticopt for tho
bond Riverside Go -nty Trcc—ca,
proceeds) �^^t 401ed Wiz--J, ; ron: F:.rnd} As
required by law under the
California Government Code.
Investment officers shall not invest public monies in financial instruments that are
not authorized under this policy.
Prohibited investments shall include, but shall not be limited to, equity securities,
bond mutual funds, reverse repurchase agreements, and derivative contracts
(forwards, futures, and options). The purchase of derivative securities shall be
prohibited, unless specifically authorized in this policy.
Investment officers shall not engage in securities lending, short selling, or other
hedging strategies.
LAIF and MMFs shall be exempt from the prohibitions on derivative contracts,
derivative securities, reverse repurchase agreements, securities lending, short
selling, and other hedging strategies.
11.0 Investment Pools/Mutual Funds
A thorough investigation of the pool/fund is required prior to investing, and on a
continual basis. There shall be a questionnaire developed which will answer the
following general questions:
11.0.1 A description of eligible investment securities, and a written statement
of investment policy and objectives.
Page 12
Palm Desert Treasury Policies and Procedures Revision No. 26
No. 2: "Statement of Investment Policy" Adopted: 618117
11.0.2 A description of interest calculations and how it is distributed, and how
gains and losses are treated.
11.0.3 A description of how the securities are safeguarded (including the
settlement processes), and how often the securities are priced and the
program audited.
11.0.4 A description of who may invest in the program, how often, what size
deposit and withdrawal are allowed.
11.0.5 A schedule for receiving statements and portfolio listings.
11.0.6 A verification on whether or not reserves or retain earnings are utilized
by the pool/fund.
11.0.7 A fee schedule, and when and how it is assessed.
11.0.8 The eligibility of the pool/fund for bond proceeds, and whether it will
accept such proceeds.
12.0 Collateralization
Investment officers shall ensure that all demand deposits and all non-negotiable
certificates of deposit that exceed the Federal Deposit Insurance Corporation
("FDIC') limit shall be fully collateralized with securities authorized under state
law and under this SOIP. Collateral may be waived for the amount of the FDIC
limit. Any amount on deposit that exceeds the FDIC limit plus accrued interest,
however, shall be collateralized with United States Treasury or federal agency
securities at a constant margin ratio of 110 percent or with mortgage -backed
collateral at a constant margin ratio of 150 percent.
Collateralized investments and demand deposits may require substitution of
collateral. The City Treasurer must approve all requests from financial
institutions for substitution of collateral that involve interchanging classes of
securities.
An independent third party with which the City has a current custodial agreement
shall always hold the collateral. The independent third party shall provide the
City Treasurer with a safekeeping receipt that he shall retain.
13.0 Safekeeping and Custody
Investment officers shall conduct all security transactions on a delivery -versus -
payment ("DVP") or on a receipt -versus -payment ("RVP" ) basis. A third -party
bank trust department ("Custodian") that acts as an agent for the City, under the
terms of a custody agreement executed between both parties, shall hold the
Page 13
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 6/8117
securities. The custodial bank shall be one of the 20 largest commercial banks in
the world, as measured by total assets. The City's Custodian shall
rc^r�s.�n+ed on the aatl ,rtr„et [tip. Pgcc 1 g} is
Ir
po.
The only exception to the foregoing shall be securities purchases made with:
13.0.1 Local government investment pools.
13.0.2 Money market mutual funds.
13.0.3 Federal Reserve Banks ("Treasury Direct Program") since the
purchased securities are not deliverable.
No securities broker or investment advisor shall have access to City monies,
accounts, or investments. Any transfer of monies to or through a securities
broker must have the City Treasurer's prior written approval. If the City
Treasurer is unavailable, then the Assistant Finance Director must authorize the
transfer, in writing.
The City shall require Broker Trade Confirmations for all trades. Investment
Officers shall review these confirmations immediately Upon receipt, for conformity
with the terms of the City's Trade Sheets.
14.0 Diversification
Investment officers shall diversify the City's investment portfolios by security type
and by issuer, except for bond reserve monies; bond escrow monies; and any
other monies that the City Council or the Finance Committee designates.
15.0 Maximum Maturities
Investment officers shall not invest in securities with maturities exceeding five
years. Tie A by the Finance Committee, a - Rd the City Council;
however, may approve longer maturities for the investment of bond reserve,
bond escrow, and other funds if the maturities of such investments are expected
to coincide with the expected use of the funds.
16.0 Basic Investment Strategy
The City portfolio shall be invested using a passive strategy of "buying and
holding" fixed -income securities. Whenever possible, a bond ladder shall be
constructed with laddered maturities that support anticipated cash flow dates.
Securities may be sold prior to maturity only to: 1) address an actual or potential
deterioration in credit quality; 2) rebalance the portfolio; or 3) meet unanticipated
financial obligations.
Page 14
Palm Desert Treasury Policies and Procedures
No. 2: "statement of Investment Policy"
Revision No. 20
Adopted: 618117
Active strategies, such as market timing, sector rotation, or indexing to a
benchmark shall be prohibited.
17.0 Portfolio Rebalancing
If portfolio percentage constraints are violated due to a temporary imbalance in
the portfolio, then investment officers shall hold the affected securities to maturity
in order to avoid capital losses.
If no capital losses would be realized
officers shall consider rebalancing the
length of time that it will be imbalanced.
upon sale, however, then Investment
portfolio after evaluating the expected
Portfolio percentage limits are in place in order to ensure diversification of the
City investment portfolio; a small, temporary imbalance will not significantly
impair that strategy.
18.0 Credit Downgrading
This policy sets forth minimum credit risk criteria for each type of security. This
credit risk criteria applies to the initial purchase of a security; it does not
automatically force the sale of a security if its credit risk ratings fall below policy
limits.
If a security is downgraded below the minimum credit risk criteria specified in this
policy, then investment officers shall evaluate the downgrade on a case -by -case
basis in order to determine the security should be held or sold.
The City Treasurer shall inform WOM00inager and the Finance Committee at
its next monthly meeting of the credit downgrade and of the investment officers's
decision to hold or sell the downgraded security.
Investment officers shall review the credit standing of all securities in the City's
investment portfolios annually, at a minimum.
19.0 Bond Proceeds
The City Treasurer shall segregate the gross proceeds of tax-exempt bands from
the City general pool and shall keep them in a separate pool. They shall be
invested pursuant to the instructions in the respective bond indentures of trust. ff
the bend in�.cntusc ay.`hcrizci& inve�onto that cr3nfliot With this ,col Gy, then cvch
4wes#Ymnto a'iall bo mado only w+ h4ho Fincnoo ✓unn+ttee's fir, ie cl. All
securities shall be held in third -party safekeeping with the bond trustee
("Trustee") and all DVP and RVP rules shall apply. The City's Trustee Abe
Page 15
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 6/8/17
.raprctintcsd-en thru &uthorize� list Page 18) is listed in Appendix A of this
policy.
tfweotmant Cfficora ohcll uc/i ocmpetl is Ocrings, wheaevor prP.03al, for all
wont trar!oa&c\ns the involvo the greoc prc000ds of tar( zru1•nr- "tinny
The City chap ;'taro a '""* `'um of three e mpotitiN�o offorc. /'ny cj(ti,-%vi&4e
this palioy chaVbo documonted-and chc,'I bo roportod to thn Finsnoo Comm4ee
0 itc ncrt monthly mQc. ing,
The City is required under the "U.S. Tax Reform Act of 1986" to perform annual
arbitrage calculations and to rebate excess earnings to the United States
Treasury from the investment of the gross proceeds of tax-exempt bonds that
were sold after the effective date of that law. The City Treasurer may contract
with qualified outside financial consultants to provide the necessary technical
expertise that is required to comply with this law.
20.0 Internal Controls
The City Treasurer shall ensure that all investment transactions comply with the
City's policy, and shall establish internal controls that are designed to prevent
losses due to fraud, negligence, and third -party misrepresentation.
Internal controls deemed most important shall include: avoidance of collusion;
separation of duties and administrative controls; separating transaction authority
from accounting and record keeping; custodial safekeeping; clear delegation of
authority; management approval and review of investment transactions; specific
limitations regarding securities losses and remedial action; written confirmation of
telephone transactions; documentation of investment transactions and strategies;
and monitoring of results.
The City Treasurer shall establish a process of independent review by an
external audit firm of the City's investment program every three years. The
external auditor shall review the program's management in terms of compliance
with the internal controls that are specified in the City's Treasury Policies and
Procedures Manual.
A Finance Committee consisting of City officials and community representatives
shall be responsible for reviewing the City investment reports, transactions,
policies and procedures, and strategies on at least a monthlyquarterly basis
lace` frequ,-nrly. if tho Finance Cemmittoo detc�-mincc th1 a leoc froquont
oohodule %%3uld not dk2pki3h it' offoctivonccc. Tie -Mayor, the Mc}�or Pro
Te;:Rporo, tho City 114anager/Exooutivo Dirootor of the ivci soer nScnoy to tho
PclmRodevelopmont ASency, tho City Atternoy, tho City T7.-x-,C6;rcr, and
varick` citizonc Who cro appointcc! ley tho C'it : Council-urs�,int tc QAf
—.
_ _ . The Ut% Cc un,4 i '&tali ij ws for
er+ncnoo, chcll sit cn Chic c�, „<<ff�
the F nonce Committee.
Page 16
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted. 618117
21.0 Performance Standards
The investment portfolio shall be designed with the objective of obtaining a rate
of return throughout budgetary and economic cycles, commensurate with
investment risk constraints and cash flow needs.
22.0 Portfolio Benchmark
The City shall adopt the average monthly effective yield of the LAIF Pooled
Money Investment Account as a performance benchmark for the City investment
portfolio.
23.0 Reporting
The City Treasurer shall provide the City Council with an investment report within
30 days after Finance Committee review of the report.
Pursuant to Governmental Accounting Standards Board ("GASB") Statement
Number 40, as amended March 2003, the monthly investment report shall:
23.0.1 Organized individual securities by investment type (e.g., U.S.
Treasuries, corporate bonds, commercial paper, etc.). Dissimilar
investments (e.g., U.S. Treasury bills and Treasury strips) should not
be aggregated.
23.0.2 List credit risk ratings for each security, mutual fund, or investment
pool from at least two nationally recognized statistical rating
organizations ("NRSRO"). If the security, mutual fund, or investment
pool has not rating, then it shall be shown as "unrated".
23.0.3 Disclose the amount of individual securities and corresponding issuers
if they exceed five percent of net plan assets, except for securities
guaranteed by the U.S. Government, money market mutual funds, and
external investment pools.
23.0.4 Use the specific identification method to reflect interest -rate risk by
investment type and amount.
This report shall include a complete portfolio inventory with details on issue, par
value, book value, coupon/rate, original settlement date of purchase, final
maturity date, CUSIP number, average weighted yield, average days to maturity,
and market value (including source of market valuation). The report will include a
statement on compliance or noncompliance with the City's SOIP and a statement
on whether there are or are not sufficient funds to meet the City's anticipated
cash requirements for the next six months.
Page 17
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted: 618117
24.0 Investment Policy Adoption
The City Treasurer shall submit a Statement of Investment Policy annually to the
Finance Committee; for rein vii` aria t o —` o the City Council, the Successor
Agency to the Palm Desert Redevelopment Agency Board, the Housing Authority
Board, the Financing Authority Commission, and the Recreational Facilities
Corporation Board of Directors cnnuclty for their review and adoption.
Palm Desert Treasury Policies and Procedures Revision No. 26
No. 2: "Statement of Investment Policy" Adopted: 618117
Appendix A: List of Authorized Financial Institutions
The City Treasurer's Office is authorized to transact investment and depository
business with the following financial institutions. Investment and depository
transactions with firms other than those appearing on this list are prohibited.
UNITED STATES GOVERNMENT
1. Federal Reserve Bank
PRIMARY DEALERS
1. J.P. Morgan Securities LLC
2. Wells Fargo Securities LLC
SECONDARY BROKERS
1. Piper Jaffray & Company
2. Stifel, Nicolaus & Company
PUBLIC DEPOSITORIES
1.
Citibank, N.A.
2.
JP Morgan Chase & Co.
3.
Rabobank, N.A.
4.
MUFG Union Bank, N.A.
5.
Wells Fargo Bank, N.A.
CUSTODIAN
1. MUFG Union Bank Global Custody Services
TRUSTEE
1. U.S. Bank Global Corporate Trust Services
Page 19
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted: 6/8117
era�-ir Ot-Assa�jf
AGE-NQCS. Ecdoral s,go,noy and inotrurncntality ocoarities
ASKED, Tho prioa at whioh 000:rit:iec aro offorod.
R—ANKERS' ACCEPTAINIC ("MA"). A draft, U11, or cr(ohango accopted by a acnk era
truot ✓ompany. Bath thr3 iooL. or and tho a000pting inotitution g&�&rantoo psymont of the
b&.
WD. Tho prise-Af mmd by s bNyor of 000aritie hcn axlc rllc �c�,ri+iac, one �I #er
a -laid) . goo "Offor".
BROKER. A brokor bringo bu}�o�c and crallerr togcthor co that ho oars ni�u
nnmmiccion.
C-EIR„F;CATG CF-B€RAaIT ("CO"). A timc &--pecit wh a cpooifio matarity, ac
ovi&-nand by a ocrtifioato. Largo don^ Gn Cso aro tyniGally negotiable
Eoou t� idence cf &p-ccit, or e:hrrr-ro*"`��ty %W.-Oh a borrow'--F
plcdroo to cvevrc rcpaymcnt of a Iosn. AI✓o roforo to c/3osriti30 plcrdged by a banl4o
ses rc Ii cf
COMPREHENSIVE ANNUAL FINANCIAL REPORT ("GACI]"). Tho 0
feport for tho City of Pafrn Qccert. It inch:�cc fi%,,o ocmbir.cd rya+.amonto for or -oh
individual fvnd vnO acccwnt gre6:p, thvt ire proparad in conformity w4h r P—.44s
inoNdoc cb-Vperting SGhedulec that are nccrcc: any to cCrnP&\ncc IV414
finanoo-re'��d4egal and eentracWal cxtcn:ivo introduotory mates ial, and a
detailod atati,ics� cz,2\ien.
COUPON. (a) Tho annual K&\+a of intorost tha; a bond'o ioouor promiseo to pay tho
bGRdhalder on tho bond'o faoo valwe\ (k) A m1 t e!c LW*ca"rod to c bond, that
ovidonc\^�eet on a -c.mant G!11C\
DRAT F . A doatrr, co opp000d tc c lurckcr, aoto co a prinoipal in all tranaactien�s-,
a-yinr and cclling for hio own woount.
DFRFNT E. A bend 000urod col by tho gonor--� credit of tho ieovc�-.
DELIVERY VERSUS PAYMENT. Thorn arc two mothodo of dolivory of 000uritiou: (1�
rn�r■
de4ivory vcn;6,o payment (DVP); and (2) deliver�-verouo r000ipt (DVR). ❑VP io d-i\'Ory
of coouritie, - iith an ox,3hango of mono„„ for 000uritloo. DVR is �k`ry of a-.vYritix
with an cy.r,hanga of c oigned roocipt for tho rani T
Page 20
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 20
Adopted: 618117
1 FPillA r:'PS. (1) Finoncial jnctrvmcntc thQt ors linkoa to, or dorivad from the
movcmont of ono or moro andorlyin",�� or 000uWiec, and may in^l, e a
lcvcraging faotor; or (2) finanoial oontraoto bated upon a nceional ��vho✓o \%:1NO
is der+vod from an under! ing indox or 000urity (o,g., intoroot ratoo, foroign exGhange
Y-Occ, > gOtioo, or oommoditie .
DISCOUNT. Tho difforonc tc "vcn the c-,i 4si-}ion 000t of a coourity and itc vaiui , at
maturity, hon ga�tod s� 13wc +hcn f-a c vrkW3. A croou- ity that ❑olio b3!ow, o;gk�al
efferiR prior ❑h^after onlo, iG4co is ooncidor5d to be at a 1393 W.
Non intoroot bearingmonoy m&rkeram ;etPjm--\n+c that w
iooucA a dis«Gnd that aro rodeemod at mcturiVj for full f& o vslso (o.g., U.E.
Treadunr Rills)
DIVERCIEICATION Divide } � r i � � cc tho n
n,T Ong im•oo.mant fcn�ng a � ar,oty of 000.�riti.....h� off..r
4+4ep3nd3nt rod rr
FEDERAL CREDIT AGENCIES. Agonoioo of tho Fodasal GovefRniant that vx e
cct►sNz iohcd to r6 pply rredit to various Glasses of inctit do c and indMolualo (o.g., C
a-n&i ks:cinno firmo, xfvrder , farmos;-fa-rm 000porative-, -and crrcr*crc):
INSURANCE CC+.R.1201RATInu ("FD!Cn n fc�sral agcnoy that
fRavrec "only r�loTrc s.
FEDERAL FUNDS RATE, Tho rato of intoroot at whioh Pod fando sro ttcdod. Thio rate
io ourront!y poggod by tho Fodora! Reserve +hr"h opon-ma*o± opor&tiof ss
FEDERAL WGRAE 1-GAIN RAINKS ("F 1 11V). Gn�ra�et zpanccre� who4aoale loRnks
urmntly 12 rogional barLc+Y��.3h land fundo and provido oorroopondont bank
c/jrviom to mombor oommc�---\;cl I.:onks, th ift inotitut;ono, orodit uniono, an4ms ranee
wmpanies: Th"o miooion of tho F�!LEo io tc liq�:ofy tho haucinS rc\',QUC acocto of ito
Coro, who rnuat peurohaco ❑toot[ in thcir Ciotriot Ear*7
FFnn1-RAI NATIONAL MORTGAGE ASSOCIATION («EI.IM "). FNMA, like G,^�R�, X,
w" ohartorod undor tho Fodovl NWio�r:rzgc Accrcicticn /lot in 193,9- FNMA
a k&v&� corp=r ion %w*,ing smdor tho s,:opi000 of tho D,&psrtlrr3nt of Peouong aPA
than Lrnalopmont (HUP). It is tho largoat oinglo providor of rosidentisl mo4gage
fund in tho Unitod Stato-. F-gnnie Mao ac the cerperation is oaltad, io a prime
stAAkhcl&- cvrnod oorporaticn. Tho oorperation'o purohaocc in3hA3 S \Wioty of
adfuotaW/3 morgagci zn� loam~, in saArli+inn to fixed -Coto mortgagoo. FNMA'c
GeGwr o aro a!oo highly liquid and aro Mdcly a\,jocptsA FWA ac,trmoc and
glwrrentccc thQt Ol cccvri+y hcl&-rc x0l rcc•\-vc timcly paymont of lxinceV-L� cn� in+crc--%L
FEDERAL OPEN MARKET CC\nanWI7PEE («Tna9C"). The�C c-c\ncic:c Cif ccvm
nmcml►wo of tho Podcral R,30on'o Board and tivo of the 12 Pedorsl R000rvo Q-snl(
Presidentr,\ The Prcci"nt cf the N\cw Yvrk Fo&,rwl Qcccr1` QQn,t ie & pvm&nont
Page 21
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted: 618117
mombor, whilo the Oher Preudcantc acrvo on a rotting baois. Th3 Ccmmittoo
periodira".c is tc c--\' Fc&mn R. 3n` S,6: &-�inoo rogarding purohac o Snd 3s100 of
govornmont woar'itiou in tho opon mark, " c mavnc cf ingoing tho veto a of bank
crodit and mono)
rEDEQ�RESSE VE SYSTEM. Tho oantrcl bank of tho Llr*c� EtRMs ^reated h„
Cengr000 and oonoioting of a Dovon mombor Socrd cf Gcvornoro in Wcohi an, D.C.,
42 reglOnal banes, and about 5,700 ocrnrncc�x:1 tenko that am mernhcrc of the cyc±cm.
GGOVERNAMENT NATUDIS Al MORTGAGE ASSOCIATION ("r_`NMA" or "G;nna`
AU"). Eroaariticc lhzinflvv,.00 tho volumo of bank omelit that io guaranteed by r_NM
Q,nd isoaod by mortgcgc baNwro, oornmcrsim l teaks,-savinga and loan accwiation",
,and othor inotitutiono. A eoouri#y-heWr is priMiRtcd Icy the fbll fc;th and orodit of tho
nm3nt. G4+R-k3 MCC 3cs�ia3 am baoleid lb�y. tho FPA, VA, or F
mortgaNgoo. Tho torm "paoo through:," is cf+an u`cd-te-doc/-- c Q- n is Mrcc,
WOU ^ITY. A liquid sc:rut is oru the ocn ba oonvonkod oaoily nand rapidly into ocUh
cc ��
wftc►. a cvtcNlantimtl Ic0 � zluo. In tho mency rncrMt, a 000urity io oaid to b❑ liquid 0
the spread between hid and asked nricoo is narrow, and roacona ro oizo can ba done -at
thece quW-Ls
1 OCAl GOVERNMENTT1J,T�E �€NT—FUND ("L/UF„). KlGn--a friRm local
g3vornmontal units may bo ramittcd to thr3 Cslif3rnic E Oc Trccacre pcoit in this
apooial fend fcr tho purpo3a of ir}.rz\�mcnt.
MARKET ►►AI S. The prOo s� 1 k,-oh a 000Nrity io tr&Aging and oosld pmosmah'be
pvrchcccd cr acW.
MASTS REPURCHASE AGREEME IT. A wri*ton oontroot oovoring all future
tr-nsan- iAnc habACQn tho parboo to rapurchaco rviorsl- rc��urchor/) ag.mamont-s, that
establiohro❑ --,a3h part}' rights in th_. tranoaoticno. A MMt3r agmonUnt will oM. n
cpooif)� among othor thingo, tho right cF tho b-uy3r (londor) to ligaid&�o tho underlying
see Fitme in the ov`nt cf &-fc►„'t by tho DA—cr (bcrroN\qer)-.
MATURITY. Tf-�o dato upon whioh thr3 prin3ipu,l or otat3d va lu3 of an irnorotment
bc'civa-6 ► able and payable
MONEY MARKET. Tho market- which chart tc; rn &bt inotrumr3nto (a.g., bid
aomrnoro.�al pcpor, acnl�✓a'c ccirr, crer��j arc IJ-uaI any, t,�d-.
OFFS . Thu priea nol --� "y c ccl!or of 000urifies (when one b 9 c/).JuritieJ' , ene ask
for an offor). Era "Askid"and "Bid".
OPEN MARKET OPERATIONS. Purchases and c1'..lcc 3f gc�jemmont and oortain 3th3r
ocouritioa in tho epan market ry flr� Hccw Ycrk-F-edaral R000nfe Bank, am rootod by
the FQMC in ordor to infLinoo th3 vobm3 3f manoy and cros!it in the ewnemy.
Page 22
Palm Desert Treasury Policies and Procedures Revision No. 20
No. 2: "Statement of Investment Policy" Adopted: 618117
P,,,:rahaooc injoot rov.)rv66 i, tts tho bank oyot3m and otimutatc SrvMh cf mcnvy cng!
Gredit ea hav tho oppcoito offoot. Qpcn mark3t oporatianc aro the Pcdcral
f?ocono'a meat impertant cnc! mo1 flexible notary polioy tool.
PORTFOLIr; A aolleetim of oaouritioo that an invc t�x hc),,Js
. A grewp of Severnment doaloro that aukmit Oaf
of markot wtivity and pooiticna, and monthly finanoial otatementc to th^ Pe&-ral
P.occnw Qankef-��Ii, and are c►..,bjsot to ito inferma.l evoroight. Primary doalorc
+nslode Scceriticc and Enchanp r^Y'v*&sion (EEC) r, rS;ctorciw cctitiiri+i;c I �
dc,&loro, banks, nd a fea, ►;nmg�:la�od firma.
PRUDENT INVESTOR -RULE. An in\e& -ent ctandard. A fiduoiary, cuoh as a trustee,
cr crustee,
may-im+.,cct in a :;,=6wity if it is oo that woOr!d ba hc�,ght by a prl,:c+ant invootor sating in
We ca; ecit", tYho io Docicin5 rwnvnable— r-,00mo and prcoorvOien cf ;4-4ta4:
QUALIFIED PUBLIC I" EPOSITAQIG. A financial institutien that: (1) not alc4m
exe ption from the peymont of arW-:at o, ccmpqnqP4ing uso, or a� ►akrom 12rCc
undor the !Pzwo of thi❑ otao, (2) hac oegmgatc� fer the "vncfit of the cemrr�,svcn e�+ble
oollOoml havinS a vp.l ao of not 15oc than ito marcimlwm li"il;ty; and (2) h" "\ccn
apprcvod by the PwlhIio r-".cpo--\;t Protection Ccmn-k6on to hold publio dopccita.
RATE OF QCTI IQKk T' 3 yiald obtainable en a occvrity awod on-4"vrt1",&cv ;ire-n
its t markot price ,
REPURCHASE AGREEMENT ("113112" nQ "4C'"). A holder of v nw4e!lo the n to
an-iwccter �\qth an s�groomont tc rcp6:rchcti the c cvritioo et c fired prioo cn a firod
data Thv "ourity "auyor", in Occt, len�c the "wltol" mcr�oy for tho po;iod of tho
agroom/cxit, and tho torrru of tho --groornont aro cfr:. awcreC to cvrnr--\n.rOe-Wrn for this
gealero uoo RP ortcnsively to finanoo thoir pooiticna. Enc,Z- icn: whoa tho Fc,� is cai�
+b do ng PP, it io londing mono} (iniRmacing wcnk rc ww6y
SAFEKE PIN . A c \-vie to w atemcrc ren&rv� ty !tinnkc fcr P. fco whefeby
ov ritca and vaJuablec of ail tyrtes and de&G i^bona t,\C7 hold in tho aaNt'o vaults der
CCf"`ONDAQV nnA.FWET. A market- m sk fcr the pvwhaac and :ale cf cc���an�ing
issues fning tha initial distribution.
SE�'I_,�;RI;TCc�DEXGHANGE COMMISSION. An agcney crca}ocl by
ad,niniotcr oeGuri ica lvgic!iZicn fer tho purp000 of pmtcetinr invootcro in aoslwit+es
tmnc"-�icnc,
SEC RULE 1 ih-1. Ece "Uniform NO Poly"
Page 23
Palm Desert Treasury Policies and Procedures Revision No. 28
No. 2: "Statement of Investment Policy" Adopted: 618117
STRUCTURED ES. Nbkmo iaoL. od by inotrurncntcliticc (ctig,, Fui Q, FNMA, SE A
af44/ c rperoirsno, that ha\,c imkoddod options (s.g., oRll foatNmc, o�op Np a:vpcno,
floating rato ooupono, dori\��iw b&cam mtrrno; in throir debt otru3taro. Tho madCet
perfurnanea of atruoturod not&&4a affootcd by fluotuating in}c�-c� rLz�cc; the vcVi"
imaod�od options; and ohifto in tho yiold ourvo.
TREASURY BILL n non intoroot bearing diacccnt cc",fky that is icvjod by tho U.E.
TrssaV:.rry to finanoo tho n&�ionsl debt. Moot T aiHo aro ioouod t-- maturc in thrums
montho, oix montho, or ono ye�.
TREASURY BON C. Long torm, ooNpon barring U.E. Tm&oury ❑oourit:oo that are
tcauod as rdireGt oblinatienr, of the 'U.E. Govornmont, Snd having ini i&l mat -wit
rnoro than 10 yccr&-,
TREASURY IN OT5E. Msdiurn torm, ooNpon-boaring U.S. Troaa,--ry 000urit;cc thO a-rr
ioa so dirc,3t-hligatienc of tho U.E. Government, and having initial msturW/ac of two
to 19 yoaro.
UNIFORM NET GAPITAI Rl LE. SEC rog:.rimmont the mombor f;rrr,*� ac wiM ac nc�n
member broker daale�ro in cwurit,00, rnaintal n a maxkn*rn rVic of indobtednecc_+G_
4qui� oap:-W of 1 F, to ono, Aloo oallad not ospi.*,�l rids and not oapik rafic\
!nd,obtadn000 ao%wo all moray that, is-o oc to a firm, inoiuding margin to no and
ssr4rnitm3nto to purehaoo coouritia@ (cne r"-cen that4:v-,w public ioaaoo wm oproad
stung momboro of under-witing oyndioc�co;. I igs:id capital inoludm owh and aocoto
oacily oanvsrtad into osoh.
YAE l—r\ Tho rAo of arx u&l inoome---retwm on sn imoot nwt, mcr ecccd c-- a
Nefsent&Ngo. (a) INGO E YIELD io obtained by di .frog tho ourr a!Isr inoomo by
the Gu rent rnaAtot pr)raa for tho eocurity. (�_,) M€T VaGLC' or YIGLC' TO MATT RITV ice.
tho ourront inoomo yio;d MiRus any pr icm fAeve Fzr or pWa any di-000unt from par in
Fcrcaha.1 Fri„ w th tho adjuotmont op road w.\3r tru poricd from the data of PUrnhase tG
*ho dato of matrrity of tlho bond,
Page 24
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