HomeMy WebLinkAboutRDA RES 354RESOLUTION NO. 354
A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE
CITY OF PALM DESERT, CALIFORNIA, AMENDING THE POLICY
FOR THE INVESTMENT OF REDEVELOPMENT AGENCY FUNDS.
WHEREAS, Section 53646 of the State of California Govemment Code has been
amended to require the annual review and adoption of an investment policy statement; and
WHEREAS, said investment policy has been written in compliance with all applicable
laws and in accordance with guidelines provided by the Municipal Treasurers' Association of the
United States and Canada; and
WHEREAS, the City of Palm Desert Finance Investment Committee comprised of the
Mayor, Mayor Pro-Tempore, City Manager, City Attorney, Finance Director, Investment
Manager, other members of City Staff and citizens at large, have reviewed and approved the
proposed policy.
NOW THEREFORE BE IT RESOLVED by the Redevelopment Agency Board of the
City of Palm Desert, California, as follows:
That the policy statement attached hereto as Exhibit "A" is adopted; and
2. That the policy be examined and considered for readoption each January.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Redevelopment
Agency of the City of Palm Desert, California, held this 12th day of February, 1998, by the
following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN
CRITES, FERGUSON, KELLY, BENSON
NONE
SPIEGEL
NONE
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SHEILA R. LLIGAN,
PALM DESERT RED
CYSECRETARY
MENT AGENCY
ON, MAYOR
F�IBIT "A" RESOLUTION N0. 354
CITY OF PALM DESERT
and
PALM DESERT REDEVELOPMENT AGENCY
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ADOPTED BY RESOLUTION: 3a�a+ ,
RESOLIITION N0. 354
CITY OF PALM DESERT/PALM DESERT REDEVELOPMENT AGENCY
Statement of Investment Policy
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. Paee
Introduction..................................................................1
Scope........................... ... ...................... ..............1
InvestmentObjectives ................... ....................................1
A. Sajety ............................................................1
B. Liquidity ..........................................................2
C. Yield .............................................................2
Authorityto Invest Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment/Finance Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
InternalControl...............................................................3
Ethics and Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Evaluation of Investment Officer Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Authorized Financial Dealers & Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Authorized Investments .........................................................4
InvestmentPools..............................................................6
Safekeepingof Securities ........................................................6
Diversifieatioa......................................... . .6
. ....................
MaximumMalurities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
BondProceeds ................................................................7
ReportingRequirements ........................................................7
InvestmentPolicyAdoption .....................................................7
InvestmentPolicy Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Policy Statement oa Collaterxlized Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule I
Policy Criteria for Entering Into a Money Market Fund . . . . . . . . . . . . . . . . . . . . Schedule II
Policy Criteria for Selecting Broker/Dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedrile III
Firms Authorized to Conduct Investment Transactions . . . . . . . . . . . . . . . . . . . . Schedule IV
Chart of Authorized Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule V
Glossary
RESOLDTION N0. 354
CITY OF PALM DESERT/PALM DESERT REDEVELOPMENT AGENCY
5tatement of Investment Policy
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The policy and practices oflhe City ofPalm Desert and the Palm Desert Redevelopment Agency are
based upon state law, city ordinances, prudent money management and the "prudent person "
standards. The primary gouls of this policy are to invest public funds to:
1. Meet the daily cash flow needs of the City and the Redevelopment Agency.
2. Comply with all laws of the State of Califarnia regarding the investment of public
funds.
3. Achieve a reasonable rate of return while minimizing the potential for capital losses
arising,jrom market changes or issuer default.
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The investment policy applies to all funds under the control of the Finance Director/City Treasurer
of the City of Palm Desert and the Palm Desert Redevelopment Agency, including but not limited to
the general revenues of the City/Agency, enterQrise fund revenues, proceeds of bond sales and debt
service revenues, trust funds in the custody of the Finance DirectorlTreasurer and any other funds
under his control. These funds are accounted for in the comprehensive annual financial reports of the
City of Palm Desert and the Palm Desert Redevelopment Agency.
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Safety of principal is the City/Agency's foremost objective of the investment program.
Investrnents shall be undertaken in a manner that seeks to ensure that capital losses resulting
from institution default, braker-dealer default, or the erosion of market value are avoided. The
City/Agency shall seek to preserve principal by mirigating the two types of risk: credit risk
and mazket risk.
Credit risk, defined as the risk of loss due to failure of the issuer of a security, shall be
mitigated by investing in only the highest quality securities (see authorized
investments) and by diversifying the investment portfolio so that the failure of any one
issuer would not unduly harm the City/Agency's cash flow.
2. Mazket 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
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RESOLDTION N0. 354
securities matwe at the same tune that major cash outflows occur, this eliminating the
securities mature at the same time that major cash outtlows occur, thus
eliminating the need to sell securities prior to maturity; and by prohibiting the taking
of short positions, that is, selling securities that the City/Agency does not own. It is
explicitly recognized, however, that in a diversified portfolio, occasional measured _
losses may occur, and must be considered within the context of overall investment
return.
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Liquidity is the second most important objective of the investment program. The investmeni
portfolio shall remain suff`iciently liquid to enable the City/Agency to meet al� operating
requirements. At all times, at least 50% of the total portfolio shall be invested for p�riods of
three yeazs or less; at least 30% of the total portfolio shall be invested for two yeazs or less;
at least 20% of the total portfolio shall be invested for one yeaz or less. At no time will a
security in the portfolio mature in more than five years except bond reserve funds, bond
escrow funds and any funds appreve� reviewed by the Finance Committee er and approved
by City Council to be appropriate for a longer period.
C. �'ield
The City/Agency portfolio shall be invested to attain a mazket average rate of return through
economic cycles, as long as it does not diminish the objectives of Safety and Liquidity. The
mazket rate of return is defined as the average return on the one-year U.S. Treasury Bill.
Whenever possible and in a manner consistent with the objectives of safety of principal and
liquidity, a yield higher than the mazket rate of return shall be sought.
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The City Council and Redevelopment Agency Board have appointed the City Finance Director as City
Treasurer responsibie for undertaking investment transactions on behalf of the City/Agency. Unless
specifically designated by the City Council and Agency Board, the only officials authorized to
undertake investment transactions on behalf of the City/Agency are the Director of Finance/Treasurer
and his/her designee. The Finance DirectorrI'reasurer and Investment Manager will observe, review
and react to the changing conditions that affect the investment portfolio. They will meet on a regular
basis to discuss current market conditions, future trends and how each of these affects the investment
portfolio and the City/Agency. The Finance Director/Treasurer and Investment Manager shall
establish a system of controls to ensure compliance with the City/Agency's investment policy.
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The City utilizes a Finance Committee, composed of the Mayor, Mayor Pro-Tempore, City Manager,
Redevelopment Agency Executive Director, Finance Director, Investment Manager, City Attorney
and Citizen(s) appointed by the City Council, to insure stability and constant information flow as it
relates to investment and other finance activities. They will meet monthly to discuss issues relating
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RESOLIlTION SO. 354
to the City/Agency's investment portfolio. Items may include the suitability of current investment
policies and procedures, current and proposed strategies, investment transactions since the last
meeting as well as other topics affecting the sources and uses of funds in the portfolio.
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The Finance Director, is responsible for ensuring compliance with the City/Agency investment
policies as well as establishing internal controls designed to prevent losses due to fraud, employee
error, misrepresenting by third parties, or unanticipated changes in finan�ial markets. A written policy
on the specific internal controls will be reviewed by the Finance Committee. �
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Officer and employees 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 unpartial investment decisions. Employees and investment officers shall disclose any
material financial interests in financial institutions that conduct business within this jurisdiction, and
they shall further disclose any lazge personal financiaUinvestment positions that could be related to
the performance of the CitylAgency's portfolio. Employees and officers shall subordinate their
personal investment transactions to those of the City/Agency, particularly with regard to the timing
of purchases and sales, and shall avoid transactions that might impair public confidence in the City's
ability to govern effectively. _
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� The actions of City/Agency investment officers in the performance of their duties as managers of
public funds shall be evaluated using the following "prudent person" standazd applied in the context
of managing the overall portfolio:
Investments shall be made with judgment and care, under circumstances then
prevailing, which persons of prudence, discretion, and inteltigence exercise in the
professional manrrgement of their business affairs, not for speculation, but for
investment, considering the probable safety of their capital as well as the probable
income to be derived.
City/Agency investment officers acting in accordance with written policies and the "prudent person"
standard and exercising due diligence shall be relieved of personal responsibility for an individual
securiry's credit risk or market price changes, provided that substantial deviations from expectations
are reported by the Treasurer to City Manager and the Finance Committee within ttu�ee days of
discovery. Mutually agreeable remedial action will be taken by the Treasurer and reported to the next
Finance Committee meeting.
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RESOLDTION N0. 354
The City/Agency shall transact business only with banks and savings and loans, and with investment
securities dealers which/who comply with Schedule III (Policy Criteria for Selecting Broker/Dealers)
attached. The Finance Director/Treasurer will maintain a Iist of financial institutions authorized to
provide investment services. He will also maintain a list of approved security brokers/dealers selected
by credit worthiness who are authorized to provide investment services to the City/Agency. The _
dealers must be primary dealers regularly reporting to the Federal Reserve Bank. Exceptions to the
primary dealer rule may be made with the approval of the Investment/Finance Committee, provided
they are consistent with California Govemment Code Section 53601.5.
All primary financial institutions and broker/dealers who desire to become qualif ed bidders for
investment transactions must supply an audited financial statement, and U4 Form for the broker,
completed broker/dealer questionnaire (see Schedule III) and certification of having read the
City/Agency's investment policy. All secondary financial institutions and broker/dealers who desire
to become qualified bidders for investment transactions must supply an audited financial statement,
proof of National Association of Securities Dealers certification, trading resolution, proof of state
registration, completed broker/dealer questionnaire (see Schedule III), U4 Form for the broker and
certification of having read the City/Agency's investment policy. The Finance Director/Treasurer
shall determine if they aze adequately capitatized, make mazkets on securities appropriate to the
City/Agency's needs and are recommended by managers of portfolios similar to the City/Agency.
The Finance Director/Treasurer shall submit his findings and recommendations to the
Investment/Finance Committee. The committee will determine which broker/dealers will be
authorized to trade with the City/Agency.
An annual review of the financial condition and registration of qualified bidders will be conducted.
A current audited financial statement is required to be on file for each financial institution and
broker/dealer in which the City/Agency invests.
The City/Agency shall at least annually send a copy of the current investment policy to all financial
institutions and broker/dealers appraved to do business with the City/Agency. Confirmation of receipt
of this policy shall be considered evidence that the dealer has read and understands the Ciry/Agency's
investment policy and will recommend and execute only transactions suitable for and in compliance
with the City/Agency's investment policy.
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The City/Agency is authorized by Califomia Government Code Section 53600, et. seq. to invest in
specific types of securities. The City/Agency ha : further limited the types of seciu-ities in which we
may invest. Any security not listed, is not a valid investment for the City/Agency. The concise list
of approved securities is as follows:
A. United States Treasury Bills, Bonds, and Notes, or those for which the full faith and
credit of the Utited States are piedged for payment of principal and interest. There is
no limitation as to the percentage of the portfolio which can be invested in this
category.
Rev: O 1 /98
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RESOLDTION N0. 354
B. Obligations issued by United States Government Agencies such as, but not limited to,
the Govemment National Mortgage Association (GNMA), the Federal Fazm Credit
Bank System (FFCB), the Federal Home Loan Bank (FHLB), the Federal National
Mortgage Association (FNMA), the Federal Home Mortgage Corporation (FHLMC),
__ the Student Loan Mazketing Association (SLMA), and the Tennessee Valley Authority
(TVA). Although there is no percentage limitation of the dollar amount that can be
invested in these issuers, the "prudent person" rule shall apply- for any single agency
name.
C. Bills of exchange or time drafts drawn on and accepted by a commercial banlc,
otherwise known as bankers acceptances which are eligible for purchase by the
Federal Reserve System, may not exceed 270 days to maturity or 40% of the market
value of the portfolio. No more than 30% of the mazket value of the portfolio may be
invested in banker's acceptances issued by any one bank.
D. Commercial paper of prime quality and ranked PI by Moody's Investor Services and
A 1 by Standard and Poor's and issued by a domestic corporation having assets in
excess of $500 million and having an"A" or better rating on its long term debt as
provided by Moody's or Standard and poor's. Purchases of eligible commercial paper
may not exceed 180 days to maturity. Purchases of commercial paper may not exceed
15% of the market value of the portfolio. No more than 5% of the market value of the
portfolio, or $5,000,000 or 10% of the issuers' outstanding paper may be invested in
commercial paper issued by any one corporation. �
E. Medium Term Notes (MTNs) issued by corporations organized and operating within
� the United States. MTNs eligible for purchase shall be rated "A" or better by Standard
and Poor's or by Moody's rating services. MTNs with an"A" rating shall be limited
to 24 months maximum maturity; "AA" rated MTNs shall be limited to 36 months.
The aggregate total of all purchased MTNs may not exceed 30% of the market value
of the investment portfolio. No more than 5% of the market value of the portfolio may
be invested in notes issued by any one corporation. Commercial paper holdings shall
be considered when calculating the maximum percentage of any issuer name.
F. The Local Agency Investment Fund (LAIF), established by the State Treasurer for the
benefit of local agencies and identified under Government Code Section 16429.1, is
authorized up to the maximum amount permitted by State Law.
G. The City/Agency may invest in "shazes of beneficial interest" issued by diversified
management companies which invest only in direct oblitations in United States
Treasury bills, notes and bonds, and repurchase agreements with a weighted average
of �8 65 days or less. They must be rated in the highest-rating category of at least two
nationally-recognized rating services (e.g., Moody's P-1 or Standard and Poor's
AAA), and have a minimum of $500 million in assets under management, and comply
with Schedule II (Policy Criteria for Entering Into a Diversified Management
Company) attached. The purchase price may not include commissions.
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RESOLDTIOI�I NO. 354
H. The City/Agency may place funds in inactive deposits with Banks and Savings and
Loans with a branch within California that have a rating of at Ieast "A-1 " from the
Financial Directory or an equivalent rating from another generally recognized
authority on ratings, and have an Equity to Total Assets ratio of at least 4%. No more
than 15% of ihe City/Agency portfolio, exclusive of investments in govemment �
agency issues and the State Treasurer's Local Agency Investment Fund, shall be
placed with any one fmancial institution. All deposits shall be secured in accordance
with Sections 53651 and 53652 of the California Government Code and comply with
Schedule I(Policy Statement of Collateralized Time Deposits) attached. If deposits
aze not collateralized, the maximum placed at any one institution will be$100,000.
The maximum amount of collateralized inactive deposits placed at any one institution
shall not constitute more than 15% of the total assets of the institution or $5,000,000,
whichever is Iess, and sha11 not exceed the total shareholders' equity of the issuing
mstrtuUon.
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The City/Agency will investigate all local government investment pools (LGP) and money market
mutual funds prior to investing and periodically thereafter while the City/Agency is invested in the
pool.
All money market mutual funds and LGP's, except the Local Agency Investment Fund (LAIF} of the
State of Califorrua, must meet the criteria in Schedule II of this policy which includes providing a
written statement that it meets the requirements in Sections 53601 and 53635 of the California
Government Code and have the highest raring from two national rating agencies. The fund must
maintain a daily principal per share vatue of $1.00 per share and distribute interest monthly. The
fund's investments shail be Iimited to direct obligations in United States Treasury bills notes and
bonds, and repurchase agreements.
LAIF is authorized under provisions in Section 16429.1 of the California Government Code. The
City/Agency's participation in the pool was approved by the City Council and the Redevelopment
Agency Boazd on December 12, 1981, by Resolution 81-161. It is a permitted investrnent of the
City/Agency even though it does not comply with all of the items listed in Schedule II, "Criteria for
Entering Into a Money Market Fund."
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To protect against potential losses by the collapse of individual securities dealers, all securities owned
by the City/Agency shall be held in safekeeping by a third party bank tivsi department acting as agent
for the City/Agency under the terms of a custody agreement executed by the bank and the
City/Agency. All securities will be received and delivered using standard delivery-versus-payment
(DVP) procedures. The third party bank trustee agreement must comply with Section 53608 of the
California Government Code. No outside broker/dealer or advisor may have access to City/Agency
funds, accounts or investments, and any transfer of funds to or through an outside broker/dealer must
be approved by the Finance DirectorlTreasurer.
Rev: Ol /98
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RESOLDTION N0. 354
DIVERSIFICATION
The City/Agency will diversify its investrnents by security type and investment. With the exception
of bond reserve funds, bond escrow funds, and any other funds approved by the Finance Committee
or the City Council, at all times at least 50% of the total portfolio shall mature in three years or less;
at least 30% of the total portfolio shall mature in two yeazs or less; at least 20% of the portfolio shall
� mature in one year or less. � .
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The City/Agency will attempt to match its investments with anticipated cash flow requirements.
Unless matched to a specific cash flow, as ap�re�e� reviewed by the Finance Committee and
approved by City Council, the City/Agency will not directly invest in securities maturing more than
five years from the date of purchase. Bond reserve funds, bond escrow funds, and any other funds
appre�ae� reviewed by the Finance Committee er and approved by the City Council may be invested
in securities exceeding five years if the maturities of such investments aze made to coincide as nearly
as possible with the expected use of the funds.
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The City/Agency will direct the investment of proceeds on bonds issued as instructed in the bond
indenture. Securities authorized by the bond indenture that aze not authorized by the CitylAgency's
� investment policy will only be used if they are specifically approved by the Finance Committee. All
securities will be held in third-party safekeeping with the bond trustee, and all delivery-versus-
payment rules will apply. .
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The Finance Director/Treasurer shall render a report of investment activity to the City Council,
Agency Board and the Finance Committee �erl� monthly within 30 days following the end of
the-�er month or the neat regular scheduled Council meeting following t6e Finance and
Investment Committee meeting. The report will include the type of investment, issuer, date of
maturity, and par and dollar amount invested, on all securities, investments and monies held by the
City/Agency. The report shall state mazket value and the source of the valuation, and state that the
portfolio is in compliance with the policy or the manner in which it is not in compliance. The report
will also include a statement denoting the ability to meet the City/Agency's expected expenditure
requirements for the next six months or provide an explanation as to why sufficient money is not
available. The report date will be the actual month-end date unless the last day of the month fa11s on
a weekend or legal holiday. If the last day of the month is a weekend or legal holiday, the date of
month-end report will be the last business day prior to the end of the month.
Rev: O 1 /98
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RESOLDTION N0. 354
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The Finance Director/Treasurer shall submit an annual Statement of Investment Policy to the Finance
Committee and then the City Council and Redevelopment Agency Board for their approval. This �
statement shall be filed with the Finance Committee by January 31 of each year.
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The City/Agency's independent Certified Public Accountant shall annually review and make
recommendations regarding the City/Agency investment policies to the extent considered necessary
as required by generally accepted auditing standards as they relate to the annual financial audit which
includes cash and investments.
Rev: O 1 /98
RESOLDTION NO. 354
CITY OF PALM DESERT
PALM DESERT REDEVELOPMENT AGENCY
POLICYSTATEMENT ON COLLATERALIZED TIME DEPOSITS
SCHEDULE I
Before the Treasury can place a time deposit with a local bank or savings and loan, the following
criteria must be met:
1. The bank must provide us with an executed copy of the "Contract for Deposit for Moneys"
as specified in Section 53649 of the California Government Code.
2. The interest rate on the Time CeRificate of Deposit must be competitive with rates offered by
other banks and savings and loans residing in Riverside County and must exceed the interest
rate for treasury bills for a similar maturity period.
3. For investments less than $100,000, FDIC insurance will be sufficient without requiring any
collateral to be pledged with the Federal Reserve to secure the public fund deposit.
4. For investments exceeding $100,000, there may be a waiver of collateral for the first
$] 00,000 deposited, and all of the funds placed on deposit must be collateralized by �%
1l0% of U.S. Treasury or Federal Agency securities, or by 150% of mortgages having
maturities less than five years in accordance with Secrion 53652 of the California Government
Code. The CitylAgency must receive confirmation that these securities have been pledged in
repayment of the time deposit. The securities pledged must be maintained at a current market
value 10% greater than the dollar amount of the deposit.
5. The City/Agency must be given a current audited financial statement for the financial year just
ended . The financial
reports must both include a"statement of financial condition" as well as an "income
statement" depicting current and prior year operations.
6. The City/Agency will not place a fund deposit for more than $5,000,000, or 10% of the assets
of the institution, whichever is less.
7. The Ciry/Agency must receive a certificate of deposit which specifically expresses the terms
governing the transaction, (i.e., the period of time, name of depositor, interest rate, etc.).
8. All time certificates must have a maturity period not exceeding one year from the date of
deposit with quarterly payments of interest based upon the stated interest rate.
Rev: O 1 /98
Schedule I
RESOLDTION N0. 354
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�-9. Time deposits will only be made with qualified banks and savings and loans having branch
office locations within Riverside County. �iowever, time deposits with a bank or savings and
loan must be centralized at one designated office location rather than making separate deposits
with each branch office.
Rev: O 1 /98
Schedule I
RESOLDTION N0. 354
CITY OF PALM DESERT
PALM DESERT REDEVELOPMENT AGENCY
� POLICY CRITERIA FOR ENTERING INTO A DIVERSIFIED MANAGEMENT COMPANY
SCHEDULE II
The firm must meet all requirements set forth in the California Government Code Sections
53601 and 53635.
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-3: 2. The fund must provide evidence that it has been registered with SEC and has "AAA" ratings
from Standard & Poor's and Moody's.
�- 3. The fund's investments shall be limited to direct obligations in U.S. Treasury bills, bonds or
notes and repurchase agreements, to the extent allowed by law, and shall maintain weighted
average maturities within their portfolio of less than 60 days.
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�- 4. The fund shall provide-trs a current prospectus before our participation in the fund.
�: 5. The fund cannot engage in hedging strategies, WI purchases, options, future, reverse-
repurchase agreements, or security lending.
-8- 6. The fund must rnaintain daily, a principal per share value of $1.00 per share.
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�& 7. The fund shall provide �s at least annual financial statements on the fund's financial condition
and performance.
�-}- 8. T'he fund shall provide-�s wire instructions for the purchase and redemption of shares and
must be able to distribute interest earnings to us on a monthly basis.
�- 9. Unless the fund is more than five yeazs old, the City/Agency is to be given its performance
history since the inception of the fund.
Rev: O 1 /98
Schedule II
RESOLUTION NO. 354
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Rev: O 1 /98
Schedule II
RESOLUTION NO. 354
CITY OF PALM DESERT
PALM DESERT REDEVELOPMENT AGENCY
POLICY CRITERIA FOR SELECTING BROKER/DEALERS
SCHEDULE III
All primary financial institutions and broker/dealers who desire to become qualified bidders
for investment transactions must supply an audited financial statement, and U4 Form for the
broker, completed broker/dealer questionnaire (made-e part of this Schedule) and certification
of having read the City/Agency's investment policy. All secondary financial institutions and
broker/dealers who desire to become qualified bidders for investment transactions must supply
an audited financial statement, proof of National Association of Securities Dealers
certification, trading resolution, proof of state registration, completed broker/dealer
questionnaire (�a�e� part of this Schedule), U4 Form for the broker and certification of
having read the City/Agency's investment policy.
2. The net capital position of the firm shall be in excess of $100 million.
3. The Finance Director/Treasurer's intent is to enter into a long-term relationship. Therefore,
the integrity of the firm and the personnel assigned to our account is of primary importance.
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�4. It is important that the firm provide related services that will enhance the account relationship
which could include:
a) An active secondary market for its securities.
b) Internal credit research analysis on commercial paper, banker's acceptances and other
securities it offers for sale.
dj c) Be capable of providing market analysis, economic projections, newsletters.
ej d) Provide mazket education on new investment products, security spread relationships,
graphs, etc.
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�9:5. If requested, the firm must be willing to provide us a list of local government clients or other
references, particulazly those client relationships established within the State of California.
Rev: O 1 /98
Schedule III
RESOLUTION N0. 354
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,
' . Without exception, all transactions are to be conducted
on a"delivery vs. payment" basis. All securities owned by the City/Agency shall be
held in safekeepiag by a Third Party Bank Trust Department acting as Agent for the
City/Agency under the terms of a Custody Agreement executed by the bank and the
City/Agency.
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�7. The-bral�er Firm shall be headquartered or have a branch office in California; �eept
,
ett� and must be registered with and be operating under the laws of the State of
California.
�:8. The �re�Cer/�ea�x Firm must have been in operation for more than 5 years, and must have net
capital in excess of $100 million.
�4-9. No business relationship shall be established with firms engaging in the sale of "exotic"
products. Exotic meaning "unusually high yields," no ready secondary mazket, or "high price
volatility" on the security.
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�-Ei-10. No broker/dealer or security firm shall be selected rNhe which has, within any consecutive 48-
month period, made a political contribution in an amount exceeding the limitations contained
in Rule G-37 of the Municipal Securities Rulemaking Boazd, to the local treasurer or any
member of the City Council or the Redevelopment Agency governing board or to any
candidate for these offices.
11. All Broker/Dealers who have been selected to work with the City/Agency will aaually
review the revised Investment PoGcy and sign a statement indicating that 6e/she will
compty with i� They will also provide their audited financial statement to us.
Rev: O 1 /98
Schedule III
RESOLIITION N0. 354
CITY OF PALM DESERT
PALM DESERT REDEVELOPMENT AGENCY
FIRMS A UTHORIZED TO CONDUCT INVESTMENT TRANSACTIONS
SCHEDULEIV �
The City/Agency is authorized to conduct investment security transactions with the following
investment firms and broker/dealers, many of which are designated by the Federal Reserve Bank as
primary government dealers. Security transactions with fums, other than those appearing on this list,
are prohibited.
A. Firms designated by the Federal Reserve Bank as Primary Govemment Dealers:
Bank of America NT & SA
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Morgan Stanley Dean Witter Reynolds, Discover, Inc.
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Solomon Smith Barney, Inc.
B. Other authorized firms:
Union Bank of Califomia
The Bank of New York
Great Westem Bank
Home �avings of America
Downey Savings
Glendale Federal Bank
Wells Fargo Bank
Rev: O 1 /98
Schedule IV
RESOLIITION N0. 354
GLOSSARY
AGENCIES: Federal agency securities
ASKED: The price at which securities are
offered. (The price at which a firm will sell a
security to an investor.)
BANKERS' ACCEPTANCE (BA): A draft
or bill or exchange accepted by a bank or trust
company. The accepting institution guarantees
payment of the bill, as well as the issuer.
BASIS POINT: One one-hundredth of a
percent (i.e., 0.01 %).
BID: The price offered by a buyer of
securities. (When you aze selling securities,
you ask for a bid.)
DEBENTURE: A bond secured only by the
general credit of the issuer.
DELIVERY VERSUS PAYMENT: There
aze two methods of delivery of securities:
delivery versus payment and delivery versus
receipt. Delivery versus payment is delivery of
securities with an exchange of money for the
securities. Delivery versus receipt is delivery
of securities with an exchange of a signed
receipt for the securities.
DISCOiJNT:The difference between the cost
price of a security and its maturity when
quoted at lower ihan face value. A security
selling below original offering price shortly
after sale also is considered to be at a discount.
BROKER: A broker brings buyers and sellers
together for a commission. He does not take a
position.
CERTIFICATE OF DEPOSIT (CD): A time
deposit with a specific maturity evidenced by
a certificate. Large-denomination CD's are
typically negotiable.
COLLATERAL: Securities, evidence of
deposit or other property which a borrower
pledges to secure repayment of a.loan. Also
refers to securities pledged by a bank to secure
deposits of public monies.
COUPON: a) 3'he annual rate of interest that
a bond's issuer promises to pay the bondholder
on the bond's face value. b) A certificate
attached to a bond evidencing interest due on
a payment date.
DEALER: A dealer, as opposed to a broker,
acts as a principal in all transactions, buying
and selling for his own account.
Rev: O 1 /98
DISCOUNT SECURITIES: Non-interest
bearing money market instruments that are
issued at a discount and redeemed at maturity
for full face value (e.g., U.S. Treasury Bills).
DIVERSIFICATION: Dividing investrnent
funds among a variety of securities offering
independent returns.
FEDERAL CREDIT AGENCIES: Agencies
of the Federal government set up to supply
credit to various classes of institutions (e. g.
S&L's, Small business firms, students,
farmers, fazm cooperatives, and exporters).
FEDERAL DEPOSIT INSURANCE
CORPORATION (FDIC): A Federal agency
that insures bank deposits, currently up to
$100,000 per deposit.
FEDERAL FUNDS RATE: The rate of
interest at which Fed funds are traded. This
rate is currently pegged by the Federal Reserve
through open-mazket operations.
Glossary
RESOLDTION N0. 354
FEDERAL HOME LOAN BANKS
(FHLB): The institutions that regulate and
lend to savings and loan associations. The
Federal Home Loan Banks play a role
analogous to that played by the Federal
Reserve Banks vis-a-vis member commercial
banks.
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA): FNMA, like
GNMA was chartered under the Federal
National Mortgage Association Act in 1938.
FNMA is a Federal corporation working under
the auspices of the Department of Housing and
Urban Development (HUD). It is the largest
single provider of residential mortgage funds
in the United States. Fannie Mae, as the
corporation is called, is a private stockholder-
owned corporation. The corporation's
purchases include a variety of adjustable
mortgages and second loans, in addition to
fixed-rate mortgages. FNMA's securities are
also highly liquid and are widely accepted.
FNMA assumes and guarantees that all
security holders will receive timely payment of
principal and interest.
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION (GNMA or
Ginnie Mae): Securities influencing the
volume of bank credit 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 securities are backed by the FHA,
VA or FMHM mortgages. The term "pass-
throughs" is often used to describe Ginnie
Maes.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without
a substantial loss of value. In the money
mazket, a security is said to be liquid if the
spread between bid and asked prices is narrow
and reasonable size can be done at those
quotes.
LOCAL GOVERNMENT INVESTMENT
POOL (LGIP): The aggregate of all funds
from political subdivisions that are placed in
the custody of the State Treasurer for
investrnent and reinvestment.
FEDERAL OPEN MARKET
COMMITTEE (FOMC): Consists of seven
members of the Federal Reserve Board and
five of the twelve Federal Reserve Bank
Presidents. The President of the.New York
Federal Reserve Bank is a permanent member,
while the other presidents serve on a rotating
basis. The Committee periodically meets to
set Federal Reserve guidelines regazding
purchases and sales of Govemment Securities
in the open mazket as a means of influencing
the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The
central bank of the United States created by
Congress and consisting of a seven-member
Board of Govemors in Washington, D.C.; 12
regional banks and about 5,700 commercial
banks are members of the system.
Rev: O 1 /98
MARKET VALUE: The price at which a
security is trading and could presumably be
purchased or sold.
MARKET REPURCHASE AGREEMENT:
A written contract covering all future
transactions between the parties to repurchase-
reverse repurchase agreements that establish
each party's rights in the transactions. A
master agreement will often specify, among
other things, the right of the buyer-lender to
liquidate the underlying securities in the event
of default by the seller-borrower.
MATURITY: The date upon which the
principal or stated value of an investment
becomes due and payable.
Glossary
RESOLDTION N0. 354
OFFER: The price asked by a seller of
securities. (When you aze buying securities,
you ask for an offer.) See "Asked" and "Bid".
OPEN MARKET OPERATIONS:
Purchases and sales of government and certain
other securities in the open market by the New
York Federal Reserve Bank as directed by the
FOMC in order to influence the volume of
money and credit in the economy. Purchases
inject reserves into the bank system and
stimulate growth of mone� and credit: Sales
have the opposite effect. Open market
operations are the Federal Reserve's most
important and most flexible monetary policy
tool.
PORTFOLIO: Collection of securities held
by an investor.
amortized yield to maturity; on a bond, the
current income return.
REPURCHASE AGREEMENT (RP or
REPO): A holder of securities sells these
securities to an investor with an agree�nent to
repurchase them at a fixed date. The security
"buyer" in effect lends the "seller" money for
the period of the agreement, and the terms of
the agreement are structured to compensate
him for this. Dealers use RP extensively to
finance their positions. Exception: When the
Fed is said to be doing RP, it is lending money,
that is, increasing bank reserves.
SAFEKEEPING: A service to customers
rendered by banks for a fee whereby securities
and valuables of all types and descriptions are
held in the bank's vaults for protection.
PRIMARY DEALER: A group of
government securities dealers who submit
daily reports of market activity and positions
and monthly financial statements to the
Federal Reserve Bank of New York and are
subject to its informal oversight. Primary
dealers include Securities and Exchange
Commission (SEC)-registered securities
broker/dealers, banks and a few unregulated
firms.
PRUDENT pERSl7N RULE: An investment
standard. In some states, the law requires that
a fiduciary, such as a trustee, may invest
money only in a list of securities selected by
the custody state--the so-called "legal list". In
other states, the trustee may invest in a security
if it is one which would be bought by a prudent
person of discretion and intelligence who is
seeking a reasonable income and preservation
of capital.
RATE OF RETURN: The yield obtainable on
a security based on its purchase price or its
current mazket price. This may be the
Rev: O 1 /98
SECONDARY MARKET: A market made
for the purchase and sale of outstanding issues
following the initial distribution.
SECURITIES & EXCHANGE
COMMISSION: Agency created by Congress
to protect investors in securities transactions
by administering securities legislation.
SEC RULE 15C3-1: See "Uniform Net
Capital Rule".
TREASURY BILLS: A non-interest bearing
discount security issued by the U.S. Treasury
to finance the national debt. Most bills are
issued to mature in three months, six months,
or one year.
TREASURY BOND: Long-term U.S.
Treasury securities having initial maturities of
more than 10 yeazs.
TREASURY NOTES: Intermediate-term
coupon bearing U.S. Treasury securities
having initial maturities of from one year to
ten yeazs.
Glossary
RESOLDTION N0. 354
�
UNIFORM NET CAPITAL RULE:
Securities and Exchange Commission
requirement that member firms as well as
nonmember broker/dealers in securities
maintain a maximum ratio of indebtedness to
liquid capital of 15 to 1; also called net capital
rule and net capital ratio. Indebtedness covers
all money owed to a firm, including margin
loans and commitments to purchase securities,
one reason new public issues are spread among
members of underwriting syndicates. Liquid
capital includes cash and assets easily
converted into cash.
YIELD: The rate of annual income return on
an investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the
current dollar income by the current mazket
price for the security. (b) NET YIELD or
YIELD TO MATURITY is the current
income yield minus any premium above par or
plus any discount froni par in purchase price,
with the adjustment spread over the period
from the date of purchase to the date of
maturity of the bond.
Rev: O 1 /98
Glossary
RESOLDTION NO. 354
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