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HomeMy WebLinkAboutResolution 2011-14 - Amend Statement of Investment PolicyCITY OF PALM DESERT OFFICE OF THE CITY TREASURER STAFF REPORT REQUEST: FOR APPROVAL OF ACTIONS RELATED TO AMENDMENT OF THE PALM DESERT "STATEMENT OF INVESTMENT POLICY" TO INCLUDE THE RIVERSIDE COUNTY TREASURER'S POOLED INVESTMENT FUND AS AN INVESTMENT (JOINT CONSIDERATION WITH THE PALM DESERT CITY COUNCIL, REDEVELOPMENT AGENCY, FINANCING AUTHORITY, AND HOUSING AUTHORITY). SUBMITTED BY: Paul S. Gibson, C.C.M.T., City Treasurer DATE: March 10, 2011 CONTENTS: 1) Riverside County "Statement of Investment Policy" 2) Riverside County Pooled Investment Report (1/31/11) 3) Amendment to Palm Desert "Statement of Investment Policy" 4) City Resolution on Participation in Riverside County Pool 5) RDA Resolution on Participation in Riverside County Pool Recommendation By Minute Motion: 1) Approve the proposed amendment to the Palm Desert "Statement of Investment Policy" to authorize the Riverside County Treasurer's Pooled Investment Fund as an investment. Waive further reading and adopt: 2) City Council Resolution No. 2011 - 14 , authorizing the investment of monies in the Riverside County Treasurer's Pooled Investment Fund. 3) Redevelopment Agency Resolution No. 583_ , authorizing the investment of monies in the Riverside County Treasurer's Pooled Investment Fund. Staff Report Riverside County Investment Pool March 10, 2011 Page 2 of 3 Background Due to historically low interest rates (approaching zero), the City of Palm Desert ("City") has had to concentrate surplus monies and bond proceeds in the State of California Local Agency Investment Fund ("LAIF") in order to maximize profit. As of January 31, 2011, approximately 40% of the City bond portfolio, and approximately 62% of the Palm Desert Redevelopment Agency ("RDA") bond portfolio were invested in LAIF at a yield of 0.54%. Wells Fargo Corporate Trust Services, and the California Asset Management Program ("CAMP"), two competing investment alternatives, had fund yields of 0.00% and 0.17%, respectively. The Riverside County Treasurer's Pooled Investment Fund ("Riverside County Pool"), which is currently not authorized, had a yield of 0.68%. The Palm Desert City Treasurer's Office believes that it would be prudent to invest a portion of surplus City and RDA monies in the Riverside County Pool. This recommendation is the product of extensive research on the County Pool, as well as a visit to the Riverside County Treasurer's Office to interview the Riverside County Treasurer and his staff. The Riverside County Pool, which has a current book value of approximately $5.8 Billion, is rated "Aaa" by Moody's, and "AAA" by Fitch. Unlike the Orange County, San Bernardino County, and San Diego County investment pools, the Riverside County Pool has not incurred any principal losses or been tainted by scandal. The County Pool is managed principally for the benefit of school districts and special districts. The County Treasurer does not advertise to increase Pool membership out of concern that it might attract "hot money" (depositors with high, erratic activity levels) that could destabilize the County Pool. According to the Riverside County Treasurer's "Statement of Investment Policy", the Riverside County Pool must have a weighted average maturity of 541 days (1.5 years) or less. Concentrations are limited to 5% per issuer. At least 40% of the Pool must be highly liquid at all times. The Pool's investment strategy is to "buy and hold." There are no limits on either the number or the dollar amount of deposits and withdrawals. An Investment Oversight Committee reviews the Pool's operations. The County Pool is currently "light" on corporates, and "heavy" on U.S. Government Agencies, particularly callables. The Pool is able to outperform LAIF because of a tier of three-year callable Agencies. The County Pool's only exposures are large positions in Fannie Mae and Freddie Mac, both of which are now U.S. Government -owned. Three of the four County investment officers are former securities brokers (Treasurer Don Kent -- Paine Webber; Assistant Treasurer Jon Christensen -- Morgan Stanley; and Investment Manager Giovane Pizano -- Morgan Stanley). County Treasurer Kent has Staff Report Riverside County Investment Pool March 10, 2011 Page 3of3 been with the Riverside County Treasurer's Office for more than 15 years, and the other two for more than 10 years. The fourth staff member, Assistant Investment Manager Angela Tressler, is a UC-Riverside business graduate who has been with the Riverside County Treasurer's Office for more than five years. Christensen, Pizano, and Tressler trade securities from a bullpen -style office with a huge Bloomberg TV news screen, and a Bloomberg Trading Terminal on each desk. County Treasurer Kent has the same setup in his office. Pizano, a native of Italy, is the group's "thinker" and financial markets historian. He reportedly anticipated the 2008 financial markets crisis before it happened. Based upon Deputy City Treasurer Jeffrey's observations during the interview, the County Treasurer's staff is quite compatible, and possesses a strong team ethos. This, along with their sophisticated communications layout, private -sector expertise, and state-of-the-art technology explains how they are able to rapidly closeout trading positions that might expose them to loss (e.g., a small amount of Lehman Brothers paper in 2008, and a significant position in municipal bonds in 2010). In order for the City and the RDA to participate in the Riverside County Pool, the "Local Government Investment Pools" section of the Palm Desert "Statement of Investment Policy" must be amended to authorize the Riverside County Pool as an investment. No other amendments to the City's Treasury Policies and Procedures are needed for 2011. The Audit, Finance, and Investment Committee approved these recommendations at its February 22, 2011 meeting. Fiscal Analysis City and RDA participation in the Riverside County Pool, in addition to promoting portfolio diversification, would enhance profitability since the County Pool has typically outperformed LAIF by 10 — 20 basis points (0.10% - 0.20%). Furthermore, millions of dollars that are currently spilling over into CAMP (0.17% yield) because LAW is maxed out, could be diverted into the higher -yielding County Pool (0.68% yield). Submit By: Paul . Gibson, C.C.M.T., City Treasurer John V. YVohlmuth, City Manager REGULAR PALM DESERT CITY COUNCIL MEETING %IV. NEW BUSINESS MARCH 10, 2011 B. REQUEST FOR APPROVAL OF ACTIONS RELATED TO AMENDMENT OF THE PALM DESERT "STATEMENT OF INVESTMENT POLICY" TO INCLUDE THE RIVERSIDE COUNTY TREASURE'S POOLED INVESTMENT FUND AS AN INVESTMENT (JOINT CONSIDERATION WITH THE PALM DESERT REDEVELOPMENT AGENCY, PALM DESERT HOUSING AUTHORITY, AND PALM DESERT FINANCING AUTHORITY). Rec: 1) By Minute Motion, approve proposed amendment to the Palm Desert "Statement of Invesment Policy" to authorize the Riverside County Treasurer's Pooled Investment Fund as an Investment; 2) waive further reading and adopt City Council Resolution No. 2011-14, authorizing the investment of monies in the Riverside County Treasurer's Pooled Investment Fund; 3) waive further reading and adopt Redevelopment Agency Resolution No. 583, authorizing the investment of monies in the Riverside County Treasurer's Pooled Investment Fund. Action: Approved the recommendation. 5-0 &I'LL116111-- on file with City Clcrk's Office Z BY HOUSG AUTH J-a ON rnO ro) VERIFIED BY: Original on file with City Ck--,rk' PWQ—V0--,,BY FIN AUTH 5`C-) CITY COUNCILA�' APPROVED — RECEIVED DENIED RECEIVED OTHER MEETNGDT "� "GL'AYES:rn�NOES: ..---.—ABSEABSTA VERIFIED I3Y: Original on File with City erk's Office COUNTY OF RIVERSIDE OFFICE OF THE TREASURER TAX -COLLECTOR STATEMENT OF INVESTMENT POLICY INTRODUCTION The Treasurer's Statement of Investment Policy is presented annually to the County Investment Oversight Committee for review and to the Board of Supervisors for approval, pursuant to the requirements of Sections 53646(a) and 27133 of the California Government Code (the Code). This policy will become effective immediately upon approval by the Board of Supervisors. SCOPE The Treasurer's Statement of Investment Policy is limited in scope to only those County, school and special district fund assets actually deposited and residing in the County Treasury. It does not apply to bond funds or other assets belonging to the County of Riverside, or any affiliated public agency the assets of which reside outside of the County Treasury. FIDUCIARY RESPONSIBILITY Section 27000.3 of the Code declares each treasurer, or governing body authorized to make investment decisions on behalf of local agencies, to be a trustee and therefore a fiduciary subject to the prudent investor standard. This standard, as stated in Section 27000.3 requires that "When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the county treasurer or the board of supervisors, as applicable, shall act with care, skill, prudence, and diligence under the circumstances then prevailing, specifically including, but not limited to, the general economic conditions and the anticipated needs of the county and other depositors, 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 county and the other depositors." PORTFOLIO OBJECTIVES The first and primary objective of the Treasurer's investment of public funds is to safeguard investment principal; second, to maintain sufficient liquidity within the portfolio to meet daily cashflow requirements; and third, to achieve a reasonable rate of return or yield on the portfolio consistent with these objectives. The portfolio shall be actively managed in a manner that is responsive to the public trust and consistent with State law. AUTHORITY Statutory authority for the Treasurer's investment and safekeeping functions are found in Code Sections 53601 and 53635 et. seq. The Treasurer's authority to make investments is to be renewed annually, pursuant to state law. It was last renewed by the Board of Supervisors on November 3, 2009 by County Ordinance No. 767.13. Code Section 53607 effectively requires the legislative body to delegate investment authority of the County on an annual basis. AUTHORIZED INVESTMENTS Investments shall be restricted to those authorized in Code Sections 53601 and 53635 as amended and as further restricted by this policy statement. All investments shall be governed by the restrictions shown in Schedule I which defines the type of investments authorized, maturity limitations, portfolio diversification, credit quality standards (two of the three nationally recognized ratings shall be used for corporate securities), and purchase restrictions that apply. STAFF AUTHORIZED TO MAKE INVESTMENTS AND WIRE TRANSFERS Only the Treasurer -Tax Collector, Don Kent, Assistant Treasurer -Tax Collector, Jon Christensen, and, Investment Manager, Giovane Pizano are authorized to make investments (except in the case of an emergency) and to order the receipt and delivery of investment securities among custodial security clearance accounts. Additionally, authorized Capital Markets staff inember(s) may execute end -of -day bank and/or money market fund transfers. Staff authorized to make wire or electronic fund transfers (EFT's), and staff authorized to release these wires and EFT's are governed under the Treasurer's Wire Policy. AUTHORIZED BROKER/DEALERS Securities transactions are limited solely to those noted on Schedule II of this policy. DAILY ACCOUNTABILITY AND CONTROL Except for emergencies or previous authorization by the Treasurer -Tax Collector, all investment transactions are to be conducted at the Treasurer -Tax Collector's office (if open and available to conduct business), documented, and reviewed by the Treasurer -Tax Collector. All investment transactions will be entered daily into the Treasurer's internal financial accounting system with copies to be filed on a timely basis. Portfolio income shall be reconciled daily against cash receipts and quarterly, prior to the distribution of earnings among those entities sharing in pooled fund investment income. SECURITY CUSTODY & DELIVERIES All securities except for money market funds registered in the County's name and securities issued by the County or other local agencies shall be deposited for safekeeping with banks contracted to provide the County Treasurer with custodial security clearance services. These third party trust department arrangements provide the County with a perfected interest in, and ownership and control over the securities held by the custodian on the County's behalf, and are intended to protect the County from the bank's own creditors in the event of a bank default and filing for bankruptcy. Securities are NOT to be held in investment firm/broker dealer accounts. All security transactions are to be conducted on a "delivery versus payment basis." Confirmation receipts on all investments are to be reviewed immediately for conformity with County transaction documentation. Securities issued by local agencies purchased directly shall be held in the Treasurer's vault. The security holdings shall be reconciled monthly and audited quarterly by the Treasurer's Internal Audits staff. COMPETITIVE PRICING Investment transactions are to be made at current market value and competitively priced whenever possible. Competitive pricing does not necessarily require submission of bids, but does require adequate comparative analysis. The current technology utilized by the Treasury provides this information. PA MATURITY LIMITATIONS No investment shall exceed a final maturity date of five years from the date of purchase unless it is authorized by the Board of Supervisors pursuant to Code Section 53601. LIQUIDITY The portfolio shall maintain a weighted average days to maturity (WAM) of less than 541 days or 1.5 years. To provide sufficient liquidity to meet daily expenditure requirements, the portfolio shall maintain at least 40% of its total value in securities having maturities 1 year or less. SECURITIES LENDING The Treasurer may engage in securities lending activity limited to 20% of the portfolio's book value on the date of transaction. Instruments involved in a securities lending program are restricted to those securities pursuant to Code Section 53601(i) and by the Treasurer's Statement of Investment Policy. REVERSE REPURCHASE AGREEMENTS The Treasury shall not engage in any form of leverage for the purpose of enhancing portfolio yield. There shall be no entry into reverse repurchase agreements except for temporary and unanticipated cashflow requirements that would cause the Treasurer to sell securities at a principal loss. Any reverse repurchase agreements are restricted pursuant to Code Section 53601(1) and by the Treasurer's Statement of Investment Policy. MITIGATING MARKET & CREDIT RISKS Safety of principal is the primary objective of the portfolio. Each investment transaction shall seek to minimize the County's exposure to market and credit risks by giving careful and ongoing attention to the: (1) credit quality standards issued by the nationally recognized rating agencies on the credit worthiness of each issuer of the security, (2) limiting the concentration of investment in any single firm as noted in Schedule I, (3) by limiting the duration of investment to the time frames noted in Schedule I, and (4) by maintaining the diversification and liquidity standards expressed within this policy. TRADING & EARLY SALE OF SECURITIES All securities are to be purchased with the intent of holding them until maturity. However, in an effort to minimize market and credit risks, securities may be sold prior to maturity either at a profit or loss when economic circumstances, trend in short-term interest rates, or a deterioration in credit- worthiness of the issuer warrants a sale of the securities to either enhance overall portfolio yield or to minimize further erosion and loss of investment principal. Such sales should take into account the short and long term impacts on the portfolio. However, the sale of a security at a loss can only be made after first securing the approval of the Treasurer -Tax Collector. PURCHASE OF WHEN ISSUED SECURITIES When issued (W.I.) purchases of securities and their subsequent sale prior to cash settlement are authorized as long as sufficient cash is available to consummate their acceptance into the Treasurer's portfolio on the settlement date. 3 PORTFOLIO REPORTS/AUDITING Portfolio reports required by Code Sections 53607 and 27133(e) shall be filed monthly with the Board of Supervisors. The Treasurer shall also prepare and file with the Board of Supervisors, the County Executive Officer, County Auditor -Controller, Superintendent of Schools and the Investment Oversight Committee, the Monthly Treasurer's Pooled Investment Fund reports, including at a minimum, all information required by law. Monthly Treasurer's Pooled Investment Fund reports are to be filed with the County Investment Oversight Committee as required by Code Section 27133. Consistent with Board Policy B-21 (County Investment Policy Statement), § III A, an outside compliance audit will be conducted annually. Outside audits will be conducted at least biannually by an independent auditing firm selected by the Board of Supervisors, per Board Minute Order No. 3.48. SPECIFIC INVESTMENTS Specific investments for individual funds may be made in accordance with the Treasurer's Statement of Investment Policy, upon written request of the responsible agency, and, approval of the Treasurer - Tax Collector. Investments outside of the policy may be made on behalf of such funds with approval of the governing Board. With the purchase of specific investments, the fund will be allocated the earnings and/or loss associated with those investments. The Treasurer -Tax Collector reserves the right to allocate a pro-rata charge for administrative costs to such funds. PERFORMANCE EVALUATION Portfolio performance is monitored daily and evaluated monthly in comparison to the movement of the Treasurer's Institutional Money Market Index (TIMMI), or other suitable index. Over time, the portfolio rate of return should perform in relationship to such an index. Regular meetings are to be conducted with the investment staff to review the portfolio's performance, in keeping with this policy, and, current market conditions. INVESTMENT OVERSIGHT COMMITTEE In accordance with Section 27130 et seq. of the Code, the Board of Supervisors has established an Investment Oversight Committee. The role of the Committee is advisory in nature. It has no input on day to day operations of the Treasury. QUARTERLY DISTRIBUTION OF INVESTMENT EARNINGS Portfolio income, including gains and losses (if any), will be distributed quarterly in compliance with Sections 53684 and 53844 of the Code which give the Treasurer broad authority to apportion earnings and losses among those participants sharing in pooled investment income, and, except for specific investments in which the interest income is to be credited directly to the fund from which the investment was made, all investment income is to be distributed pro-rata based upon each participant's average daily cash balance for the calendar quarter. Any subsequent adjustments of reported earnings by the Auditor -Controller will be first reviewed and approved by the Treasurer to assure compliance with Code Sections 53684 and 53844. QUARTERLY APPORTIONMENT OF ADMINISTRATIVE COSTS Prior to the quarterly apportionment of pooled fund investment income, the County Treasurer is permitted, pursuant to Code Section 27013, to deduct from investment income before the distribution thereof, the actual cost of the investment, audit, deposit, handling and distribution of such income. 4 Accordingly, in keeping with Code Sections 27013, 27133(f), and 27135, the Treasury shall deduct from pooled fund investment earnings the actual cost incurred for: retail banking services, wire transfers, custodial safekeeping charges, the pro-rata annual cost of the salaries including fringe benefits for the personnel in the Treasurer -Tax Collector's office engaged in the administration, investment, auditing, cashiering, accounting, reporting, remittance processing and depositing of public funds for investment, together with the related computer and office expenses associated with the performance of these functions. Costs are apportioned based upon average daily ending balances. Prior to gaining reimbursement for these costs, the Treasurer -Tax Collector shall annually prepare a proposed budget revenue estimate for "Section 27013 administrative costs," providing a detailed itemization of all costs required to be reimbursed. TREASURY OPERATIONS Treasury operations are to be conducted in the most efficient manner to reduce costs and assure the full investment of funds. The Treasurer will maintain a policy regarding outgoing wires and other electronic transfers. Requests for outgoing transfers which do not arrive on a timely basis may be delayed. The County Treasurer may institute a fee schedule to more equitably allocate costs that would otherwise be spread to all depositors. POLICY CRITERIA FOR AGENCIES SEEKING VOLUNTARY ENTRY Should any agency solicit entry, the agency shall comply with the requirements of Section 53684 of the Code and provide to the County Treasurer a resolution adopted by its governing board stating that it has excess funds available for the purpose of investment. The resolution shall specify the amount of monies to be invested, the person authorized by the agency to coordinate the transaction, the anticipated time frame for deposits, the agency's willingness to be bound to the statutory 30-day written notice requirement for withdrawals, and acknowledging the Treasurer's ability to deduct pro- rata administrative charges permitted by Code Section 27013. Any solicitation for entry into the TPIF must have the County Treasurer's prior written approval before the receipt of funds is authorized. The depositing entity will enter into a depository agreement with the Treasurer. POLICY CRITERIA FOR VOLUNTARY PARTICIPANT WITHDRAWALS With the Treasury being required to maintain a 40% liquidity position at all times during the calendar year, it is anticipated that sufficient funds will be on hand to immediately meet on demand all participant withdrawals for the full dollar amounts requested without having to make any allowance or pro-rata adjustment based on the current market value of the portfolio. In addition, any withdrawal by a local agency for the purpose of investing or depositing those funds outside the Pool shall have the prior written approval of the County Treasurer. The Treasurer's approval of the withdrawal request shall be based on the availability of funds; the circumstances prompting the request; the dollar volume of similar requests; the prevailing condition of the financial markets, and, an assessment of the effect of the proposed withdrawal on the stability and predictability of the investments in the county treasury. POLICY ON RECEIPT OF HONORARIA, GIFTS AND GRATUITIES Neither the Treasurer -Tax Collector nor any member of his staff, shall accept any gift, gratuity or honoraria from financial advisors, brokers, dealers, bankers or other persons or firms conducting business with the County Treasurer which exceeds the limits established by the Fair Political Practices Commission (FPPC) and relevant portions of Code Section 27133. IOC members shall be subject to the limits included in the Board of Supervisors Policy B-21. ETHICS & CONFLICTS OF INTEREST Officers and staff members involved in the investment process shall refrain from any personal business activity that compromises the security and integrity of the County's investment program or impairs their ability to make impartial and prudent investment decisions. In addition, the County Treasurer -Tax Collector, Assistant Treasurer -Tax Collector, Chief Deputy Treasurer -Tax Collector 11 and Investment Manager are required to file annually the applicable financial disclosure statements as mandated by the FPPC and County policy. INVESTMENTS MADE FROM DEBT ISSUANCE PROCEEDS The proceeds of a borrowing may be specifically invested per Schedule I of this policy (with the exception of Collateralized Time Deposits and Local Agency Obligations) as well as competitively bid investments (see County of Riverside Office Of The Treasurer -Tax Collector Statement Of Investment Policy Governing Competitively Bid Investments for Pool Participants, dated February 28, 2006). No pooled fund investments made from the proceeds of a borrowing, the monies of which are deposited in the County Treasury, shall be invested for a period of time exceeding the maturity date of the borrowing. Nor shall any monies deposited with a bank trustee or fiscal agent for the ultimate purpose of retiring the borrowing be invested beyond the maturity date of the borrowing. POLICY ADOPTION & AMENDMENTS This policy statement will become effective following adoption by the Board of Supervisors, and, will remain in force until subsequently amended in writing by the Treasurer -Tax Collector and approved by the Board. November 24, 2009 Don Kent County of Riverside Treasurer -Tax Collector d 5 m L, o S. L DO p a ! O O MR R yM w O •~ E � ti H O 0`0 bL� C � EN, d = i i ate+ R f.. O G au+ F �•.j d F d L L L � R L L L � y � �' •'� H a a a a Ri rr�� O E E 7 E O E E_, O �_' C - O E F_. E e R •° E . 5 q p 6= A d e o � o E U •"• C6 i i ° 9 V1 a Z QyI R t°. qR VI VI y O A a o aV. 3 y � z e.L. UZ h C%1 V] Qa° Ra O CG R Vl V1 if a FL G4 V1 0V4+ z z V] E a ` E E E N" = d E E 5 0 04 w e o E E E a R E R E E E 14 > L O di _ o � a o Z v y � d y cc d O '0 0 0 cE p e V t F C L Y G U >, �, V O R N pp R V] In `41 27 H O w R o 0 a` a H ' D y d O w p G W° `e C u O. = E A ° 3° go F IN _10. a> 11 o o v R d d R R m u F R E ayy E d x F yy U cs' Ica cC hU 3 AUTHORIZED BROKER/DEALERS SCHEDULE II The Treasurer is authorized to conduct investment security transactions with the broker/dealers which are designated by the Federal Reserve Bank as primary government dealers. Security transactions with firms, other than those appearing on this list, are prohibited. 1. Other authorized firms: Union Bank of California Bank of New York Oppenheimer & Co. Inc. Wells Fargo Bank Piper Jaffray & Co. E.J. De La Rosa & Co. Stone & Youngberg Stifel Nicolaus 2. Direct purchases from major commercial paper issuers, money market mutual funds, banker's acceptance issuers, negotiable CD issuers, or savings and loan are authorized. Incidental purchases of less than $10 million may be made with other firms if in the opinion of the Treasurer, such transactions are deemed advantageous. To ensure compliance with the County Treasurer's investment guidelines, each newly authorized primary government dealer and other authorized firms (as listed above in section A, B and C) will be supplied a complete copy of this Investment Policy document approved by the Board of Supervisors. POLICY CRITERIA FOR SELECTION OF BROKER/DEALERS SCHEDULE III The County Treasurer has elected to limit security transactions as mentioned in Schedule Il. Accordingly, the financial institution must confirm that they are a member of the National Association of Security Dealers (NASD), registered with the Securities & Exchange Commission (SEC), and possess all other required licenses. The Treasurer is prohibited from the selection of any broker, brokerage, dealer, or securities firm that has, within any consecutive 48-month period following January 1, 1996, made a political contribution in an amount exceeding the limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board, to the local treasurer, any member of the governing board of the local agency, or any candidate for those offices. 2. The County Treasurer's intent is to enter into long-term relationships. Therefore, the integrity of the firm and the personnel assigned to our account is of primary importance. 3. The firm must specify the types of securities it specializes in and will be made available for our account. Additionally, the firm must maintain its own securities clearing operations to qualify doing business with the County Treasurer. 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. (c) Be willing to trade securities for our portfolio. (d) Be capable of providing market analysis, economic projections, and newsletters. (e) Provide market education on new investment products, security spread relationships, graphs, etc. 5. The firm must be willing to provide us annual financial statements. 6. The County Treasurer is prohibited from the establishment of a broker/dealer account for the purpose of holding the County's securities. All securities must be subject to delivery at the County's custodial bank. 7. Without exception, all transactions are to be conducted on a delivery versus payment (DVP) basis. 8. The broker/dealer must have been in operation for more than 5 years, and, if requested, the firm must be willing to provide us a list of local government clients or other reference, particularly those client relationships established within the State of California. M POLICY CRITERIA FOR COLLATERALIZED TIME DEPOSITS SCHEDULE IV Before the Treasury can place a time deposit with a local bank or savings and loan, the following criteria must be met: The bank must provide us with an executed copy of the "Contract for Deposit of Moneys." 2. The interest rate on the Time Certificate 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. Investments less than the FDIC insurance limit will be sufficient without requiring any collateral to be pledged with the Federal Reserve to secure the public fund deposit. 4. Investments exceeding the FDIC insurance limit shall be fully collateralized by U.S. Treasury and Federal Agency securities having maturities five years or less. The County Treasury must receive written confirmation that these securities have been pledged in repayment of the time deposit. The securities pledged as collateral must have a current market value greater than the dollar amount of the deposit in keeping with the ratio requirements specified in Code Section 53652. Additionally, a statement of the collateral shall be provided on a monthly basis. A collateral waiver for the portion insured by the FDIC will be granted. The County Treasurer must be given a current audited financial statement for the financial year just ended as well as the most recent quarterly statement of financial condition. 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 County Treasurer will not place a public fund deposit for more than 10% of the present paid -in capital and surplus of the bank. 7. The County Treasurer must receive a certificate of deposit which specifically expresses the terms governing the transaction, deposit amount, issue date, maturity date, name of depositor, interest rate, interest payment terms (monthly, quarterly, etc). All time certificates must have a maturity date not exceeding one year from the date of the deposit, with interest payments based upon the stated interest rate. 9. The County Treasurer must receive a letter from an officer of the bank at the time the initial deposit is made, that there is no known pending financial disclosure or public announcement of an adverse financial event involving the bank or savings and loan, nor is there any knowledge that a conflict of interest situation exists between any County official and an officer or employee of the bank. 10. Time deposits will only be made with banks and savings and loans having branch office locations within Riverside County. 10 POLICY CRITERIA FOR ENTERING INTO A MONEY MARKET FUND SCHEDULE V Shares of beneficial interest issued by diversified management companies, also known as mutual funds, invest in the securities and obligations authorized by Code Sections 53601.7(10). Approved mutual funds will be registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et. seq.) and shall meet the following criteria: The fund must have a "AAA" ratings from two of the nationally recognized rating services: Moody's, Fitch, Standard & Poor's and the fund must maintain daily, a principal per share value of $1.00 per share. 2. The fund's prospectus cannot allow hedging strategies, options or futures. The fund must provide a current prospectus before participation in the fund and provide copies of their portfolio reports and shall provide at least at month -end, a complete listing of securities within the fund's portfolio. 11 POLICY CRITERIA CORPORATE AND MUNICIPAL SECURITIES SCHEDULE VI Government guaranteed programs. Corporate debt obligations, backed by the full faith and credit of the United States for the life of the security, will be evaluated on par with Federal Agency debt obligations, and the selection criteria for selecting Federal agencies will be applied. The maximum maturity is the earlier of the expiration date of the guarantee or five years. Corporate Criteria. No short-term negative credit watch or long-term negative outlook by any rating agency except for entities participating in government guaranteed programs. Municipal Criteria. Minimum of A or A2 or A, underlying credit rating for selecting insured municipal securities and a maximum of 5% exposure to any one insurer (direct purchases and indirect commitments). Liquidity Provider Restrictions. Maximum of 5% exposure to any one institution (direct purchases and indirect commitments). Category Short -Term Ratings Long -Term Restrictions Ratings 1 A-1+/P-1/F-l+ AAA/Aaa/AAA Corp. Maximum of 4% per issuer with no more than 2% (SP-1+/MIG1/F-1+) greater than 1 year final maturity and no more than 1% greater than 2 year final maturity. Muni. Maximum of 5% per issuer with no more than 2% greater than 13 month final maturity. 2 A-1+/P-1/F-1+ AA+/Aal/AA+, Corp. Maximum of 3% per issuer with no more than 1% (SP-1+/MIG1/F-1) AA/Aa2/AA greater than 1 year final maturity. No more than 13 month final maturity. Muni. Maximum of 5% per issuer with no more than 1% greater than 13 month final maturity. 3 A-1+/P-I/F-l+ AA-/Aa3/AA- Corp. Maximum of 3% per issuer with no more than 1.5% (SP-1+/MIG1/F-1) greater than 90 days. No more than 270 days final maturity. Muni. Maximum of 5% per issuer. No more than 13 month final maturity. 4 A-l/P-l/F-1 A/A2/A or Corp. No Asset Backed programs. Maximum of 2% per (SP-1/MIG1/F-1) better. issuer with no more than 1% greater than 7 days. No more than 45 days maximum maturity. Muni. State of California GO Debt only. Maximum of 3% with no more than 2% greater than 1 year final maturity. Short -Term Scale S&P A-1+, A-1 Moody's P-1 Fitch F-1+, F-1 Rating Agency Comparison Table Long -Term Scale S&P AAA, AA+, AA, AA-, A+, A Moody's Aaa, Aal, Aa2, Aa3, Al, A2 Fitch AAA, AA+, AA, AA-, A+, A 12 Palm Desert Treasury Policies and Procedures No. 2: "Statement of Investment Policy" Revision No. 17 Adopted: % Of No. Type of Investment Portfolio Other Restrictions Authorized City Council and Redevelopment Agency approved participation in LAIF on 12/12/81 in Resolution No. 81-161. 11. Structured Notes in the form of 20% Maximum maturity: 5 years callable securities or "STRIPS" issued by the United States Treasury or by Federal Agencies or government - sponsored enterprises ("GSE"). 12. Local Government Investment 30% Must meet above criteria for Pools ("LGIPS") (excluding MMFs (except for LAIF and bond the Riverside County proceeds) Treasurer's Pooled Investment Fund). 10.0 Prohibited Investments 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. Page 11 RESOLUTION NO. 2011 - 14 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA, AUTHORIZING THE INVESTMENT OF MONIES IN THE RIVERSIDE COUNTY TREASURER'S POOLED INVESTMENT FUND WHEREAS, pursuant to California Government Code Sections 27000.1 and 27000.1 (b), the Riverside County Treasurer is authorized to invest or reinvest the monies of local agencies in the county treasury, and to hold such monies in trust; WHEREAS, the City Council does hereby find that the deposit and withdrawal of monies in the Riverside County Treasurer's Pooled Investment Fund for the purpose of investment, is in the best interests of the City of Palm Desert. NOW THEREFORE, BE IT RESOLVED, that the City Council does hereby authorize the deposit and withdrawal of monies in the Riverside County Treasurer's Pooled Investment Fund for the purpose of investment, and verification by the Riverside County Treasurer's Office of all banking information provided in that regard. BE IT FURTHER RESOLVED BY THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA, that the following City officers or their successors in office shall be authorized to order the deposit or withdrawal of monies in the Riverside County Treasurer's Pooled Investment Fund: Paul S. Gibson Jose Luis Espinoza Thomas W. Jeffrey City Treasurer Assistant Finance Director Deputy City Treasurer PASSED, APPROVED, AND ADOPTED, by the City Council of the City of Palm Desert, Riverside County, California, at its regular meeting held on this 10th day of March, 2011, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: RESOLUTION NO. 2011 - 14 JEAN M. BENSON, MAYOR ATTEST: RACHELLE D. KLASSEN, CITY CLERK CITY OF PALM DESERT, CALIFORNIA RESOLUTION NO. 583 A RESOLUTION OF THE BOARD OF THE PALM DESERT REDEVELOPMENT AGENCY OF PALM DESERT, CALIFORNIA, AUTHORIZING THE INVESTMENT OF MONIES IN THE RIVERSIDE COUNTY TREASURER'S POOLED INVESTMENT FUND WHEREAS, pursuant to California Government Code Sections 27000.1 and 27000.1 (b), the Riverside County Treasurer is authorized to invest or reinvest the monies of local agencies in the county treasury, and to hold such monies in trust; WHEREAS, the Board does hereby find that the deposit and withdrawal of monies in the Riverside County Treasurer's Pooled Investment Fund for the purpose of investment, is in the best interests of the Palm Desert Redevelopment Agency. NOW THEREFORE, BE IT RESOLVED, that the Board does hereby authorize the deposit and withdrawal of monies in the Riverside County Treasurer's Pooled Investment Fund for the purpose of investment, and verification by the County Treasurer's Office of all banking information provided in that regard. BE IT FURTHER RESOLVED BY THE BOARD OF THE PALM DESERT REDEVELOPMENT AGENCY OF PALM DESERT, CALIFORNIA, that the following City officers or their successors in office shall be authorized to order the deposit or withdrawal of monies in the Riverside County Treasurer's Pooled Investment Fund: Paul S. Gibson Jose Luis Espinoza Thomas W. Jeffrey City Treasurer Assistant Finance Director Deputy City Treasurer PASSED, APPROVED, AND ADOPTED, by the Board of the Palm Desert Redevelopment Agency of the City of Palm Desert, Riverside County, California, at its regular meeting held on this 10th day of March, 2011, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: RESOLUTION NO. 583 JEAN M. BENSON, MAYOR ATTEST: RACHELLE D. 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