The URL can be used to link to this page

Home My WebLink About05D PD Statement of Investmnt PolicyCITY OF PALM DESERT �� (�� Alas�►-rj �� Y OVERS NT �t�AN�1► OFFlCE OF THE C/TY TREASU� �.,._ �� STAFF REPORT VERiFIED BY ��d� Original on fiie with City Clerlc's Of�ice REQUEST: ADOPTION OF THE PALM DESERT STATEMEfVT OF lNVESTMENT POLICY, AS AMENDED (.101NT CONSIDERATION WITH THE PALM DESERT CITY COUNCIL, THE RDA SUCCESSOR AGENCY — PALM DESERT, THE FINANCING AUTHORITY, AND THE HOUSING AUTHORITY). SUBMITTED BY: Paul S. Gibson, C.C.M.T., City Treasurer DATE: March 8, 2012 CONTENTS: Proposed Amendments to Statement of Investment Policy Recommendation By Minute Motion: That the City Councii adopt the Palm Desert Statement of Investment Policy, as amended. Backqround At its February 28, 2012 meeting, the Audit, Finance, and Investment Committee reviewed the proposed amendments, and voted unanimously to recommend that the City Council adopt the investment poiicy as amended. Both amendments are necessitated by the dissolution of the Palm Desert Redevelopment Agency ("RDA") on January 31, 2012, and the establishment of the "RDA Successor Agency -- Palm Desert" on February 1, 2012. Amendment No. 1 would update the Palm Desert Statement of Investment Policy by substituting "RDA Successor Agency — Palm Desert" for "Palm Desert Redevelopment Agency" wherever that phrase is found in the body of the policy. Amendment No. 2 would raise the concentration limit for local agency investment pools ("LGIPs") from 30 percent to 50 percent. Traditionally, both the City of Palm Desert ("City") and the City's outside auditor have calculated the concentration limit for LGIPs by adding together all investrr►ents in LGIPs (numerator}, and dividing by the sum �f the Staff Report Adoption of Statement of Investment Policy as Amended March 8, 2012 Page 2 of 2 City and RDA investment portfolios (denominator). With the elimination of the RDA, a much smaller denominator must now be used, consistinq onlv of the Citv's investment partfolio. This will drive the City's concentration percentage significantly above the existing 30 percent limit. This effect is further amplified by the increased sums of cash that Staff is investing in LGIPs since they often provide greater profit opportunities than do individual shart-term securities under current market conditions. Amendment No. 2 also includes the removal of a textual reference to the Local Agency Investment Fund ("LAlF"), which is discussed under another section of the policy. Proposed additions to the investment policy are highlighted with "��i�VE't��'g"; proposed deletions with "s#�ilEe�". Fiscal Analvsis Under prevailing market conditions, raising the concentration limit for LGIPs to 50 percent would significantly increase interest income for both the City and the RDA Successor Agency — Palm Desert investment portfolios, as well as enhance their liquidity. �� Succ�'sS�r��-�e��cy �'� � �r�� l�p.c' ps� Submitted By: ��C��i.�rnaa .�• Paul S. Gibson, C. �., ity Treasurer Approval: Jgl%( M. Wohlmuth, City Manager APPROVED RECEIVED DENfED OTHER MEE GDA fC � 1� AYESs � � NOE3: �' ABSENTs 1a , ABSTAINt >>,iIp VERIFIED BYt..iS.U�L.Y'� Ori�inal an Ffls with City�erk's Oftice �►� rna�i� R. �c�� +EflIFlEC3 l�Y� � � Urigin�l an fiie uvith C;tv Gi�-K s Cft;c*� ��jl Q1,�� . . �;W ; . . . . : ; � � "� _,n?Qr�.��`� �la � �: - -� „- /=�� r7 s ��...�_'� ..:t!__, �r; a:rn�l on �le ;�.af°r� �:ity Cle�k's C3ific� BY HC�USC AUTl� �J -D ot� �%?arU� g, �.�vl'� . VEPI'rlcD �Y: r�� CiC?if'! �.•. � . ., �I v:1 :ii�.' �.��+it�i �,�€v f r•�.r.��:- --, Palm Desert Treasury Policies and Prceedures No. 2: "Statement of Investment Policy" 1.0 Policy It is the policy of the: Revision No. 18 Adopted: 5J12/17 ➢ City of Palm Desert; ➢ RDA Successor Agency — Paim Desert ➢ Palm Desert Housing Authority; ➢ Palm Desert Financing Authority; and the ➢ Palm Desert Recreational Facilities Gorporation (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) maximize profit within the parameters of prudent risk management. For the purposes of this policy� Y"Investment Officers" shall be defined as the City Treasurer and the Deputy City Treasurer. y"Finance Committee" shall be defined as the Audit, Investment, and Finance Committee. ➢"City Council" shall be defined as the Palm Desert City Council. 2.0 Scope This policy shall apply to aIl funds that are under the City Treasurer's control including, but not limited to, the general fund; special revenue funds; debt service funds; capital project funds; enterprise funds; and trust and agency funds. These funds are accounted for in the City's Comqrehensive Annual Financial Report. The City's Deferred Compensation Plan ("Plan") shall be excluded from the scope of this policy if the following three conditions exist: (1) a third-party administrator manages the Plan; (2) individual plan participants have control over the selection of investments; and (3) the City has no tiduciary responsibility to act as a"trustee" for the Plan. The only exception to the foregoing shall be that if the City retains the fiduciary responsibility to act as a trustee for the Plan, then the Plan shall be deemed to be within the scope of this policy. The City Treasurer sha11 provide the Finance Committee with a quarterly report on the investment of Plan assets. Page 1 Palm Desert Treasury Policies and Procedures No. 2: "Statement of Investment Policy" Revision No. 18 Adopted: 5/12/11 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.FSuccessot Ag�ncy:-'Palm Q�sert Baard, the Housing Authoriry Commission, or the Finance Committee shall not be eligible to transact business with the City. The Finance Committee and the City Council shall review 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 afl authorized brokers annuaHy, in January, with a copy of the City's investment policy for that calendar year. The City Treasurer's Office shall retain, on file, the annual financial statements of each authorized broker for the preceding three years. The City Treasurer shall maintain an authorized list (see Page 18} of all commercial banks, savings associations, and federal associations (as defined by California Financial Code Section 5102), and trust companies that the Finance Committee and the City Council have authorized as public depositories of City monies, in the form of checking, savings, and money market accounts, and certificates of deposit. This list shall be provided to all members of the City Council and the Finance Committee. The City shall only deposit public monies in financiai institutions that have: 8.0.11 8.0.12 8.0.13 8.0.14 8.0.15 At least $5 bil(ion in total assets. A core capital-to-total assets ratio of at least five percent. Favorable statistical ratings from a nationally recognized rating service, as determined by the City Treasurer. A federal or a state charter. A branch office within Riverside County. Page 6 Palm Desert Treasury Policies and Procedures No. 2: "Statement of Investment Policy" No Type of Investment 0 11. Structured Notes in the form of callable securities or "STRIPS" issued by the United States Treasury or by Federal Agencies or government- sponsored enterprises f "GSE") 12. Local Government Investment Pools ("LGIPS") 10.0 Prohibited Investments % of Portfolio Authorized 20% i, �;..iyd§Ta`�R..��:`'-' ''w� t�,%.��. r �p� , . � Vt"7G ', (excludrng bond proceedsJ Revision No. 18 Adopted: 5/12/7 7 Other Restrictions Maximum maturity: 5 years Must meet above criteria for MMFs (except for' ^'�a the Riverside County Treasurer's Pooled Investment Fund). 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. tnvestment 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 12 Palm Desert Treasury Policies and Procedures No. 2: "Statement of Investment Policy" Revision No. 18 Adopted: 5/12/11 The City shall obtain a minimum of three c�mpetitive offers. Any exceptions to this policy shall be documented and shall be reported to the Finance Committee at its next monthly meeting. 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 grass 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. 19.0 Internal Controls The City Treasurer shall ensure that all investment kransactions 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 a monthly basis. The Mayor; the Mayor Pro Tempore; the City Manager; the City Attorney; the �� Age+�sy RDA Successor Agency — Palm Qesert Executive Director; the City Treasurer; the Deputy City Treasurer; and various citizens who are appainted by the City Council pursuant to City ordinance, shall sit on this committee. 20.0 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. Page 15 Palm Desert Treasury Policies and Procedures No. 2: "Statement oi Investment Policy" Revision No.18 Adopted: 5112l11 maturity date, CUSIP number, average weighted yield, average days to maturity, and market value (including source of market valuation). 7he 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. 23.0 Investment Policy Adoption The City Treasurer shall submit a Statement of Investment Policy to the Finance Committee; the City Council; the RDA Successor Agency — Palm Desert Board; the Housing Authority Commission; the Financing Authority Commission; and the Recreational Facilities Corporation Board of Directors annually for their review and adoption. Page 17