RES FA-69RESOLUTION NO. FA-69
A RESOLUTION OF THE PALM DESERT FINANCING AUTHORITY
APPROVING THE PALM DESERT STATEMENT OF INVESTMENT POLICY,
AS AMENDED
WHEREAS, pursuant to California Government Code Section 53646, the treasurer has
proposed a Statement of Investment Policy for consideration by the Palm Desert Financing
Authority (hereafter referred to as the "Financing Authority"), which is attached hereto, and
incorporated herein by reference; and
WHEREAS, pursuant to Palm Desert Municipal Code Section 3.08.020, the Agency Board
has delegated the authority to invest all public funds that the Agency holds, to the treasurer.
NOW, THEREFORE BE IT RESOLVED, by the Financing Authority, as follows:
Section 1. The Palm Desert Statement of Investment Policy is hereby approved and
adopted.
Section 2. The authority to invest and reinvest all public funds that the Financing
Authority holds, and to sell or exchange the securities so purchased, in compliance with the terms
of the approved Statement of Investment Policy, is hereby delegated to the treasurer.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the Palm Desert
Financing Authority, held on this 11th day of April, 2019, by the following vote to wit:
AYES: HARNIK, JONATHAN, KELLY, NESTANDE, and WEBER
NOES: NONE
ABSENT: NONE
ABSTAIN: NONE
S_- - _; - --t2P.1—
SUSAN MARIE WEBER, PRESIDENT
ATTEST:
RA H ' L D. KLASSEN, - CRETAR
PALM DESERT FINANCING AUTHORITY
APPROVED AS TO FORrV :
R ARE , C} Y ATTORNEY
BEST, EST & KRI GER, _LP
RESOLUTION NO. FA-69
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
TABLE OF CONTENTS
OVERVIEW PAGE
1.0 Policy 1
2.0 Scope 1
3.0 Prudence 1
4.0 Objectives 1
INVESTMENT AUTHORITY
5.0 Delegation of Authority 2
6.0 Investment Procedures 3
7.0 Conflicts of Interest 3
INVESTMENTS
8.0 Authorized Broker -Dealers and Financial Institutions 3
9.0 Authorized Investments 6
10.0 Prohibited Investments 10
11.0 Investment Pools/Mutual Funds 10
PORTFOLIO MANAGEMENT
12.0 Collateralization 11
13.0 Safekeeping and Custody 11
14.0 Diversification 12
15.0 Maximum Maturities 12
16.0 Basic Investment Strategy 12
17.0 Portfolio Rebalancing 13
18.0 Credit Downgrading 13
19.0 Bond Proceeds 13
20.0 Internal Controls 14
PERFORMANCE MEASUREMENT
21.0 Performance Standards 14
22.0 Portfolio Benchmark 14
23.0 Reporting 15
LEGAL REQUIREMENTS
24.0 Investment Policy Adoption 15
APPENDIX
A: List of Authorized Financial Institutions 16
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
1.0 Policy
It is the policy of the City of Palm Desert, the Successor Agency to the Palm
Desert Redevelopment Agency, the Palm Desert Housing Authority, the
Palm Desert Financing Authority, and the Palm Desert Recreational
Facilities Corporation (hereafter referred to collectively as the "City") to: (1)
comply with applicable law governing the investment of public monies under the
city treasurer's control; (2) protect the principal monies entrusted to the City; and
(3) achieve a market rate -of -return.
2.0 Scope
This investment policy will apply to all funds over which the Treasurer's Office
has fiduciary responsibility and direct management control.
3.0 Prudence
Pursuant to Cal. Govt. Code, section 53600.3, investment officers, as trustees of
public monies, shall adhere to the "Prudent Investor Standard" when managing
the City's investment portfolio. They shall invest "...with care, skill, prudence,
and diligence under the circumstances then prevailing, including, but not limited
to, the general economic conditions and the anticipated needs of the agency, that
a prudent person acting in a like capacity and familiarity with those matters would
use in the conduct of funds of a like character and with like aims, to safeguard
the principal and maintain the liquidity needs of the agency."
Investment officers who follow the provisions of this policy and who exercise due
diligence shall be relieved of personal responsibility for a security's credit risk or
market price risk; provided that they report substantial deviations from
expectations to the city manager and to the Audit, Investment & Finance
Committee ("Finance Committee") in a timely manner, and that they take
appropriate action to control adverse developments.
"Substantial deviations" shall be defined as either a decline of 10 percent or more
in the market value of a security due to issuer default or a credit risk downgrade,
or the sale of a security prior to maturity at 10 percent or more below its
acquisition cost.
4.0 Objectives
The City's investment objectives, in order of priority, shall be:
4.0.1 Safety. Safety of principal shall be the foremost objective. Investments
shall be made with the aim of avoiding capital losses due to issuer
default; broker default; or market value erosion. Principal shall be
preserved by mitigating:
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
Credit Risk, the risk of Toss due to the failure of the issuer of the
security, shall be mitigated by investing in only the highest quality
securities; by diversifying investments; and by pre -qualifying securities
brokers and public depositories; and
Market Risk, the risk of loss due to a decline in bond prices because of
rising market interest rates, shall be mitigated by structuring the
portfolios so that issues mature concurrently with the City's anticipated
cash requirements, thereby eliminating the need to sell securities
prematurely on the open market.
It is recognized, however, that in a diversified portfolio, occasional
measured losses are inevitable, and must be considered within the
context of overall investment return.
4.0.2 Liquidity. An adequate percentage of the portfolios shall be maintained
in liquid, short-term securities that can be converted to cash, if
necessary, to meet disbursement requirements. Since all cash
requirements cannot be anticipated, the portfolios should consist largely
of relatively low -duration securities with active secondary markets.
Since not all possible cash demands can be anticipated, an amount
equal to the City's annual expenditures shall be invested in securities
that mature in less than one year.
4.0.3 Yield. Yield shall be considered only after the basic requirements of
safety and liquidity have been met. Whenever possible and in a manner
consistent with the objectives of safety and liquidity, a yield higher than
the market rate of return shall be sought.
5.0 Delegation of Authority
Cal. Govt. Code, sections 53607 and 53608 authorize the legislative body of a
local agency to invest, deposit, and provide for the safekeeping of a local
agency's funds or to delegate those responsibilities to the treasurer of the local
agency.
Palm Desert, California, Municipal Code, section 3.08.010 delegates the
authority to invest, deposit, and provide for the safekeeping of City public monies
to the city treasurer.
Palm Desert, California, Municipal Code, section 2.16.010 authorizes the director
of finance to serve ex officio as city treasurer. The city treasurer shall be
responsible for all investment transactions that are executed on behalf of the
City. The city treasurer and their designee shall have exclusive authority to buy
and sell securities on behalf of the City.
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 21
Adopted: 4/11/19
Investment transactions may be executed on behalf of the City only if the city
treasurer has previously authorized them. If the city treasurer is unavailable,
then the assistant finance director must authorize them prior to execution.
6.0 Investment Procedures
The city treasurer shall establish written procedures for the operation of the City's
investment program that are consistent with the provisions of this policy. The
procedures shall include the following: safekeeping, PSA repurchase
agreements, banking service contracts, and collateral/depository agreements.
Such procedures shall include explicit delegation of authority to persons
responsible for investment transactions. No person may engage in an
investment transaction except as provided under the terms of this policy and
under the procedures that the city treasurer establishes.
7.0 Conflicts of Interest
Investment officers shall not conduct any personal business activity that could
conflict with the proper execution of the City's investment program or impair their
ability to make impartial investment decisions. They shall disclose to the City
Council any material financial interest in financial institutions that conduct
business within the City's jurisdiction. They shall also disclose any personal
investment positions that could be related to the performance of the City's
investment portfolios.
Investment officers shall subordinate their personal investment transactions to
those of the City, particularly with regard to the timing of securities purchases
and sales, and shall avoid transactions that might impair public confidence.
Investment officers and their immediate relatives shall not accept or solicit any
gifts, gratuities, honorariums, or favors from persons or entities who provide or
who are seeking to provide financial services to the City.
8.0 Authorized Broker -Dealers and Financial Institutions
After review by the Finance Committee, the City Council shall review and
approve the securities broker -dealers that are authorized to do business with the
City. Authorized securities broker -dealers are listed in Appendix A of this policy.
Only primary government securities dealers ("primary dealers") that
regularly report to the Federal Reserve Bank of New York shall be eligible
for inclusion on the City's authorized list.
The only exception to the foregoing shall be that the City Council may, at its
discretion, accept, review, and approve Requests for Information ("RFI") from
secondary securities brokers that: (1) have been in existence for more than five
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
years; (2) have a net capital position in excess of $100 million; (3) are licensed
as brokers by the State of California; and (4) are headquartered or have a branch
office in California.
The total number of broker -dealers on the authorized list shall not exceed four at
any time. The City shall accept and review new broker -dealer applications only
when there is an immediate need to fill a vacancy on the authorized list. In all
cases, the City shall only accept RFIs from and transact business with the
institutional securities sales departments of broker -dealers. The City shall
not transact business with an authorized broker -dealer until all of the
documentation that both parties require has been executed and delivered.
All broker -dealers who wish to apply for inclusion on the authorized list must, at a
minimum, provide the city treasurer with a copy of the following documents,
unless otherwise noted:
8.0.1 Completed "Broker -Dealer Request for Information" (signed original
only).
8.0.2 The firm's most recent Annual Report and Securities and Exchange
Commission ("SEC") Form 10-K or 20-F.
8.0.2 The firm's National Association of Securities Dealers ("NASD") Form BD
-- Uniform Application for Broker -Dealer Registration or, in the case of an
investment department within a commercial bank, SEC Form MSD.
8.0.3 The firm's current NASD Form BD Status Report.
8.0.4 NASD Form U-4 -- Uniform Application for Securities Industry
Registration or Transfer for each employee would who might be trading
with the City.
8.0.5 Current NASD Form U-4 Status Report on each employee who might be
trading with the City.
8.0.6 A resume from each of the firm's employees who might be trading with
the City.
8.0.7 The firm's delivery and wiring instructions.
8.0.8 An executed corporate resolution that identifies employees who are
authorized to trade with the City.
8.0.9 The firm's current investment policy.
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In addition to the above documents, secondary brokers must also submit:
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
8.0.10 The firm's most recent SEC Form X-17 A-5 or, in the case of an
investment department within a commercial bank, SEC Consolidated
Reports of Condition and Income for A Bank With Domestic and Foreign
Offices -- FFIEC 031.
Investment officers shall investigate all broker -dealer applicants in order to
determine if they: (1) are adequately capitalized; (2) are subject to pending legal
action (either the firm or the trader); (3) make markets in securities that are
appropriate for the City's needs; (4) are licensed as a broker by the State of
California Department of Corporations; and (5) are a member of the National
Association of Securities Dealers. Broker -dealer applicants shall be required to
provide state or local government references from within California.
Any broker -dealer that has made a political contribution within any consecutive
four-year period following January 1, 1996 in an amount that exceeds the limits in
Municipal Securities Rulemaking Board ("MSRB") Rule G-37, to any member of
or candidate for the City Council, the RDA Successor Agency — Palm Desert
Board, the Housing Authority Commission, or the Finance Committee shall be
ineligible to transact business with the City.
After review by the Finance Committee, the City Council shall consider the
submitted documents, along with the investment officers's recommendations,
and decide if any new broker -dealers should be added to the authorized list. If,
in the City's opinion, a broker -dealer'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 the broker -dealer's RFI and that broker -dealer shall not
be eligible to submit another RFI to the City for three years.
The city treasurer shall provide all authorized broker -dealers with a copy of the
City's investment policy and any amendments as they occur.
After review by the Finance Committee, the City Council shall review and
approve all commercial banks, savings associations, and federal associations (as
defined by Cal. Fin. Code, section 5102), and trust companies that are
authorized as public depositories of City monies, in the form of checking,
savings, and money market accounts, and certificates of deposit. Authorized
financial institutions are listed in Appendix A of this policy.
The City shall only deposit public monies in financial institutions that have:
8.0.11 At least $5 billion in total assets.
8.0.12 A core capital -to -total assets ratio of at least five percent.
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
8.0.13 Favorable statistical ratings from a nationally recognized rating service,
as determined by the city treasurer.
8.0.14 A federal or a state charter.
8.0.15 A branch office within Riverside County.
8.0.16 A "satisfactory" overall rating in their most recent evaluation by the
appropriate federal financial supervisory agency, in terms of meeting
the credit needs of California communities, pursuant to federal law.
Under no circumstances shall the City's deposits in a financial institution exceed
the total shareholders' equity of that institution.
9.0 Authorized Investments
The City Council has authorized the City Treasurer's Office to invest in the
following financial instruments pursuant to Cal. Govt. Code, section 53600, et
seq., under the terms and conditions stated below. All non -pooled securities
must mature within five years unless the City Council has approved longer
maturities for the investment of bond reserve, bond escrow, and other funds.
No. Type of Investment
% of
Portfolio
Authorized
Other Restrictions
1. United States Treasury bills, 100% Maximum maturity: 5 Years
notes, bonds, or certificates of
indebtedness, or those for
which the full faith and credit of
the United States are pledged
for the payment of principal and
interest.
2. Federal Agency or United
States government -sponsored
enterprise ("GSE") obligations,
participations, or other
instruments, including those
issued by or fully guaranteed as
to principal and interest by
Federal Agencies or by GSE.
100% Maximum maturity: 5 years
Page 6
No more than 30% of the
portfolio may be invested in
any one issuer (excluding the
proceeds of tax-exempt
bonds).
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
No. Type of Investment
3. California State and Local
Agency debt obligations that
are general obligation bonds or
revenue bonds that are issued
by the state or local agency or
by a department, board,
agency, or authority of the state
or a local agency.
4. Commercial Paper ("CP")
(Non -Pooled Fund) issued by
general corporations organized
and operating in the United
States with assets exceeding
$500 million.
5. Negotiable Certificates of
Deposit ("NCD") issued by a
nationally- or state -chartered
bank, a savings association, a
federal association, or by a
state -licensed branch of a
foreign bank.
6. Time Certificates of Deposit
("TCD") issued by qualified
public depositories.
% of
Portfolio
Authorized
Revision No. 21
Adopted: 4/11/19
Other Restrictions
25% Maximum maturity: 5 Years
Rated "A" or higher by S&P or
by Moody's.
25% Maximum maturity: 270 days
Rated "A-1" by S&P or "P-1 "
by Moody's.
No more than 10% of the
outstanding CP of any one
issuer may be purchased.
No more than 10% of the
portfolio may be invested in
the CP of any one issuer.
Asset -backed CP is ineligible
for purchase.
15% Maximum maturity: 5 years
Long-term debt rated "AA-"
higher by S&P or by Moody's.
15% Maximum maturity: 1 year
TCDs exceeding the FDIC
limit must be collateralized.
TCDs must be centralized at
Page 7
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
% of
No. Type of Investment Portfolio
Authorized
Other Restrictions
one location for each bank or
S&L.
If TCD is uncollateralized,
then no more than 90 percent
of the FDIC limit may be
invested per TCD.
Issuing public depository must
meet qualifying criteria on
Pages 5 and 6 of this SOP.
7. Repurchase Agreement ("RP") 20% Maximum maturity: 30 days
sold by authorized brokers.
Collateral must be United
States Treasury, Federal,
Agency, or GSE obligations.
Zero coupon and stripped
coupon instruments are not
acceptable as collateral.
Collateral must be valued at
102% of cost and adjusted
weekly.
City must have first lien and
security interest in all
collateral.
City's custodian must hold
collateral.
An authorized broker must file
a Public Securities
Association (PSA) Master
Repurchase Agreement with
the City treasurer, and the
City Attorney must review the
agreement, prior to the
Page 8
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy"
No. Type of Investment
8. Medium -Term Notes ("MTNs")
issued by corporations
organized and operating in the
United States, or by depository
institutions operating in the
United States and licensed by
the United States or by any
state.
9. Money Market Mutual Funds
("MMF") that are registered with
the SEC under the Investment
Act of 1940.
10. State of California Local
Agency Investment Fund
("LAIF") that is managed by the
State Treasurer's Office.
% of
Portfolio
Authorized
Adopted: 4/11/19
Other Restrictions
transaction of RP business
with that broker.
25% Maturity maturity: 5 years
20%
(excluding
bond
proceeds)
Up to
maximum
(currently
$65,000,000
per account)
(except for
bond trustee
Rated "A" or higher by S&P or
by Moody's.
No more than 10% of the
portfolio may be invested in
the MTNs of any one issuer.
Either rated "AAA" by S&P,
"Aaa" by Moody's, or "AAA-V-
1+" by Fitch (2 of 3), or retains
an investment advisor
registered or exempt from
registration with SEC, with at
least 5 years of experience
managing a MMF with $500
million or more in assets.
MMF must have dollar -
weighted average maturity of
90 days or Tess.
MMF must buy securities that
mature in 13 months or Tess.
No commission may be
charged.
City Council and
Redevelopment Agency
approved participation in LAIF
on 12/12/81 in Resolution No.
81-161.
Page 9
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 21
Adopted: 4/11/19
% of
No. Type of Investment Portfolio Other Restrictions
Authorized
accounts
which have
no deposit
limit)
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 75% As required by law under the
Pools ("LGIP") and Joint (excluding Cal. Govt. Code.
Powers Authority ("JPA") bond
Pools proceeds)
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.
11.0 Investment Pools/Mutual Funds
A thorough investigation of the pool/fund is required prior to investing and on a
continual basis. There shall be a questionnaire developed which will answer the
following general questions:
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
11.0.1 A description of eligible investment securities, and a written statement
of investment policy and objectives.
11.0.2 A description of interest calculations and how it is distributed, and how
gains and losses are treated.
11.0.3 A description of how the securities are safeguarded (including the
settlement processes), and how often the securities are priced and the
program audited.
11.0.4 A description of who may invest in the program, how often, what size
deposit and withdrawal are allowed.
11.0.5 A schedule for receiving statements and portfolio listings.
11.0.6 A verification on whether or not reserves or retain earnings are utilized
by the pool/fund.
11.0.7 A fee schedule, and when and how it is assessed.
11.0.8 The eligibility of the pool/fund for bond proceeds, and whether it will
accept such proceeds.
12.0 Collateralization
Investment officers shall ensure that all demand deposits and all non-negotiable
certificates of deposit that exceed the Federal Deposit Insurance Corporation
("FDIC") limit shall be fully collateralized with securities authorized under state
law and under this SOIP. Collateral may be waived for the amount of the FDIC
limit. Any amount on deposit that exceeds the FDIC limit plus accrued interest,
however, shall be collateralized with United States Treasury or federal agency
securities at a constant margin ratio of 110 percent or with mortgage -backed
collateral at a constant margin ratio of 150 percent.
Collateralized investments and demand deposits may require substitution of
collateral. The city treasurer must approve all requests from financial institutions
for substitution of collateral that involve interchanging classes of securities.
An independent third party with which the City has a current custodial agreement
shall always hold the collateral. The independent third party shall provide the
city treasurer with a safekeeping receipt that they shall retain.
13.0 Safekeeping and Custody
Investment officers shall conduct all security transactions on a delivery -versus -
payment ("DVP") or on a receipt -versus -payment ("RVP") basis. A third -party
Page 11
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
bank trust department ("Custodian") that acts as an agent for the City, under the
terms of a custody agreement executed between both parties, shall hold the
securities. The custodial bank shall be one of the 20 largest commercial banks in
the world, as measured by total assets. The City's Custodian is listed in
Appendix A of this policy.
The only exception to the foregoing shall be securities purchases made with:
13.0.1 Local government investment pools.
13.0.2 Money market mutual funds.
13.0.3 Federal Reserve Banks ("Treasury Direct Program") since the
purchased securities are not deliverable.
No securities broker or investment advisor shall have access to City monies,
accounts, or investments. Any transfer of monies to or through a securities
broker must have the city treasurer's prior written approval. If the city treasurer is
unavailable, then the assistant finance director must authorize the transfer, in
writing.
The City shall require Broker Trade Confirmations for all trades. Investment
officers shall review these confirmations immediately upon receipt, for conformity
with the terms of the City's Trade Sheets.
14.0 Diversification
Investment officers shall diversify the City's investment portfolios by security type
and by issuer, except for bond reserve monies; bond escrow monies; and any
other monies that the City Council or the Finance Committee designates.
15.0 Maximum Maturities
Investment officers shall not invest in securities with maturities exceeding five
years. After review by the Finance Committee, the City Council may approve
longer maturities for the investment of bond reserve, bond escrow, and other
funds if the maturities of such investments are expected to coincide with the
expected use of the funds.
16.0 Basic Investment Strategy
The City portfolio shall be invested using a passive strategy of "buying and
holding" fixed -income securities. Whenever possible, a bond ladder shall be
constructed with laddered maturities that support anticipated cash flow dates.
Securities may be sold prior to maturity only to: 1) address an actual or potential
Page 12
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 21
Adopted: 4/11/19
deterioration in credit quality; 2) rebalance the portfolio; or 3) meet unanticipated
financial obligations.
Active strategies, such as market timing, sector rotation, or indexing to a
benchmark shall be prohibited.
17.0 Portfolio Rebalancing
If portfolio percentage constraints are violated due to a temporary imbalance in
the portfolio, then investment officers shall hold the affected securities to maturity
in order to avoid capital losses.
If no capital losses would be realized upon sale, however, then investment
officers shall consider rebalancing the portfolio after evaluating the expected
length of time that it will be imbalanced.
Portfolio percentage limits are in place in order to ensure diversification of the
City investment portfolio; a small, temporary imbalance will not significantly
impair that strategy.
18.0 Credit Downgrading
This policy sets forth minimum credit risk criteria for each security. This credit
risk criteria applies to the initial purchase of a security; it does not automatically
force the sale of a security sale if its credit risk ratings fall below policy limits.
If a security is downgraded below the minimum credit risk criteria specified in this
policy, then investment officers shall evaluate the downgrade on a case -by -case
basis in order to determine the security should be held or sold.
The city treasurer shall inform the city manager and the Finance Committee at its
next monthly meeting of the credit downgrade and of the investment officers's
decision to hold or sell the downgraded security.
Investment officers shall review the credit standing of all securities in the City's
investment portfolios annually, at a minimum.
19.0 Bond Proceeds
The city treasurer shall segregate the gross proceeds of tax-exempt bonds from
the City general pool and shall keep them in a separate pool. They shall be
invested pursuant to the instructions in the respective bond indentures of trust.
All securities shall be held in third -party safekeeping with the bond trustee
("Trustee") and all DVP and RVP rules shall apply. The City's Trustee is listed in
Appendix A of this policy.
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RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures Revision No. 21
No. 2: "Statement of Investment Policy" Adopted: 4/11/19
The City is required under the "U.S. Tax Reform Act of 1986" to perform annual
arbitrage calculations and to rebate excess earnings to the United States
Treasury from the investment of the gross proceeds of tax-exempt bonds that
were sold after the effective date of that law. The city treasurer may contract with
qualified outside financial consultants to provide the necessary technical
expertise that is required to comply with this law.
20.0 Internal Controls
The city treasurer shall ensure that all investment transactions comply with the
City's policy, and shall establish internal controls that are designed to prevent
losses due to fraud, negligence, and third -party misrepresentation.
Internal controls deemed most important shall include avoidance of collusion,
separation of duties and administrative controls, separating transaction authority
from accounting and record keeping, custodial safekeeping, clear delegation of
authority, management approval and review of investment transactions, specific
limitations regarding securities losses and remedial action, written confirmation of
telephone transactions, documentation of investment transactions and strategies,
and monitoring of results.
The city treasurer shall establish a process of independent review by an external
audit firm of the City's investment program every three years. The external
auditor shall review the program's management in terms of compliance with the
internal controls that are specified in the City's Treasury Policies and Procedures
Manual.
A Finance Committee consisting of City officials and community representatives
shall be responsible for reviewing the City investment reports, transactions,
policies and procedures, and strategies on at least a quarterly basis. The City
Council shall establish bylaws for the Finance Committee.
21.0 Performance Standards
The investment portfolio shall be designed with the objective of obtaining a rate
of return throughout budgetary and economic cycles, commensurate with
investment risk constraints and cash flow needs.
22.0 Portfolio Benchmark
The City shall adopt the average monthly effective yield of the LAIF Pooled
Money Investment Account as a performance benchmark for the City investment
portfolio.
Page 14
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
23.0 Reporting
Revision No. 21
Adopted: 4/11/19
The city treasurer shall provide the City Council with an investment report within
30 days after Finance Committee review of the report.
Pursuant to Governmental Accounting Standards Board ("GASB") Statement
Number 40, as amended March 2003, the monthly investment report shall:
23.0.1 Organized individual securities by investment type (e.g., U.S.
Treasuries, corporate bonds, commercial paper, etc.). Dissimilar
investments (e.g., U.S. Treasury bills and Treasury strips) should not
be aggregated.
23.0.2 List credit risk ratings for each security, mutual fund, or investment
pool from at least two nationally recognized statistical rating
organizations ("NRSRO"). If the security, mutual fund, or investment
pool has not rating, then it shall be shown as "unrated".
23.0.3 Disclose the amount of individual securities and corresponding issuers
if they exceed five percent of net plan assets, except for securities
guaranteed by the U.S. Government, money market mutual funds, and
external investment pools.
23.0.4 Use the specific identification method to reflect interest -rate risk by
investment type and amount.
This report shall include a complete portfolio inventory with details on issue, par
value, book value, coupon/rate, original settlement date of purchase, final
maturity date, CUSIP number, average weighted yield, average days to maturity,
and market value (including source of market valuation). The report will include a
statement on compliance or noncompliance with the City's SOIP and a statement
on whether there are or are not sufficient funds to meet the City's anticipated
cash requirements for the next six months.
24.0 Investment Policy Adoption
The city treasurer shall submit a Statement of Investment Policy annually to the
Finance Committee for review, and then to the City Council, the Successor
Agency to the Palm Desert Redevelopment Agency Board, the Housing Authority
Board, the Financing Authority Commission, and the Recreational Facilities
Corporation Board of Directors for their review and adoption.
Page 15
RESOLUTION NO. FA-69
Palm Desert Treasury Policies and Procedures
No. 2: "Statement of Investment Policy"
Revision No. 21
Adopted: 4/11/19
Appendix A: List of Authorized Financial Institutions
The City Treasurer's Office is authorized to transact investment and depository
business with the following financial institutions. Investment and depository
transactions with firms other than those appearing on this list are prohibited.
UNITED STATES GOVERNMENT
1. Federal Reserve Bank
PRIMARY DEALERS
1. J.P. Morgan Securities LLC
2. Wells Fargo Securities LLC
SECONDARY BROKERS
1. Piper Jaffray & Company
2. Stifel, Nicolaus & Company
PUBLIC DEPOSITORIES
1. Citibank, N.A.
2. JP Morgan Chase & Co.
3. Rabobank, N.A.
4. MUFG Union Bank, N.A.
5. Wells Fargo Bank, N.A.
CUSTODIAN
1. MUFG Union Bank Global Custody Services
TRUSTEE
1. U.S. Bank Global Corporate Trust Services
Page 16
RESOLUTION NO. FA-69
CITY OF PALM DESERT
STATEMENT OF
INVESTMENT POLICY
CALENDAR YEAR 2019
PREPARED BY THE CITY TREASURER'S OFFICE
Thomas J. Metz, J.D., M.B.A.
Deputy City Treasurer
REVIEWED AND APPROVED BY
Janet M. Moore
City Treasurer
Administrative Policy No. FIN002
(Revision No. 21)
Adopted by the City Council on April 11, 2019