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CC RESOLUTION 3449r-"j i it 4 t RESOLUTION NO. 3449 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL SEGUNDO, CALIFORNIA, APPROVING AND ADOPTING THE CITY TREASURER'S 1987 STATEMENT OF INVESTMENT POLICY AND GUIDELINES. WHEREAS, the Government Code requires that City Treasurers prudently invest the City's temporary idle cash; and, WHEREAS, the City Treasurer of the City of El Segundo has presented the 1987 Statement of Investment Policy and Guidelines, a copy of which is attached hereto as Exhibit "A ", to the City Council for its approval, NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF EL SEGUNDO, CALIFORNIA, DOES RESOLVE AS FOLLOWS: SECTION 1. The City Council hereby approves and adopts the 1987 Statement of Investment Policy and Guidelines as submitted by the City Treasurer. SECTION 2. The City Clerk shall certify to the passage and adoption of this resolution; shall enter the same in the book of original resolutions of said city; and shall make a minute of the passage and adoption thereof in the record of the proceedings of the City Council of said city, in the minutes of the meeting at which the same is passed and adopted. PASSED, APPROVED and ADOPTED this 20th day of January, 1987. ( SEAL) -1- 012087 -R.T 0 City of E1 Segundo Statement of Investment Policy (Continued) POLICY =Negotiable Certificates of Deposit Bankers Acceptances - Commercial Paper - Corporate Bonds - Local Agency Investment Fund (State Pool) Demand Deposits - Mutual Funds Comprised of Government Issues and Agencies - Repurchase Agreements (Repos) - Passb000k Savings Account Demand Deposits - Reverse Repurchase Agreements Criteria for selecting investments and the order of priority are: 1. Safety. The safety and risk associated with an investment refers to the potential loss of principal, interest or a combination of these amounts. The City only operates in those investments that are considered very safe. 2. Liquidity. This refers to the ability to "cash in" at any moment in time with a minimal chance of losing some portion of principal or interest. Liquidity is an important in- vestment quality especially when the need for unexpected funds occurs occasionally. 3. Yield. Yield is the potential dollar earnings an investment can provide, and sometimes is described as the rate of return:. Safekeeping. Securities purchased from brokers /dealers shall be held in third party safekeeping by the trust department of the local agency's bank or other designated third party trust, in local agency's name and control, whenever possible. Investment Objective. The cash management system of the City of E1 Segundo is designed to accurately monitor and forecast expenditures and revenues, thus insuring the investment of monies to the fullest extent possible. Attempts to obtain highest interest yields possible as long as investments meet the criteria required for safety and liquidity. • '9 08 City of El Segundo Statement of Investment Policy (Continued) City Constraints. The City of El Segundo operates its pooled idle cash investments under the Prudent Man Rule. (Copy attached.) This affords a broad spectrum of investment opportunities so long as the investment is deemed prudent and is permissible under currently effective legislation of the State of California and other imposed legal restrictions. City Constraints. The City strives to maintain the level of investment of all funds as near 100% as possible, through daily and projected cash flow deter- minations. Idle cash management and investment transactions are the responsibility of the City Treasurer. The basic premise underlying the City's investment philosophy is, and will continue to be, to insure that money is always safe and available when needed. IV City Treasurerr City of E1 Segundo Attachment: Prudent Man Rule =. L1 '0 *The prudent man rule states, in essence, that "in investing... prop- erty for the benefit of another, a trustee shall exercise the judgment and care, under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs...." • t of M �LOUISE ECKERSLEY CITY TREASURER INVESTMENT GUIDELINES 1. CASH AVAILABILITY GUIDELINES 350 Main Street El Segundo, California 90245 (213) 322 -4670 January 1987 a) Cash flow analysis is developed (either /both daily, weekly or monthly) which serves as a basis for determining the cash available for investment and maturity dates needed to cover future disbursements. b) A close rapport is maintained with all other departments having a significant impact on cash flow to ensure receipt of timely and accurate data. c) where practical, revenue receipts are consolidated into one bank account and invested on a pooled concept basis. In- terest earnings are allocated according to fund cash and investment balances. d) Active bank balances are kept as low as possible without jeopardizing good banking relationships by maintaining investment of available cash as near to 100% as possible. e) Bank balances are obtained daily via computer to assure fast, accurate and detailed information. f) Sufficient funds are maintained in very liquid investments to meet most unexpected contingencies. 2. INVESTING GUIDELINES a) A close working relationship is maintained with a list of well established brokers, dealer /brokers, and bankers whose proven technical knowledge and expertise is of assistance in making investing decisions. b) Economic data, forecasts, and conditions are continuously obtained from financial experts in the field and evaluated as to impact on investing decisions. 11 • • 0 *8 c) Business journals are routinely reviewed and education programs attended to enhance knowledge and professional skills required to manage an investment portfolio. d) Only investments authorized by the Investment Policy are transacted. e) Before an unfamiliar security is purchased, the issuer and the instrument are researched and investigated and all contractual agreements and administrative procedures are completed before any transactions are consumated. f) Investments are diversified by (1) type, (2) institution, (3) length of maturity and (4) broker /dealer /bank used as is consistent with safety, liquidity, yield, and administrative cost. g) Purchases of investments are made with the intent of holding the investments to maturity. If under favorable market conditions, investments of similar maturities can be swapped or traded and portfolio performance improved without compro- mising safety, they may be done. h) Individuals Treasurer in purchases of transactions specifically stances. authorized by delegation to assist the City conducting transactions are limited to one year maturity or less, and are limited to of no more than $1 million in size, unless authorized to do so under unusual circum- i) The City does not permit the purchase of securities on margin (the borrowing of funds via Reverse Repurchase Agreements using the security to be purchased as col- lateral). j) Competitive bids are obtained and documented on all invest- ments when practical. k) Every investment transaction is documented and the procedure for monitoring is clearly defined. 1) Security purchases are maintained within statutory limits imposed by the California Government Code. Current limits are: Bankers Acceptances - 400 (56301 -f -); Commercial Paper - 300 (53601 -g -); Negotiable Certificates of Deposit - 300 (53601 -h -) -2- ti Mutual Funds Consisting of Government Securities and Agencies (Senate Bill 2115, Chapter 853) Corporate Bonds - 150 (Sentate Bill 2115, Chapter 853) m) The weighted average life of the portfolio is maintained within limits dictated by the cash flow needs of the City. Long term securities do not represent a significant per- centage of the total portfolio, as the market risk involved outweigh the potential for higher interest income. n) Investment strategies are reviewed for possible need to change at least quarterly. They are reviewed more fre- quently as changes in economic conditions dictate. 3. SAFEKEEPING GUIDELINES a) All securities including collateral from Repurchase Agree- ments purchased from brokers, broker /dealers, or banks are transferred to the City's safekeeping account in the Trust Department of the City's designated bank. b) Securities purchased that require safekeeping on the East Coast are safekept for the city in the city's name in a perfected interest account in a Trust Department of an eastern 'dank that is a correspondent bank of the city's designated bank. c) The City has a written statement on file from its designated bank that the City has a 'perfected interest' in all securi- ties held in the safekeeping account. d) The Trust Department of the city's designated bank sends to the city a monthly statement of what is being safekept; which is reconciled monthly with the city's records of what should be in safekeeping. 4. GUIDELINES FOR BROKER /DEALER, BANKER RELATIONSHIPS a) A list of approved brokers, broker /dealers, banks, and savings and loans is reviewed monthly based on the following criteria: 1) Being authorized under California Government Code Section 53635.5 to transact investments with local agencies. 2) Receipt of a positive, audited financial statement. 08 3) Being in business for a minimum of three years as evi- dence of minimum experience. -3- 5. b) A qualified person reviews requests to be on the approved list and the accompanying financial statements. c) There is a formal filing system of the required information of those on the approved list which provides for an annual report of updated financial information. d) There is a timely transaction monitoring system to ensure all documents and confirmations are received and are correct. e) Transactions are monitored monthly as an assurance that there are not undue concentrations conducted with any single firm. GUIDELINES FOR TYPES OF INVESTMENTS a) PASSBOOK SAVINGS ACCOUNTS: A savings account is maintained for amounts of $50,000 that are received too late in the day to invest in other instru- ments. There is a standing instruction with the bank that deposits to the savings account are automatically trans- ferred to the regular pooled investment account the next morning. b) CALIFORNIA STATE -LOCAL AGENCY INVESTMENT FUND: A resolution of the city is on file with the State Treasurer which permits maintaining an account in the Local Agency Investment Fund. The maximum balance that can be held in the fund is $5 million. There can be a total of eight deposits or withdrawals during a month. Interest is paid quarterly on an average of what the fund earned for the quarter. C) REPURCHASE AGREEMENTS (REPOS): The city requires physical delivery of the securities underlying the Repurchase Agreement into an acceptable safekeeping account having perfected interest in the name of the City. Repos are used mainly as a short term investment not exceeding 30 days. The institution from which the City purchases a Repo must transfer sufficient securities to the City's safekeeping account to compensate for changed market conditions and insure that adequate collateral is maintained to cover principal investment and accrued interest. The Repo investment in any one institution does not exceed 10% of the City's portfolio. -4- E7 0 0 1 0 00 d) COMMERCIAL PAPER: Commercial Paper is required to be held in an acceptable safekeeping account with perfected interest in the City's name. Commercial Paper will be used mainly as a short term investment usually not exceeding 90 days. A rating of Standard and Poors A -1 and Moody's P -1 is required. The City is to be informed by the selling institution of any change in rating prior to maturity. The city will only invest in the largest 100 companies (in terms of total assets) in the United States. Investment in any one insti- tution will not exceed one million dollars. Investment in Commercial Paper will not exceed 30% of the City's portfolio as per state law. e) BANKERS ACCEPTANCES: Bankers Acceptances are required to be held in an acceptable safekeeping account with perfected interest in the City's name. Bankers Acceptances are mainly used for investments with maturities of one to six months. The City will only invest in the 100 largest banks in the world (in terms of assets). Investment in any one institution will not exceed 10% of the City's portfolio. Investment in Bankers Accept- ances will not exceed 40% of the City's portfolio as per state law. f) NEGOTIABLE CERTIFICATES OF DEPOSIT (NCD'S): Negotiable Certificates of Deposit are held in an acceptable safekeeping account that has a perfected interest in the City's name. Each purchase is evaluated in terms of the credit worthiness of the issuer, as these deposits are unin- sured if over $100,000, and are uncollateralized promissory notes. Not more than 10% of the portfolio is purchased from one issuer. Not more than 30% of the portfolio is in Nego- tiable Certificates of Deposits as per state law. NCD's may be purchased by the City with maturities of one month to five years. g) TIME CERTIFICATES OF' DEPOSIT (TCD'S): Only Time Certificates of Deposits that are insured for $100,000 by FDIC or FSLIC or fully collateralized as re- quired by state law if over $100,000 are .purchased. Not more than 5% of the City's portfolio is invested in any one institution. Time Certificates of Deposits are safekept in the City's vault or in an acceptable safekeeping account with a perfected interest in the City's name. An institu- tion must meet the following criteria to be considered by the City: -5- ti 0 0 1. The institution must be located in California. 2. The institution must have current financial infor- mation, signed contract and waiver on file with the City. 3. The institution must maintain a net worth to asset ratio of at least 3 %, and have a positive earnings record. 4. The institution must be at least 3 years old. 5. For collateralized investments, the institution must have at least $100 million in assets. h) TREASURY BILLS AND AGENCY DISCOUNT NOTES: U.S. Treasury Bills and U.S. Government Agency Discount Notes are purchased for maturities from one month to one year. The City requires that these instruments be held in an acceptable safekeeping account with perfected interest in the City's name. As these instruments are safe and highly liquid, they are purchased for use as part of the City's reserve for unusual contingencies. i) TREASURY NOTES AND GOVERNMENT AGENCY SECURITIES: U.S. Treasury Notes and U.S. Government Agency Securities are purchased for maturities from one year to five years. The weighted average life of the portfolio is maintained within limits dictated by the cash flow needs of the City. Therefore, only a minor percentage of the portfolio is in instruments with maturities of one to five years. Rarely, and under special circumstances would a maturity extend out to ten years. The City requires that these instruments be held in an acceptable safekeeping account with perfected interest in the City's name. j) TREASURY BONDS AND MORTGAGE - BACKED AGENCY BONDS: Treasury Bonds and Mortgage- Backed Agency Bonds have maturi- ties extending from 10 to 30 years. Only under special circumstances that are also known by City Management and City Council, does the city portfolio contain any securities with maturities of over 10 years as market risk at longer maturities outweighs the potential for higher interest income. If purchased under the special circumstances mentioned above, the City requires that these instruments be held in an acceptable safekeeping account with perfected interest in the City's name. -6- STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) SS CITY OF EL SEGUNDO ) I, Ronald L. Hart, City Clerk of the City of E1 Segundo, California, DO HEREBY CERTIFY that the whole number of members of the City Council of the said City is five; that the foregoing resolution, being Resolution No. 3449 was duly passed and adopted by the said City Council, approved and signed by the Mayor of said City, and attested by the City Clerk of said City, all at a regular meeting of the said Council held on the 20th day of January, 1987, and that the same was so passed and adopted by the following vote: AYES: Councilmembers Anderson, Jacobson, Schuldt, West, and Mayor Siadek NOES: None 8 ABSENT: None 0 18 WITNESS MY HAND AND THE OFFICIAL SEAL OF SAID CITY this 29th day of January, 1987. KVAAJi v L. ri9K1, City Clerk of the City of E1 Segundo, California (SEAL)