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CC RESOLUTION 3518RESOLUTION NO. 3518 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL SEGUNDO, CALIFORNIA, APPROVING AND ADOPTING THE CITY TREASURER'S 1988 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 1988 Statement of Investment Policy and Guidelines, a copy of which is attached hereto as Exhibit "A ", to the City Council for its approval, 0 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 1988 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 Sthe City Council of said city, in the minutes of the meeting at which the same is passed and adopted. PASSED, APPROVED and ADOPTED this 16th day of February, 1988. ATT ' C City Clerk Is (SEAL) i of E1 Segundo, Californ -1- JOA:R- 021688.T a LOUISE ECKERSLEY CITY TREASURER rP2 Z d M-0740-WW"), � =60A CITY OF EL SEGUNDO INVESTMENT GUIDELINES 1. CASH AVAILABILITY GUIDELINES 350 Main Street El Segundo, California 90245 (213) 322.4670 February, 1988 a. When the cash flow system is installed, cash flow analy- sis will be developed (daily, weekly and monthly for a period of up to 36 months), which serves as a basis for determining the cash available for investment and matur- ity 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. Interest earnings are allocated according to fund cash and investment balances. d. Active non interest - bearing bank balances are kept as low as possible without jeopardizing good banking relation- ships 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 invest- ments to meet most unexpected contingencies. These liquid investments are intended to be sufficient to provide for a minimum of three months' net outflows. 2. SPECIFIC INVESTMENT GOALS a. Invest assets with an expectation of achieving a total rate of return at a level that exceeds the rate of return on short -term government guaranteed or insured obliga- tions (91 -day Treasury bills) in every measurement period and which, over a two -year period, exceeds that rate by at least 25% annually. City of El Segundo Investment Guidelines February, 1988 Page 2 b. Assure that the principal is preserved with minimal risk of depreciation or loss 3. INVESTING GUIDELINES a. Consistent with the guidelines and reporting requirements described herein, authority is granted to the City Treasurer as regards the sector mix of these assets, the selection of securities and the timing of their trans- actions. b. 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 admini- strative cost. Specifically, investments with maturities longer than five years are limited to no greater than 20% of the portfolio, unless specifically authorized by the City • Council. Further, investments in any single financial institution may not exceed 15% of the portfolio. C. 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 compromising safety, this may be done. d. Individuals authorized by delegation to assist the City Treasurer in conducting transactions are limited to purchases of one year maturity or less, and are limited to transactions of no more than $2 million in size, unless specifically authorized to do so by the City Treasurer under unusual circumstances. e. The City does not permit the purchase of securities on margin (the borrowing of funds via Reverse Repurchase Agreements using the security to be purchases as col- lateral). 4. GUIDELINES FOR TYPES OF INVESTMENTS Security purchases are maintained within statutory limits as defined by the California Government Code. The investments and their limits are as follows: • City of E1 Segundo Investment Guidelines February, 1988 Page 3 a. PASSBOOK SAVINGS ACCOUNTS A savings account may be maintained for amounts of $50,000 that are received too late in the day to invest in other instruments. There is a standing instruction with the bank that deposits to the savings account are automatically transferred to the regular pooled invest- ment 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 based on an average of the funds' quarterly earnings. • 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 compen- sate 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 will not exceed 10% of the City's portfolio. 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 institution will not exceed one million dollars. Investment in Commercial Paper will not exceed 30% of the City's portfolio as per state law. r 7 U City of E1 Segundo Investment.Guidelines February, 1988 Page 4 e. BANKERS ACCEPTANCES Bankers Acceptances are required to be held in an accept- able 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 Acceptances 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 accept- able 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 uninsured 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 Negotiable 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 Deposit that are insured for $100,000 by FDIC or FSLIC, or fully collateralized as required 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 safe- keeping account with a perfected interest in the City's name. An institution must meet the following criteria to be considered by the City: 1. The institution must be located in California. 2. The institution must have current financial informa- tion, 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. City of El Segundo Investment Guidelines February, 1988 Page 5 i 4. The institution must be at least three 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. As the weighted average life.of the portfolio is main - tained within limits dictated by the cash flow needs of the City, only a minor percentage of the portfolio is in instruments with maturities of 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 per- fected interest in the City's name. j. TREASURY BONDS AND MORTGAGE - BACKED AGENCY BONDS Treasury Bonds and Mortgage- Backed Agency Bonds have maturities extending from 10 to 30 years. Only under special circumstances that are also known by City Manage- ment 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. Not • more than 25% of the portfolio may be in mortgage- backed securities as per state law. E City of E1 Segundo Investment Guidelines February, 1988 Page 6 k. SHARES OF MUTUAL FUND COMPANIES Shares of mutual fund companies who are Registered Investment Advisors, or investments placed with other Registered Investment Advisors, with at least five years' experience and $500 million of assets under management, may be purchased. The mutual funds used shall be restricted to those with constant net asset values, that is, the principal value shall not fluctuate. Such investment shall not exceed 15% of the City's funds available for investment, as per state law. 1. MEDIUM -TERM CORPORATE NOTES Medium -term corporate notes, with a maximum of five years' maturity, and which are rated in the top three rating categories by at least two of the three largest national rating services, may be purchased. Such invest- ments shall not exceed 30% of the City's funds available for investment, as per state law. 5. STANDARDS OF INVESTMENT PERFORMANCE Assets of the account will be evaluated periodically. Con- sideration will be given to the extent to which these performance results are consistent with the goals and objec- tives as herewith set forth. Toward that end, the following standards of performance will be used in evaluating investment performance: a. The extent to which the City Treasurer follows the guidelines as expressed herein b. The extent to which the performance of the portfolio on a total rate of return basis achieves or exceeds the targeted goals. 6. BASES FOR MEASUREMENT • Performance of the portfolio is to be measured in context with these goals and objectives. The portfolio investment performance results will also be compared, on a time - weighted basis, with that of an unmanaged market index of 91 -day Treasury bills. City of E1 Segundo Investment Guidelines February, 1988 Page 7 The portfolio's consistency of performance results will be determined by computing the mean absolute deviation of the portfolio's total rate of return from quarter to quarter and comparing this with the same statistics measured for the unmanaged market index described above. 7. SAFEKEEPING GUIDELINES a. All securities including collateral from Repurchase Agreements 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 bank that is a correspondent bank of the City's designated bank. . C. The City has a written statement on file from its design- ated bank that the City has a 'perfected interest' in all securities 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 safe - kept; which is reconciled monthly with the City's records of what should be in safekeeping. 8. 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. • 3. Being in business for a minimum of three years as evidence of minimum experience. 0 • City of E1 Segundo Investment Guidelines February, 1988 Page 7 The portfolio's consistency of performance results will be determined by computing the mean absolute deviation of the portfolio's total rate of return from quarter to quarter and comparing this with the same statistics measured for the unmanaged market index described above. 7. SAFEKEEPING GUIDELINES a. All securities including collateral from Repurchase Agreements 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 bank that is a correspondent bank of the City's designated bank. C. The City has a written statement on file from its design- ated bank that the City has a 'perfected interest' in all securities 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 safe - kept; which is reconciled monthly with the City's records of what should be in safekeeping. 8. 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. 3. Being in business for a minimum of three years as evidence of minimum experience. 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. E City of E1 Segundo Investment Guidelines February, 1988 Page 8 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 informa- tion 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. Transaction are monitored monthly as an assurance that there are not undue concentrations conducted with any single firm. f. Competitive bids are obtained and documented on all investments when practical k. Every investment transaction is documented and the procedure for monitoring is clearly defined. 9. COMMUNICATION a. Documentation Statements are to be supplied monthly to the City Council by the City Treasurer, indicating: 1. The portfolio composition, i.e., at "book" or cost and at market value. 2. Position, by individually named securities, showing both their respective book and market values. 3. All principal cash transactions, including all buys and sells, in sufficient descriptive detail. 4. All income cash transactions, including sources of all interest and dividends, in sufficient descrip- tive detail. • The City Treasurer shall maintain and make available documentation in support of the buy, sell and hold decisions. b. Reporting The City Treasurer will report annually to the City Council to review the portfolio and to discuss investment City of El Segundo Investment Guidelines February, 1988 Page 9 • results in context with these goals, objectives and polieies,.and will be available to report more frequently as needed. 10. IMPLEMENTATION All new monies invested by the City Treasurer after the adoption of this Investment Policy shall conform to this policy. 11. OTHER CONSIDERATIONS It is the intent of the City Council to revise this statement of goals and objectives to reflect modifications and revisions to anticipated payment outflows that may develop from time to time. It is also the policy of the City Council to review these goals and objectives at least once per year and, after consideration of the advice and recommendations of the City Treasurer, adopt such amendments as may be appropriate. • 12. EFFECTIVE DATE This policy shall be effective February 1, 1988. City Treasuret City of E1 Segundo Ll • LOUISE ECKERSLEY CITY TREASURER PURPOSE 350 Main Street El Segundo, California 90245 CITY OF EL SEGUNDO STATEMENT OF INVESTMENT POLICY (213) 322.4670 February, 1988 This statement is intended to provide guidelines for the prudent investment of the City's temporary idle cash, and outline the policies for maximizing the efficiency of the City's cash manage- ment system. The ultimate goal is to enhance the economic status of the City while protecting its pooled cash. . OBJECTIVE The City of El Segundo attempts to invest monies to the fullest extent possible. It attempts to obtain the highest yields possible as long as investments meet the criteria required for safety and liquidity, and are consistent with the Guidelines which have been established. To further this objective the City will be automating its cash management system on or before July 1, 1988, to improve its ability to accurately monitor and forecast revenues and expen- ditures. The City strives to maintain the level of investment of all funds as near 100% as possible, through daily and projected cash flow determinations. Idle cash management and investment transactions are the responsibility of the City Treasurer. POLICY The City of E1 Segundo operates its temporary pooled idle cash investments under the prudent man rule (Civil Code Sect. 2261, et seq.). This affords the City a broad spectrum of investment • opportunities as long as the investment is deemed prudent and is allowable under current legislation of the State of California (Government Code Section 53600 et seq.). Investments may be made in the following media: Securities of the U.S. Government, or its agencies Small Business Administration Loans • City of E1 Segundo Statement of Investment Policy February, 1988 Page 2 Certificates of Deposit (or Time Deposits) placed with commercial banks and /or savings and loan institutions Negotiable Certificates of Deposit - Bankers Acceptances - Commercial Paper - Corporate Bonds - Local Agency Investment Fund (State Pool) Demand Deposits - Mutual Funds comprised of Government and Agency Issues - Repurchase Agreements (Repos) - Passbook Savings Account Demand Deposits. • Criteria for selecting investments and the order of priority are: 1. Safety - The City's primary goal for investment of its assets is avoidance of risk and, therefore, preservation of principal. Assets whose values are subject to market fluctuation are intended to be held to maturity, to minimize the risk of loss of principal. 2. Liquidity - Sufficient liquidity shall be maintained to provide a source for all anticipated net payment outflows over a three month period. The intent is to avoid having to cash in any investments where there is a potential for loss of principal. 3. Yield -Yield is the potential dollar earnings an invest- ment can provide, and sometimes is described as the rate of return. 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. CITY CONSTRAINTS The City of E1 Segundo operates its pooled idle cash investments under the Prudent Man Rule. This affords a broad spectrum of investment opportunities so long as the investment is deemed City of E1 Segundo Statement of Investment Policy February, 1988 Page 3 • prudent and is permissible under currently effective legislation of the State of California and other imposed legal restrictions. The basic premise underlying the City's investment philosophy is, is and will continue to be, to insure that money is always safe and available when needed. M • City Treasurer City of E1 Segundo • 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. 3518 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 2nd day of February 1988 and that the same was so passed and adopted by the following vote: AYES: Anderson,Jacobson, Schuldt , West, and Mayor Siadek. NOES: None ABSENT: None WITNESS MY HAND THE OFFICIAL SEAL OF SAID CITY this 18th day v- a of February, 1988 RONALD L. HART City Clerk of the City of El Segundo, California (SEAL)