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CC RESOLUTION 3628RESOLUTION NO. 3628 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL SEGUNDO, CALIFORNIA, APPROVING AND ADOPTING THE CITY TREASURER'S 1990 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 1990 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 1990 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 40 the City Council of said city, in the minutes of the meeting at which the same is passed and adopted. _4 PASSED, APPROVED and ADOPTED this 1990. (SEAL) 20th day of February • LOUISE ECKERSLEY CITY TREASURER CITY OF EL SEGUNDO INVESTMENT GUIDELINES 350 Main Street El Segundo, California 90245 (213) 322.4670 February 20, 1990 1.- CASH AVAILABILITY GUIDELINES a. When the cash flow system is installed, cash flow analysis 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 maturity dates needed to cover future disburse- ments. b. A close rapport is maintained with all other depart- ments 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 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 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. • City of E1 Segundo Investment Guidelines February 20, 1990 Page 2 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 obligations (91- day._Treasury bills) in every measure- ment period and which, over a two -year period, exceeds that rate by at least 25% annually. b. Assure that the principal is preserved with minimal risk of depreciation or loss 3. INVESTING GUIDELINES a. Consistent with the guidelines and reporting require- ments 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 transactions. b. Investments are diversified by (1) type, (2) institu- tion, (3) length of maturity and (4) broker /dealer bank used as is consistent with safety, liquidity, yield and administrative 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 institu- tion may not exceed 15% of the portfolio. C. Purchases of investments are made with the intent of holding the investments to maturity. If under favor- able market conditions, investments of similar maturi- ties 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. • City of E1 Segundo Investment Guidelines February 20, 1990 Page 3 • 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: a. MONEY MARKET ACCOUNT The City has an agreement with Security Pacific Bank whereby all unneeded funds are swept into a Money Market Account each day. At this time it is paying just under 8 %. 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 $10 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 compensate for changed market conditions and insure that adequate collateral is maintained to cover princi- pal investment and accrued interest. The Repo invest- ment 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 accept- able safekeeping account with perfected interest in the City's name. Commercial Paper will be used mainly as a City of E1 Segundo Investment Guidelines February 20, 1990 Page 4 • 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. 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 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 acceptable safekeeping account that has a perfected interest in the City's name. Each purchase is eval- uated 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 Certif- icates 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: 0 City of E1 Segundo Investment Guidelines February 20, 1990 Page 5 • 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 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 per- fected interest in the City's name. As these instru- ments 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 Secur- ities are purchased for maturities from one year to five years. As the weighted average life of the port- folio is maintained 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 safe- keeping 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 maturities 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 5 years as market risk at longer maturities outweighs the • is • City of E1 Segundo Investment Guidelines February 20, 1990 Page 6 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. 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 fluct- uate. Such investment shall not exceed 15% of the City' 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 investments 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 invest- ment 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. City of E1 Segundo Investment Guidelines February 20, 1990 Page 7 • 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 unman- aged market index of 91 -day Treasury bills. 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 designated bank that the City has a 'perfected interest' in all securities held in the safekeeping account. 0 0 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. 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. 0 0 0 0 City of E1 Segundo Investment Guidelines February 20, 1990 Page 8 2. Receipt of a positive, audited financial state- ment. 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 bank- ers whose proven technical knowledge and expertise is of assistance in making investing decisions. b. A qualified person reviews requests to be on the ap- proved list and the accompanying financial statements. C. There is a formal filing system of the required infor- mation 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, show- ing both their respective book and market values. 3. All principal cash transactions, including all buys and sells, in sufficient descriptive detail. City of E1 Segundo Investment Guidelines February 20, 1990 Page 9 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 invest- ment results in context with these goals, objectives and policies, and will be available to report more fre- quently 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 state- ment 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 recom- mendations of the City Treasurer, adopt such amendments as may be appropriate. 12. EFFECTIVE DATE This policy shall be effective February 20, 1990. City Treasurer • City of El Segundo 0 • LOUISE ECKERSLEY CITY TREASURER PURPOSE This statement is investment of the policies for maxi ment system. The . of the City while OBJECTIVE 350 Main Street El Segundo, California 90245 (213) 322.4670 February 20, 1990 CITY OF EL SEGUNDO STATEMENT OF INVESTMENT POLICY intended to provide guidelines for the prudent City's temporary idle cash, and outline the sizing the efficiency of the City's cash manage - ultimate goal is to enhance the economic status protecting its pooled cash. 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 11 1990, to improve its ability to accurately monitor and fore- cast revenues and expenditures. 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.). City of E1 Segundo Statement of Investment Policy February 20, 1990 Page 2 • Investments may be made in the following media: Securities of the U.S. Government, or its agencies - Small Business Administration Loans - 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 Depos- its 0 - 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, preserva- tion 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 out- flows 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 in- vestment 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 i 0 • 0 City of E1 Segundo Statement of Investment Policy February 20, 1990 Page 3 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 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. City Treasurer City of El Segundo STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) SS CITY OF EL SEGUNDO ) I, Ronald L. Hart, City Clerk of the City of El Segundo, California, DO HEREBY CERTIFY that the whole number of members of the City Council of said City is five; that the foregoing resolution, being Resolution No. 3628 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 February, 1990 and that the same was so 40 passed and adopted by the following vote: AYES: Councilmembers Clutter, Dannen, West, Anderson and Mayor Jacobson NOES: None ABSENT: None WITNESS MY HAND THE OFFICIAL SEAL OF SAID CITY this 21st day of February, 1990. 0 RONALD L. HART City Clerk of the City of El Segundo, California (SEAL)