CC RESOLUTION 4974RESOLUTION NO. 4974
A RESOLUTION ADOPTING THE STATEMENT OF INVESTMENT
POLICY EFFECTIVE APRIL 1, 2016
The City Council of the City of El Segundo does resolve as follows:
SECTION 1: The City Council finds and declares as follows:
1. The City of El Segundo is required to have a Statement of Investment Policy that
regulates the investment of public funds.
2. Pursuant to Government Code §53646(a), the City Treasurer may submit the
Investment Policy to the local agency's legislative body as an agenda item at a
public meeting.
SECTION 2: Approval. The City Council of the City of El Segundo approves the
Statement of Investment Policy, attached as Exhibit A. The Statement of Investment
Policy will take effect retroactively, as of April 1, 2016.
SECTION 3: The City Clerk is directed to certify the adoption of this Resolution, record
this Resolution in the book of the City's original resolutions, and make a minute of this
adoption of the Resolution in the City Council's records and the minutes of this meeting.
SECTION 4: This Resolution will become effective immediately and will remain effective
unless repealed or superseded.
PASSED AND ADOPTED this 5t" day of April, 2016.
Su ne Fuentes,
Mayor
ATTEST:
(bm // 'Wh)
Tracy We4er, CityV Clerk
APPROVED AS TO FORM:
I Dj �
Mark D. Hensley, it Attorney
Exhibit A
EFFECTIVE ril 1, 2016
Crista Binder, CTP, CFI'P
City Treasurer
CITY OF EL SEGUNDO
INVESTMENT POLICY
TABLE OF CONTENTS
1.0
Policy
Page 3
2.0
Scope
Page 3
3.0
Prudence
Page 4
4.0
Ethics and Conflict of Interest
Page 4
5.0
Investment Objectives
Page 4
6.0
Delegation of Authority
Page 5
7.0
Authorized Investments
Page 7
8.0
Investment Pools /Mutual Funds
Page 8
9.0
Diversification Guidelines
Page 8
10.0
Maximum Maturities
Page 8
11.0
Benchmarks
Page 8
12.0
Investment Advisory Committee
Page 9
13.0
Collateralization
Page 9
14.0
Safekeeping and Custody
Page 9
15.0
Reporting
Page 10
16.0
Internal Controls
Page 10
17.0
Authorized Financial Dealers and Institutions
Page 10
18.0
Continuing Education
Page 11
Attachments
Glossary of Investment Terms
Questionnaire — Financial Dealers
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City of El Segundo
Investment Policy
1.0 Policy
The City of El Segundo Investment Policy (Policy) establishes the cash management and
investment guidelines for the City Treasurer. The City of El Segundo invests public funds
in a prudent manner with the primary objectives of, in priority order, safety of principal,
adequate liquidity and investment return, in conformance with all State of California
Code Sections (53600 and 53635 et seq.) and local statutes governing the investment of
public funds.
State of California Code 53646 (a) (2) does not mandate that investment policies be
updated annually. However, on an annual basis, the City Treasurer will report to the
City Council any material changes to the policy as reviewed and approved by the City's
Investment Advisory Committee (IAC). The IAC will be required to review and approve
the policy annually.
The City Treasurer will prepare a quarterly report to the City council, City Manager and
Director of Finance listing investment transactions made during the reporting period
pursuant to Government Code Section 53607.
State of California Code (53607) still requires that the City Council delegate investment
authority to the City Treasurer on an annual basis.
2.0 Scope
This investment policy applies to all investment activities and financial assets of the City
under management by the City Treasurer. This policy pertains to the City funds which
are pooled for investment purposes and funds held in depository agencies.
It is the City's policy to pool funds for investment purposes to maximize efficiencies,
reduce transaction costs, streamline cash flow forecasting, and provide greater access
to the market.
The pooled funds include:
• General Fund
• Special Revenue Funds
• Capital Project Funds
• Enterprise Funds
• Trust and Agency Funds
• Debt Service Funds
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Assets not under management of the City Treasurer are investments in the City's
defined benefit plans, health savings plans, and pension plans.
3.0 Prudence
State of California Government Code Section 53600.3 states that "...all governing bodies
of local agencies or persons authorized to make investment decisions on behalf of those
local agencies investing in public funds pursuant to this chapter are trustees and
therefore fiduciaries subject to the prudent investor standard. When investing,
reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a
trustee shall act 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.
Within the limitations of this section and considering individual investments as part of
an overall strategy, investments may be acquired as authorized by law."
The City Treasurer and persons that the City Treasurer delegates to manage City
investments, shall use the "Prudent Investor" standard. Investment officers acting in
accordance with this Policy, written portfolio guidelines and procedures, and exercising
due diligence shall be relieved of personal responsibility for individual security's credit
risk or market price changes, provided deviations from expectations are reported in the
quarterly investment reports to the City Council, and appropriate action is taken to
control adverse developments.
When investing and managing City funds, the City Treasurer and employees shall act
with care, skill, prudence and diligence to meet the aims of the investment objectives
listed in order in Section 5.0, Investment Objectives.
4.0 Ethics and Conflict of Interest
The City Treasurer, employees involved in the investment process, and the members of
IAC shall refrain from all personal business activity that could conflict with the
management of the investment program. All individuals involved with the investment
of City funds, or review of investment transactions, will be required to file a Form 700 —
Statement of Economic Interests on an annual basis in accordance with California state
law.
5.0 Investment Obiectives
Safety: Safety of principal is the foremost objective of the investment program.
Investments of the City of El Segundo shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio. To attain this objective, the
City shall only invest in high quality securities and it shall diversify its investments in
order that potential losses on individual securities do not exceed the income generated
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from the remainder of the portfolio so as not to harm the City's cash flow and principal.
The City shall also structure its portfolio so as to prevent the need to sell securities prior
to maturity and it shall not take short positions, that is, selling securities that the City
does not own.
Two risks are monitored to help ensure safety of the investments. They are credit risk
and market or interest rate risk.
Credit Risk: Credit risk is defined as the risk of loss due to the failure of an issuer
to redeem the outstanding debt at the stated maturity date. Within this
concept, credit risk also applies to the overall market perception of the financial
strength and capacity of the issuer. Diversification of the investment portfolio by
issuer, maturity date and amount invested will ensure that in the event of a
failure of any one issuer, the event will not unduly harm or compromise the
City's cash flow.
Market or Interest Rate Risk: Market or Interest Rate risk is the risk that the
market value of investment securities in the portfolio may decline due to
changes in general interest rates. Market rate risk can be mitigated by
diversifying the investment of funds by maturity date and by investing funds to a
specific cash requirement that would reduce the need to sell the security prior to
maturity to meet immediate City cash flow needs.
Liquidity: The City of El Segundo's investment portfolio will remain sufficiently liquid to
meet all operating requirements that might be reasonably anticipated.
Return on Investments: The City of El Segundo shall manage funds to optimize the
return on investments consistent with the two primary objectives of safety and liquidity.
The rate of return on investment should be designed to attain a market rate of return
through budgetary and economic cycles consistent with the risk limitations, prudent
investment principles and cash flow requirements identified by the City's Investment
Policy.
. 1 � »I •� • w � s
Pursuant to State of California Code Section 53607, the City Council hereby authorizes
the City Treasurer to invest and reinvest the City's funds, to sell or exchange securities
so purchased, and to deposit securities for safekeeping in accordance with established
procedures.
No person may engage in an investment transaction except as provided under the terms
of this policy and the procedures established by the City Treasurer. The City Treasurer
may delegate all, or a portion of the investment authority to subordinates pursuant to
State of California Government Code Section 41006. Such delegation by the City
Treasurer shall not remove or abridge the Treasurer's investment responsibility.
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The City Treasurer shall establish written procedures for the operation and management
of the City's investment program consistent with this investment policy, including
appropriate written agreements with financial institutions.
. ................. _ ............... .._CITY OF EL SEGUNDO
7.0 - AUTHORIZED INVESTMENTS
Allowable Investment Instruments per State Government Code Applicable to All Local Agencies
As of January 1, 2016
MINIMUM
CITY OF EL SEGUNDO
MAXIMUM %
INVESTMENTTYPE MAXIMUM MATURITY
Local Agency Bonds 5 years
.. �. � � . ._ °_
None
_ ...._._.. .�..__ ..... ..
"A" Rating
10%
U.S. Treasury Obligations 5 years
None
None
None
State Obligations - CA and Others 5 years
None
None
100
CA Local Agency Obligations 5 years
None
None
10%
U.S. Agency Obligations 5 years
None
None
None
Bankers' Acceptances 180 days
40%
None
Not Permitted
Commercial Paper - Pooled Funds 270 days
....__....
40% of the agency's
_._._.__ ._. _
"A-1" if the issuer has
.......... ...... . .............................. .............. .. .....
10% (no more than 3%
money
issued long -term debt it
per issuer)
must be rated "A"
without regard to
modifiers **
Commercial Paper- Non - Pooled 270 days
25% of the agency's
"A -1" if the issuer has
10% (no more than 3%
Funds
money
issued long -term debt it
per issuer)
must be rated "A"
without regard to
modifiers **
Negotiable Certificates of Deposit 5 years
30% (combined with
None
None
placement service CDs)
Non - negotiable Certificates of 5 years
None
None
None
Deposit
Placement Service Deposits 5 years
30% (inclusive of
None
10%
placement service CDs)
Placement Service Certificates of 5 years
30% (combined with
None
10%
Deposit
negotiable CDs)
....... ....... _._...m...
Repurchase Agreements 1 year
�..... .._._ ..�.._._.....
None
._._._._. _._......_.....................
None
_. �.._......_..........._._......
Not Permitted
Reverse Repurchase Agreements 92 days
20% of the base value of
None
Not Permitted
and Securities Lending
the portfolio
Agreements
mm .... _. .......... ..
- — - -
.................. � �—
-- - - -�.........
Medium -Term Notes 5 years
30%
A' Ratin g if the issuer
15/o no more than 3%
(
has issued long -term debt
per issuer)
it must be rated "A"
without regard to
modifiers **
Mutual Funds and Money Market N/A
20%
Multiple
5%
Mutual Funds
.....Collateralized Bank .. De._. osits .............._......_............_..... 5....... ed. rs.... ...............................
Deposits y
�...................... None ........_.....................
.......................... Non.. e........................... ...............................
.....
None
Mortgage Pass - Through Securities 5 years
20%
"A" Rating
Not Permitted
County Pooled Investment Funds N/A
None
None
Not Permitted
Joint Powers Authority Pool N/A
None
Multiple
Not Permitted
Local Agency Investment Fund N/A
None
None
None
(LAIF) (Up To Maximum Allowed)
Voluntary Investment Program N/A
None
None
Not Permitted
Fund
Supranational Obligations 5 years 30% "A A" Rating 10% and "AAA" Rating
• if less than State Code Maximum % of Portfolio
• Pursuant to Government Code Sections: 16340, 16429.1, 53601, 53601.8, 53635, 53635.2, 53635.8 and 53638
** Issuing corporation must be organized and operating within the U.S. and have assets in excess of $500 million
8.0 Investment pooh /Mutual Fuunds
The City of El Segundo will be required to conduct a thorough investigation of any
government sponsored pool and /or mutual fund prior to investing and on a continual
basis. There shall be a questionnaire completed which will provide the following:
1. A description of eligible investment securities, and a written statement of
investment policy and objectives.
2. A description of interest calculations and how it is distributed, and how gains and
losses are treated.
3. A description of how the securities are safeguarded (including the settlement
process), and how often the securities are priced and the program audited.
4. A description of who may invest in the program, how often, what size deposits and
withdrawals are allowed.
5. A schedule for receiving statements and portfolio listings.
6. A description of how the pool /fund utilizes reserves, retained earnings, etc.
7. A fee schedule, including when and how fees are assessed.
8. The eligibility of the pool /fund to invest in bond proceeds and a description of its
practices.
9.0 Diversification Guidelines
The City of El Segundo will diversify its investments by security type, issuer and maturity
dates. Concentration limits are indicated in the Authorized Investments Section 7.0 for
all investment categories except Treasury securities.
10.0 Maximum Maturities
To the extent possible, the City of El Segundo will attempt to match its investments with
anticipated cash flow requirements. The City will not directly invest in securities
maturing more than five (5) years from the date of purchase pursuant to Government
Code Section 53601.
11.0 Benchmarks
The City of El Segundo Quarterly Investment Report will include benchmark reporting.
The benchmark reporting will be used as a reference tool only to communicate
investment performance against established benchmarks. The use of benchmarks will
not imply that the City Treasurer will assume more risk to the portfolio as safety of
principal and liquidity of funds are the first two primary objectives of the City's portfolio.
The City will use the following benchmark to compare and evaluate portfolio
performance.
Interpolated Yield: The market yield of US Treasury securities as compared to the
portfolio's weighted average maturity (WAM) for the long -term and short-term
investments in the portfolio.
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12.0 Investment Advisor Committee
The City of El Segundo has established an Investment Advisory Committee (IAC) to
provide advice and assistance of persons with experience in the investment field on the
investment of City funds to ensure that City funds are invested in a safe and prudent
manner.
The City of El Segundo Investment Advisory Committee (IAC) was established by City
Council resolution 3764 on June 12, 1992.
The IAC shall have four (4) members appointed by the City Council to serve at their
discretion. The committee members shall be the City Treasurer, the Director of Finance,
one member who shall be a resident of the City of El Segundo and one member who
may be a non - resident of the City. Desirable qualifications of IAC members include, but
are not limited to, work experience or educational background in banking, investments
or finance.
The IAC shall review and make recommendations on City investment policy and
guidelines, list of banking institutions working with the City, list of brokers and dealers
working with the City, and investments in the City portfolio. IAC members shall review
and vote on recommendations of any new type of investment.
The IAC shall meet on a quarterly basis to discuss the City's investments and investment
objectives.
The City Treasurer will prepare a quarterly report to the City council, City Manager and
Director of Finance listing investment transactions made during the reporting period
pursuant to Government Code Section 53607.
13.0 Collateralization
California Government Code, Sections 53652, et seq., requires depository institutions to
post certain types and levels of collateral for public funds above the FDIC insurance
amounts. The collateral requirements apply to bank deposits, both active (checking and
savings accounts) and inactive (non - negotiable time certificates of deposit).
14.0 Safekeeping and Custody
The City of El Segundo shall require that all investment transactions be conducted
through the delivery- versus - payment (DVP) process pursuant to Government Code
Section 53601. Securities shall be held by a third party custodian designated by the City
Treasurer and evidenced by safekeeping receipts pursuant to Government Code Section
53608.
15.0 Reporting
The City Treasurer will prepare a quarterly report to the City council, City Manager and
Director of Finance listing investment transactions made during the reporting period
pursuant to Government Code Section 53607. At a minimum, the quarterly report must
include type of investment, issuer name, dollar amount of each security, date of
maturity, par value, book value and current market value of securities, rate of interest,
funds managed by contracted parties, percentage of the portfolio in each investment
category, weighted average maturity, statement of ability to meet expenditure
requirements for the next six months, and Treasurer indication of compliance with the
City's Investment Policy.
In addition to the quarterly report, the City Treasurer will prepare a monthly statement
of investments and transactions to the Director of Finance.
16.0 Internal Controls
The City Treasurer shall establish a system of written internal controls, which shall
ensure compliance with this Investment Policy and state law. The controls shall be
designed to prevent loss of public funds due to fraud, employee error, and
misrepresentation by third parties, or imprudent actions of employees. The City
Treasurer shall evaluate any audit reports in a timely manner with the Director of
Finance.
Investment transactions and holdings shall be verified by the Director of Finance on a
monthly basis and reviewed annually by the City's external auditor.
17.0 Authorized Financial Dealers and Institutions
The City Treasurer shall transact business only with banks, savings and loans, state and
federal credit unions, and securities dealers. The Treasurer shall select and maintain a
current list of broker /dealers, as defined by Corporations Code Section 25004,
authorized to provide the City investment services. This list of broker /dealers shall be
included in the Treasurer's quarterly investment report to the City Council. The
broker /dealers shall meet the requirements of Government Code Section 53635.5 and
Securities & Exchange Commission Rule 240.15c3 -1 (uniform net capital rule). The
Treasurer shall keep on file with the City an audited financial statement for each
authorized broker /dealer's last complete fiscal year. Each authorized broker /dealer shall
execute an acknowledgement that it has read the City's current Investment Policy and
that it will abide by the terms and conditions of the Policy. Additionally, each such
broker /dealer shall complete the questionnaire attached hereto. City funds shall only be
placed in and invested with depositories that meet the requirements of Government
Code Sections 53630 et seq.
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18.0 Continuing Education
The City of El Segundo recognizes that employees engaged in investment and
management of public funds should be provided with continuing education on all
aspects of public fund management. At a minimum, the City Treasurer, Deputy
Treasurer I and Deputy Treasurer 11, should complete, at a minimum, five hours of
continuing education in investment management on an annual basis through qualified
institutions. Staff engaged in the management and investment process are encouraged
to complete more than the minimum amount of continuing education as required in this
policy. The Treasurer will include in the quarterly investment report the continuing
education hours for the employees listed in this section.
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CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS
CITY OF EL SEGUNDO )
I, Tracy Weaver, 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 No. 4975 was duly passed and adopted by said City Council, approved and
signed by the Mayor, and attested to by the City Clerk, all at a regular meeting of said
Council held on the 6th day of June, 2016, and the same was so passed and adopted by
the following vote:
AYES: Mayor Fuentes, Mayor Pro Tem Jacobson, Council Member Atkinson,
Council Member Fellhauer, Council Member Dugan
NOES:
ABSENT:
ABSTAIN:
WITNESS MY HAND THE OFFICIAL SEAL OF SAID CITY THIS 6th day of June, 2016,
Tracy Weaver, City Clerk
of the City of El Segundo,
California
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