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RESOLUTION NO. 12-6815
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
HERMOSA BEACH, CALIFORNIA, REVISING THE
STATEMENT OF INVESTMENT POLICY AND RESCINDING
RESOLUTION NO.12-6788
The City Council of the City of Hermosa Beach does hereby resolve and order as follows:
SECTION 1. The City strives to maintain the level of investment of all idle funds as near
to 100% as possible through the optimum operation of its cash management system consistent
with its investment goals of safety, liquidity, and yield, in that order.
SECTION 2. The authority to invest City funds is vested in the elected City Treasurer
subject to the limitations set forth in this Investment Policy. The City Treasurer will review and
select all qualified investments. No investment shall be made in any single specific security that
exceeds 5% of the idle investment portfolio. Subject to restrictions established herein, actual
administration of the selected investments, including the transference of funds and bank
reconciliations, will be performed by the Department of Finance staff and the Deputy Treasurer.
SECTION 3. The Citys investments shall be limited to the investment instruments
authorized by California Government Code sections 53600 through 53609, except as follows:
1. Not more than fifty percent (50%) of the City's idle funds will be invested for any
extended period of time with the Local Agency Investment Fund ("LAIF") administered by the
Treasurer of the State of California.
2. Medium Term Corporate Notes shall have a Moody or S & P rating of at least AA and
mature in 5 years or less.
SECTION 4. The City's investment goals are, in order of priority:
1. Safety:
Safety and the minimizing of risk associated with investing refers to attempts to reduce
the potential for loss of principal, interest, or a combination of the two. The first level of risk
controls is found in state law, which restricts the particular type of investments permissible for
municipalities. The second level of risk control is reduction of default risk by investing in
instruments that are the most credit worthy. The third level of risk control is reduction of market
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risk by investing in instruments that have maturities in an aggregate amount that avoids the risk of
loss from a forced sale to satisfy cash needs. The City invests only in those instruments that are
(considered very safe.
2. Liquidity:
Liquidity is the ability to easily sell at any time with a minimal risk of losing some
portion of principal or interest. Liquidity is an important quality for an investment since the City
may experience unexpected or unusual circumstances requiring larger disbursements than
anticipated, and necessitating the sale of investments to meet the contingency. Most of the City's
investments are reasonably liquid, with the exception of insured Time Certificates of Deposit
issued by banks whose maturities are selected in anticipation of disbursement needs, thereby
avoiding forced liquidation or lost interest penalties.
3. Yield:
Yield is the potential dollar earnings an investment can provide; it is sometimes
described as the rate of return. The City attempts to obtain the highest yield possible when
selecting an investment, provided that the criteria stated herein for safety and liquidity are met.
SECTION 5. The City of Hermosa Beach operates its investment program with various
self-imposed constraints. It does not:
1. Speculate.
2. Deal in futures or options.
3. Purchase on margin or through reverse repurchase agreements.
4. Buy securities exceeding 10 year maturity, unless otherwise approved by City Council.
The City will utilize LAM and LACPIF to the extent it is feasible and practical to maintain
liquidity for its short term cash needs.
SECTION 6. In accordance with Government Code Section 53646, the Treasurer renders
an annual Statement of Investment Policy for City Council approval.
Similarly, and in accordance with the City's Investment Policy, the Treasurer renders a
monthly Investment Report to the City Manager and City Council. The Investment Report
includes an Investment Schedule summarizing the type of investment, date of purchase,
institution, date of maturity, amount of deposit or purchase price, and current market value and
rate of interest for all securities. The monthly Investment Report clearly states compliance with,
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or manner of noncompliance if any divergence from, or violation of the Investment Policy exists,
by including a detailed statement on this matter.
California Government Code Section 53646 (i) requires the City to submit its annual
investment policy to the California Debt and Investment Advisory Commission within 60 days
after the close of the second quarter of the calendar year (and within 60 days of any amendments
thereto).
SECTION 7. Annually, in conjunction with the City's "annual" audit, there shall be an
external audit of the City's Investment Program by an independent auditor to assure compliance
with the Investment Policy. The report of this audit shall be included as part of the auditor's
report.
SECTION 8. The City adheres to the following investment guidelines:
1. Only investments authorized by the hnvestment Policy are used.
2. A copy of this Investment Policy should be given to each financial institution with
which the City conducts business.
3. 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 consummated.
4. The City only invests in banks which are insured or are collateralized pursuant to the
California Government Code.
5. Every investment transaction is properly documented and the procedure for monitoring
is clearly defined.
6. Investment strategies are approved by the Council annually and can be reviewed more
frequently as changes in economic conditions may dictate.
SECTION 9. The City adheres to the following guidelines for certain types of
investments as follows:
1. California State/Local Agency hnvestment Fund (LAIF) — A resolution of the City is on
file with the State Treasurer, which permits maintaining an account in LA1F. The City can use this
account for its short term liquidity requirements, but will not have more than 50% of total pooled
funds invested for any extended period of time.
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2. Los Angeles County Pooled Investment Fund (LACPIF) - Pursuant to Government
Code Section 53684, local agencies in the County of Los Angeles may deposit excess funds in
LACPIF for the purpose of investment by the county treasurer (Government Code Sections 53601
and 53635);
3. Cash Management for Operations -- The City is required to maintain working capital
balances in its general operating accounts. These balances will be minimal and maintained solely
to cover outstanding checks.
SECTION 10. The objectives of the internal control of investments are established by the
City's management to ensure:
1. An orderly and efficient conduct of investing, including adherence to investment
policies.
2. The safeguarding of assets.
3. The accuracy and completeness of the accounting records for investment.
4. The timely preparation of reliable financial information.
5. The prevention of errors.
6. The detection of fraud.
The following procedures will be implemented to ensure that the objectives of internal
control for the City's investments are accomplished:
A. Responsibility
Specific responsibility for the performance of duties should be assigned and lines of
authority and reporting clearly identified and understood.
B. Segregation of Functions
Segregation of functions reduces the risk of developing a situation where one
individual may be in a position to conceal errors. To this end, the following accounting functions
will be performed by different individuals: investments, receivables, and reconciliations.
C. Authorization
All transactions must be authorized by the assigned individual whose responsibilities
and limits of authorization have been clearly delineated. Delegation of authority to approve
transactions must be carefully monitored.
D. Transfer of Investment Funds
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The transferring of investment funds will be carried out exclusively by use of the
Federal Reserve Bank's electronic wire transfer system. The Treasurer will issue each bank with
which the City conducts business a written list of the City's pre -authorized bank accounts to
ensure that funds are transferred only between the City's established accounts.
The written list will include the names of the specific staff authorized to initiate
transfers. Any changes to this list will be submitted in writing to the pertinent banks by the
Treasurer as changes arise.
E. Recording
The manual and electronic recording procedures must be carried out independently of
the individual initiating the investment transaction, to ensure the validity, completeness, and
appropriate authorization of each investment transaction.
SECTION 11. The annual Statement of Investment Policy for the City of Hermosa Beach,
as set forth in the recitals hereof, filed by the City Treasurer in compliance with Section 53646 (a)
of the Government Code, is hereby approved.
SECTION 12. This policy applies to investments effective September 11, 2012.
SECTION 13. 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 minutes of the
passage and adoption thereof in the records of the proceedings of the City Council at which the
same is passed and adopted.
PASSED, APPROVED and ADOPTED this I lth day of September, 2012.
PRESIDENT of
ATTEST:
City Clerk
YOR of the City of Hermosa Beach, California
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STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )
CITY OF HERMOSA BEACH )
I, Elaine Doerfling, City Clerk of the City of Hermosa Beach, California, do
hereby certify that the foregoing Resolution No.12-6815 was duly and regularly passed,
approved and adopted by the City Council of the City of Hermosa Beach at a Regular
Meeting of said Council at the regular place thereof on September 11, 2012.
The vote was as follows:
AYES:
Bobko, DiVirgilio, Fishman, Tucker, Mayor Duclos
NOES:
None
ABSTAIN:
None
ABSENT:
None
Dated: September 12, 2012
Elaine Doerfling, City Ce c