HomeMy WebLinkAboutRES-12-6788 (INVESTMENT POLICY AND RESCINDING RESOLUTIONS)1
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RESOLUTION NO. 12-6788
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
HERMOSA BEACH, CALIFORNIA, CONFIRMING A STATEMENT OF
INVESTMENT POLICY AND RESCINDING RESOLUTIONS NOS. 11-
6729 AND 12-6782
THE CITY COUNCIL OF THE CITY OF HERMOSA BEACH, CALIFORNIA,
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 City's 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
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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
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.
1. 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.
2. 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, California, 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 LAW and LACT 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.
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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,
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 Investment 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.
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SECTION 9. The City adheres to the following guidelines for certain types of
investments as follows:
1. California State/Local Agency Investment Fund (LAIF) — A Resolution of the City
is on file with the State Treasurer, which permits maintaining an account in LAIF. 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.
2. 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:
1. Responsibility
Specific responsibility for the performance of duties should be assigned and lines of
authority and reporting clearly identified and understood.
2. 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.
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3. 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.
4. Transfer of Investment Funds
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, California, 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 January 1, 2012
PASSED, APPROVED AND ADOPTED this 28th day of February 2012.
PRESIDENT
ATTEST:
Clerk
City Council and MAYOR of the City of Hermosa Beach, California
APPROVED AS T� FORM:
City Attorney
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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. 12-6788 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 February 28, 2012.
The vote was as follows:
AYES:
Bobko, DiVirgilio, Duclos, Tucker, Mayor Fishman
NOES:
None
ABSTAIN:
None
ABSENT:
None
Dated: March 13, 2012
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AlameDoerfling, City k