HomeMy WebLinkAboutRES-92-5517 (INVESTMENT POLICY/ANNUAL STMT)1
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RESOLUTION NO. 92- 5517
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERMOSA BEACH
ACKNOWLEDGING THE RECEIPT AND FILING OF THE ANNUAL STATEMENT OF
INVESTMENT POLICY FOR THE YEAR 1992
WHEREAS, the California State Legislature passed legislation
during the 1984 session requiring the filing of an annual
Statement of Investment Policy by local public agencies; and
WHEREAS, the Governor of the State of California signed such
legislation into law effective January 1, 1985 (Chapter 1226);
and
WHEREAS, the City Treasurer of the City of Hermosa Beach
declares the annual Statement of Investment Policy to be as
follows:
PURPOSE: This statement is intended to provide a guideline for
the prudent investment of temporary idle cash, trust funds and
restricted monies and to outline a policy for maximizing the
efficiency of the cash management system. Ultimate investment
goals include the enhancement of economic status and the
protection of pooled cash investments.
OBJECTIVE: The cash management system of the City of Hermosa
Beach is designed to accurately monitor and forecast expenditures
and revenues, thus insuring the investment of monies to the
fullest extent possible. Attempts to obtain highest interest
yields possible are statement of fact as long as investments meet
the criteria required for safety and liquidity.
POLICY: The City of Hermosa Beach operates its investment
program with State and self-imposed constraints. It does not buy
stocks; it does not speculate; it does not deal in futures,
options or security loan agreements. With regard to investment
companies, the City will deal only with investment companies
registered with the Securities and Exchange Commission. The City
Treasurer will have sole discretion over Security Trading, except
the state of California and Los Angeles County Investment pool.
Longer term investments (over one year) are generally limited to
maturities of 3 years or less, but will never exceed five years.
Criteria for selecting investments and the absolute order of
priority are:
1. Safety
2. Liquidity
3. Yield
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The City's investment philosophy is to insure the safety of
principle and to provide money when needed. A high dollar yield
on investments, though important, ranks third in the priority of
investment strategy.
Depository Services
Money must be deposited in state or national banks, state or
federal savings associations, or state or federal credit unions
in the state. It may be in inactive deposits, active deposits or
interest-bearing active deposits. The deposits cannot exceed the
amount of the bank's or savings and loan's paid up capital and
surplus.
We require that each financial institution submit current
financial statements which are evaluated prior to the investment
of funds. We use the following criteria:
The institution must have been in business at least three
years.
The institution must submit audited financial statements.
In addition, examination is made of the Reserve for Loan
Losses category to evaluate the financial trend of the
institution's asset base.
Whenever possible, the use of several years' financial data
is evaluated to present a trend of activity in the
institution.
We also require that interest be paid to the City on a monthly
basis (current state law only requires quarterly payment).
Authorized Investments
Generally, investments shall be made in the context of "prudent
man" rule, which states that,
"investments shall be made with judgement and care, under
circumstances then prevailing, which persons of prudence,
discretion, and intelligence exercise in the management of
their own affairs, not for speculation, but for investment,
considering the probable safety of their capital as well as
the probable income to be derived."
The City is further governed by the California Government Code,
Sections 53600 et seq. Within the context of these limitations,
the following investments are authorized, as further limited
herein:
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TCD's (Time Certificates of Deposits) which 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 insitu-
tion. Time Certificates of Deposits are safekept in a
legally acceptable safekeeping account. 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
information, signed contract and waiver on file
with the City.
3. The institution must maintain a net worth to asset
ratio of at least 5%, and have a positive earnings
record.
4. The institution must be at least 3 years old.
5. For collateralized investments, the institution must
have at least $100 million in assets. Acceptable
collateral is 110% of the public fund account in
government securities.
U. S. TREASURY's are direct obligations of the United States
Government.
U.S. TRILLS are issued weekly with maturity dates up to
one year. They are issued and traded on a discount
basis and the interest is figured on a 360 day basis,
actual number of days. They are issued in amounts of
$10,000 and up, in multiples of $5,000. They are a
highly liquid security.
U.S. TNOTES are initially issued with two to ten year
maturities. They are actively traded in a large
secondary market and are very liquid. The Treasury may
issue note issues with a minimum of $5,000.
BANKERS ACCEPTANCES are negotiable time drafts drawn to
finance the export, import, shipment or storage of goods, and
they are termed "Accepted" when a bank guarantees to pay the
face value at maturity. A Banker's Acceptance constitutes an
irrevocable obligation of the accepting bank and a contingent
obligation of the drawer and of any endorsees whose names
appear upon it. The bank is protected by its customer's
agreement to provide the necessary funds in advance of the
maturity of the Acceptance and also by the pledge of
documents such as bills of lading, independent warehouse of
terminal receipts, and other documents evidencing ownership
and the insurance of the goods so financed.
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Cities and other local agencies are authorized to purchase
Banker's Acceptances subject to several restrictions. First,
the Banker's Acceptance must be eligible for purchase by
Federal Reserve Systems. Second, purchases of Banker's
Acceptances must not exceed two hundred seventy (270) days'
maturity or 40% of the City's surplus money invested under
Sections 53601 and/or 53635. Finally, no more than 5% of the
agency's surplus funds may be invested in the Banker's
Acceptances of any one commercial bank (Government Code
Sections 53601(f), 53635(f).
LOCAL AGENCY INVESTMENT FUND is a special fund in the State
Treasury which local agencies may use to deposit funds for
investment. There is no minimum investment period and the
minimum transaction is $5,000, in multiples of $1,000 above
that, with a maximum of $5,000,000 for any agency. The City
is restricted to a maximum of eight transactions per month.
It offers high liquidity because deposits can be converted to
cash in twenty-four hours and no interest is lost. All
interest is distributed to those agencies participating on a
proportionate share determined by the amounts deposited
and the length of time they are deposited. Interest is
paid quarterly via a check or warrant.
The State keeps an amount for reasonable costs of making the
investments, not to exceed one-quarter of one percent of the
earnings.
The interest rates are fairly high because of the pooling of
the State surplus cash with the surplus cash deposited by
local governments. This creates a multi -billion dollar money
pool and allows diversified investments. In a high interest
rate market, we do better than LAIF, but in times of low
interest rates, LAIF yields are higher. The City continually
invests in the Local Agency Investment Fund (Government Code
Section 16429).
LOS ANGELES COUNTY POOL INVESTMENT FUND California Government
Code ("Government Code") Section 53684 allows local agencies
in the County of Los Angeles (the "County") to deposit
excess funds in the Los Angeles County Treasury Pool for the
purpose of investment by the Treasurer and Tax Collector of
the County (the "Treasurer") pursuant to Government Code
Sections 53601 and 53635;
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STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )
CITY OF HERMOSA BEACH )
I, Naoma Valdes, Deputy City Clerk of the City
Council of the City of Hermosa Beach, California, do hereby
certify that the foregoing Resolution No. 91-5517 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 meeting place thereof on January 28,
1992.
The vote was as follows:
AYES: Benz, Edgerton, Essertier, Mayor Midstokke
-NOES: None
ABSTAIN: None
ABSENT: Wiemans
DATED: January 29, 1992
Deputy City Clerk