Loading...
HomeMy WebLinkAboutResolution 6506 . . . RESOLUTION NO. 6506 CITY OF MOUNDS VIEW COUNTY OF RAMSEY STATE OF MINNESOTA Adopting an Investment Policy WHEREAS, the City Council has reviewed a draft investment policy; and, WHEREAS, the City Council finds it to be in the best interest to adopt the attached investment policy to guide the conduct of the City's investment program. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Mounds View adopts the attached investment policy. Adopted this 9th Day of May 2005. /; ) . ~;/~~~ - Rob Marty, Mayor ~. (;,7, (3 Kurt Ulrich, City Administrator (ATTEST) (SEAL) . . . City of Mounds View Investment Policy The purpose of this investment policy is guide the City Council and officials of the City in the conduct of the investment program so as to obtain a reasonable rate of return on the investments while minimizing risk and maintaining the public's trust. The Finance Director shall seek to act responsibly as a custodian of the public trust and shall avoid any transaction that might impair public confidence in the City, the City Council, or the Administration. I. Governing Authority Ll!gali(v The investment program shall be operated in conformance with fcderal. statc. and other legal requirements. including Minnesota Statutes Chapter 118A. II. Scope This policy applies to the investment of all funds. I. Poolil/g (4Ful/d\' Except for cash in celtain restricted and special funds. the City \vill consolidate cash and reserve balances from all funds to maximize investment earnings and to increase eniciencies with regard to investment pricing. safekeeping and administration. Investment income will be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. 2. Penwnnel The personnel authorized to conduct banking and investment transactions on behalf of the City shall be named in the Annual Resolution Appointing Official Newspaper, Acting Mayor, Official Depository, and Treasurer. Within this policy, use of the title Finance Director shall mean the person appointed to that position by the City Council. The use of the title Treasurer shall mean any of the persons named in the Annual Resolution Appointing Official Newspaper, Acting Mayor, Official Depository, and Treasurer as being authorized to conduct banking and investment transactions on behalf of the City. Duties of the Treasurer will predominantly be carried out by the Finance Director, but may be carried out by any of the other named persons in the Finance Director's absence. Treasurer shall mean any person carrying out the duties of the Treasurer. III. General Objectives The primary objectives. in priority order. of investment activities shall be safety. liquidity, and yield: I. S(!!ety Safety of principal is thc foremost objective of the investment program. lnvestments shall be undeltaken in a manner that seeks to ensure the preservation of capital in the overall pOltfolio. The objective will be to mitigate credit risk and interest rate risk. a. Credit Risk The City will minimize credit risk. which is the risk of loss due to the failure of the security issuer or backer. by: . Limiting investments to the types of securities listed in Section VII of this Investment Policy . . . · Pre-qualifying the financial institutions, broker/dealers, intennediaries. and advisers with which the City will do business in accordance with Section V · Diversifying the investment portfolio so that the impact of potential losses from anyone type of security or from anyone individual issuer will be minimized. b. Interest Rate Risk The City will minimize interest rate risk, \vhich is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by: · Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity · Investing operating funds primarily in shorter-term securities, money markct mutual funds, or similar investment pools and limiting the average maturity of the portfolio in accordance with this policy (see section VI 11). 2. Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largcly of securities with active secondary or resale markets (dynamic liquidity). Alternatively, a portion of the portfolio may be placed in money market mutual funds or local government invcstment pools, \vhich otTer same-day liquidity for short-term funds. 3. Yield The investmcnt portfolio shall be designed with the ohjective of attaining a market rate of return throughout budgetary and economic cyclcs, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall generally be held until maturity with the following exceptions: · A security with declining credit may be sold early to minimize loss of principal. · A security swap would improve the quality, yield, or target duration in the pOlifolio. · Liquidity needs of the portfolio require that the security be sold. IV. Standards of Care ]. Prudence The standard of prudence to be used by the Treasurer investment officials shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. The Treasurer Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms ofthis policy. The "prudent person" standard states that, "Investments shall be made with judgment 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." . . . 2. Ethics and C01?tlicls (?t1111/!/"CSI The Treasurer OCficers and employee~; inyol';ed in the investment proee~;s shall refi'ain from personal business activity that could conflict with the proper execution and management ofthe investment program. or that could impair their ability to make impmtial decisions. The Treasurer Officers and employee:; shall disclose any material interests in financial institutions \"ith which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment p0l1folio. The Treasurer Officers and employees shall reCrain from undeltaking personal investment transactions with the same individual with whom business is conducted on behalf of the City. 3. Delegal ion qj'A /II hori~\' Authority to manage the investment program is granted to the Finance Director hereinafter rcrerred to as--tHe Treasurer and derived fi'om the following: Annual Resolution Appointing Official Newspaper. Acting Mayor. Official Depository. and Treasurer. Responsibility for the operation of the investment program is hereby delegated to the Treasurer. who shall act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this investment policy. Procedures should include relerences to: safekeeping. delivery vs. payment. investment accounting. repurchase agreements. wire transfer agreements, and collateral/depository agreements. [Please refer to GFOA's 1II1'est111elll Procedures A/milia!. :l003.} No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Treasurer. The Treasurer shall be responsible for all transactions undertaken and shall establish a system oC controls to regulate the activities of subordinate orticials. V. Authorized Financial Institutions, Depositories, and Brokerillealers I. A/llhori::.ed Final1c;alll1stilutiol1s, Depositories, and Brokeli'Dcal/!/"s A list will be maintained of financial institutions and depositories authorized to provide investment services. In addition. a list will be maintained of approved security broker/dealers selected by creditw0l1hiness (e.g., a min imum capital requirement of $ I 0.000.000 and at least five years of operation). These may include "primary" dealers or regional dealers that quali(y under Securities and Exchange Commission (SEC) Rule 15C3-1 (unili.mn net capital rule). Alllinancial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following as appropriate: . Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines . Proof of National Association of Securities Dealers (NASD) cel1ification (not applicable to Certilicate of Deposit counterpmiies) . Proof of state registration . Completed broker/dealer questionnaire (not applicable to Certificate of Deposit counterpaJiies) . Certification of having read and understood and agreeing to comply with the r entity'sJ investment policy. . l:vidence of adequate insurance coverage. An annual review of the financial condition and registration of all qualilicd financial institutions and broker/dealers will be conducted by the Treasurer. (See Appendix for the GFOA Recommended Practice on "Governmental Relationships with Securities Dealers.") . . . VI. Saf-ekeeping and Custody Internal Controls I. Dc!il'L'l:', ',S. p{~l'lI1L':1: All trades ofmarketablc ~~ceuritics will be cxeeuted by delivcry vs. payment (DVP) to ensure that securities are deposited in an eligible finam:ial in:;titu~ion prior to the relea~;e of funds. 2. S{~o:fi:kL't'pi:7g Securities will be held by a l centralized] independent third party ClI:;todian selected by the entity a~; e....ideneed by safekeeping receipts in the City'~~ name. The safekeeping institution shall annually provide a copy of their most recent report on internal controL (Statement oL^,uditing Standard~; No. 70. or Sf\S 70). ;h I. Jnh:rnal Conlrols The Finance Director is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss. thell or misuse. Details of the internal controls system shall be documented in an investment procedures manual and shall be reviewed and updated annually. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that ( I) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management. The internal controls structure shall address the follO\ving points: . A voidance of physical delivery securities . Written eonfinnation of transactions for investments and wire transfers . Password protected authorizations of wire transfers . Development of a wire transfer agreement with the lead bank Accordingly, the investment officer shall establish a process li.)r an annual independent review by an external auditor to assure compliance with policies and procedures or alternatively. compliance should be assured through the City's annual independent audit. vn. Suitable and Authorized Investments I. Investment Tjpes Consistent with the GFOA Policy Statement on State and Local La\vs Concerning Investment Practices. the following investments will be permitted by this policy and are those defined by state and local law where applicable: . U.S. Treasury obligations which eHlTY the full faith and credit guarantee of the United States government and are considered to be the most secure instruments available: . U.S. government agency and instrumentality obligations that have a liquid market with a readily determinable market value; . Certificates of deposit and other evidences of deposit at financial institutions. . Bankers' acceptances: . Commercial paper. rated in the highest tier (e.g.. A-I. P-I. F-l. or D-I or higher) by a nationally recognized rating agency: . Money market mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of dollar-denominated securities: and . . . . Loca] government investment pools either state-administered or developed through joint powers statutes and other inlergovel1llllental agreement legislation. Investment in derivatives ofthe above instruments shall not be allowed. 2. Collalerali::aliol/ Where allowed by state law and in accordance with the GfOA Recommended Practices on the Collateralization of Public Dcposits, full collatcralization will be required on all demand deposit accounts. including checking accounts and non-ncgotiable eCltificates of deposit. (See CiFO^ Recolllmended Practiccs.) VIII. Investment Parameters I. Dil'el'sfficafioll The investments shall be diversified by: . limiting investments to avoid overconeentration in securitics from a specific issuer or business sector (excluding U.S. Treasul)' securitics), . limiting investment in securities that have higher crcdit risks, . investing in securities with varying maturities, and . continuously investing a pOltion at least 10 percent of the portfolio in readily available funds such as local government investment pools (LGlPs). money market funds to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. (Scc the CiFOA Recommcnded Practice on "Diversification of Invcstments in a P0I1fiJlio".) . never investing more than 20 percent of the portfolio in securities with final maturities greater than five years '1 Afaxill1l1l11 !\1aflll'ifies To the extent possible. the City shall attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, thc City will not directly invest in securities maturing morc than ten (10) years from the date of purchase or in accordanec with state and local statutes and ordinances. The City shall adopt weightcd average maturity limitations (which often range from 90 days to 3 years), eonsistcnt with the investment objectives. Because of inherent difficulties in accurately forecasting cash flow requirements, a p011ion of the portfolio should be continuously invested in readily availab]e funds such as loca] government investment pools or money market funds to ensure that appropriate liquidity is maintained to meet ongoing obligations. 3. COlllpclilire Bill.\' The Treasurer inve~;tmcnt oUicer shall obtain competitive bids from at least two brokers or financial institutions on all purchases of investment instruments purchased on the secondary market. IX. Reporting . . . X. XI. XII. I. Reporting The finance Director shall submit qUattcrly an invcstment report that summarizes recent markct conditions, economic developments and anticipated invcstment conditions. The rcpOlt shall summarizc the invcstmcnt stratcgies cmployed in thc most recent qUaJ1er. and dcscribe the portfolio in terms of investment sccuritics, maturities, risk characteristics and other featurcs. The report shall explain the quarter's total investment return and compare the return \,""ith budgetary expectations. The report shall include an appendix that discloses all transactions during the past quarter: The repOlt shall bc in compliancc with state law and shall be distributed to the investment committee and others as required by law. Each quarterly report shall indicate any areas of policy conccrn and suggested or planned revision of investment strategies. 2. Pel./ormance Standards The City" s cash management pOltt()lio shall be designed with the objective of regularly meeting or exceeding a selected performance benchmark, which shall be thc average return on thrcc- month U.S. Treasury bills. 3. ;\!arking to ,Harket Thc markct valuc ofthc p0l1t()lio shall be calculated at least quarterly and a statement of the market value of the pOlttolio shall be issued at least quarterly. This \"ill ensure that rcview of thc investment p0l1folio. in terms ofvaluc and price volatility. has bccn perfornled consistent with the GFOA Recommended Practice on "Mark-to-Market Practices for Statc and Local Govcrnmcnt Investment Portfolios and Invcstmcnt Pools." (See GFOA Recommended Practiccs.) In dcfining market value, considerations should be given to the GASB Statemcnt 31 pronouncement. Policy Considerations I. Exemption Any investment currently held that does not meet the guidelines of this policy shall be exempted from the requiremcnts of this policy. At maturity or liquidation. such monies shall be reinvested only as provided by this policy. 2. Amendments This policy shall be reviewed on an annual basis. Any changes must be approved by the investment officer and any other appropriate authority, as well as the individuals charged with maintaining internal controls. Approval of Investment Policy The investment policy shall be fonnally approved and adopted by the governing body ofthc City and reviewed annually. List of Attachments The following documcnts, as applicable. are attached to this policy: . Listing of authorized personnel. see Annual Appointing Resolution 642-J, . Relevant investment statutes and ordinances. sec MN Statutes. Chapter 118A . . . . Listing of authorized broker/dealers and tinancial institutions. scc Annual Appointing Resolution 64U lntemal Controls see Section VI orthe drall investmcnt policy G lo:;sary . .