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HomeMy WebLinkAboutResolution No. 502-01 Investment PolicyRESOLUTION NO.: S n 2- o t A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ZEPHYRHILLS, FLORIDA, AMENDING THE CITY OF ZEPHYRHILLS, FLORIDA, INVESTMENT POLICY AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the State of Florida has mandated certain changes in the investment policy of the City's finances; WHEREAS, the City Council of the City of Zephyrhills, Florida, has determined that it is in the best interest of the citizens of the City of Zephyrhills that the "Investment Policy" be enacted as soon as possible; and WHEREAS, the new amended Investment Policy is attached hereto, marked as Exhibit "A", and made a part hereof. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Zephyrhills as follows: 1. , That Resolution No.:.<da •a/ , is hereby enacted, together with Exhibit "A", which is attached hereto and made a part hereof. 2. The Resolution and attached Exhibit shall supersede any and all investment policies, which may be contradictory to the provisions contained herein. 3. The provisions of this Resolution shall become effective upon approval by the City Council of the City of Zephyrhills, Florida. RESOLVED in regular meeting on this A7 1 day of A.D., 2001. r k CATHI L. COMPTON, President of City Council r• ATTEk: ChytGlork, LYNDA D. BOAN A. ROY BURNSIDE, Mayor CITY OF ZEPHYRHILLS. FLORIDA INVESTMENT POLICY I. SCOPE This Investment Policy applies to all funds held by or for the benefit of the City of Zephyrhills, Florida (the City). H. INVESTMENT OFBJECTIVES The following investment objectives will be applied in the management of the City's funds. A. The primary objective of the investment activities is the protection of City funds. B. The investment strategy will provide sufficient liquidity to meet the City's operating, payroll and capital requirements. C. In investing public funds, the Finance Director will strive to maximize the return on the portfolio, but will minimize investment risk. D. The Finance Director will set procedures to control risks and diversify investments regarding specific security types, maturities and financial institutions. M. PRUDENCE AND ETHICAL STANDARDS The City staff shall use the "prudent person" standard in the management of the overall investment portfolio. The Finance Director, or persons performing the investment functions, acting as a "prudent person" in accordance with the written policies and procedures and exercising due diligence, shall not be responsible for an individual security's credit risk or market price change provided that appropriate monitoring efforts are performed. The "prudent person" standard is herewith understood to mean: Investments shall be made with judgment and care, under circumstances then prevailing, that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety if their capital as well as the probable income to be derived. IV. INVESTMENT PERFORMANCE AND REPORTING A portfolio report shall be provided each month to the City Manager. The report shall include a breakdown of the portfolio as well as its overall performance during that period. V. DELEGATION OF AUTHORITY Responsibility for the administration of the investment program is hereby delegated to the Finance Director who shall establish investment procedures based on these policies. The Finance Director shall be responsible for the implementation of internal controls and monitoring the activities of subordinate staff. VII. AUTHORIZED INSTRUMENTS The Finance Director or appropriate staff shall purchase or sell investment securities at prevailing market rates with City Manager approval. Authorized instruments are as follows: A. The Florida Local Government Surplus Funds Trust Fund (SBA) and the Florida Municipal Investment Trust. B. Negotiable direct obligations or obligations, the principal and interest of which are unconditionally guaranteed by the United States Government. Such securities will include but not be limited to the following: 1. Treasury Bills 2. Treasury Notes 3. Treasury Bonds 4. Cash Management Bills 5. Treasury Securities -State & Local Government Series (SLGS) C. Non-negotiable interest-bearing time certificates of deposit or savings accounts in banks and savings associations under the laws of this state and/or in national banks or savings associations organized under the law of the United States and doing business and situated in this state, provided that any such deposits are secured by the Florida Security of Public Deposits Act Chapter 280, Florida Statutes, and provided that the bank or savings association is not listed with any recognized credit watch information service. D. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by United States agencies provided such obligations are backed by the full faith and credit of the United States Government Such securities will include, but not be limited to, the following: 1. United States Export -Import Bank -Direct obligations or full guaranteed certificates of beneficial ownership. 2. Farmers Home Administration -Certificates of beneficial ownership. 3. Federal Financing Bank -Discount notes, notes and bonds. 4. Federal Housing Administration Debentures. 5. General Services Administration Participation Certificates. 6. Government National Mortgage Association (GNMA) GNMA-guaranteed mortgage -back bonds GNMA-guaranteed pass-through obligations. 7. United States Maritime Administration Guaranteed Title XI Financing. 8. New Communities Debentures -US Government guaranteed debentures 9. US Public Housing Notes and Bonds -US Government guaranteed public housing notes and bonds 10. US Department of Housing and Urban Development Project notes and local authority bonds. E. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by United States Government agencies (Federal Instrumentalities) which are non -full faith and credit agencies limited to the following: 1. Federal Farm Credit Bank (FFCB) 2. Federal Home Loan Bank or its district banks (FHLB) 3. Federal National Mortgage Association (FNMA)- FNMA guaranteed pass-through obligations. 4. Federal Home Loan Mortgage Corporation (Freddie -Macs) including Federal Home Loan Mortgage Corporation participation certificates. 5. Student Loan Marketing Association (Sallie -Mac) 6. Tennessee Valley Authority (TVA) F. Repurchase agreements comprised of only those investments as authorized in Section B, C and D. VII. INVESTMENT MATURITY AND LIQUIDITY A. To the extent possible, an attempt will be made to match investment maturities with known cash needs and anticipated cash flow requirements. Investments of current operation funds shall have maturities of no longer than twelve (12) months. Investments of bond reserves, construction funds, and other non- operating funds shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no even shall exceed three (3) years. The maturities of the underlying securities of a repurchase agreement will follow the requirements of the Master Repurchase Agreement. B. Investments do not necessarily have to be made for the same length of time that the funds are available. The basic criteria for consideration of investments are listed below: 1. Keep maturities short in a period of constantly rising interest rates based on treasury bill auctions or the daily Federal Funds rate. 2. Keep maturities short in a period of inverted treasury yield curve (short-term rates are higher than the long-term rates). 3. Maturities should be lengthened when the treasury yield curve is normal and is expected to remain whole. 4. Maturities should be lengthened when interest rates are expected to fall based on economic reports taken as a whole. 5. The yield curves of the market should be analyzed for significant breaks in yields over various maturity dates. The points at which the yield curve breaks are the points at which there are significant marginal declines in yields for incremental changes in maturity dates. Investments should be made at these breaks in the yield curve so that yields will be maximized. VIII. BID POLICY After the Finance Director or staff has determined the approximate maturity date based on cash flow needs and market conditions and has analyzed and selected one or more optimal types of investment, a minimum of three (3) banks and/or dealers must be contacted and asked to provide bids on the securities in question. To the extent permitted by law, bids will be held in confidence until the highest bid is determined and awarded. If the maturing investment is a certificate of deposit, then one of the contacts shall be the present holder of the funds subject to the portfolio diversification requirements in this policy. Due to the cost of safekeeping, one business day repurchase agreements and overnight sweep repurchase agreements will not be bid, but may be placed with the depository bank relating to the demand account for which the repurchase agreement was purchased. This bid policy shall not apply to investments authorized in Section A. IX.. RISK AND DIVERSIFICATION Assets held shall be diversified to control the risk of loss resulting from overconcentration of assets in a specific maturity, issuer, instrument, dealer or bank through which these instruments are bought and sold. The appropriate management staff shall review and revise periodically as necessary the diversification strategies within the established guidelines. X. AUTHORIZED INVESTMENT INSITUTIONS AND DEALERS The Finance Director shall only purchase securities from financial institutions that are qualified as public depositories by the Treasurer of the State of Florida or from securities dealers that are members of the National Association of Securities Dealers (NASD) and the Securities Investors Protection Corporation (SIPC) with a physical presence in Florida and having minimum net capital as required by Rule 15c3-1 of the Securities and Exchange Commission (SEC) of $10 million ($10,000,000) or primary securities dealers as designated by the Federal Reserve Bank of New York. Repurchase agreements shall only be entered into with primary securities dealers and financial institutions that are state -qualified public depositories. M. THIRD PARTY CUSTODIAL AGREEMENTS The Finance Director, with prior City Manager approval, may execute a Third - Party Custodial Safekeeping Agreement with a commercial bank having trust powers or a trust company chartered by the United States Government or the State of Florida. All securities purchased and/or collateral obtained by the City shall be properly designated as an asset of the City and held in safekeeping by the trust department or trust company and no withdrawal of such securities, in whole or in part, shall be made from safekeeping except by an authorized City staff member. The Third -Party Custodial Safekeeping Agreement shall include letters of authority from the City, details of each party's responsibilities, notification of security purchases, sales, delivery, repurchase agreements, wire transfers, safe- keeping and transaction costs, procedures in care of wire failure, or other unforeseen mishaps including liability of each party. XII. MASTER REPURCHASE AGREEMENT The Finance Director will require all approved institutions and dealers transacting repurchase agreements to execute and perform as stated in the Master Repurchase Agreement. All repurchase agreement transactions will adhere to requirements of the Master Repurchase Agreement. XIII. INTERNAL CONTROLS The Finance Director shall establish and monitor a set of internal controls designed to protect the City's funds and ensure proper accounting and reporting of the securities transactions. Such internal controls shall include, but not be limited to the following: A. All securities purchased or sold will be transferred only under the "deliver versus payment" (D.V.P.) method to insure that funds or securities are not released until all criteria relation to the specific transaction are met. B. The Finance Director is authorized to accept on behalf of and in the name of the City of Zephyrhills bank trust receipts or confirmation as evidence of actual delivery of the obligations or securities in return for investment of funds. C. Trust receipts or confirmations shall fully describe the various obligations or securities held. The receipt or confirmation shall state that the investment is held in the name of the City of Zephyrhills. D. The actual obligations or securities, whether in book -entry or physical form, on which trust receipts or confirmations are issued may be held by a third - party custodial bank and/or institution or by designated correspondent bank with a correspondent relationship to the City's third -party custodian. E. Other internal controls such as: 1. Written documentation of telephone conversations. 2. Adequate separation of duties. 3. Custodial safekeeping 4. Supervisory control of employee actions and operations review. 5. Performance evaluations and interim reporting. F. The Finance Director will coordinate all daily investment activity. The City Manager has designated the position of Finance Director with the authority to initiate all investment activities: other positions may be designated as the City Manager deems necessary. XIV. PORTFOLIO COMPOSITION The guidelines for investments and limits on security issues, issuers, and maturities as established by the City are addressed herein. The City Manager or the City Manager's designee shall have the option to further restrict or increase investment percentages from time to time based on market conditions. Any changes to the established portfolio composition must be in writing from the City Manager directed to the Finance Director. Purchases of investments based on bond covenane requirements shall not be included in the portfolio's composition calculations. A. Florida Local Government Surplus Trust Fund (SBA) and the Florida Municipal Investment Trust. 1. Investment Authorization -The Finance Director, with prior approval of the City Manager, may invest in the SBA and the Florida Municipal Investment Trust 2. Portfolio Composition -A maximum of 100% of the portfolio may be invested in the SBA and the Florida Municipal Investment Trust. B. United States Government Securities 1. The Finance Director, with prior City Manager approval, may invest in negotiable direct obligations or obligations, the principal and interest of which are unconditionally guaranteed by the United States Government. Such securities will include, but not be limited to the following: Treasury Bills Treasury Notes Treasury Bonds Cash Management Bills Treasury Securities -State & Local Government Series (SLGS) 2. Portfolio Composition -A maximum of 50% of the portfolio may be invested in the United States Government Securities. 3. Maturity Limitations- The maximum length of maturity of any direct investment in government securities is three (3) years, except for the underlying securities of repurchase agreements. C. United States Federal Agencies (full faith and credit of the United States Government). 1. Purchase Authorization —With prior City Manager approval, the Finance Director may invest in United States Federal Agency securities that include obligations of the: United States Export -Import Bank -Direct obligations or full guaranteed certificates of beneficial ownership. Farmers Home Administration -Certificates of beneficial ownership. Federal Financing Bank -Discount notes, notes and bonds. Federal Housing Administration Debentures. General Services Administration Participation Certificates. Government National Mortgage Association (GNMA) GNMA-guaranteed mortgage -back bonds GNMA-guaranteed pass-through obligations. United States Maritime Administration New Communities Debentures -US Government guaranteed debentures US Public Housing Notes and Bonds -US Government guaranteed public housing notes and bonds US Department of Housing and Urban Development Project notes and local authority bonds. 2. Portfolio Composition- A maximum of 30% of the portfolio may be invested in United States Federal Agencies 3. Maturity Limitations -Limited to the maturity requirements of United States Government Securities. D. Federal Instramentalitics (United States Government Agencies that are non - full faith and credit. 1. Purchase Authorization- With prior City Manager approval, the Finance Director may invest in Federal Instrumentalities that include obligations of the: Federal Farm Credit Bank (FFCB) Federal Home Loan Bank or its district banks (FHLB) Federal National Mortgage Association (FNMA)- FNMA guaranteed pass-through obligations. Federal Home Loan Mortgage Corporation (Freddie -Macs) including Federal Home Loan Mortgage Corporation participation certificates. Student Loan Marketing Association (Sallie -Mac) Tennessee Valley Authority (TVA) 2. Portfolio Composition -A maximum of 30% of the portfolio may be invested in Federal Instumentalities. 3. Limits on Individual Issuers -A maximum of 15% of the portfolio may be invested in any one issuer. 4. Maturity Limitations -The maximum length of maturity for an investment in any Federal Instrumentality is three (3) years. E. Non -Negotiable Interest -Bearing Time Certificates of Deposit 1. Purchase Authorization -With prior City Manager approval, the Finance Director may invest in non-negotiable interest-bearing time certificates of deposit or savings accounts in banks or savings associations organized under the laws of this state and/or in national banks organized under the laws of the United States and doing business and situated in this state, provided that any such deposits are secured by the Florida Security for Public Deposits Act, Chapter 280, Florida Statutes, and provided that the bank or savings association is not listed with any recognized credit watch information service. 2. Portfolio Composition -A maximum of 30% of the portfolio may be invested in non-negotiable interest-bearing time certificates of deposit or savings accounts. 3. Limits on Individual Issuers -A maximum of 10% of the portfolio may be deposited with any one issuer. 4. Maturity Limitations -The maximum maturity of any certificate shall be no greater than one (1) year from the time of purchase. F. Repurchase Agreements 1. Purchase Authorization -The Finance Director, with prior City Manger approval, may invest in repurchase agreements based on the requirements set forth by the Master Repurchase Agreement. All firms with which the City enters into a repurchase agreement will have in place an executed Master Repurchase Agreement with the Finance Director. 2. Portfolio Composition -A maximum of 20% of the portfolio may be invested in repurchase agreements with the exception of one (1) business day agreements or overnight sweep agreements. 3. Limited on Individual Sellers- A maximum of 5% of the portfolio may be invested with any one institution or dealer with the one exception of one (1) business day agreements and overnight sweep agreements. 4. Maturity Limitations -The original maturity of the security must be 180 days or less. XV. MONEY MANAGERS The City Manager may utilize an outside money manager to invest up to 25% of the portfolio. XIV. STANDARD OF ETHICS Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment programs, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the City Manager any material financial interest in financial institutions that conduct business with the City of Zephyrhills and shall further disclose any large personal financial or investment positions that could be related to the performance of the City's portfolio. Employees and investment officers shall subordinate their personal investment transactions to those of this jurisdiction, particularly with regard to the timing of purchases and sales. XVII. REPORTING The Finance Director shall submit annually to the City Council an investment report outlining the City's investment transactions for the preceding year and describing the City's investment position as of the date of the report. Earnings on investments shall be compared to benchmark indicators relative to portfolio performance. Quarterly reports, in addition to the required annual report, will be provided to the City Manager. XVIII. CONTINUING EDUCATION This investment policy shall provide for the continuing education of the unit of local government's officials responsible for making investment decisions or chief financial officer. Such officials must annually complete 8 hours of continuing education in subjects or courses of study related to investment practices and products. XIX. AUDITING State and local laws require an annual audit of the City's financial records. That audit will include a review of all investment activity for the year for compliance with these investment procedures. Included in the audit review will be a review of internal controls related to investment of City funds and appropriate investment documentation. XX. INDEMNITY The Financial Director and other employees authorized to invest City Funds shall be personally indemnified in the event of investment loss provided investments are made in full compliance with these policies.