HomeMy WebLinkAboutAgenda Packet - February 4, 2013 - CC APPROVED .
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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: MARCENE HAMILTON, CITY TREASURER
DATE: FEBRUARY 4, 2013
SUBJECT: CITY TREASURER'S STATEMENT OF CASH AND INVESTMENT
BALANCES FOR THE MONTH OF DECEMBER 2012
RECOMMENDATION:
It is recommended that the Council Members receive, review, and file the City Treasurer's
Report for the City of Azusa for the month of December 2012.
BACKGROUND:
Transmitted herewith is the City Treasurer's Statement of Cash Balances for the City of Azusa
for the month of December 2012. City investments are made in accordance with the City's
Investment Policy adopted and approved with Resolution No. 05 — C16 dated, November 21,
2011 and Government Code Section 53600 et seq.
FISCAL IMPACT:
The balances of cash, investments, and projected revenues for the next six months are expected
to be sufficient to meet cash disbursement requirements of the City for at least the next six
months.
The change in total cash in bank and investments from November 30, 2012 to December 31,
2012 is a net increase of$1,612,163.58.
CITY OF AZUSA TREASURER'S REPORT
Prepared by: Marcene Hamilton, Treasurer
Treasury Checking Accounts and Certificates of Deposit December 31,2012
Held in Wells Fargo Bank
Interest or Balance
Face Maturity Account Number
Coupon Description or
Amount Date or CUSIP
Rate Market Value
Checking Accounts
General Checking Account XXX-XXX1244 73,154.00
Stagecoach Sweep Account DDA XXX-XXX1244 3,062,896.94
Worker's Compensation Checking XXXX-XX3279 0.00
Flexible Reimbursement XXXX-XX5036 0.00
Payroll Checking(ZBA account) XXXX-XX1393 0.00
Police Petty Cash Fund XXX-XXX0334 189.12
Police Detective Petty Cash Fund XXX-XXX2231 4,920.00
DACA Account-ISO Collateral XXXX-XX2015 500,000.00
Section 108
0.970% Choice IV-Public Fund Account XXX-XXX2239 30,842.19
Covington Endowment
WFB Advantage Heritage Money Market Fund(rated AAAm/Aaa) WFB XXXX7554 19,816.87
100,000 05/12/14 1.400% Certificate of Deposit Discover Bank DE Matures 5/12/14 CUSIP 254670D66 100,973.90
TOTALS WELLS FARGO BANK ACCOUNTS 3,792,793.02
•
Page 1
CITY OF AZUSA TREASURER'S REPORT
Prepared by: Marcene Hamilton,Treasurer
December 31,2012
Market Price Interest Received
Coupon Maturity SettlementMarket
Broker Face Amount Description Acct/Cusip No. Principal** (Changes Fiscal Year to
Rate Date Date Monthly), Value***
Date*
City of Azusa Investments - Certificates of Deposit-FDIC Insured
CERTIFICATES OF DEPOSIT SOLD OR MATURED DURING FISCAL YEAR 4,715.54,
Wachovia Sec 245,000.00 Everbank Jacksonville FL 0.500% 11/29/12 29976DQC7 11/29/12 245,000.00 99.939 244,850.55
Wachovia Sec 200,000.00 Beal Bank Nevada Las Vegas 0.600% 06/05/13 07370S6T7 06/06/12 200,000.00 100.073 200,146.00
Wachovia Sec 100,000.00 Metlife Bank,NA 1.300% 10/28/13 591557FH1 10/21/10 100,000.00 100.805 100,805.00 651.78
Wachovia Sec 245,000.00 Mizuho Corp Bank USA 0.500/ 12/12/13 60688TGZ6 12/12/12 245,000.00 99.943 244,860.35
Wachovia Sec 200,000.00 Bank of China New York 0.600% 01/06/14 06425H4T0 07/05/12 200,000.00 100.024 200,048.00
Wachovia Sec 250,000.00 American Express Centurion 1.250% 06/09/14 02587DAX6 _ 06/06/11 250,000.00 100.972 252,430.00 1,566.78
Wachovia Sec 200,000.00 Sovereign Bank FSB 0.700% 06/20/14 84603MZ66 06/20/12 200,000.00 100.251 200,502.00 701.92
Wachovia Sec 100,000.00 Ally Bank 1.100% 09/08/14 02005QTS2 09/07/11 100,000.00 100.990 100,990.00 554.52
Wachovia Sec 200,000.00 BMW Bank of North America 1.350% 09/23/14 05568PR90 09/23/11 200,000.00 100.966 201,932.00 1,361.10
Wachovia Sec 200,000.00 CIT Bank SLC 1.450% 11/14/14 17284AH43 11/14/11 200,000.00 101.291 202,582.00 1,461.92
Wachovia Sec 200,000.00 Huntington National Bank 0.750% 12/08/14 446438QL0 06/08/12 200,000.00 100.240 200,480.00 752.05
Wachovia Sec 200,000.00 Compass Bank Birmingham AL 1.000% 12/29/14 20451PACO _ 06/29/12 200,000.00 100.201 200,402.00 1,002.74
Wachovia Sec 100,000.00 Ally Bank UT 95.000% 02/08/15 02005QYS6 02/08/12 100,000.00 100.682 100,682.00 473.70
Wachovia Sec 200,000.00 State Bank of India NY 1.250% 06/22/15 856284F74 06/22/12 200,000.00 100.262 200,524.00 1,253.42
Wachovia Sec 200,000.00 Safra National Bank 0.800% 06/29/15 786580T83 07/28/12 200,000.00 100.154 200,308.00 661.92
Wachovia Sec 200,000.00 Bank Hapoalim NY 1.000% 07/24/15 06251AYD6 07/24/12 200,000.00 100.121 200,242.00 0.00
Wachovia Sec 200,000.00 Sallie Mae Bank Murray UT 1.100% 08/10/15 795450NT8 08/08/12 200,000.00 100.099 200,198.00
Wachovia Sec 200,000.00 Barclays Bank of Delaware 1.600% 01/11/16 06740KFS1 01/11/12 200,000.00 101.763 203,526.00 1,595.62
Wachovia Sec 200,000.00 Merrick Bank South Jordan UT 0.900% 01/25/16 59012YU96 07/25/12 200,000.00 100.262 200,524.00 754.54
Wachovia Sec 200,000.00 Goldman Sachs Group,Inc. 1.200% 03/07/16 38143ALTO 03/07/12 200,000.00 100.696 201,392.00 1,209.86
Wachovia Sec 245,000.00 Webster Bank NA 1.000% 12/12/17 94768NJD7 12/12/12 245,000.00 99.596 244,010.20
TOTALS 4,085,000.00 4,085,000.00 4,101,434.10 18,717.41
Page 2
CITY OF AZUSA TREASURER'S REPORT
Prepared by: Marcene Hamilton,Treasurer
December 31,2012
Market Price Interest Received
Coupon Maturity Settlement Market
Broker Face Amount Description Acct/Cusip No. Principal** (ChangesFiscal Year to
Rate Date Date Monthly) Value***
Date*
City of Azusa Investments - AAA Rated Federal Agency Bonds
BONDS CALLED OR MATURED DURING FISCAL YEAR 37,708.33
Wachovia Sec 1,000,000 FHLB 1.250 07/29/14 1.250% 07/29/14 313370YK8 09/17/10 1,000,000.00 101.557 1,015,570.00 6,250.00
Gilford Sec 1,000,000 FHLB 2.185 04/15/15 2.185% 04/15/15 313373DW9 04/15/11 1,000,000.00 100.527 1,005,270.00 10,925.00
Gilford Sec 1,000,000 FFCB 1.040 04/11/16 1.040% 04/11/16 3133EALA4 04/11/12 1,000,000.00 100.240 1,002,400.00 5,200.00
Gilford Sec 1,000,000 FFCB 0.910 05/23/16 0.910% 05/23/16 3133EARK6 05/23/12 1,000,000.00 100.196 1,001,960.00 4,550.00
Gilford Sec 1,000,000 FFCB 0.770 6/15/17 0.770% 06/15/17 3133EC5L4 12/05/12 999,300.00 99.905 999,050.00
Gilford Sec 1,000,000 FFCB 0.900 12/26/17 0.900% _ 12/26/17 3133ECB45 12/26/12 999,500.00 99.820 998,200.00
Wachovia Sec 1,000,000 FHLB 2.100 06/07/16 2.100% 06/07/16 3133742R0 06/07/11 1,000,000.00 100.816 1,008,160.00 10,500.00
Gilford Sec 1,000,000 FFCB 0.875 06/14/16 0.875% 06/14/16 3133EAUE6 06/14/12 1,000,000.00 100.273 1,002,730.00 4,375.00
Gilford Sec 1,000,000 FFCB 0.710 07/19/16 0.710% 07/19/16 3133EAYQ5 07/23/12 1,000,000.00 100.211 1,002,110.00 (78.89)
Gilford Sec 1,000,000 FFCB 1.260 03/01/17 1.260% 03/01/17 3133EAFQ6 03/01/12 1,000,000.00 100.194 1,001,940.00 6,300.00
Gilford Sec 1,000,000 FHLB 1.240 05/16/17 1.240% 05/16/17 313379B81 05/16/12 1,000,000.00, 100.322 1,003,220.00 6,200.00
Gilford Sec 1,500,000 FHLB 0.800 05/23/17 0.800% 05/23/17 313381AN5 11/23/12 1,500,000.00 100.138 1,502,070.00
Higgins 1,000,000 FFCB 1.100 06/20/17 1.100% 06/20/17 3133EAVA3 06/20/12 1,000,000.00 100.402 1,004,020.00 5,500.00
Gilford Sec 1,000,000 FHLB.085 07/24/17 0.850% 07/24/17 313380WR4 10/24/12 1,000,000.00 100.031 1,000,310.00
Gilford Sec 1,000,000 FFCB 0.980 09/18/17 0.980% 09/18/17 3133EAX29 09/20/12 1,000,000.00 100.157 1,001,570.00 (54.44)
Gilford Sec 1,000,000 FHLB 0.980 11/15/17 0.980% 11/15/17 3133817D1 11/15/12 1,000,000.00 100.325 1,003,250.00
TOTALS 16,500,000 16,498,800.00 16,551,830.00 97,375.00
WFB-CITY THIRD PARTY CUSTODIAL TRUST ACCT 0.070% N/A N/A N/A 2,010,102.05 100.000 2,010,102.051 888.68
LAIF-CITY LOCAL AGENCY INVESTMENT FUND 0.326% N/A N/A N/A 17,760,542.26 100.000 17,760,542.261 39,107.52
Page 3
CITY OF AZUSA TREASURER'S REPORT
Prepared by: Marcene Hamilton, Treasurer
December 31,2012
Market Price Interest Received
Coupon Maturity Settlement Market
Broker Face Amount Description Acct/Cusip No. Principal** (Changes Fiscal Year to
Rate Date Date Monthly) Value*** Date*
Light&Water Fund Investments - Certificates of Deposit-FDIC Insured
CERTIFICATES OF DEPOSIT SOLD OR MATURED DURING FISCAL YEAR (6,037.12)
Wachovia Sec 245,000.00 Bank BarodaNY 0.550% 10/16/13 060624PQ0 10/16/12 245,000.00 100.027 245,066.15
Wachovia Sec 40,000.00 Bank Hapoalim NY 1.000% 07/24/15 06251AYD6 07/24/12 40,000.00 100.121 40,048.40 127.12
Wachovia Sec 40,000.00 Bank of China NY 0.850% 02/03/14 06425HYW0 02/01/12 40,000.00 100.467 40,186.80 524.09
Wachovia Sec 40,000.00 Beal Bank Nevada Las Vegas 0.600% 06/05/13 07370S6T7 06/06/12 40,000.00 100.073 40,029.20 205.15
Wachovia Sec 40,000.00 BMW Bank of NA 1.350% 04/27/16 05568PW45 04/27/12 40,000.00 100.471 40,188.40 963.12
Wachovia Sec 40,000.00 Compass Bank Birmingham AL 0.900% 06/30/14 20451PAB2 06/29/12 40,000.00 100.239 40,095.60 393.53
Wachovia Sec 200,000.00 Discover Bank Greenwood DE 1.050% 05/11/15 254671AR1 05/09/12 200,000.00 100.238 200,476.00 1,058.63
Wachovia Sec 240,000.00 Enerbank USA 5.000% 09/14/14 29266NUY1 06/14/12 240,000.00 100.149 240,357.60 266.30
Wachovia Sec 240,000.00 First National Bank of Omaha 0.500% 01/10/14 332135EZ1 10/10/12 240,000.00 99.888 239,731.20
Wachovia Sec 200,000.00 GE Capital Financial Inc. 1.250% 05/18/16 36160XD87 05/18/12 200,000.00 99.751 199,502.00 1,260.27
Wachovia Sec 235,000.00 GE Capital Retail Bank 1.050% 04/27/15 36157PCW7 04/27/12 235,000.00 100.237 235,556.95 1,237.13
Wachovia Sec 40,000.00 Goldman Sachs Group,Inc. 0.850% 02/03/14 38143AJB2 02/01/12 40,000.00 100.478 40,191.20 925.92
Wachovia Sec 40,000.00 Huntington National Bank 0.750% 12/08/14 446438QL0 06/08/12 40,000.00 100.240 40,096.00 396.99
Wachovia Sec 40,000.00 Safra National Bank 0.800% 06/29/15 786580T83 07/28/12 40,000.00 100.154 40,061.60 213.05
Wachovia Sec 40,000.00 Sovereign Bank FSB 0.700% 06/20/14 84603MZ66 06/20/12 40,000.00 100.251 40,100.40 333.70
Wachovia Sec 40,000.00 State Bank of India NY 1.250% 06/22/15 856284F74 06/22/12 40,000.00 100.262 40,104.80 584.93
TOTALS 1,760,000.00 1,760,000.00 1,761,792.30 2,452.81
Page 4
•
CITY OF AZUSA TREASURER'S REPORT •
Prepared by: Marcene Hamilton,Treasurer
December 31,2012
Market Price Interest Received
Coupon Maturity Settlement Market
Broker Face Amount Description Acct/Cusip No. Principal** (Changes Fiscal Year to
Rate Date Date Monthly) Value***
Date*
Light&Water Fund Investments - AAA Rated Federal Agency Bonds
BONDS CALLED OR MATURED DURING FISCAL YEAR 28,788.16
Gilford Sec 1,000,000.00 FFCB 1.000 03/08/16 1.000% 03/08/16 3133EAGG7 03/08/12 1,000,000.00 100.161 1,001,610.00 5,000.00
Gilford Sec 1,000,000.00 FHLB 0.720 08/08/16 0.720% 08/08/16 3133805K9 08/08/12 999,500.00 100.005 1,000,050.00
WFB 1,000,000.00 FFCB 0.690 09/26/16 0.690% 09/26/16 3133EAZ76 09/26/12 1,000,000.00 100.301 1,003,010.00
WFB 1,000,000.00 FFCB 0.620 10/24/16 0.620% 10/24/16 3133EA5V6 10/24/12 1,000,000.00 100.207 1,002,070.00
Higgins Capital 1,000,000.00 FHLB 0.700 11/21/16 0.700% 11/21/16 313381AD7 11/21/12 1,000,000.00 100.177 1,001,770.00
Gilford Sec 1,000,000.00 FFCB 1.260 03/01/17 1.260% 03/01/17 3133EAFQ6 03/01/12 1,000,000.00 100.194 1,001,940.00 6,300.00
Gilford Sec 1,000,000.00 FFCB 0.820 07/11/17 0.820% 07/11/17 3133EA4H8 10/12/12 999,000.00 99.972 999,720.00 (22.78)
Gilford Sec 1,000,000.00 FFCB 0.980 09/18/17 0.980% 09/18/17 3133EAX29 09/18/12 1,000,000.00 100.157 1,001,570.00
TOTALS 8,000,000.00, 7,998,500.00 8,011,740.00 40,065.38
WFB-L&W THIRD PARTY CUSTODIAL TRUST ACCT 0.110% N/A N/A N/A 882.40 100.000 882.40 159.77
Market Price Interest Received
Market
CITY OF AZUSA and LIGHT&WATER RATE STABLIZATION Principal** (Changes Fiscal Year to
Monthly) Value***
Date*
TOTAL INVESTMENTS IN FEDERAL AGENCIES,CD's,WFB INSTITUTIONAL TRUSTS,and LAIF 50,113,826.71 50,198,323.11 198,766.57
*The Interest reflects earnings received from July 1,2012.
**The"Principal"column reflects the balance on the last day of the month or the"historical cost"spent to purchase a security.
***The"Market Value" is the current price at which a security can be traded or sold.
Page 5
CITY OF AZUSA TREASURER'S REPORT
Quarterly Comparison Summary December 31,2012
Prepared by: Marcene Hamilton,Treasurer
Account Quarterly Balances
Description
June 30,2012 September 30,2012 December 31,2012 March 31,2013 June 30,2013
WFB-Checking
and Sweep $ 1,325,303.35 $ 2,653,889.40 $ 3,141,160.06 $ - $ -
Accounts
WFB-Section 108
Choice IV $ 30,847.82 $ 30,844.67 $ 30,842.19 $ $
Public Fund
Account
WFB-Certificate of
Deposit-ISO $ 500,000.00 $ 500,000.00 $ 500,000.00 $ - $ -
DACA&Collateral
Account
WFB-Certificate of
Deposit-Covington $ 119,867.44 $ 120,047.72 $ 120,790.77 $ - $ -
Trust Account
Local Agency
Investment Fund $ 22,721,434.74 $ 16,244,535.54 $ 17,760,542.26 $ - $ -
(LAIF)
WFB-3rd Party
Custodial Trust $ 4,004,366.67 $ 6,249,006.04 $ 2,010,984.45 $ - $ -
Investment Account
City of Azusa-
Certificates of $ 3,000,000.00 $ 3,350,000.00 $ 4,085,000.00 $ $
Deposits
Investments
City of Azusa-
Agency Securities $ 16,000,000.00 $ 14,999,210.00 $ 16,498,800.00 $ - $ -
Investments
Light&Water
Rate Stabilization-
Certificates of $ 2,150,000.00 $ 1,275,000.00 $ 1,760,000.00 $ - $ -
Deposit
Investments
Light&Water
Rate Stabilization- $ 7,464,375.00 $ 5,999,500.00 $ 7,998,500.00 $ - $ -
Agency Securities
Investments
Total Cash in
Bank and $ 57,316,195.02 $ 51,422,033.37 $ 53,906,619.73 $ '" $
Investments
APPROVED
• COUNCIL MEETING
Date,d_J4ia ol3 +41" *43' '
AZUSA
CONSENT ITEM
D-6
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: MARCENE HAMILTON, CITY TREASURER
DATE: February 4, 2013
SUBJECT: INVESTMENT POLICY FOR THE CITY OF AZUSA
RECOMMENDATION
The City Treasurer recommends that the City Council approve the attached resolution re-adopting
the Investment Policy for the City of Azusa.
BACKGROUND
California Government Code Section 53646(a)(2) requires the City to adopt an Investment Policy
every year. The City is also charged with changing the policy as necessary. The policy must be
adopted or changed at a public meeting of the Council. The Council Members last adopted the
Investment Policy on November 21, 2011.
DISCUSSION
In addition to the annual review of the City's Investment Policy, Government Code Section 53607
requires the City to reconfirm annually the delegation of investment authority to the City Treasurer.
The Treasurer and the City Council are "fiduciaries" subject to the prudent investor standard. The
Investment Policy is the outline from which the Treasurer operates to ensure that investments are
safe, liquid and achieving returns.
FISCAL IMPACT
None
RESOLUTION NO. 13-C8
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA
ADOPTING THE INVESTMENT POLICY
WHEREAS,the City of Azusa receives taxes and other revenues from a variety of sources
and uses the funds to pay its bills on a regular basis; and
WHEREAS,the City Treasurer is charged with the duties of handling and maintaining the
cash that is taken in or otherwise received by the City; and
WHEREAS,the balance of these funds fluctuates between$3,000,000 and$40,000,000 or
more; and
WHEREAS, per Government Code Sections 53607 and 53600.5 the City Treasurer is
charged with investing idle public funds on the basis of protecting the safety of the funds, ensuring the
liquidity of the investments, and maximizing earnings in that order of importance and based on the
"Prudent Investor Standards"; and
WHEREAS,the State of California requires each City annually to adopt an investment
policy per Government Code Section 53646; and
WHEREAS, the City Council, with the aid of its staff has reviewed the Statement of
Investment Policy and wishes to approve the same;
NOW THEREFORE BE IT RESOLVED that the City Council of the City of Azusa does
hereby adopt its Investment Policy attached hereto marked Exhibit A and instructs the City Treasurer to
be guided by it in carrying out the duties of his office for the benefit of the City of Azusa.
ADOPTED AND APPROVED this 4th day of February 2013.
( 4-(,41
JOSEPH R.ROCHA,MAYOR
I HEREBY CERTIFY that the foregoing resolution was duly adopted by the City Council of
the City of Azusa at a regular meeting thereof on the 4th day of February 2013 by the following vote of
Council:
AYES: CITY COUNCIL MEMBERS:GONZALES,CARRILLO,MACIAS,HANKS,ROCHA
NOES: CITY COUNCIL MEMBERS: NONE
ABSENT: C • - I UNCIL MEMBERS: NONE
ir/ _•/" �
VERA ' NDOZA,CITY C - RK
City of Azusa, California
INVESTMENT POLICY
1. POLICY STATEMENT
All funds of the City of Azusa ("City") shall be invested in accordance with principles of
sound treasury management and in accordance with the provisions of California Government
Code Section 53600, et seq., and guidelines established by the California Municipal
Treasurer's Association, the California Society of Municipal Finance Officers, and this
Investment Policy ("Policy"). These funds are defined and detailed in the City's
Comprehensive Annual Financial Report ("CAFR") and include any new funds created
unless specifically excluded by the City Council.
Specifically excluded funds are:
Funds deposited with the State Public Employees' Retirement System; and
Bond proceeds that are subject to covenants and restrictions as defined in the Bond's
indenture are administered under the direct control of the Bond Trustee.
2. INVESTMENT POLICY OBJECTIVES
A. Overall Risk Profile
Pursuant to California Government Code Section 53600.5 the three(3)objectives of
the City's Policy are, in order of priority:
1. Safeguard the principal of the funds;
2. Meet the liquidity needs of the City; and
3. Achieve a return on the funds.
To achieve these objectives, the City shall consider the following when making an
investment:
1. Safeguard the Principal of the Funds
The City shall mitigate the risk to the principal of invested funds by limiting
credit and interest rate risks. Credit risk is the risk of loss due to the failure
of the security issuer or backer. Interest rate risk is the risk that the market
value of the City's portfolio will fall due to an increase in general interest
rates.
1
a) Credit risk will be mitigated by:
(i) Limiting investments to the safest types of securities;
(ii) By pre-qualifying the fmancial institutions with which it will
do business; and
(iii) By diversifying the investment portfolio so that the potential
failure of any one issue or backer will not place an undue
financial burden on the City.
b) Interest rate risk will be mitigated by:
(i) Structuring the City's portfolio so that securities mature to
meet the City's cash requirements for ongoing obligations,
thereby avoiding the possible need to sell securities on the
open market at a loss prior to their maturity to meet those
requirements; and
(ii) Investing primarily in shorter-term securities.
2. Meet the Liquidity Needs of the City
The City's investment portfolio shall be structured in a manner that ensures
securities mature at the same time as cash is needed to meet anticipated
demands (Static Liquidity). Additionally, since all possible cash demands
cannot be anticipated, the portfolio should consist of securities with active
secondary markets (Dynamic Liquidity). The maximum percentage of
different investment instruments and maturities is detailed within Section II
of this Policy.
3. Achieve a Return on the Funds
Yield on the City's investment portfolio is of secondary importance compared
to the safety and liquidity objectives described above. Investments are
limited to relatively low risk securities in anticipation of earning a fair return
relative to the risk being assumed. While it may occasionally be necessary or
strategically prudent for the City to sell a security prior to maturity to either
meet unanticipated cash needs or to restructure the portfolio, this Policy
specifically prohibits trading securities for the sole purpose of speculating on
the future direction of interest rates.
2
B. Basic Investment Strategy
The City's investment portfolio shall be structured to provide sufficient funds from
investments to meet the City's monthly anticipated cash needs. Subject to the
objectives stated above,the choice in investment instruments and maturities shall be
based upon an analysis of future anticipated cash needs, existing and anticipated
revenues,interest rate trends and specific market opportunities. No investment may
have a maturity of more than five (5) years from its date of purchase without
receiving prior City Council approval. After approval by City Council,reserve funds
associated with bond issues may have a maturity of more than five(5)years,up to
the earliest date the bonds may be redeemed or mature.
3. INVESTMENTS
This section of the Policy identifies the types of investments in which the City will invest its
idle or surplus funds.
A. Standard of Prudence
The City operates its investment portfolio under the Prudent Investor Standard
(California Government Code Section 53600.3) which states, in essence, "when
investing,reinvesting,purchasing,acquiring,exchanging,selling or managing public
funds, a trustee shall act with care, skill, prudence and diligence under the
circumstances then prevailing, including, but not limited to, the general economic
conditions and the anticipated need of the City, that a prudent person in a like
capacity and familiarity with those matters would use in the conduct of funds of a
like character and with like aims, to safeguard the principal and maintain the
liquidity needs of the City."
This standard shall be applied in the context of managing the overall portfolio.
Investment officers,acting in accordance with written procedures and this investment
policy and exercising the above standard of 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
appropriate action is taken to control adverse developments.
B. Eligible Securities
The City is provided a broad spectrum of eligible investments under California
Government Code Section 53600, et seq. The City may choose to restrict its
permitted investments to a smaller list of securities that more closely fits the City's
cash flow needs and requirements for liquidity. If a type of investment is added to
3
California Government Code Section 53600 et seq.,the new investment option will
not be added to the City's Authorized Investment List until this Policy is amended
and approved by the City Council. If a type of investment permitted by the City
should be removed from California Government Code 53600 et seq.,the investment
will be deemed concurrently removed from the City's Authorized Investment List.
The City's Authorized Investment List
• Insured Certificates of Deposit (CD's) of California banks and/or savings and
loan associations, and/or savings banks that mature in five (5) years or less,
provided that the City's investments shall not exceed Two Hundred and Fifty
Thousand Dollars ($250,000) per institution. If the investment exceeds the
insured Two Hundred and Fifty Thousand Dollars($250,000),the funds are to
be collateralized at one hundred and ten percent (110%) of the deposit in
government securities or one hundred and fifty percent(150%) in mortgages.
• Local Agency Investment Fund (LAIF) Demand Deposits.
• Securities of the U.S. Government, and securities of which the principal and
interest is guaranteed by the full faith and credit of the U. S. Government.
• Securities issued by agencies and instrumentalities of the U. S. Government or
issued by a government-sponsored enterprise.
• Commercial Paper(limited to 30%of the portfolio)rated Al/P1 or the equivalent
by two nationally recognized rating agencies with maturities not to exceed one
hundred and eighty-one (181) days.
• Medium-Term Corporate Notes (limited to 20% of the portfolio)that are rated
"AA"or better by two (2) nationally recognized rating agencies.
• Passbook Savings or Money Market Demand Deposits,subject to the restrictions
and limitations set forth in California Government Code Section 53638.
• Repurchase Agreements (limited to 30% of the portfolio)with approved banks
and broker-dealers who have completed and signed a Master Repurchase
Agreement with the City.
• Money Market Mutual Funds(with a stated objective of maintaining a$1.00 net
asset value) that has been rated AAAm by Moody's or any two nationally
recognized rating agencies.
Please see Exhibit A for a more detailed description of the authorized
investments listed above.
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A thorough investigation of any pool or fund is required prior to investing and on a
continual basis. The investigation will, at a minimum, obtain the following
information:
• A description of eligible investment securities, and a written statement of
investment policies and objectives; and
• A description of interest calculations and how it is distributed,and how gains and
losses are distributed; and
• A description of how securities are safeguarded (including the settlement
process) and how often the securities are marked to market and how often an
audit is conducted; and
• A description of who may invest in the program, how often, what size deposits
and withdrawals are permitted; and
• A schedule for receiving statements and portfolio listings; and
• A determination as to whether the pool/fund maintain a reserve or retain earnings
or is all income after expenses distributed to participants; and
• A fee schedule that also discloses when and how fees are assessed; and
• A determination as to whether the pool or fund is eligible for bond proceeds
and/or will accept such proceeds.
The purpose of this investigation is to determine the suitability of a pool or fund and
evaluate the risk of placing funds with that pool or fund.
One of the purposes of this Policy is to define what investments are permitted.
If a type of security is not specifically authorized by this Policy, it is not a
permitted investment.
C. Qualification of Brokers,Dealers and Financial Institutions
The City Treasurer or designees will establish and maintain a list of the financial
institutions and broker/dealers authorized to provide investment and depository
services to the City, will perform an annual review of the financial condition and
registrations of the qualified bidders,and require annual audited financial statements
to be on file for each approved company. The City shall annually send a copy of
their current Policy to all financial institutions and broker/dealers approved to do
business with the City. Receipt of the Policy and Enabling Resolution, including
confirmation
that it has been received and reviewed by the person(s)handling the City's account,
shall be acknowledged in writing within thirty (30) days.
All broker-dealers and financial institutions that desire to become qualified bidders
for investment transactions must submit a"Broker-Dealer Application"and related
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documents relative to eligibility. This includes a current audited fmancial statement,
proof of state registration,proof of NASD registration and a certification they have
received and reviewed the City's Policy and agree to comply with the provisions
outlined in the Investment Policy. The City Treasurer or designees may establish
any additional criteria they deem appropriate to evaluate and approve any financial
services provider. The selection process for broker-dealers shall be open to both
"primary dealers"and"secondary/regional dealers"that qualify under Securities and
Exchange Commission Rule 15c3-1 (Uniform Net Capital Rule). The provider must
have an office in California and the provider's representative must be experienced in
institutional trading practices and familiar with the California Government Code as it
relates to investments by a City.
D. Collateralization Requirements
Uninsured Time Deposits with banks and savings and loans shall be collateralized in
the manner prescribed by state law for depositories accepting municipal investment
funds.
Re-purchase Agreements shall be collateralized in accordance with terms specified in
the Master Repurchase Agreement. The valuation of collateral securing a Re-
purchase Agreement will be verified weekly to ensure a minimum of one hundred
and two percent (102%) of the value of the transaction is held by the City's
depository agent.
E. Diversification
The City will diversify its investments by security type and investment. With the
exception of bond reserve funds, bond escrow funds, and any other specific funds
approved by the Treasury Committee or the City Council, the City Treasurer or
designee, and the City's Investment Committee will adopt a strategy that combines
current market conditions with the City's cash needs to maintain the maximum
degree of safety of principal and liquidity throughout market and budgetary cycles.
This strategy will include diversification by investment type and maturity allocations
and will be included in the regular quarterly reports to the City Council. This
strategy will be reviewed quarterly and can be changed accordingly.
F. Confirmations
Receipts for confirmation of purchase of authorized securities should include at a
minimum the following information: trade date, settlement date, description of the
security,par value,interest rate,price,yield to maturity,agency's name,net amount
due, and third party custodial information.
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G. GASB 3
The Governmental Accounting Standards Board("GASB")issued GASB#3 in April
1986,and the local entity's investments must be categorized into three (3) levels of
credit risk as follows:
1) Securities that are insured or registered, or for which the securities are held
by public units or its agent in the units;
2) Securities that are uninsured and unregistered and are held by the broker's or
dealer's trust department or agent in the unit's name;
3) Securities that are uninsured and unregistered and are held by the broker or
dealer, or by its trust department or agent, but not in the unit's name.
The carrying amount and market value of all types of investments must be disclosed
in total and for each type of investment. GASB#3 exempts mutual funds and LAIF
investments from the mandatory risk categorization.
4. SAFEKEEPING OF SECURITIES
A. Safekeeping Agreement
The City shall contract with a bank or banks for the safekeeping of securities that are
owned by the City as a part of its investment portfolio or transferred to the City
under the terms of a Re-purchase Agreement.
All securities owned by the City shall be held in safekeeping by a third party bank
trust department acting as agent for the City under the terms of a custody agreement
executed by the bank and the City. All securities will be received and delivered
using standard delivery versus payment(DVP)procedures. The third party bank
trustee agreement must comply with California Government Code Section 53608.
No outside broker/dealer or advisor may have access to City funds, accounts or
investments, and any transfer of funds must be approved by the City Treasurer.
B. Security Transfers
The authorization to release City's securities or funds will be telephoned to the
appropriate bank representative by a finance department member other than the
person who initiated the transaction. A written confirmation outlining details for the
transaction and confirming the telephoned instructions will be sent to the bank within
five (5) working days.
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C. Verification of Security
Securities transferred to the City as collateral securing time deposits or repurchase
agreements that are being held in safekeeping for the City will be verified in writing
and examined on a random basis during the year by the City's independent auditors
as part of the City's annual independent audit.
5. STRUCTURE AND RESPONSIBILITY
This section of the Policy defines the overall structure and areas of responsibility within the
investment management program.
A. Responsibilities of the City Treasurer
The City Treasurer is charged with responsibility for maintaining custody of all
public funds and securities belonging to or under the control of the City,and for the
deposit and investment of those funds in accordance with principles of sound
treasury management applicable laws, ordinances, and this Policy. This includes
establishing written procedures for the operation of the investment program
consistent with this Policy. The procedures should include reference to safekeeping,
master repurchase agreements,wire transfer agreements,banking services contracts
and depository agreements. Such procedures shall also include explicit delegation of
authority to persons responsible for investment transactions. No person may engage
in any investment transaction except as provided under the terms of this Policy and
the procedures established by the Treasurer and approved by the Investment
Committee. Investment decisions that involve borrowing in the amount of One
Hundred Thousand Dollars ($100,000) or more must be included as a separate
discussion item on the City Council's agenda. Such items can no longer be included
on the City Council's consent calendar. (California Government Code Section
53635.7)
B. Responsibilities of the Director of Finance
The Director of Finance is responsible for keeping the City Council fully advised as
to the financial condition of the City.
C. Responsibilities of the City Council
The City Council shall consider and adopt a written Investment Policy. As provided
in that policy, the Council shall receive, review and accept monthly investment
reports.
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D. Responsibilities of the Investment Committee
There shall be an Investment Committee consisting of the Director of Finance,the
City Manager, and City Treasurer and their designees. The Committee shall meet
quarterly to discuss cash flow requirements, the monthly investment reports,
investment strategies,investment and banking procedures and significant investment
related work projects being undertaken in eachdepartment that will affect the cash
flow management of the City Treasurer. This will require timely reports from the
department heads to the City Treasurer concerning significant future cash flow
requirements. The Committee's meetings will be summarized in minutes that are
distributed to the City Council. The Investment Committee,with the approval of the
City Council,may retain an external investment manager on behalf of the City. The
investment manager will be required to act in accordance with this investment policy.
E. Ethics and Conflicts of Interest
All City officers and employees involved in the investment process shall refrain from
personal business activity that could conflict with the proper execution of the
investment program, or that could impair their ability to make impartial investment
decisions. Those employees and investment officials shall disclose to the appropriate
City executive (City Manager, City Attorney, or the Director of Finance) any
material financial interest in financial institutions that conduct business within the
City,and they shall further disclose any large personal financial/investment positions
that could be related to the performance of the City's investments.
6. REPORTING
The City Treasurer shall prepare a monthly investment report, including a succinct
management summary that provides a clear picture of the status of the current investment
portfolio and transactions made over the past month. This management summary shall be
prepared in a manner that will allow the Director of Finance and the City Council to
ascertain whether investment activities during the reporting period have deviated from the
City's Investment Policy.
The monthly report shall include all of the information required by California Government
Section 53646, including the following:
• A list of individual securities held at the end of the reporting month; and
• Unrealized gain or loss resulting from amortization or accretion of principal versus
market value changes by listing the cost and market value of securities owned by the
City; and
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• A description of the current investment strategy and the assumptions upon which it is
based; and
• Dollar weighted yield to maturity of the City's investments; and
• Maturity schedule by type of each of the City's investments; and
• Statement as to compliance of the City's Investment Policy with Government Code
Section 53601 et seq.; and
• Statement as to ability to meet expenditure requirements for next six months; and
• Market value, book value,par value and cost basis of all investments; and.
• Investments"under the management of contracted parties,including lending programs"(i.e.,
investments held by deferred compensation administrators).
7. PERFORMANCE STANDARDS
The investment portfolio will be managed in accordance with the standards established
within this Policy and should obtain a market rate of return throughout budgetary and
economic cycles. The Investment Committee will establish and periodically review the
City's portfolio benchmarks and performance. A benchmark will be selected that compares
with the portfolio composition, structure and investment strategy at that time.
8. REVIEW OF INVESTMENT POLICY
A. Policy Review
This Policy shall be reviewed annually by the City Council in accordance with State
law to ensure its consistency with respect to the overall objectives of safety,liquidity
and yield. Proposed amendments to the Policy shall be prepared by the Treasurer
and reviewed by the Investment Committee and City Attorney and then be forwarded
to the City Council for consideration.
The Investment Committee shall annually review the Policy and any proposed
amendments and forward to the City Council for its consideration and adoption at a
public meeting.
B. Internal Control and Review
The external auditors shall annually review the investments and general activities
associated with the investment program to ensure compliance with this Policy. This
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review will provide internal control by assuring compliance with policies and
procedures for the activities that are selected for testing.
9. ADOPTION OF POLICY
This Policy was duly adopted by the City Council of the City of Azusa on February 5,2013.
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EXHIBIT A
EXHIBIT A
DESCRIPTION OF INVESTMENTS
The City of Azusa's("City") investments may be placed in those securities as outlined below;the
allocation between the various investment instruments may change in order to give the City the best
combination of safety, liquidity and higher yield. Surplus funds of local agencies may only be
invested in certain eligible securities. The City limits its investments to allowable securities under
the State of California statutes(Government Code Section 53601, et. seq., Section 53356, et. seq.,
and Section 53595, et. seq.) and is further limited to those listed below.
Certificates of Deposit
Certificates of deposit allow the City to select the exact amount and day of maturity as well as the
exact depository. Certificates of deposit are issued in any amount for periods of time as short as
fourteen(14)days and as long as several years. At any given time,the City may have certificates of
deposit in numerous fmancial institutions in the future.
The City Treasurer may at his/her discretion waive security for that portion of a deposit, which is
insured pursuant to federal law. Currently, the first Two Hundred and Fifty Thousand Dollars
($250,000)of a deposit is federally insured by FSLIC or FDIC. It may be to the City's advantage to
waive this collateral requirement for the first Two Hundred and Fifty Thousand Dollars($250,000)
because the City may receive a higher interest rate. If funds are to be collateralized,the collateral
will be one hundred and ten percent(110%)of the deposit in government securities or mortgages of
one hundred and fifty percent(150%). At purchase, institutions must not show an operating loss.
Banks must have an equity-to-asset ratio of at least six percent(6%). Savings and loan associations
and savings banks must have an equity-to-asset ratio of a least three percent(3%).
Local Agency Investment Fund
The Local Agency Investment Fund("LAIF")of the State of California offers high liquidity because
deposits can be wired to the City checking account within twenty-four (24) hours. Interest is
computed on a daily basis.
This 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 Five Thousand
Dollars ($5,000) in multiples of One Thousand Dollars ($1,000) above that, with a maximum of
Fifty Million Dollars ($50,000,000) for any city. It offers high liquidity because deposits can be
converted to cash within twenty-four(24)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 by adding it to the principal.
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The State charges participants a small fee to cover reasonable costs associated with operating the
investment pool,not to exceed one quarter of one percent(.25%) of the earnings.
The interest rates received are fairly stable because of the pooling of the State's surplus cash with
the surplus cash deposited by local governments. This creates a well-diversified multi-billion dollar
money pool.
U.S. Treasury Securities
U.S.Treasury securities are highly liquid and considered the safest of all investments because they
are backed by the full faith and credit of the United States Government.
U.S.Treasury Bills are direct obligations of the United States Government. They are issued
weekly with maturity dates up to six(6)months. They are issued and traded on a discount
basis and the interest is figured on a three hundred and sixty(360)day basis using the actual
number of days to maturity. They are issued in the minimum amount of Ten Thousand
Dollars($10,000) and in multiples of Five Thousand($5,000)thereafter.
U.S. Treasure Notes are direct obligations of the United States Government. They are
issued throughout the year with maturities from two up to thirty (30) years. Notes are
coupon securities paying a fixed amount every six(6)months. The City will not invest in
notes having maturities longer then five(5)years.
Federal A2encv Securities
Federal Agency securities are highly liquid and considered to be virtually without credit risk.
Federal Agency issues are guaranteed indirectly by the United States Government. All Agency
obligations that are fixed-rate and meet the maturity restrictions of the State Code and this Policy
qualify as legal investments and are acceptable as security for public deposits. They usually provide
higher yields than regular Treasury issues with all of the same advantages. Examples are:
FNMA's(Federal National Mortgage Association)are used to assist the home mortgage
market by purchasing mortgages insured by the Federal Housing Administration and the
Farmers Home Administration,as well as those guaranteed by the Veterans Administration.
FHLB's (Federal Home Loan Bank Notes and Bonds) are issued by the Federal Home
Loan Bank System to help finance the housing industry. The notes and bonds provide
liquidity and home mortgage credit to savings and loan associations,mutual savings banks,
cooperative banks, insurance companies and mortgage-lending institutions.
Other Federal Agency issues are Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Farm Credit Bank ("FFCB"), Small Business Administration
Notes("SBA's"),Government National Mortgage Association("GNMA's"),Tennessee
Valley Authority("TVA's")and the Student Loan Marketing Association("SLMA's")
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Negotiable Certificate of Deposit
Negotiable certificates of deposit are high-grade instruments, paying a higher interest rate than
regular certificates of deposit. They are liquid because they can be traded in the secondary market.
Negotiable Certificates of Deposit ("NCD's") are unsecured obligations of the issuing financial
institution, bank or savings and loan, bought at face value with a promise to pay face value plus
accrued interest at maturity. The primary market issuance is in multiples of One Million Dollars
($1,000,000). The secondary market usually trades in denominations of Five Hundred Thousand
Dollars($500,000),although smaller denominations are occasionally available. Local agencies may
not invest more than thirty percent(30%)of their surplus money in negotiable certificates of deposit.
NCD's will only be placed with the largest and most financially sound institutions.
Commercial Paper
Commercial paper allows the investment of large amounts of money on a short-term basis at rates
higher than passbook savings accounts. Commercial paper is a short-term unsecured promissory
note issued by a corporation to raise working capital. These negotiable instruments are purchased at
a discount to par value. As an example, corporations such as American Express, International
Business Machines (IBM) and General Electric issue commercial paper.
Local agencies are permitted by state law to invest in commercial paper of"prime" quality of the
highest ranking or of the highest letter and numerical rating as provided by Moody's Investor's
Service, Inc. or Standard and Poor's Corporation (A1/p1 or al+/pl). Purchases of eligible
commercial paper may not exceed one hundred and eighty (180) days maturity nor exceed thirty
percent(30%) of the City's surplus funds.
Medium-Term Corporate Notes
A city may invest in medium term corporate notes with a maximum maturity of five years issued by
a corporation organized and operating within the United States,a depository institution licensed by
the United States Government or any state government and operating within the United States.
California Government Code Section 53601 et seq. permits cities to invest in corporations with a
rating category of"A" or better, but the City will limit its investments in corporate medium term
notes to those issued by corporations that have been rated "AA" or its equivalent by two (2)
nationally recognized ratings agencies.
Passbook Savings or Money Market Account
Passbook savings account allows us to transfer money from checking to savings and earn interest on
smaller amounts of money, which are not available for a longer-term investment.
The passbook savings account is similar to a CD except not for a fixed term. The interest rate is
much lower than CD's but the savings account provides daily liquidity and funds can be deposited
and withdrawn according to our daily needs.
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Mutual Funds
Mutual Funds allow the City to maintain liquidity and receive money market rates. Mutual Funds
are referred to in the Government Code, Section 53601(1), as"shares of beneficial interests issued
by diversified management companies". The Mutual Fund must be restricted by its prospectus to be
a"Money Market"mutual fund and be limited to the same approved investments as LAIF. These
investments include U.S. Treasury and Agency issues, Bankers Acceptances, Commercial Paper,
Repurchase Agreements, Certificates of Deposit, and Negotiable Certificates of Deposit. The
quality rating and percentage restrictions in each investment category applicable to LAIF also apply
to any Mutual Fund.
One of the stated objectives of the Mutual Fund must be to attempt to maintain a One Dollar($1.00)
Net Asset Value(NAV). A further restriction is that the purchase price of shares of any mutual fund
shall not include any sales commission. Investments in mutual funds shall not exceed fifteen percent
(15%) of the City's surplus money.
Repurchase Agreements
Repurchase Agreements are purchases of securities by the City under an agreement with a term of
one(1)year or less whereby the seller will"repurchase"the same securities on or before a specified
date or on demand of either party and for a specified amount. The underlying securities must be
delivered to the City's custodial account by book entry,physical delivery or a third-party custodial
agreement.
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