HomeMy WebLinkAboutCity of Tamarac Ordinance O-2004-010Temp. Ordinance #2041
March 18, 2004
Page 1 of 7
Revision #1 — March 18, 2004
CITY OF TAMARAC, FLORIDA
ORDINANCE NO. 0-2004- 10
AN ORDINANCE OF THE CITY COMMISSION OF THE
CITY OF TAMARAC, FLORIDA, AMENDING CHAPTER
6, "FINANCE AND TAXATION" ARTICLE II, "FEES AND
FUNDS" SECTION 6-26, "INVESTMENT OF CITY
FUNDS" TO RECOGNIZE THE INVESTMENT POLICY
AS THE GOVERNING DOCUMENT FOR THE
INVESTMENT OF CITY FUNDS AND SECTION 6-27,
"CITY COMMISSION INVESTMENT DECISIONS"
REQUIRING THE CITY COMMISSION TO ESTABLISH
AN INVESTMENT POLICY BY RESOLUTION;
PROVIDING FOR CODIFICATION; PROVIDING FOR
CONFLICTS; PROVIDING FOR SEVERABILITY; AND
PROVIDING FOR AN EFFECTIVE DATE,
WHEREAS, Section 6-26 of the City of Tamarac Code of Ordinances
provides for the investment of City funds; and
WHEREAS, in 1996 the City of Tamarac in accordance with F.S. 218.415
adopted an Investment Policy via Resolution R-96-67 and amended via R-2002-
377 a copy of which is attached hereto as Exhibit A; and
WHEREAS, The Investment Policy is a comprehensive document which
provides a formal structure that governs the City's investment activities and
clarifies the City's investment objectives and standards; and
WHEREAS, The City of Tamarac desires to amend its Code of
Ordinances to formally Recognize the Investment Policy as the governing
document for investment of City funds; and
Coding: Words ettel 4hfeugFi-are deletions from existing law.
Words underscored are additions.
Temp. Ordinance #2041
March 18, 2004
Page 2 of 7
Revision #1 — March 18, 2004
WHEREAS, The Director of Finance recommends amending the Code of
Ordinances to formally recognize the Investment Policy as the governing
document for investment of City funds and to require that the City Commission
establish the Investment Policy by Resolution; and
WHEREAS, the City Commission of the City of Tamarac, Florida, deems it
to be in the best interest of the citizens and residents of the City of Tamarac to
amend the Code of Ordinances to formally recognize the Investment Policy as
the governing document for investment of City funds and to require that the City
Commission establish the Investment Policy by Resolution.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF
THE CITY OF TAMARAC, FLORIDA:
SECTION 1: The foregoing "WHEREAS" clauses are hereby
ratified and confirmed as being true and correct and are hereby made a specific
part of the Ordinance upon adoption hereof.
SECTION 2: That Chapter 6, "Finance and Taxation", Article II,
"Fees and Funds," Section 6-26, "Investment of city funds" and Section 6-27 "City
Commission investment decisions" are hereby amended as follows:
Sec. 6-26. Investment of city funds.
Funds in
any
general or special account
or fund of the city,
held
or
controlled
by
the governing body of the
city, which funds
are
not
Coding: Words struck thfflugh are deletions from existing law.
Words underscored are additions.
Temp. Ordinance #2041
March 18, 2004
Page 3 of 7
Revision #1 — March 18, 2004
reasonably contemplated to be needed for the purposes intended within a
reasonable time from the date of the deposit, shall be invested en"
pursuant to Section 6-27.
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Temp. Ordinance #2041
March 18, 2004
Page 4 of 7
Revision #1 — March 18, 2004
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an ageney of the United States Geyeffiment unless otherwise
Coding: Words stFuek4hfougt-are deletions from existing law.
Words underscored are additions.
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Temp. Ordinance #2041
March 18, 2004
Page 5 of 7
Revision #1 — March 18, 2004
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Temp. Ordinance #2041
March 18, 2004
Page 6 of 7
Revision #1 — March 18, 2004
Sec. 6-27. City commission investment decisions
Investment of city funds shall be the responsibility of the city commission.
The city commission shall establish by resolution an Investment Polic
which sets forth procedures for investment transactions. Whenever
possible proposals for investments (purchase or sale) shall be reviewed
by the investment advisory committee before being presented to the city
commission. The investment advisory committee may make
recommendations but has no veto power over investment decisions.
SECTION 3: It is the intention of the City Commission and it is
hereby ordained that the provisions of this ordinance shall be made a part of the
Code of Ordinances of the City of Tamarac, Florida, and that Section of this
Ordinance may be renumbered or reletterd and the word "Ordinance" may be
changed to "Section", "Article" or such other word or phrase in order to
accomplish such intention.
SECTION 4: All Ordinances or parts of Ordinances in conflict
herewith are hereby repealed to the extent of such conflict.
SECTION 5: If any provision of the Ordinance or the application
thereof to any person or circumstance is held invalid, such invalidity shall not
affect other provision or application of this Ordinance than can be given affect
without the invalid provision or application, and to this end the provisions of the
Ordinance are declared to be severable.
Coding: Words StRiek thFOUgh are deletions from existing law.
Words underscored are additions.
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Temp. Ordinance #2041
March 18, 2004
Page 7 of 7
Revision #1 — March 18, 2004
SECTION 6: This Ordinance shall become effective immediately
upon its passage and adoption.
PASSED, FIRST READING this 24th day of March, 2004.
PASSED, SECOND READING this 14th day of April, 2004.
ATTEST:
MARION SWENSON, CMC
CITY CLERK
I HEREBY CERTIFY that
I have approved this
ORDINANCE as to form.
ITCHELL/S/Kf
CITY AT RN
(, . JOE SCHREIBER, MAYOR
RECORD OF COMMISSION VOTE: 1st Re
MAYOR SCHREIBER _ I
DIST 1: COMM. PORTNER
DIST 2: COMM. FLANSBAUM-TALABISC
DIST 3: V/M SULTANOF
DIST 4: COMM. ROBERTS
ing
RECORD OF COMMISSION VOTE: 2nd Reaa
MAYOR SCHREIBER
DIST 1: COMM. PORTNER
DIST 2: COMM. FLANSBAUM-TALABISCO
DIST 3: V/M SULTANOF _ Q
DIST 4: COMM ROBERTS
Coding: Words stFue'( thFougare deletions from existing law.
Words underscored are additions.
ing
CITY OF TAMARAC, FLORIDA
RESOLUTION NO. R-2002- 337
Exhibit A
Temp Ord. #2041
Temp. Reso. #9980
November 18, 2002
Page 1
A RESOLUTION OF THE CITY COMMISSION OF THE
CITY OF TAMARAC, FLORIDA, REVISING SECTION
VII. AUTHORIZED AND SUITABLE INVESTMENT
INSTRUMENTS C. REPURCHASE AGREEMENT, OF
THE CITY OF TAMARAC INVESTMENT POLICY TO
INCLUDE REQUIRED LANGUAGE FOR
CERTIFICATION OF THE CITY OF TAMARAC
INVESTMENT POLICY BY THE MUNICIPAL
TREASURERS' ASSOCIATION OF THE UNITED
STATES AND CANADA; PROVIDING FOR
CONFLICTS; PROVIDING FOR SEVERABILITY; AND
PROVIDING FOR AN EFFECTIVE DATE.
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WHEREAS, an Investment Policy provides the formal structure that
governs the activities of investment official(s) and clarifies the City's investment
objectives, standards, and activities; and
WHEREAS, the City Commission of the City of Tamarac adopted an
Investment Policy by Resolution R-96-67 on March 27, 1996; and
WHEREAS, the City Commission of the City of Tamarac adopted a
revised Investment Policy by Resolution R-2001-262 attached hereto as Exhibit
1; and
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Temp. Reso. #9980
November 18, 2002
Page 2
WHEREAS, the City of Tamarac desires to have its Investment Policy
certified by the Municipal Treasurers' Association; and
WHEREAS, the Municipal Treasurers' Association recommends the
addition of the following verbiage to Section VII. C. (hereto attached as Exhibit 2)
in order to receive certification of the policy : If re urchase a reements are legal
and authorized by policy,a Master_ Repurchase Agreement must be sianed with
the bank or dealer. e. . a PSA Master. Repurchase Agreement or equivalent) :
and
WHEREAS, the City of Tamarac executed a Master Repurchase
Agreement with Wachovia Bank, N.A. (f/k/a First Union National Bank) by
Resolution 2001-289; and
WHEREAS, the City of Tamarac Director of Finance and Finance and
Policy Officer recommend the revision of the Investment Policy in order to
receive certification; and
WHEREAS, the City Commission of the City of Tamarac, Florida, has
deemed it to be in the best interest of the citizens and residents of the City of
Tamarac that Section VII. Authorized and Suitable Investment Instruments C.
Repurchase Agreement of the City of Tamarac Investment Policy be revised to
include the recommended language in order to receive certification.
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Temp. Reso. #9980
November 18, 2002
Page 3
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF
THE CITY OF TAMARAC, FLORIDA:
SECTION 1: The foregoing "WHEREAS" clauses are hereby
ratified and confirmed as being true and correct and are hereby made a specific
part of this Resolution.
SECTION 2: The appropriate City Officials are hereby authorized
to revise Section VII. Authorized and Suitable Investment Instruments C.
Repurchase Agreement of the City of Tamarac Investment Policy to include the
recommended language in order to receive Certification of the Investment Policy
by the Municipal Treasurers' Association,
SECTION 3: All resolutions or parts of resolutions in conflict
herewith are hereby repealed to the extent of such conflict.
SECTION 4: If any clause, section, other part or application of this
Resolution is held by any court of competent jurisdiction to be unconstitutional or
invalid, in part or application, it shall not affect the validity of the remaining
portions or applications of this Resolution.
Temp. Reso. #9980
November 18, 2002
Page 4
SECTION 5: This Resolution shall become effective immediately
upon its passage and adoption.
PASSED, ADOPTED AND APPROVED this 27"' day of November, 2002.
ATTEST:
MARION SWE SON, CIVIC
CITY CLERK
I HEREBY CERTIFY that
I have approved this
RESOLUTION as to form.
f// l
MITCHELL S. KF* T
CITY ATTORKE _.,
J.OE SCHREIBER, MAYOR'
RECORD OF COMMISSION
MAYOR SCHREIBER
DIST 1. V/M. PORTNER_
DIST 2: COMM. MISHKIN
DIST 3: COMM. SUL.TANOF
DIST 4: COMM. ROBERTS
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Temp. Reso. # 9980
November 18, 2002
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CITY OF
TAMARAC
m
CITY COMMISSION
TAMARAC, FL,ORIDA
JOE SCHREIBER.
MAYOR
MARC L. SULTANOF
VICE -MAYOR
GERTRUDE MISHKIN
COMMISSIONER
EDWARD C. PORTNER
COMMISSIONER
KAREN ROBERTS
COMMISSIONER
JEFFREY L. MILLER
CITY MANAGFFR
MITCHELL KRAFT
CITY ATTORNEY
DONA J. NEWMAN, LEANNE WILLIAMS,
CPA,CGFO CPA
DIRECTOR OF FINANCE AND POLICY
FINANCE OFFICER
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1 Table of Contents
I. PURPOSE............................................................................................... 4
' II. SCOPE ........................................................................................ ..............4
1 III. DEFINITIONS...................................................................... 4
IV.
013.)lvCTIVES ................. I---------- ..............................
5
A. Safety .................
B. Liquidity .................................................. ......._...............................
'
C. Yield .........................
5
V.
STANDARD OF CARE ..................................................
5
'
A_ Prudence........................................................ ........ ...................................5
B. Ethics and Conflicts of Interest .............
C. Delegation of Authority ......................
...6
VI.
SAFEKEEPING, AND CUSTODY.....................................................................
.....7
A. Authorized Financial Dealers and Institutions .............................
..............7
B. Internal Controls.........................................................................................8
'
C. Third -Party Custodial Agreements...........................................................
10
'
VII.
AUTHORIZED AND SUITABLE INVESTMENT- INSTRUMENTS
A. lnvestmenlTypes......................................................................
.......................11
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B. Collateralizalion .......................................................................................12
'
C. Repurchase Agreement ...................................................13
D. Cornplirance with City's Bond Covenants ................................
................13
E. Purchase of City's Utility Bonds................................................................13
VIII.
INVESTMENT- INSTRUMENTS NOT AUTHORIZED .........................................
13
A. High Grade Corporate Debt......................................................................13
'
B. Repurchase Agreements..........................................................................
C. Derivative Investment Products
14
14
................................................................
'
IX.
INVESTMENT PARAMETERS ........... .................................................
-------14
A. Diversilication....................................................................................
.....14
B. Maximurn Maturities.................................................................................14
C. Duration........ ............................................. ............ ... ...............
15
D. Security Selection .......................... I ........ ..........................
........... .
.... 1 5
..
E. Policies to Enhance Return on Investment ........................................
TABLE 1 Investment Parameters.................................................................................18
Table of Contents
}{. RFnP{]RTIK1G................................ ----.................
.................... ............. —1g
A. Method ...................................................................
...... —..................... 1A
8- Pedorn1anCgStandards .............. ----
... ................ .................. ...... ... 19
C. Marking to Market .......... --- ............................................
...................... 13
XiPOLICY ------ .................. .................. ...................
.......... ....... ---.............. 19
A- Exemption ..... ---- ............. —.....................
--------- ...... ............. ---------- -1B
B, Amendment --......................... ............
---................................ '2O
C� Effective [)at( ..------.........................
----...................... ... ---- �20
(;L[)88ARY----------------------------^^^--------.
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City of Tamarac, Florida
Investment Policy
I. PURPOSE
' The iratc_nnt of this policy is to provide the Director of Finance and designated staff
with sufficient latitude to effectively manage the City of Tamarac:'s (City) financial
' assets so as to:
1) Ensure, the; preservation of principal,
2) Maintain sufficient crash flow to enable the City to m(ret its
' obligations, and
3) Maximize the return on assets with an acceptably low exposure to
' risk.
' II. SCOPE
This investment Policy shall apply to all the tunas held by the City on behalf of
' the residents of the City of Tamarac, with the exception of Pension Fund assets
;rand Funds whose uses are restricted by debt covenants, prior contracts, legal,
regulatory or other constraints.
' All financial assets held or controlled by the City, not otherwise classified as
restricted assets requiring separate investing, shall be identified as "general
' ope,raling funds" of the City for the purpose: of this policy and shall be invested
undor the guidelines as horc;in set forth. The guidelines, provided herein, are the
general operating procedures. General operating funds include:
General fund
Special Revenue Funds
Debt Service Funds
Capital Projects
Enterprise Funds
' Internal Service Funds
Trust and Agency Funds
and any new funds croaled by the governing body,
unless specifically exempt.
' III. DEFINITIONS
See Glossary Section (Rage 21)
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IV. OBJECTIVES
The following investment objectives will be applied in the management of City
lunds:
A. Safety
Ensuring the preservation of principal is the: primary objective. of the City's
investment activities. All other objectives are secondary to the preservation of
principal. Each investment transaction shall be executed to insure that capital
losses are avoided, whether from market value fluctuations or credit erosion.
This objective: includes rniligntion of credit risk and interest rate risk.
B. Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating
requirements that may be reasonably anticipated. This will be accomplished by
structuring the portfolio so that securities mature concurrent with cash needs to
meet anticipated demands. Furthermore, since all possible cash demands
cannot be anticipated, the portfolio will consist largely of securities with active
secondary markets.
C. Yield
'rho investment portfolio shall be designed with the- objective of attaining a
market rate: of return Ihroughout budgetary and ecronomic cycles, taking into
account the investrnem-1 risk constraints and liquidity needs. Return on
investment shrill not have as much weight in comparison to safety and liquidity
objectives. The core of investments will be limited to relatively low risk securities
in anticipation of earning a fair rc:>turn relative to the risk being assumed.
' Securities shall not be sold prior to maturity with the following exceptions: a
declining credit security could be sold early to minimize loss of principal; a
sCCurity swap that would improve the quality, yield, or target duration in the
' portfolio; or liquidity needs of the portfolio require that the security be sold. No
(ransactions of this kind will be executed without the approval of the City
Manager-
V. STANDARD OF CARE
A. Prudence
The standard of prudence to be applied by the Director of Finance or designee
shall be the, "Prudent Person Ruler" which states: "Investments shall be made
with judgment and crarc, candor circumstances then prevailing, which persons of
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' prudence, discretion and intelligence exercise in the management of their own
affairs, not for speculation, but for investments, considering the probable safety
of their capital as well as the probable income derived." The "Prudent Person
' Rule" shall be applied in the context of managing the overall portfolio.
' B. Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from
personal business activity that could conflict or appear to conflict with the proper
execution and management of the investment program, or that could impair their
ability to make impartial decisions. Employees and investment officials shall
disclose any material interests in financial institutions with which they conduct
business. They shall further disclose any personal financial/investment positions
that could be related to the performance; of the investment portfolio. Officers and
' employees shall be prohibited from undertaking personal investment transactions
with the same individual with whom business is conducted on behalf of their
entity.
C. Delegation of Authority
' The authority to manage the City's investment program is granted to the City
Manager as set forth in City of Tamarac Resolution R-94-167. Responsibility for
the operation of the investment program is hereby delegated to the Director of
' Finance, who shall carry out established written procedures and internal controls
for the operation of the investment program consistent with this investment
policy. Procedures include:
' Safekeeping
Delivery vs. Payment
1 Investment Accounting
Wire Transfer Agreements
Collateral/Depository Agreements
Banking Services Contracts
No person may engage in in investment transaction except as provided under
the terms of this policy and the procedures established by the Director of
Finance. The Director of Finance shall be responsible for all transactions
undertaken and shall establish a system of controls to regulate the activities of
subordinate officials. These include but are not limited to:
' 1. The Director of Finance, and/or other stuff as may be designated by
the Director of Finance, shall have the authority to execute trades and
to otherwise conduct business within the scope: of the City's Investment
Policy.
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2. The Director of Finance: shall have the authority to further restrict
the authority delegated to any staff rnomber.
3_ The Director of Finance shall prepare or cause to be prepared
month -end reports which, at a minimum, include:
a. Investment Holdings Reports which at a minimum
detail shall include:
(1) holdings by class of security;
(2) income earned;
(3) book value; and
M) market value
I), Perforrnancc Measurement Reports for the City's
Aggregate Investment Portfolio, as well as for each
separate portfolio and respective third -pearly manager.
4. 1-he reports which are required under Item 3 above, as well as any
others deemed appropriate by the Director of Finance, shall be
provided to the members of the Investment Committee no less
frequently than monthly.
VI SAFEKEEPING AND CUSTODY
A. Authorized Financial Dealers and Institutions
The Director of Finance; or designee shall maintain a list of financial institutions
authorizr_d to provide investment services. In addition, a list will be maintained of
approved security brokers/dealers selected by credit worthiness who are
authorized to provide investment services in the State of Florida. These may
include "primary dc:,-alc:rs or regional dealers that qualify under Securities &
Exchange Commission Rule 15C;3-1 (Uniform Net Capital Rule). No public
deposits shall be made, except in a qualified public depository as established by
the laws and regulations of the State of Florida. A current audited financial
statement is required to be on file for each financial institution and broker/dealer
in which the City invests.
Certificates of Deposit shall be placed only with financial institutions which quality
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' under Florida Law. Other securities shall be purchased oniv:
1) through the financial institutions which provide the services of a
securities dealer, (who qualify as public depositories), with an office
convenient to the City of Tamarac,
' 2) through the "primary government securities dealer" as designated
by the Federal Reserve Bank.
These institutions, dealers and issuers must meet capital adequacy guidelines as
determined by their respective regulatory agancies and certify that no material
' adverse events have occurred since the issue of their most recent financial
statements. They must also agree to notify the City in a timely rnanner in the
event of material :adverse events affecting their capital adequacy, All securities
' pr.rrchased shall be only those securities of authorized issuers of the various
security types. Lists of these authorized institutions, dealers and issuers of the
various security types will be maintained by the Director of Finance or his
designee. Criteria for addition to or deletion from the lists will be based on the
following:
1) in accordance with State Law, City Ordinance or Resolution, or
investment policy requirements;
2) financial condition;
3) consistent lack of competitiveness;
4) experience or familiarity of the account representative in providing
service to large institutional accounts; and/or
5) when deemed in the best interest of the City.
Before engaging in investment transactions with an institution, the Director of
Finance shall receive a signed certification form attesting that the individual
responsible for the City's account with that firm has reviewed the City's
' investment policy and that they agree to undertake necessary and appropriate
efforts to preclude imprudent transactions involving City funds_
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B. Internal Controls
The Director of Finance or designee is responsible for establishing and
maintaining an internal control structure designed to ensure that the assets of the
entity are protected from loss, theft or misuse. The internal control structure shall
be designed to provide reasonable assurance that these objectives are met. The
concept of reasonable assurance recognizes that (1) the:: cost of a control should
not exceed the benefits likely to be derived (2) the valuation of costs and benefits
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1 requires estimates and Judgments by management-
1. Establishment of Internal Controls
The: internal controls shall address lho following points:
a. Control of collusion
Collusion is .a situation where two or more employees are
' working in conjunction to defraud.
b. Separation of _unc.iion
' By separating key functions and having different people: perform
OW;h function, each person can perform a "check and balance"
review of the other people in the same area.
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c;. Separation of transaction Zfuthoritvfrom _accounting :and record
keeping
By separating the person who authorized or performs the
transaction, from the people who record or otherwise account
for the transaction, a good separation of duties is achieved.
d. C;us_tOdial Safekee�ing
Securities purchased from any bank or dealer, including
appropriate collateral, should be; placed into ra third party hank
for custodial safcakeeping.
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e. Prohibition of sec l� . e�arer-form _ _
Bearer -form sec::urities are much Weasier to convert to personal
use, than are securities registered in the name of Ific, City of
Tamarac.
f. Avoidance of ph sicai delivary_securities
Book entry securities are much easier to transfer and account
for, since actual delivery is never taken. Physical delivery
sC'curilies must be properly safeguarded as are any valuable
documents. The potential for fraud and loss increases with
physical delivery securities.
g. Gle�ar.delegatwn of authority to subordinate staff members
Subordinate stuff members must have a clear understanding of
their authority and responsibilities to avoid any improper actions.
Clear delegations of authority also preserves the internal control
structure that is built around the various staff positions and their
respective responsibilities.
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h. Specific lirnitations regardinq securities losses and remedial
action
Securities losses may lac, necessary to adhere to the Investment
Policy_ These lasses should be restricted to spec:ifiexd purposes
and proper documentation, and the required approval should be
clearly defined for each staff person and further requires the
approval of the City Manager.
Written confirmation of telephone transactions for investments
and wire transfers
Due to the, potential for error and improprieties arising from the
back of written confirmations, all transactions must bo. supported
by written communications anti approved by the appropriate
person.
c tion of transactions and_strateqles
_ f7pc;umcnt�._ .
All lr�ansaction,__ s and the strategies that may have been used to
develop the transactions must bc_a documented in writing and
approved by the appropriate person.
k. Develop ent ofa_ wire; transfer agreement with the
concentration bank
This agreement must outline the: various controls rand security
provisions for cranking and receiving wire transfers.
1. Training and Education
It is the policy of the City to provide periodic., training in investments
for the investment officials through courses and seminars offered by
the Government Finance OIfic:c:rs Association, Municipal Treasurers
Association and/or other qualified and pertinent organizations. Such
training shall be at least eight (8) hours annually of continuing
education in subjects or courses of study related to investment
practices and products.
1 C. Third -Party Custodial Agreements
' The City will execute a Third Party Cus1Uc Ol Safekeeping Agreement with a
commercial bank's trust department which is separately chartered by the United
States Government and the State of Florida. All securities purchased and/or
collateral obtained by the City shall be properly designated as an asset of the
City rand held in safekeeping by the trust department and no withdrawal of such
securities, in whole or in part, shall be made frorn safekeeping except by an
authorized City staff member. The Third -hearty Custodial Safekeeping
Agreement shall include lotters of authority from the City, details as to
responsihilities of c.., ac:h party, notification of security purchases, sales, delivery,
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' repurchase agreements, wire, transfers, safekeeping and transactions costs,
procedures in erase of wire failure of othE_�r unforeseen mishaps including liability
of each party.
Internal controls shr.all include details of delivery vs. payment procedures and
' trust receipt documE:ntation. Such controls and procedures shall be reviewed
annually by the External Auditor.
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1. Delivery Versus Payment
All securities purchased or sold will be transferred when possible
only under the "delivery versus payment" (D.V.P.) method or
"payment versus delivery" method to insure that funds or securities
are not released until all criteria relating to the specific transactions
are met.
Z. Trust Receipt and Confirmation
The Director of Finance or designee is authorized to accept, on the
behalf of and in the name of the City of lamarac, bank trust
receipts or confirmations in return for investment of temporarily idle
funds as evidence of actual delivery of the obligations or securities.
Any such trust receipt or confirmation shall fully describe the
various obligations or securities field, together with the specific
identification number of each obligation or security held, and that
they are hold for the City of Tamarac.. The actual obligations or
securities, whether in book -entry or physical form, on which trust
receipts or c:;onfirmations are issued may be held by a third party
custodial bank and/or institution or a designated corresponding
bank or custodian institution which has a correspondent
relationship to the City's third party custodian or its correspondent
institution, who is acting on behalf of and under the obligation as
the City's- third party custodian, The above shall apply to all
investments with the exception of securities underlying overnight
repurchase agreements; the custodial relationship for these
inslrurr►ents is described in Third -Party Custodial Agreements.
1 VII. AUTHORIZED AND SUITABLE INVESTMENT INSTRUMENTS
A. Investment Types
l he fallowing are the authorities for investments and limits on security issues,
issuers, and mriturities as established within this policy. The Director of Finance
or designe:e�; shall have the option to further restrict investment in selected
instruments, to conform to then-prosent market conditions.
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In accordance: with Section 218.415, Florida Statutes, and section 6-26, City
Code, authorized investments include:
1. The Florida Loral Government Surplus 'I rust Fund (Administered by the
State Board of Administration and commonly referred as the "SBA").
2_ Direct obligations of the U.S. Government which include but are not limited
to Treasury Bills, Treasury Notes, Treasury Bonds and Treasury Strips.
3. Obligations guaranteed by the U.S. Government as to principal and
interest which include but are not limited to Government National
Mortgage Association (GNMA), Farmers Home Administration (FmliA),
Smell Business Association (SBA), General Services Administration
(GSA), Federal Housing Acirrainistration (FHA), Housing and Urban
Development (HUD), Tennessee Valley Authority (TVA).
4. I'imn deposits and savings accounts in bank and savings and loan
associations, under the laws of Florida and the United States, doing
business in rand situated in -state. All such deposits shall be collateralized
as provided tar by Florida Statutes Chapter 2.8()_
5. Securities issued and guaranteed by a federally sponsored corporation
which are backed by, or the entity is capable c;af borrowing from, the U.S.
Treasury. I hese securities carry the "implied guarantc o" of the U.S.
Government rand include the Federal Farm Credit Banks (FFCB), Federal
Home Loan Bank Mortgage Corporation (FHLMC) (participation
certificates), Federal National Mortgage Association (FNMA), Federal
Home Loan Bank (FHLB) or its banks.
6. Commercial Paper of any United States corporation provided such notes
have a rating of A1/P1 by ;at least two of the five rating agencies.
7. Bankers Acceptance eligible for purchase: by the Federal Reserve System
issued by banks having a Moody's or Standard and Poor's corramercial
paper rating of at least AI/Pl.
8. Securities and (exchange Commission registered money market funds
shares that are open-ended, no-load funds registered under the, F=c;deral
Investment Company Act of 1946 Rule 2a--7 — Money Market Funds.
B. Collateralization
' Collateralization will be required on two types of investments. certificates of
deposit and overnight repurchase agreements (as described in the City Code,
section 6-26). In order to anticipate market chnnge-:s and provides n level of
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security for all funds, the collateralizalion level will be 100.0% at a minimum with
up to 102.0% being desired-
C. Repurchase Agreement
Overnight Repurchase Agreements are the only repurchase agreements
authorized as stated in the City Code, section 6-26.
D. Compliance with City's Band Covenants
Certain surplus funds available for investment represent capital project funds
generated through the issuance of long term bonded indebtedness, or represent
debt service funds created for the repayment of outstanding principal and interest
on such bonded indebtedness. Whenever ordinances and/or resolutions
.adopted by the City Commission which authorize the issuance of such bonded
indcsbledness contain specific provisions relative to the investment of funds, the
invesirYaent of such funds shall comply with the provision of the applicable bond
ordinance and/or resolution, the requirement contained in this policy, and
.applicable statutory or :administrative law.
E. Purchase of City's Utility Bonds
The City may use funds on hand to purchase in the open market outstanding
utility system bonds. Pursuant to Resolution R-85A36, section 512(b), moniCs
held in the General Rcsorve; Fund under the Bond Resolution may be used to
"purchase or redeem bonds_" Under Section 208, sub section (a), Director of
Finance is authorized to purchase any outstanding Term Bonds "on the most
advantageous form obtainable with reasonable diligence, such as price not to
exceed the principal of such Term Bonds plus the amount of the; redemption
premium, it any. which might on the next redemption date be paid to the holder of
such Term Bonds if such Term Bonds should be called for redemption on such
date from monies in the Sinking Fund."
V111. INVESTMENT INSTRUMENTS NOT AUTHORIZED
Types of securities that are Non -Authorized and not suitable for investment (and
in accordance with Section VII of this policy) include the following as examples:
A. High Grade Corporate Debt
U.S. dollar denorTlincated debt obligations of domestic, or foreign corporations, or
foreign sovereignties issued in the: United States or in foreign markets. This shall
include, but not be limited to, corporate notes, bonds, medium term notes,
Eurodollar notes and bonds, Yankee notes and bonds.
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1 B. Repurchase Agreements
Transaction in which securities are purchased from an institution with an
agreement to re -sell the same securities on a specified future date with the
exception of overnight repos.
' C. Derivative Investment Products
' This includes but is not limited to collateralized mortgage obligations (CMOs)
interest-- only (I0s) and principal only (POs), forwards, futures, currency and
interest rate swaps, options, flouters/inverse floaters, and caps/floors/collar-..
IX. INVESTMENT PARAMETERS
A. Diversification
It is the policy of the City of Tarnarac to diversify its investment portfolios. Assets
field shall be diversified to control the risk of loss resulting from over
concentration of assets in a specific maturity, a specific issuer, a specific
' instrument, a class of instruments, and a dealer through whom these investments
are bought and sold. Diversification strategies within the established guidelines
shall be reviewed acid revised periodically as necessary by the appropriate
' management staff and approved by the Director of Finance (See Table 1, page
18).
' B. Maximum Maturities
To the extent possible. the City will attempt to match its investments with overall
anticipated cash flow requirements, The City will not invest in long term
securities unless matched to a specific cash flow requirement.
' Investments do not necc;ssarily have to be made for the same length of time that
funds are available. The basic criteria for consideration for investments are listed
' below:
• Keep maturities short in a period of constantly rising interest rates
' based on treasury bill auctions or the daily Fed Funds rate.
• Keep maturities short in a period of an inverted treasury yield curve
' (short term rates are higher than long term rates).
• Maturities should be lengthened when the treasury yield curve is
' normal and expected to remain that way based on economic reports
taken as a whole. The yield curve is normal when short term rates are
lower than long team rates.
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' . Maturities should be lengths ned when interest rates are expected to
fall based on economic reports taken as a whole_
' w The yield curves of the market should be: analyzed for significant
hre�aks 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 the maturity dates.
Investments Should be made at the breaks in the yield curve so that
' yields will be rnaximized.
C. Duration
' The duration of each investment should not exceed the stated maturity.
' D. Security Selection
When purchasing or selling securities, the Director of Finance. or designed shall
select the security which provides the highest rate of return within the parameters
of this policy (see InVesl.rnent Objectives) and given the current objectives and
needs of the City's poiffolio. These selections shall be made utilizing one of the
following methods:
' Competitive bids, wherein the City solicits quotes from a minimum of
three firms.
• Comparison to the current market price as indicated by one of the
market pric.;ing resources available to the City (such as the City's
financial advisors, tho Wall Street Journal, or a comparable nationally
' recognized financial puhlication providing daily market pricing)
In most situations, the City shall utilize the competitive Laid process to select the
securities to be purChrased or sold. Selection by cornparison to current market
' prices, as indicated above, shall be utilized when, in the judgement of two
members of the; investment stall, competitive bidding would inhibit the selection
process. E-xramplos of when this might occur are:
• When time constraints due to unusual circumstance's preclude use of
the competitive bidding process.
• When the transaction involves new issues or issues in the "when
' issued" market.
When using the competitive bid process, all bids shall become part of the record
' 01 Ilae> specific security involved. When the Selection is made based on
comparison to current market price, the following information shall become part
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of the record of the security involved:
' * Reason for use of this method.
• Source of the current market value used.
Brice and/or interest rate quoted b said source.
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' E. Policies to Enhance Return on Investment
The City's invc,slment strategy is active. Given this strategy, tho basis used by
' the Director of Finance to determine whether market yields are being achieved is
the State Board of Administration (State Pool). The following specific policies are
set forth below to provide additional guidance in implementing Return on
' Investment objectives.
' 1. Active Portfolio Management
It. is the policy of the City to actively manage the investrn(--:nl portfolio within
' the constraints outlined in these investment policies. By using an active
portfolio mwiagement philosophy, portfolio yield will ho, enhanced without
an appreciable increase in risk.
2. Portfolio Maturity Management
When structuring the maturity composition of the investment portfolio, it is
the: policy of the City to evaluate current economic conditions, relative;
interest rate levels :and general direction of interest rates. During periods
' where economic_ conditions demonstrate considerable potential for interest
rate increases in the near future, the City will consider appropriate actions
to shorter) rMaturities. Similarly, during periods where economic conditions
' demonstrate potential for interest rate cic:creases in the near future, the
City will consider appropriate actions to lengthen maturities,
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3. r3ond Swaps
It shall be they policy of the City to pursue bond swaps as they may present
themselves over the term of any investment. All swaps shall adequately
compensate the City for administrativo costs, reinvestment risk, and
quality considerations. The following categories of bond swaps are
considered appropriate for the City:
�a. Swaps to Increase Yield:
Market aberrations are often caused by supply and demand
conditions for particular securities. For example, if a short.
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supply exists for a particular security or maturity range, then
it may be advantageous to swap out of a security in short
supply and into another similar security.
Swaps Between Different Issuers;
Interest rate differentials commonly exist between U.S.
Treasury and agency securities. Periodically, these
relationships may become distorted and thereby present
advantageous swap opportunities. At times it may be difficult
to isolato the swap opportunities that are attributable to this
factor or (1) above.
Swaps to Reduce Maturity:
Market aberrations occasionally create a situation where:
longer maturity securities are yielding the same or less than
securities with a shorter maturity. Portfolio quality can be
improved by switching from the longer maturity security to
the shorter maturity security with little or no interest penalty.
Overall Loss vs. Initial Accounting Loss:
It is the City's policy to avoid all swaps that result in r:a loss
over the accounting period of the applicable securities.
Other swap transactions may result in initial accounting
losses for the owned security but offer a gain over the
maturity period of the applicable securities. The City is
gc;ncrally reluctant to enter into this latter form of swap but
reserves the discretion to incur such initial accounting losses
in the event the; transaction offers sufficient enhancements to
yield, maturity or credit risk with the approval of the Director
of Finance.
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Table 1
Investment Parameters
FF Authorized Maturity Minimum Maximum
' Investments ; Range Percent'(%) Percent (%)
' State Board of Administration (SBA) N/A 5% 90%
Overnight Repurchase Agreement N/A N/A N/A
' U.S. Treasury Securities 15 years 10%, 95%
' U.S. Government Obligations (e.g. GNMA, °
HUD, 1=MHA, SBA, GSA, FHA, TVA) 1 n years 0/0 85`%
U.S. Government Instrumentalities (e.g. 10 years 0"/, 85%
FFCB, FHLMC, FHLB, FNMA)
' Certificate of Deposits 5 years 0% 851/A
Commercial Paper 270 days 01%1 10%
' Bankers' Acceptance 2.70 (lays 0% 10%
Mandy Market Funds N/A 0% )0%,
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1 X. REPORTING
' A. Method
'I he Director of Finance shall generate monthly reports for the City
Manager and for the City Commission. The report shall summarize the
investment slralegies employed and describe the portfolio in terms of
investment securities, maturities, risk characteristic, by class or type, gook
' value, income earnc:cl, and market value as of the: report date. Such reports shall
be available, to the public.
' The Director of Finance or Designee shall provide other such reports and
information as deer -nod reasonable, upon request from other intornal and external
' sources.
B. Performance Standards
The investnuant portfolio will be managed in accordance with the parameters
specified within this policy. The portfolio should obtain a market average rate of
return during a market/ccoilornic environment of stable interest rates. Portfolio
performance should he compared to appropriatc benchmarks on a regular basis.
The City shall use the Florida Local Government Surplus Funds Trust Fund
' (SBA) talus five (5) basis points as a specific, benchmark for the City investment
portfolio.
C. Marking to Market
A statement of the: market vain,, of the portfolio shall be issued at least monthly.
' I his will ensure that the minimal 4arnount of review has been performed on the
investment portfolio in terms of value and subsequent pried volatility.
1 XI. POLICY
' A. Exemption
Any investments currently hold that do not meet the guidelines of the policy shall
be exempted from the requirements of this policy. At maturity or liquidation, such
monies so invested shall be reinvested only as provided for in this policy.
I tie Director of Finance or designee may take to sufficient period of time to adjust
the existing portfolio to the provisions of the policy so as not to require the
premature liquidation of any investrnenl.
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B. Amendment
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This policy shall be reviewed on a timely basis. Any material changes to the
Invustrncnt Policy should be recommended by the Director of Finance and the
City Manager and approved by the City Commission-
C. Effective Date
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This policy shall become effective immediately upon its adoption by the City
Commission.
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1 BANKERS ACCEPTANCE:
GLOSSARY
Time draft drawn on and accepted by a bank, the Customary mans of effecting
' payment for merchandise sold in import-export transactions and a source of
financing used extensively in international trade.
' BANKING SERVICES AGREEMENT:
The purpose of the all -encompassing banking services agreement is to combine:
all facets of the total bunking relationship into a single document. Depending on
the nature and scope-, of the requesting banking services, the banking services
;,agreement may include any member of provisions.
' CAPITAL ADEQUACY GUIDELINES:
One tort of a dealer's financial solvency is the; relationship between the firm's
capital position and its risk exposure, known as capital adequacy. Losses that
' result from trading and credit: risk reduce the capital of the firm. After capital is
exhausted, further losses may fall on the firm's customers if the Broker/Dealer is
holding the securities. Capital adequacy guidelines measure trading and credit
' risk to the available liquid capital.
CAPITAL PROJECTS FUNDS:
' Accounts for financial resources to be used for the acquisition or construction of
major capital facilities.
' CERTIFICATE OF DEPOSIT (CD):
A time deposit with a specific maturity evidenced by a certificate. t. urge
denomination CD's are typically negotiable:.
' COLLATERAL:
' Securities, evidence of deposit or other property which a borrower pledges to
secure repayment of ;a loan. Also refers to securities pledged by a bank to
secure deposits Of put:alic monies.
COMMERCIAL PAPER:
Short-term obligations with rymturities ranging from > to 270 days issued by
' banks, corporations, and other borrowers to investors with temporarily idle cash.
Such instruments are unsecured and usually discounted.
CREDIT RISK:
Credit Risk is the risk of lois due to the failure of the security issuer or backer.
Credit risk may be rnifigratc:d by: limiting investments to the safest types of
' sc curitirs; prequalifying the financial institutions, brokers/dealers, intermediaries,
;and advisors with which the City will do business; sand diversifying the investment
portfolio so that potential lasses on individual securities will be minimi/od.
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DEBT SERVICE FUNDS:
Accounts for the accumulation of resources for, and the payment of, general
long-term principal and interest.
DELIVERY VERSUS PAYMENT:
There: Caro two methods of delivery of securities: delivery versus payment :and
delivery versus receipt (also called free). Delivery versus payment is delivery of
sectaritios with an exchange of money for the securities. Delivery versus receipt
is delivery of securities with an exchange of a signed receipt for the securities.
ENTERPRISE FUNDS:
Accounts for operations (a) that are financed and operated in a manner similar to
private business enterprises --where the intent of the governing body is that the
costs of providing goods or services to the general public on ra continuing basis
be financed or recovered primarily through user charges; or (b) where the
governing body has decided the periodic determination of revenues earned,
expenses incurred, and/or net income is appropriate for capital maintenance,
public policy, management control, accountability, and other purposes.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC):
A tedcral agency that insure bank deposits, currently up to.$100,000 per deposit.
FEDERAL HOME LOAN BANKS (FHLB):
'I he institutions that regulate and lend to savings and loan associations. The
F ccleral Home Loan Banks play a role analogous to that played by the Federal
Reserve Bank vis-a-vis member commercial banks.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA):
FNMA, like GNMA, was chartered tinder the Federal National Mortgage
Association Act in 1938, FNMA is a federal corporation working under the
:auspices of the Department of Housing and Urban Development, H.U.D. It is the,
Largest single provider of residential mortgage funds in the United States, Fannie:
Mac., as the corporation is called is a private stockholder -owned corporation.
The corporation's purchases include a variety of adjustable mortgages and
second loans in addition to fixed-rate mortgages. FNMA assumes and
guarantees that all security holders will receive timely payment of principal and
interest.
FEDERAL RESERVE BANK:
The central frank of the United States created by Congress and consisting of a
seven member Board of Governors in Washington, U.C., 12 regional banks and
about 5,700 commercial banks that are members of the system.
' GENERAL FUND:
Accounts for all financial
another fund.
resources except those required to be accounted for in
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GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA OR GINNIE
' MAE):
Securities guaranteed by GNMA and issued by mortgage bankers, commercial
banks, savings and loan associations, and other institutions. Security holder is
protected by full faith and credit of the U.S. Government. Ginnie Mae securities
are, backed by FI IA, VA or FMHM mortgages. The term passthroughs is often
used to describe Ginnie Maes.
1 INTEREST RATE RISK:
Interest rate risk is the risk that the market value of securities in the portfolio will
' fall due to changes in the general interest rates. Interest rate risk may be
rnitigated 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; and by investing operating funds
primarily in shorter-te>rrn securities or by cash flow projections.
1 INTERNAL SERVICE FUNDS:
Accounts for the financing of goods or services provided by one department or
age my to other departments or agencies of the governmental units, on a cost
' reimbursement basis.
LIQUIDITY:
A liquid :.asset is one that can be converted easily and rapidly into cash without a
substantial loss of value. In the money market, a security is said to be liquid if
' the spread between bid and asked prices is narrow and reasonable size can be
done at those quotes.
' MONEY MARKET FUND:
Open-ended mutual funds that invests in commercial paper, banker's
acceptance, repurchase agreements, government securities, certificates of
deposit, and other highly liquid and safo securities. The funds net asset value
' remains a constant $1 a share— only the interest rate goes up or down.
' PORTFOLIO:
Combined holding of more than one stock, bond, commodity, real estate;
investment, cash equivalent, or other asset by an individual or institutional
' investor. The purpose of sa portfolio is to reduce risk by diversification.
PRIMARY LEADER:
' A group e.al government securities dealers that submit daily reports of market.
activity and positions and monthly financial statements to the I-edc>ral Reserve
Bank of Now York and are subject to its informal oversight. Primary dealers
include Securities and Exchange Commission (SEC) registered securities broker -
dealers, banks, and a few unregulated firrras.
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PRUDENT PERSON RULE:
An investment standard. In some states the law requires that a fiduciary, such as
' a trustee, may invest money only in a list of securities selected by the state--the-
so-called legal list. In other states the trustee stay invest in a security if it is one
which would be Nought by a prudent person of discretion and intelligence: who is
seeking a reasonable income and preservation of capital_
QUALIFIED PUBLIC DEPOSITORIES:
A financial institution which does not claim exemption from the payment of any
sales or compensating use or ad valorem taxes under the haws of this stale,
which has segregated for the benefit of the commission eligible collateral having
' a value of riot less than its maximum liability and which has been approved by
the Public Deposit Protection Commission to hold public, deposits.
(MARKET) RATE OF RETURN:
The yield obtainable on a security basis on its purchase price or its current
market price. This may be the amortized yield to maturity on a bond or the
1 current income return_
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REPURCHASE AGREEMENT (RP or REPO):
A holder of securities stalls these securities to an investor with an agreement Io
repurchase them at a fixed price on a fixed date, The security "buyer" in effect
lends the "seller" money for the period of the agreement, and the terms of the
agreement are structured to compensate him for this. Dealers use RP
extensively to finance their positions. Exception, When the FED is said to he
doing RP, it is lending money, that is, increasing bank reserves.
SAFEKEEPING:
A service to customers rendered by banks for a fee whereby securities and
valuables of all types and descriptions are held in the bank's vaults for
protections.
SAFETY:
Relates to the volatility of the principal of the investment. Complete safety
means no increase or docrease in nominal value. The original sum invested is
returnable to the investor either at the investor's option or at the end of some
short contractual period.
SECONDARY MARKET:
f=xchanges and over-the-counter markets where securities are bought and sold
subsequent to original issuance, which took place in the PRIMARY MARKET,
Proceeds of secondary market sales accrue to the selling dealers and investors,
not to the companies that originally issued the; securities. Markc-a in which
money-market instruments pare traded among investors.
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SECURITIES & EXCHANGE COMMISSION:
' Agency created by Congress to protect investors in securities transactions by
administering securities legislation,
' SPECIAL REVENUE FUNDS:
Accounts for the proceeds of specific: revenue sources that are legally restricted
to expenditure: for specified purposes.
THIRD PARTY CUSTODIAL AGREEMENTS:
A safekeeping contract with a trust custodian riot involved in the invc siment
' transaction.
TREASURY BILLS:
' A non -interest bearing discount security issued by the U.S. Treasury to finance
the national debt. Most twills are issued to mature in three months, six months, or
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one year.
TREASURY BONDS:
Long-term U.S. l ronsury securities having maturities of more than ten years.
TREASURY NOTES:
Intermediate term coupon bearing U.S, Treasury securities having initial
maturities of from one to ten years.
TRUST AND AGENCY FUNDS:
Accounts for rasm,:Is, held by a governmental unit in a trustee capacity or as an
agent for individuals, private organizations, other governmental units, Barad/or
other trust funds.
UNIFORM NET CAPITAL RULE:
Securities and Lxchangc:: Commission requirement that member firms as well as
nonmember se=c:urities maintain a maximum ratio of indebtedness to liquid capital
of 15 to 1; also c;_allc;d net capital rule and not capital ratio. Indebtedness covers
all money owed to a firm, including margin loans and commitments to purchase
securities, one reason new public issues rare spread among members of
undc rwriting syndicates. Liquid capital includes cash and assets easily
converted into (gash.
WIRE TRANSFER AGREEMENTS:
' Many banks require an executed Wire Transfer Agrc ement from their corrarnercial
customers - those who utilize the Fedwire system as a means for transferring
large amounts of funds on a regular basis.
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YIELD:
The rate if annura► income return on an investment, expressed as a percentage.
(A) INCOME YIELD is obtained by dividing the current dollar income by the
currr_:nt market price for the security. (B) NET YIELD or YIELD TO MATURITY is
' the current income yield minus any premium above, pear or p►us any discount from
par in purchase price, with the adjustment spread over the period from the date
of purchase to th(; d;)te cat maturity of the bond.
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EXHIBIT 2
Temp. Reso. #9980
November 18, 2002
INVESTMENT POLICY REVISIONS
VII. AUTHORIZED AND SUITABLE INVESTMENT INSTRUMENTS
C. Repurchase Agreement
Overnight Repurchase Agrorments are the only repurchase agreernenls
authorized as stated in the City Code, section 6-26. If rGpurcli�ise.�igreements
are legal and authorized -policy. a _Master Repurchase Agrc�_cmon_t must be
signpcl. with the bank .ur dealer.....(e..g-._sa PSA Master R@p urch�ase Ac�revniont or
equivalent)
C.'odinp: deletions from the Investment Policy.
Words und.crl i cd ;ire addinonti to the Investment Policy,