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HomeMy WebLinkAboutCity of Tamarac Resolution R-2010-075TR11824 June 9, 2010 Page 1 CITY OF TAMARAC, FLORIDA RESOLUTION NO. 10- 75 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF TAMARAC, FLORIDA, AMENDING THE INVESTMENT POLICY FOR SECURITIES INVESTMENTS OF THE CITY OF TAMARAC TO AUTHORIZE UTILIZATION OF CERTAIN INVESTMENT INSTRUMENTS AND; TO AUTHORIZE THE AMENDING OF THE INVESTMENT PARAMETERS AS DETAILED IN EXHIBIT A ATTACHED HERETO; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Section 6-27 of the City of Tamarac Code of Ordinances establishes the procedures for adopting an Investment Policy: and WHEREAS, an investment policy for securities investments provides the formal structure that governs activities of investment official(s) and clarifies the City's securities 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 amended same in 2000, 2001, 2002, 2004, 2008, and 2009, all of which are available in the City Clerk's office; and WHEREAS, the City Manager, the Director of Financial Services and the Investment Advisory Committee recommend adopting an amended City Investment Policy as detailed in Exhibit A attached hereto and made a part of this Resolution; and WHEREAS, the Investment Advisory Committee wishes to strengthen the parameters of individual securities investments and expand the general TR11824 June 9, 2010 Page 2 objectives of the Investment Policy as detailed in the amended City Investment Policy included as Exhibit A attached hereto; 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 the existing Investment Policy be amended and revised to to allow the City to participate in certain investment products. 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. Exhibit A attached hereto is expressly incorporated herein and made a part hereof. SECTION 2 The City Commission adopts the attached Investment Policy (attached hereto as Exhibit A), pursuant to Section 6-27 of the City of Tamarac Code of Ordinances. 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. SECTION 5 This Resolution shall become effective immediately upon its passage and adoption. PASSED, ADOPTED AND APPROVED this day of 2010. n Fj 1 ATTEST: MARION SWE ON, CMC CITY CLERK I HEREBY CERTIFY that I have approved this RESOLUTION as to form. Vo ( /v SAkfUEL 6. G R CITY ATTORN TR11824 June 9, 2010 Page 3 4w X��4�20- BETH TALABISCO MAYOR Record of COMMISSION VOTE: MAYOR TALABISCO DIST 1: COMM BUSHNEL DIST 2: COMM ATKINS-GRAA DIST 3: COMM GLASSER tlXz- DIST 4: VM DRESSLER t/'U INVESTMENT POLICY CITY OF TAMARAC, FLORIDA APPROVED ON �U TABLE OF CONTENTS Page 1. PURPOSE 3 II. SCOPE 3 III. INVESTMENT OBJECTIVES 3 IV. DELEGATION OF AUTHORITY 4 V. STANDARDS OF PRUDENCE 4 VI. ETHICS AND CONFLICTS OF INTEREST 4 VII. INTERNAL CONTROLS AND INVESTMENT PROCEDURES 5 VIII. CONTINUING EDUCATION 5 IX. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS 5 X. MATURITY AND LIQUIDITY REQUIREMENTS 5 XI. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS 6 XII. AUTHORIZED INVESTMENTS AND PORTFOLIO COMPOSITION 7 XIII. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS 15 XIV. PERFORMANCE MEASUREMENTS 16 XV. INVESTMENT COMMITTEE 16 XVI. REPORTING 16 XVII. THIRD -PARTY CUSTODIAL AGREEMENTS 17 XVIII. INVESTMENT POLICY ADOPTION 17 City of Tamarac, Florida Investment Policy Page 2 Investment Policy The City of Tamarac, Florida I. PURPOSE The purpose of this policy is to set forth the investment objectives and parameters for the management of public funds of the City of Tamarac, Florida (hereinafter "City"), These policies are designed to ensure the prudent management of public funds, the availability of operating and capital funds when needed, and an investment return competitive with comparable funds and financial market indices. II. SCOPE In accordance with Section 218.415, Florida Statutes, this investment policy applies to all cash and investments held or controlled by the City with the exception of Pension Funds and funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds. Funds held by state agencies (e.g., Department of Revenue) are not subject to the provisions of this policy. III. INVESTMENT OBJECTIVES Safety of Principal The foremost objective of this investment program is the safety of the principal of those funds within the portfolios. Investment transactions shall seek to keep capital losses at a minimum, whether they are from securities defaults or erosion of market value. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. Maintenance of Liquidity The portfolios shall be managed in such a manner that funds are available to meet reasonably anticipated cash flow requirements in an orderly manner. Periodic cash flow analyses will be completed in order to ensure that the portfolios are positioned to provide sufficient liquidity. Return of Investment Investment portfolios shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return of investment is of least importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. City of Tamarac, Florida Investment Policy Page 3 IV. DELEGATION OF AUTHORITY In accordance with the Charter of the City of Tamarac, the responsibility for providing oversight and direction in regard to the management of the investment program resides with the City Manager. The daily management responsibility for all City funds in the investment program and investment transactions is delegated to the Financial Services Director and the Controller. The Financial Services Director shall establish written procedures for the operation of the investment portfolio and a system of internal accounting and administrative controls to regulate the activities of employees. The City may employ an Investment Manager to assist in managing some of the City's portfolios. Such Investment Manager must be registered under the Investment Advisors Act of 1940. The standard of prudence to be used by investment officials shall be the "Prudent Person" standard and shall be applied in the context of managing the overall investment program. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported to the City Manager in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this policy. The "Prudent Person" rule states the following: Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived from the investment. While the standard of prudence to be used by investment officials who are officers or employees is the "Prudent Person" standard, any person or firm hired or retained to invest, monitor, or advise concerning these assets shall be held to the higher standard of "Prudent Expert". The standard shall be that in investing and reinvesting moneys and in acquiring, retaining, managing, and disposing of investments of these funds, the Investment Advisor shall exercise: the judgment, care, skill, prudence, and diligence under the circumstances then prevailing, which persons of prudence, discretion, and intelligence, acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims by diversifying the investments of the funds, so as to minimize the risk, considering the probable income as well as the probable safety of their capital. VI. ETHICS AND CONFLICTS OF INTEREST Employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Also, employees involved in the investment process shall disclose to the City Manager any material financial interests in financial institutions that conduct business with the City, and they shall further disclose any material personal financial/investment positions that could be related to the performance of the City's investment program. VII. INTERNAL CONTROLS AND INVESTMENT PROCEDURES The Financial Services Director shall establish a system of internal controls and operational procedures that are in writing and made a part of the City's operational procedures. The internal controls should be designed to prevent losses of funds, which might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees. The written procedures should include reference to safekeeping/custody, repurchase agreements, and separation of transaction City of Tamarac, Florida Investment Policy Page 4 authority from accounting and recordkeeping, wire transfer agreements, banking service contracts and collateral/depository agreements. No person may engage in an investment transaction except as authorized under the terms of this policy. Independent auditors, as a normal part of the annual financial audit to the City, shall conduct a review of the system of internal controls to ensure compliance with policies and procedures. VIII. CONTINUING EDUCATION The Financial Services Director, the Controller, and other appropriate staff shall annually complete eight hours of continuing education in subjects or courses of study related to investment practices and products. IX. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS Authorized City staff and Investment Advisors shall only purchase securities from financial institutions, which are qualified as public depositories by the Treasurer of the State of Florida; instutitions designated as "Primary Securities Dealers" by the Federal Reserve Bank of New York, direct issuers of commercial paper and bankers' acceptances or approved non -primary securities dealers. All approved non -primary securities dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule) must provide the following information prior to executing investment trades with the City: 1. Annual financial statement, as well as most recent quarterly statement. 2. Regulatory history, through either the Office of the Comptroller of the Currency for dealer banks, or the NASD for securities firms. 3. Statement of any pending lawsuits materially affecting the firm's business. Authorized City staff and Investment Advisors shall only enter into repurchase agreements with financial institutions that are state qualified public depositories and primary securities dealers as designated by the Federal Reserve Bank of New York. X. MATURITY AND LIQUIDITY REQUIREMENTS To the extent possible, an attempt will be made to match investment maturities with known cash needs and anticipated cash flow requirements. Investments of current operating funds shall have maturities of no longer than twenty-four (24) months. Investments of bond reserves, construction funds, and other non -operating funds ("core funds") shall have a term appropriate to the need for funds and in accordance with debt covenants, but in no event shall exceed five (5) years. The maturities of the underlying securities of a repurchase agreement will follow the requirements of the Master Repurchase Agreement. XI. COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS After the Financial Services Director, the Controller or the Investment Advisor has determined the approximate maturity date based on cash flow needs and market conditions and has analyzed and selected one or more optimal types of investments, a minimum of three (3) qualified banks and/or City of Tamarac, Florida Investment Policy Page 5 approved broker/dealers must be contacted and asked to provide bids/offers on securities in question. Bids will be held in confidence until the bid deemed to best meet the investment objectives is determined and selected. However, if obtaining bids/offers are not feasible and appropriate, securities may be purchased utilizing the comparison to current market price method on an exception basis. Acceptable current market price providers include, but are not limited to: A. Telerate Information Systems B. Bloomberg Information Systems including but not limited to the BOOM, FIT, NIM and TRACE fixed income securities transactional and market transparency systems. C. Wall Street Journal or a comparable nationally recognized financial publication providing daily market pricing. D. Nationally recognized independent fixed income market pricing services such as IDC. The Financial Services Director, the Controller, or the Investment Advisor shall utilize the competitive bid process to select the securities to be purchased or sold. Selection by comparison to a current market price, as indicated above, shall only be utilized when, in judgment of the Financial Services Director, the Controller, or the Investment Advisor, competitive bidding would inhibit the selection process. Examples of when this method may be used include: A. When time constraints due to unusual circumstances preclude the use of the competitive bidding process B. When no active market exists for the issue being traded due to the age or depth of the issue C. When a security is unique to a single dealer, for example, a private placement D. When the transaction involves new issues or issues in the "when issued" market Overnight sweep repurchase agreements will not be bid, but may be placed with the City's depository bank relating to the demand account for which the repurchase agreement was purchased. XII. AUTHORIZED INVESTMENTS AND PORTFOLIO COMPOSITION Investments should be made subject to the cash flow needs, and such cash flows are subject to revisions as market conditions and the City's needs change. However, when the invested funds are needed in whole or in part for the purpose originally intended or for more optimal investments, the Financial Services Director, or the Controller may sell the investment at the then -prevailing market price and place the proceeds into the proper account at the City's custodian. The following are the investment requirements and allocation limits on security types, issuers, and maturities as established by the City. The Financial Services Director or the Controller shall have the option to further restrict investment percentages from time to time based on market conditions, risk, and diversification investment strategies. The percentage allocations City of Tamarac, Florida Investment Policy Page 6 requirements of investment types and issuers are calculated based on the original cost of each investment. Investments not listed in this policy are prohibited. A. The Florida Local Government Surplus Funds Trust Fund ("SBA") Investment Authorization The Financial Services Director may invest in the SBA. 2. Portfolio Composition A maximum of 50% of available funds may be invested in the SBA. B. United States Government Securities Purchase Authorization The Financial Services Director may invest in negotiable direct obligations, or obligations the principal and interest of which are unconditionally guaranteed by the United States Government. Such securities will include, but not be limited to the following: Cash Management Bills Treasury Securities — State and Local Government Series ("SLGS") Treasury Bills Treasury Notes Treasury Bonds Treasury Strips 2. Portfolio Composition A maximum of 100% of available funds may be invested in the United States Government Securities. Maturity Limitations The maximum length to maturity of any direct investment in the United States Government Securities is five (5) years from the date of purchase. C. United States Government Agencies Purchase Authorization The Financial Services Director may invest in bonds, debentures, notes or callables issued or guaranteed by the United States Government agencies, provided such obligations are backed by the full faith and credit of the United States Government. Such securities will include, but not be limited to the following: United States Export — Import Bank - Direct obligations or fully guaranteed certificates of beneficial ownership Farmer Home Administration - Certificates of beneficial ownership Federal Financing Bank City of Tamarac, Florida Investment Policy Page 7 - Discount notes, notes and bonds Federal Housing Administration Debentures - Government National Mortgage Association (Note: GNMA is a government -owned corporation within HUD. GNMA MBS securities are fully guaranteed by the U.S. government.) General Services Administration United States Maritime Administration Guaranteed - Title XI Financing New Communities Debentures - United States Government guaranteed debentures United States Public Housing Notes and Bonds - United States Government guaranteed public housing notes and bonds United States Department of Housing and Urban Development - Project notes and local authority bonds This shall include securities issued under the Temporary Liquidity Guarantee Program under which the FDIC guarantees the full and timely payment of principal and interest on qualified securities. 2. Portfolio Composition. A maximum of 50% of available funds may be invested in United States Government agencies. 3. Limits on Individual Issuers A maximum of 10% of available funds may be invested in individual United States Government agencies. 4. Maturity Limitations The maximum length to maturity for an investment in any United States Government agency security is five (5) years from the date of purchase. D. Federal Instrumentalities (United States Government Sponsored Enterprises (GSEs) and Federally Owned Corporations (FOCs)) 1. Purchase Authorization The Financial Services Director may invest in bonds, debentures, notes or callables issued or guaranteed by GSEs and FOCs which are non -full faith and credit instrumentalities limited to the following: Federal Farm Credit Bank (FFCB) Federal Home Loan Bank or its district banks (FHLB) Federal National Mortgage Association (FNMA) Federal Home Loan Mortgage Corporation (FHLMC) including Federal Home Loan Mortgage Corporation participation certificates Federal Agricultural Mortgage Corporation (FRMAC) Tennessee Valley Authority (TVA) — An instrumentality of the U.S. Government as a "Federally Owned Corporation" as distinct from a GSE. 2. Portfolio Composition City of Tamarac, Florida Investment Policy Page 8 A maximum of 75% of available funds may be invested in Federal Instrumentalities GSEs and FOCs. Limits on Individual Issuers A maximum of 25% of available funds may be invested in any one issuer. 4. Maturity Limitations The maximum length to maturity for an investment in any GSE or FOC security is five (5) years from the date of purchase. E, Interest Bearing Certificates of Deposits, Time Deposits or Saving Accounts Purchase Authorization The Financial Services Director may invest in certificates of deposit, time deposits or savings accounts in banks organized under the laws of this state and/or in national banks organized under the laws of the United States and doing business and situated in the State of Florida, provided that any such deposits are secured by the Florida Security for Public Deposits Act, Chapter 280, Florida Statutes. Additionally, the bank shall not be listed with any recognized credit watch information service. Portfolio Composition A maximum of 10% of available funds may be invested in certificates of deposit, time deposits or savings accounts. Limits on Individual Issuers A maximum of 5% of available funds may be deposited with any one issuer. 4. Maturity Limitations The maximum maturity on any certificate shall be no greater than one (1) year from the date of purchase. F. Repurchase Agreement Purchase Authorization a. The Financial Services Director may invest in repurchase agreements composed of only those investments based on the requirements set forth by the City's Master Repurchase Agreement. All firms are required to sign the Master Repurchase Agreement prior to the execution of a repurchase agreement transaction. b. A third party custodian with whom the City has a current custodial agreement shall hold the collateral for all repurchase agreements with a term longer than one (1) business day. A clearly marked receipt that shows evidence of ownership must be supplied to the Financial Services Director and retained. City of Tamarac, Florida Investment Policy Page 9 C. Securities authorized for collateral are negotiable direct obligations of the United States Government, Government Agencies, and United States Government Instrumentalities as authorized in Section XII Paragraph D with maturities under five (5) years and must have a market value for the principal and accrued interest of 102 percent of the value and for the term of the repurchase agreement. Immaterial short- term deviations from the 102 percent requirement are permissible only upon the approval of the Financial Services Director. 2. Portfolio Composition A maximum of 25% of available funds may be invested in repurchase agreements excluding one (1) business day agreements and overnight sweep agreements. 3. Limits on individual issuers. A maximum of 10% of available funds may be invested with any one institution. 4. Limits on Maturities The maximum length to maturity of any repurchase agreement is 90 days from the date of purchase. G. Commercial Paper 1. Purchase Authorization The Financial Services Director may invest in commercial paper of any United States company that is rated, at the time of purchase, "Prime-1" by Moody's and "A-1" by Standard & Poor's (prime commercial paper). If the commercial paper is backed by a letter of credit ("LOC"), the long-term debt of the LOC provider must be rated "A" or better by at least two nationally recognized rating agencies. 2. Portfolio Composition A maximum of 25% of available funds may be directly invested in prime commercial paper. 3. Limits on individual issuers A maximum of 10% of available funds may be invested with any one issuer. 4. Maturity Limitations The maximum length to maturity for prime commercial paper shall be 180 days from the date of purchase. H. Banker's Acceptance 1. Purchase Authorization City of Tamarac, Florida Investment Policy Page 10 The Financial Services Director may invest in bankers' acceptances issued by a domestic bank or a federally chartered domestic office of a foreign bank, which is eligible for purchase by the Federal Reserve System, at the time of purchase, the short-term paper is rated, at a minimum, "P-1" by Moody's Investors Services and "A-l" Standard & Poor's. 2. Portfolio Composition A maximum of 25% of available funds may be directly invested in Bankers' acceptances. 3. Limits on Individual Issuers A maximum of 10% of available funds may be invested with any one issuer. 4. Maturity Limitations The maximum length of maturity for bankers' acceptances shall be 180 days from the date of purchase. I. State and/or Local Government Taxable and/or Tax -Exempt Debt l . Purchase Authorization The Financial Services Director may invest in state and/or local government taxable and/or tax-exempt debt, general obligation and/or revenue bonds, rated at least "Aa2" by Moody's and "AA" by Standard & Poor's for long-term debt, or rated at least "MIG-2" by Moody's and "SP-2" by Standard & Poor's for short-term debt. 2. Portfolio Composition A maximum of 20% of available funds may be invested in taxable and tax-exempt debts. 3. Limits on Individual Issuers A maximum of 5% of available funds may be invested with any one issuer. 4. Maturity Limitations A maximum length to maturity for an investment in any state or local government debt security is three (3) years from the date of purchase. J. Registered Investment Companies (Mutual Funds) 1. Investment Authorization The Financial Services Director may invest in shares in open-end, no-load mutual funds provided such funds are registered under the Federal Investment Company Act of 1940 and operated in accordance with 17 C.F.R. § 270.2a-7. In addition, the Financial Services Director may make investments in other types of mutual funds provided such funds are registered under the Federal Investment Company Act of 1940, invest exclusively in the securities specifically permitted under this investment policy, and are similarly diversified. City of Tamarac, Florida Investment Policy Page I 2. Portfolio Composition A maximum of 25% of available funds may be invested in mutual funds. 3. Limits of Individual Issuers A maximum of 10% of available funds may be invested with any one non -SEC Rule 2a-7 investment mutual fund. 4. Rating Requirements The mutual funds shall be rated "AAm: or "AAm-G" or better by Standard & Poor's, or the equivalent by another rating agency. 5. Due Diligence Requirements A thorough review of any investment mutual fund is required prior to investing, and on a continual basis. There shall be a questionnaire developed by the Financial Services Director that will contain a list of questions that covers the major aspects of any investment pool/fund. K. Intergovernmental Investment Pool Investment Authorization The Financial Services Director may invest in intergovernmental investment pools that are authorized pursuant to the Florida Interlocal Cooperation Act, as provided in Section 163.01, Florida Statutes and provided that said funds contain no derivatives. 2. Portfolio Composition A maximum of 50% of available funds may be invested in intergovernmental investment pools. 3. Due Diligence Requirements A thorough review of any investment pool/fund is required prior to investing, and on a continual basis. There shall be a questionnaire developed by the Financial Services Director that will contain a list of questions that covers the major aspects of any investment pool/fund. L. Corporate Obligations or Corporate Notes Investment Authorization The Financial Services Director may invest in corporate obligations or corporate notes of U.S. corporations. 2. Portfolio Composition A maximum of 20% of available funds may be invested in corporate obligations or corporate notes. City of Tamarac, Florida Investment Policy Page 12 3. Limits of Individual Issuers A maximum of 5% of available funds may be invested with any one corporate note. 4. Rating Requirements Corporate obligations or notes shall have two of the following three minimum ratings: A-, A3 or A- as rated by Standard & Poor's and/or Moody's and/or Fitch Investors Services rating services. However, if such obligations are rated by only one rating service, then such rating shall be at least AA-, Aa3, or AA- by Standard & Poor's, or Moody's or Fitch. 5. Maturity Limitations A maximum length to maturity for an investment in any corporate obligation or note is five (5) years from the date of purchase. M. Mortgage -Backed Securities (MBS) 1. Investment Authorization The Financial Services Director may invest in mortgage -backed securities (MBS) which are usually based on mortgages that are guaranteed by a government agency or instrumentality for payment of principal and a guarantee of timely payment. 2. Portfolio Composition A maximum of 15% of available funds may be invested in MBS. 3. Limits of Individual Issuers A maximum of 5% of available funds may be invested with any one MBS. 4. Rating Requirements MBS shall be AA rated or better by Standard & Poor's or the equivalent by another rating agency. 5. Maturity Limitations A maximum length to maturity for an investment in any MBS is five (5) years from the date of purchase. N. Asset -Backed Securities (ABS) 1. Investment Authorization The Financial Services Director may invest in asset -backed securities (ABS) which are bonds or notes backed by financial assets. 2. Portfolio Composition A maximum of 10% of available funds may be invested in ABS. City of Tamarac, Florida Investment Policy Page 13 Limits of Individual Issuers A maximum of 5% of available funds may be invested with any one ABS. 4. Rating Requirements ABS shall be AA rated or better by Standard & Poor's or the equivalent by another rating agency. Maturity Limitations A maximum length to maturity for an investment in any MBS is five (5) years from the date of purchase. Q. Bond Funds 1. Investment Authorization The Financial Services Director may invest in bond funds. 2. Portfolio Composition A maximum of 25% of available funds may be invested in bond funds. 3. Limits of Individual Issuers A maximum of 10% of available funds may be invested with any one bond fund. 4. Rating Requirements Bonds funds shall be AA rated or better by Standard & Poor's or the equivalent by another rating agency. XIII. DERIVATIVES AND REVERSE REPURCHASE AGREEMENTS Investment in any derivative products or the use of reverse repurchase agreements requires specific City Commission approval prior to their use. If the City Commission approves the use of derivative products, the Financial Services Director shall develop sufficient understanding of the derivative products and have the expertise to manage them. A "derivative" is defined as a financial instrument the value of which depends on, or is derived from, the value of one or more underlying assets or indices or asset values. If the City Commission approves the use of reverse repurchase agreements or other forms of leverage, the investment shall be limited to transactions in which the proceeds are intended to provide liquidity and for which the Financial Services Director has sufficient resources and expertise to manage them. XIV. PERFORMANCE MEASUREMENTS In order to assist in the evaluation of the portfolio's performance, the City will use performance benchmarks for short-term and long-term portfolios. The use of benchmarks will allow the City to measure its returns against other investors in the same markets. City of Tamarac, Florida Investment Policy Page 14 A. The S & P Rated LGIP Index/All will be used as a benchmark as compared to the portfolio's net book value rate of return for current operating funds. B. The Bank of America Merrill Lynch 1-3 Year US Treasury & Agency Index which is a subset of The Bank of America Merrill Lynch US Treasury & Agency Index including all securities with a remaining term to final maturity less than 3 years, will be used as a benchmark for the performance of funds designated as core funds and other non -operating funds that have a longer - term investment horizon. The index will be used as a benchmark to be compared to the portfolio's total rate of return. C. Investment advisors will report performance on both book value (on operating funds only) and Month to Month total rate of return basis (on long-term funds) and compare results to the above - stated benchmarks. XV. INVESTMENT COMMITTEE The City of Tamarac Charter, Section 4.12 states the following: "The commission, by ordinance, shall create an investment advisory committee consisting of at least five (5) members from the general public. The purpose of the committee is to recommend, counsel and advise the appropriate city officials in all matters of financial investments as provided by state laws, ordinances, resolutions and Charter of the City of Tamarac." (Res. No. CBR-86-6, § 1, 1-17-86) The City Commission will establish an Investment Advisory Committee, pursuant to Ordinance, for the purpose of recommending, counseling and advising the City Manager in all matters of financial investments and shall be responsible to keep abreast of current investment trends, receive the input of administrative officers regarding investment concepts for the City, and make recommendations thereon to the City Manager (and his designees), and file such reports with the mayor and City Commission as necessary. The Committee shall have no administrative authority and shall not be directly involved in the ongoing process of investment of city funds. The members of the Investment Advisory Committee shall be appointed by the City Commission on an annual basis and serve at the pleasure of the City Commission without compensation. The chairman of the Committee shall be appointed by the City Commission. The Committee may have a Commission liaison and may have a staff liaison assigned to it by the City Manager. The Committee, or quorum of the Committee, shall meet, at a minimum, every other month, or as often as deemed necessary, to review, discuss and affirm or alter the current investment strategy. XVI. REPORTING The Financial Services Director shall provide the Investment Advisory Committee with monthly/quarterly investment reports. Schedules in the quarterly report should include the following: A. A listing of individual securities held at the end of the reporting period B. Percentage of available funds represented by each investment type C. Coupon, discount or earning rate City of Tamarac, Florida Investment Policy Page 15 D. Average life or duration and final maturity of all investments E. Par value and market value On a monthly/quarterly basis, the Financial Services Director shall prepare and submit to the City Commission a written report on all invested funds. The annual report shall provide all, but not limited to, the following: a complete list of all invested funds, name or type of security in which the funds are invested, the amount invested, the maturity date, income earned, the book value, the market value and the yield on each investment. The report will show performance on both a book value (for short-term investments) and total rate of return basis (for long-term investments) and will compare the results to the above -stated performance benchmarks. All investments shall be reported at fair value per GASB standards. Investment reports shall be available to the public. XVII. THIRD -PARTY CUSTODIAL AGREEMENTS Securities, with the exception of certificates of deposits, shall be held with a third party custodian; and all securities purchased by, and all collateral obtained by; the City should be properly designated as an asset of the City. The securities must be held in an account separate and apart from the assets of the financial institution. A third party custodian is defined as any bank depository chartered by the Federal Government, the State of Florida, or any other state or territory of the United States which has a branch or principal place of business in the State of Florida as defined in Section 658.12, Florida Statutes, or by a national association organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in the State of Florida. Certificates of deposits will be placed in the provider's safekeeping department for the term of the deposit. The custodian shall accept transaction instructions only from those persons who have been duly authorized by the Financial Services Director and which authorization has been provided, in writing, to the custodian. No withdrawal of securities, in whole or in part, shall be made from custody, or shall be permitted unless by such a duly authorized person. XVIII. INVESTMENT POLICY ADOPTION The investment policy shall be adopted by a City Ordinance. The Financial Services Director and the Controller shall review the policy annually and the City Commission shall approve any modification made thereto. APPROVED AND ADOPTED BY THE CITY COMMISSION OF TAMARAC, FLORIDA ON 2010. City of Tamarac, Florida Investment Policy Page 16