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HomeMy WebLinkAboutCity of Tamarac Resolution R-96-067Temp. Reso #7344 I - ] CITY OF TAMARAC RESOLUTION NO. R-99- b 7 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF TAMARAC, FLORIDA ADOPTING AN INVESTMENT POLICY AND AUTHORIZING ITS IMPLEMENTATION; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; AND PROVIDING FOR AN EFFECTIVE DATE. 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 safety of principal invested shall always be the primary concern of the City of Tamarac; and WHEREAS, the City currently has no formal comprehensive investment policy; and WHEREAS, Grant Thornton LLP, the City's external auditor for fiscal year 1994, recommended in their management letter the formal adoption of an Investment Policy, and WHEREAS, the Municipal Treasurers' Association of the United States and Canada (MTA), Government Finance Officers Association (GFOA), and the Florida Government Finance Officers Associations (FGFOA) recommend that a formal Investment Policy be adopted by the governing body (City Commission); and WHEREAS, the Investment Advisory Committee reviewed and approved the Proposed Investment Policy during their meeting on March 14, 1996; and WHEREAS, the proposed investment policy complies with section 6.26 of the City Code entitled Investment of City Funds and State Statute 218.415 entitled Local Government Investment Policies; and WHEREAS, the City Manager and Finance Director recommend the adoption and implementation of the Proposed Investment Policy; and WHEREAS, the City Commission of the City of Tamarac, Florida deems it to be in the best interests of the citizens and residents of the City of Tamarac to adopt the Proposed Investment Policy. Temp. Reso #7344 1 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 adoption of the Investment Policy, provided as Exhibit 1, is hereby approved. Section 3: The appropriate City Officials are hereby authorized to implement the Investment Policy. Sectio : All resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of such conflict. Sectiop 5: 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 in application, it shall not affect the validity of the remaining portion or applications of this Resolution. Section 6: This Resolution shall become effective immediately upon its adoption. PASSED, ADOPTED AND APPROVED this R day of �� , 1996. ATTEST: 2.dEP;2 �Alk"e It' CAROL A. EVANS, CMC CITY CLERK I HEREBY CERTIFY that I have approved this Resolution as / to farm. . MAYOR /-154wZ114 DIST.1: DIST. 2: MITCHELL S. KRA DIST. 3: CITY ATTORNET DIST.4: WRMANSITZ .;-• • MAYOR RECORD' OF COMMISSION VOTE • TqM� EXHIBIT 1 �oF -a, City of Tamarac, Florida �`OIZI Investment Policy Title: INVESTMENT POLICY Effective Date: 03-27-96 Originating Department: FINANCE Supersedes: Policy Number: R-96-67 Page 1 of ___15_ I. PURPOSE The intent 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 cash flow to enable the City to meet 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 funds held by the City on behalf of the residents of the City of Tamarac with the exception of Pension Fund assets and Funds whose uses are restricted by debt covenants; prior contracts; or 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 operating funds" of the City for the purpose of this policy, and shall be invested under the guidelines as herein 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 created by the governing body, unless specifically exempt. 1 �J r, C, - INVESTMENT POLICY R-96-67 PAGE 2 OF 15 III. DEFINITIONS See Glossary Section: Appendix A IV. OBJECTIVES The following investment objectives will be applied in the management of City funds: 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 mitigation 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 The investment portfolio 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 on investment shall 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 return 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 security 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 transactions of this kind will be executed without the approval of the City Manager. 2 INVESTMENT POLICY R-96-67 PAGE 3 OF 15 V. STANDARD 0,E„CARE 0 A. Prudence E The standard of prudence to be applied by the Director of Finance or designee shall be the "Prudent Person Rule" which states: "Investments shall be made with judgement 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 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 (see Appendix B). 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, investment accounting, wire transfer agreements, collateral/depository agreements and banking services contracts. No person may engage in an 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 staff 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. 3 y 67 INVESTMENT POLICY R-96-67 PAGE 4 OF 15 V. STANDA-RD OF CARE C. Delegation of Authority, continued 2. The Director of Finance shall have the authority to further restrict the authority delegated to any staff member. 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 (4) market value b. Performance Measurement Reports for the City's Aggregate Investment Portfolio, as well as for each separate portfolio and respective third -party manager. 4. The 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. SAFEKEEPAING AND CUSTODY A. Authorized Financial Dealers and Institutions The Director of Finance or designee shall maintain a list of financial institutions authorized 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" dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1(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 qualify under Florida Law. Other securities shall be purchased only 1) through the financial institutions which provide the services of a securities dealer, (who qualify as public depositories), with �J • INVESTMENT POLICY R-96-67 PAGE 5 OF 15 VI. SAFEKEEPING AND CUSTODY A. Authorized Financial Dealers and Institutions, continued 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 agencies 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 manner in the event of material adverse events affecting their capital adequacy. All securities purchased 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 (as illustrated in Exhibit A) 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. 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; and (2) the valuation of costs and benefits requires estimates and judgments by management. Establishment of Internal Controls The internal controls shall address the following points: a. Control of co lusion Collusion is a situation where two or more employees are working in conjunction to defraud. 0 • • • INVESTMENT POLICY R-96-67 _ .,,..Q,.A,b! VI. AFEKEEPIN DCUSTODY,_,__ B. Internal Controls, continued PAGE 6 OF 15 b. Separation of functions By separating key functions and having different people perform each function, each person can perform a "check and balance" review of the other people in the same area. C. Seoaration of transaction authoritv from accountina 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. Custodial Safekeeping Securities purchased from any bank or dealer, including appropriate collateral, should be placed into a third party bank for custodial safekeeping. e. Probibitipo of bea[er-forn securities Bearer -form of securities are much easier to convert to personal use, than are securities registered in the name of the City of Tamarac. Avoidance of physical delivery secufities Book entry securities are much easier to transfer and account for, since actual delivery is never taken. Physical delivery securities must be properly safeguarded as are any valuable documents. The potential for fraud and loss increases with physical delivery securities. g. Clear delegation of authority to subordinate staff members Subordinate staff 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. h. Specific limitations reaardina securities losses and remedial action Securities losses may be necessary to adhere to the Investment Policy. These losses should be restricted to specified 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. 0 INVESTMENT POLICY R-96-67 PAGE 7 OF 15 . YL SAFEKEEPING AND CUSTODY B. Internal Controls, continued Written confirmation of telephone transactions for investments and wire transfers Due to the potential for error and improprieties arising from the lack of written confirmations, all transactions must be supported by written communications and approved by the appropriate person. Documentation of transactions and strategies All transactions and the strategies that may have been used to develop the transactions must be documented in writing and approved by the appropriate person. k. Development of a wire transfer agreement with the concentration bank This agreement must outline the various controls and security provisions for making and receiving wire transfers. 2. 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 Officers Association, Municipal Treasurers Association and/or other qualified and pertinent organizations. C. Third -Party Custodial Agreements The City will execute a Third Party Custodial 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 and held in safekeeping by the trust department and no withdrawal of such securities in whole or in part, shall be made from safekeeping except by an authorized City staff member. The Third -Party Custodial Safekeeping Agreement shall include letters of authority from the City, details as to responsibilities of each party, notification of security purchases, sales, delivery, repurchase agreements, wire transfers, safekeeping and transaction costs, procedures in case of wire failure or other unforeseen mishaps including liability of each party. Internal controls shall include details of delivery vs. payment procedures and trust receipt documentation. Such controls and procedures shall be reviewed annually by the External Auditor. 1. Delivery Y Versus Payment 7 leA �C & Y7 • • INVESTMENT POLICY R-96-67 PAGE 8 OF 15 VI. SAFEKEEPING AND CUSTODY C. Third -party Custodial Agreements, continued 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. 2. 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 Tamarac, 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 held, together with the specific identification number of each obligation or security held, and that they are held for the City of Tamarac. The actual obligations or securities, whether in book -entry or physical form, on which trust receipts or confirmations are issued may be held by a third party custodial bank and/or institution or 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 same 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 instruments is described in Third -Party Custodial Agreements. VII. AUTHORIZED AND SUITABLE INVESTMENT INSTRUMENTS A. Investment Types The following are the authorities for investments and limits on security issues, issuers, and maturities as established within this policy. The Director of Finance or designee shall have the option to further restrict investment in selected instruments, to conform to then - present market conditions. In accordance with Section 166.261, Florida Statues, and section 6-26, City Code, authorized investments include: The Florida Local Government Surplus Trust 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. INVESTMENT POLICY R-96-67 PAGE 9 OF 15 VII. AU TH E D ITAB INVESTMENT INSTRUMENTS A. Investment Types, continued 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 (FmHA), Small Business Association (SBA), General Services Administraiton (GSA), Federal Housing Administration (FHA), Housing and Urban Development (HUD), Tennessee Valley Authority (TVA). 4. Time deposits and savings accounts in bank and savings and loan associations, under the laws of Florida and the United States, doing business in and situated in -state. All such deposits shall be collateralized as provided for by Florida Statutes Chapter 280. 5. Securities issued and guaranteed by a federally sponsored corporation which are backed by, or the entity is capable of borrowing from, the U.S. Treasury. These securities carry the "implied guarantee" of the U.S. Government and 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. B. Collateralization Collateral ization 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 changes and provide a level of security for all funds, the collateral ization 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 Bond 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 indebtedness contain specific provisions relative to the investment of funds, the investment of such funds shall comply with the 9 INVESTMENT POLICY •.. VI H RI AND 5UITABLE INVE TMEN R MENT D. Compliance with City's Bond Covenants, continued PAGE 10 OF 15 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-85-436, Section 512(b), monies held in the General Reserve 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 term obtainable with reasonable diligence, such as price not to exceed the principal of such Term Bonds plus the amount of the redemption premium, if 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." Vill. 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 denominated 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, banker acceptances and commercial paper. 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 (IOs) and principal only (POs), forwards, futures, currency and interest rate swaps, options, floaters/inverse floaters, and caps/floors/collars. 10 INVEST ENT(POLICY R-96-67 PAGE 11 OF 15 rI X INVESTMENT PARAMETERS A. Diversification It is the policy of the City of Tamarac to diversify its investment portfolios. Assets held 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 and revised periodically as necessary by the appropriate management staff and approved by the Director of Finance. (See Table 1). 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 necessarily 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 term rates. • Maturities should be lengthened when interest rates are expected to fall based on economic reports taken as a whole. • The yield curves of the market should be analyzed for significant breaks in yields over various maturity dates. The points at which the yield curve breaks are the points at which there are significant marginal declines in yields for incremental changes in the maturity dates. Investments should be made at the breaks in the yield curve so that yields will be maximized. C. Duration The duration of each investment should not exceed the stated maturity. 11 INVESTMENT POLICY R-96-67 PAGE 12 OF 15 IX. INVESTMENT A„RAM � . ntinued „P ERSo c. D. Security Selection When purchasing or selling securities, the Director of Finance or designee shall select the security which provides the highest rate of return within the parameters of this policy (see Investment Objectives) and given the current objectives and needs of the City's portfolio. 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 pricing resources available to the City (such as the City's financial advisors, the Wall Street Journal, or a comparable nationally recognized financial publication providing daily market pricing) In most situations, the City shall utilize the competitive bid process to select the securities to be purchased or sold. Selection by comparison to current market prices, as indicated above, shall be utilized when, in the judgement of two members of the investment staff, competitive bidding would inhibit the selection process. Examples of when this might occur are: . When time constraints due to unusual circumstances 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 of the specific security involved. When the selection is made based on comparison to current market price, the following information shall become part of the record of the security involved: Reason for use of this method. Source of the current market value used. Price and/or interest rate quoted by said source. E. Policies to Enhance Return on Investment The City's investment strategy is active. Given this strategy, the 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. Active Portfolio Management `m INVESTMENT POLICY R-96-67 PAGE 13OF15 IX. INVESTMENJ PARAMETERS,continued • E. Policies to Enhance Return on Investment, continued It is the policy of the City to actively manage the investment portfolio within the constraints outlined in these investment policies. By using an active portfolio management philosophy, portfolio yield will be 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 shorten maturities. Similarly, during periods where economic conditions demonstrate potential for interest rate decreases in the near future, the City will consider appropriate actions to lengthen maturities. 3. Bond Swaps It shall be the 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 administrative 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 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. b. 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 isolate the swap opportunities that are attributable to this factor or (1) above. C. Swaps to Reduce Maturity: Market aberrations occasionally create a situation where longer 13 /`�,-6"7 INVESTMENT POLICY R-96-67 PAGE 14 OF 15 IX. INVESTMENT PARAM TERS, continued 0 E • • Policies to Enhance Return on Investment, continued 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. d. Overall Loss vs. Initial Accounting Loss: It is the City's policy to avoid all swaps that result in 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 generally 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. Table 1 Investment Parameters v};•:}vi}.:}:}:::??tirk��nii�4sii$�.'{:iif}•i:}iJf.}41.; �i:T:�lI�Ij::•�j:T?M1aA:}�44.��FM:yjTT;:,`rj�;�G:;JY:,„•K••{••F:•;.:.1}■�.;1:•:;•:}I��}•'!}Mi}}M��;±y:}:}'�?��+•}�;:/{]j}�.'+f:::•:.:. :ij>;:::::}•>;:.:;:�+;:?; {>.:?;{:i{':};::}:�;i:}:?}�:i$�}: : +? $�.}. i'���.y4y�f�1, ��eWT•�}.:•r;••i.�••44:�vvn:•K.X:}..}4.:};:}:ii}}4}}r}iv}::}i:i?}}::}ti}.n}:i?: } ........ ................. Y ................... X :• ................. ................... ti��• i?•.+?•:.Fy}}.:��.R}.:f}/�.:��•i•,•?��i�?.:.�4•L..:.�4}.I:■..�}i................... i: i: i: ��l ?•Fii}' h•.::;.}} . 4•}: J••iRJ;•FR. :}�.•. + ?i:'i:;•}::•T;:1}�i��•: ,�M�'F��{R[ .•''l,::!iti�f.,��. '��.`R: 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,FMHA,SBA,GSA,FHA,TVA) 10 years 0% 85% U.S. Government Instrumentalities (e.g. FFCB, FHLMC, FHLB, FNMA) 10 years 0% 85% Certificate of Deposits 5 years 0% 85% 14 �/ 7 INVESTMENT POLICY R-96-67 PAGE 15 OF 15 X. REPORTING A. Method The Director of Finance shall generate monthly reports for the City Manager and for the City Commission. The report shall summarize the investment strategies employed and describe the portfolio in terms of investment securities, maturities, risk characteristic and other features. The Director of Finance or Designee shall provide other such reports and information as deemed reasonable, upon request from other internal and external sources. B. Performance Standards The investment 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/economic environment of stable interest rates. Portfolio performance should be compared to appropriate benchmarks on a regular basis. C. Marking to Market A statement of the market value of the portfolio shall be issued at least monthly. This will ensure that the minimal amount of review has been performed on the investment portfolio in terms of value and subsequent price volatility. XI. POLICY A. Exemption Any investments currently held 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. The Director of Finance or designee may take a 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 investment. B. Amendment This policy shall be reviewed on a timely basis. Any material changes to the Investment Policy should be recommended by the Director of Finance and the City Manager and approved by the City Commission. 0 C. Effective Date This policy shall become effective immediately upon its adoption by the City Commission. 15 p.. r� C� • APPENDIX A BANKING SERVICES AGREEMENT: The purpose of the all -encompassing banking services agreement is to combine all facets of the total banking 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 test 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. Large 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 Al public monies. CREDIT RISK: Credit Risk is the risk of loss due to the failure of the security issuer or backer. Credit risk may be mitigated by: limiting investments to the safest types of securities; pre -qualifying the financial institutions, broker/dealers, intermediaries, and advisors with which the City will do business; and diversifying the investment portfolio so that potential losses on individual securities will be minimized. DEBT SERVICE FUNDS: Accounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt (also called free). Delivery versus payment is delivery of securities 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 a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided the ie Y l'6. 6 APPENDIX A GLOSSARY periodic determination of revenues payment of principal and interest. earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, ENTERPRISE FUNDS, CONTINUED: management control, accountability, and other purposes. FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $100,000 per deposit. FEDERAL HOME LOAN BANKS (FHLB): The institutions that regulate and lend to savings and loan FEDERAL HOME LOAN BANKS (FHLB), CONTINUED: associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Banks vis-a-vis member commercial banks. FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like GNMA was chartered under 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 Mae, 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's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely A FEDERAL RESERVE BANK: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GENERAL FUND: Accounts for all financial resources except those required to be accounted for in another fund. 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 FHA, VA or FMHM mortgages. The term pass- throughs is often used to describe Ginnie Maes. 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 mitigated 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 -term securities or by cash flow projections. • • rI GLOSSARY INTERNAL SERVICE FUNDS: Accounts for the financing of goods or services provided by one department or agency 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. 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 a portfolio is to reduce risk by diversification. PRIMARY DEALER: A group of government securities dealers that submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New 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 firms. 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 - A 3 the -so-called legal list. In other states the trustee may invest in a security if it is one which would be bought 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 laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not 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 current income return. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to 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 be doing RP, it is lending money, that is, increasing bank reserves. � 56--- �, -7 APPENDIX A GLOSSARY THIRD PARTY CUSTODIAL SAFEKEEPING: A service to customers AGREEMENT, CONTINUED: with rendered by banks for a fee whereby financial institutions, investment securities and valuables of all types and securities, or securities underlying descriptions are held in the bank's repurchase agreements. vaults for protections. SAFETY: Relates to the volatility of the principal of the investment. Complete safety means no increase or decrease in nominal value. The original sum invested is returnable to the investor SAFETY, CONTINUED: either at the investor's option or at the end of some short contractual period. SECONDARY MARKET: Exchanges 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 he selling dealers and investors, not to he companies that originally issued the securities. Market in which money-market instruments are traded among investors. 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 written contract establishing the responsibilities of a custodian holding collateral for deposits TREASURY BILLS: A non -interest bearing discount security issued by the U.S. Treasury o finance the national debt. Most bills are issued to mature in three months, six months, or one year. TREASURY BONDS: Long-term U.S. Treasury securities having initial 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 assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other trust funds. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker -dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. A4 /.1=4ki10EI.1 GLOSSARY WIRE TRANSFER AGREEMENTS: Many banks require an executed Wire Transfer Agreement from their commercial customers - those who utilize the Fedwire system as a means for transferring large amounts of funds on a regular basis. YIELD: The rate of annual income return on an investment, expressed as a percentage. (A) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (B) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. • A 5 APPENDIX B Temp. Reso. # 6811 CITY OF TAMARAC, FLORIDA RESOLUTION NO. R-94-- I(0 1 A RESOLUTION AUTHORIZING THE INVESTMENT OF CITY FUNDS BY THE CITY MANAGER OR HIS DESIGNATED REPRESENTATIVE IN A MANNER CONSISTENT WITH THE FLORIDA STATUTES AND THE CODE OF THE CITY OF TAMARAC, FLORIDA; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City Charter, Section 7.02 provides for any City funds on deposit not currently needed for public purposes are to be invested in instruments or institutions 0 as authorized by Florida Statutes but does not clearly set forth a procedure for the • Investment of City funds; and WHEREAS, Section 166.261, Florida Statutes, states that investments by local governments are to be by resolution of the governing body unless otherwise set forth by ordinance; and WHEREAS, the City Code, Section 6-27, provides that the investment of City funds shall be the responsibility of the City Council which shall establish by resolution procedures for investment transactions; and B1 • • SECTION 1. TemR. Reso. # 6811 That the foregoing whereas clauses are hereby ratified and I confirmed as being true and correct and are hereby made a specific part of this resolution I upon adoption hereof. SECTION 2: All funds of the City or funds held by the City which are I suitable for investment may be invested on behalf of the City by the City Manager or his designated representative. SECTION _9: All investments shall be consistent with requirements set forth I within the Florida Statutes and provisions of the Code of the City of Tamarac. SEgMQN 4: All Resolutions or parts of Resolutions in conflict herewith are I hereby repealed to the extent of such conflict. ECT ON : If any clause, section, other part or application of this I 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. S2 C� C� • SECTION 6: passage and adoption. Passed this ATTEST: This Resolution shall become effective immediately upon its v� day of ardr- , 1994. Carol A. Evans 0 City Clerk NORMAN ABRAMOWITZ MAYOR RECORD OF MAYOR ABRAMOW 7 DIST.1: V / M KATZ DIST. 2: C / M MISHtIN DIST. 3: C / M SCHRMSER DIST. 4: C / W f AGHEK I HEREBY CERTIFY that I have approved the Resolution as to form. / % Mitchell S. If haft/ City Attorney,/ in"Swent OM . .r ..9 B3 rl • EXHIBIT A [ENTITY] ] INVESTMENT FIRM CERTIFICATION FORM As an authorized representative of the undersigned firm, I hereby certify that said firm has in place reasonable procedures to monitor the activities of employees of this firm engaged in transactions between our firm and the [entity]. All sales personnel of this firm dealing with the [entity] have been informed and will be routinely informed of the City's investment objectives, policies, risk constraints and other pertinent factors, whenever we are so informed. This firm further pledges due diligence in informing the City of foreseeable risks associated with financial transactions connected with this firm. (Firm) Authorized Representative (Signature) (Name - Printed ) (Title) (Date) As account representative for the [entity] on behalf of the above referenced firm hereby certify that I have personally read and understand that investment policies of the [entity], in such form as said policies were provided to me. I agree to use my best efforts to comply with the City's written policies and will not knowingly enter into any transaction with the City which appears to be in violation of the City's written policies. Account Representative (Signature) (Name - Printed ) E1 (Title) (Date)