Loading...
HomeMy WebLinkAbout1990-105 CCRMember Celia Scott introduced the following resolution and moved its adoption: WHEREAS, Effective cash management is recognized as essential to good fiscal management; and WHEREAS, it has always been the policy of the City of Brooklyn Center that available funds be invested to the maximum extent possible, at the highest rates obtainable at the time of investment, in conformance with the legal and administrative guidelines; and WHEREAS, the Government Finance Officers Association of the United States and Canada and the City's independent auditor have recommended that the City establish a written statement of investment policy. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Brooklyn Center that the attached "Statement of Investment Policy" is hereby adopted. ATTEST: May 21, 1990 Date RESOLUTION NO. 90 -105 RESOLUTION TO ADOPT A STATEMENT OF INVESTMENT POLICY 7I ri-UAA^,L11.(4kaL. Deputy City Clerk U The motion for the adoption of the foregoing resolution was duly seconded by member Jerry Pedlar and upon vote being taken thereon, the following voted in favor thereof: Dean Nyquist, Celia Scott, Todd Paulson, Jerry Pedlar, and Philip Cohen; and the following voted against the same: none, whereupon said resolution was declared duly passed and adopted. RESOLUTION NO. 90 -105 Effective cash management is recognized as essential to good fiscal management. This is particularly true as mounting costs and expanding programs have placed ever increasing pressures on local governmental revenues. The extent to which local governments can obtain investment returns on funds not immediately required can help to reduce this pressure. Investment policies must be well founded and uncompromisingly applied in their legal, vendor, and administrative aspects. It is the policy of the City of Brooklyn Center that available funds be invested to the maximum extent possible, at the highest rates obtainable at the time of investment, in conformance with the legal and administrative guidelines outlined herein. I. Legal Aspects CITY OF BROOKLYN CENTER STATEMENT OF INVESTMENT POLICY Minnesota Statues authorize and define an investment program for municipal governments. (Exhibit 1) A. Investment Instruments Authorization The City of Brooklyn Center shall invest in the following instruments allowed by Minnesota Statutes: a. United States Treasury obligations b. Federal Agency issues c. Repurchase Agreements (repo's) d. Certificates of Deposit e. Commercial Paper prime f. Bankers Acceptances prime g. Money Market Funds whose portfolios consist of United States Treasury obligations and Federal Agency issues. B. Supplemental Depositories Annually the City Council will designate depositories for investment purposes. II. Vendor Aspects The vendor aspects of investment activity focus upon protection of taxpayer dollars. and investment income, consistent with statutory authorization and financial prudence. The City of Brooklyn Center shall seek to conduct its investment transactions with several competing, reputable investment security dealers and qualifying banks. Special care should be exercised when considering new services. RESOLUTION NO. 90 -105 B. Selection of Repo Vendors or 2. Reputation and Experience CITY OF BROOKLYN CENTER -2- STATEMENT OF INVESTMENT POLICY (Continued) A. Perfecting Collateral in Repurchase Agreements Repo's are considered secured loans with securities as underlying collateral. The collateral in each repo transaction shall be perfected. (Perfection is a legal concept by which a lender attains the right to take delivery and ownership of the collateral involved in a loan in the event that a debtor defaults and files bankruptcy.) With collateral perfection there is less principal risk for the lender since the claim against the collateral is in place in relation to those of other parties. For repo's with maturities of 21 days or less, collateral is considered perfected without security delivery. For repos with maturities extending past 21 days perfection occurs only by taking possession of securities. It is the City of Brooklyn Center's policy to insist on delivery of securities if the repo transaction is for greater than 21 days. The City of Brooklyn Center will purchase repos from vendors who meet certain criteria. 1. Repo transactions restricted to: a. Reporting dealers who are monitored by the New York Federal Reserve Bank Nationally supervised commercial banks whose combined capital and surplus equals or exceeds $10,000,000. The qualifying bank or dealer must have demonstrated over a significant period of time, a successful, profitable, and reliable operation. 3. Management and Professionalism The qualifying bank or dealer must have an established managerial component and knowledgeable professional staff capable of ensuring the continued success of the enterprises. RESOLUTION NO. 90 -105 C. Local Investments CITY OF BROOKLYN CENTER -3- STATEMENT OF INVESTMENT POLICY (Continued) In order to provide an opportunity for small local banks and Savings and Loans to compete in the bidding, efforts will be made to offer smaller dollar amounts for bid. The City of Brooklyn Center will purchase short -term and medium -term certificates of deposit from vendors based on the following criteria: a. The rate should match or exceed other investment options. b. The collateral shall be government securities in excess of FDIC maximum insurance ($100,000 under current law). D. Certificates of deposit from Qualifying Banks The City of Brooklyn Center will follow Minnesota Statutes 118.01 and 118.005. (Exhibit 2) E. Bankers Acceptances and Commercial Paper Although authorized by Minnesota Law, bankers acceptances and commercial paper are more risky than instruments of the Federal government or Federal agencies. Because of the credit risk, the City of Brooklyn Center will follow these guidelines: 1. Bankers Acceptances a. Bankers Acceptances shall be restricted to the top 40 banks in the United States (as measured by deposits). Investments in Bankers Acceptances shall not be made if news leads offer concerns over the financial condition of these banks. b. The broker, dealer, or banker shall verify that the Bankers Acceptance is eligible for purchase by the Federal Reserve system. c. Bankers Acceptances should not be purchased unless the yield is greater than United States Treasury obligations or Federal Agency issues. RESOLUTION NO. 90 -105 2. Commercial Paper III. Administrative Process A. Procedures CITY OF BROOKLYN CENTER 4 STATEMENT OF INVESTMENT POLICY (Continued) a. Commercial Paper shall be restricted to issues which mature in 270 days or less with a rating of A -1 (Moody's), P -1 (Standard Poors), or F -1 (Fitch) among at least two of the three rating agencies. b. Commercial Paper shall be purchased only from dealers who report to the Federal Reserve Bank of New York or from qualifying banks. c. Commercial Paper shall not be purchased unless the yield is greater than United States Treasury obligations or Federal Agency issues. Investments of the City of Brooklyn Center shall be undertaken in a manner which seeks to insure the preservation of capital in the overall portfolio. Safety of principal is the foremost objective. Liquidity and yield are also important considerations. It is essential that money is always available when needed, therefore, the investment goal is to maximize yield while seeing that the maturity dates coincide with expenditure needs. The investment portfolio of the City of Brooklyn Center shall be designed to attain a market average rate of return during budgetary and economic cycles, taking into account the City's investment risk constraint and the cash flow characteristics of the portfolio. All participating in the investment process shall seek to act responsibly as custodians of the public trust. Investment officials shall avoid any transaction that might impair public confidence in the City of Brooklyn Center's ability to govern effectively. Cash management is' essential to a good investment program. The Finance Department has responsibility to organize and establish procedures for effective cash management. 1. Cash flow projections are prepared at the beginning of each budget year. 1 RESOLUTION NO. 90 -105 CITY OF BROOKLYN CENTER -5- STATEMENT OF INVESTMENT POLICY (Continued) 2. Each morning cash balances are prepared based on cash received the previous day, warrants paid the previous day, and sizeable checks or wire transfers that present investment opportunity. 3. Each morning the investment records are reviewed and updated as investments mature or are purchased. 4. Each month the investment records are balanced to the the financial records. 5. Each month the Treasurer shall submit a report of the City's investments and cash position to the City Council. 6. Interest earned will be allocated to the various City funds at least annually. B. Banking and Depositories Investment procedures include controlling the level of bank balances and selecting depository institutions. Except for the payroll account, all City funds are centralized in one bank account. 1. At the beginning of each year, the City Council approves depositories and investment firms. 2. Minnesota Statutes 118.005 and 118.01 requires that all deposits be collateralized in the amount of 110% of deposits in excess of federal government insurance coverage. (Exhibit 2) RESOLUTION NO. 90 -105 Minnesota Statute 385.07 requires that "all county funds shall be deposited promptly and intact by the county treasurer in the name of the county or invested as provided in 471.56 and 475.66." MS 471.56 states: "Any municipal funds, not presently needed for other purposes, may be deposited or invested in the manner...provided in section 475.66 for the deposit and investment of debt service funds." The statutes that now authorize specific investment instruments are: MS 475.66 Subd. 1. EXHIBIT 1 Exhibit 1 1of4 All debt service funds shall be deposited and secured as provided in chapter 118, except for amounts invested as authorized in this section, and may be deposited in interest bearing accounts, and such deposits may be evidenced by certificates of deposit with fixed maturities. Sufficient cash for payment of principal, interest, and redemption premiums when due with respect to the obligations for which any debt service fund is created shall be provided by crediting to the fund the collections of tax, special assessment, or other revenues appropriated for that purpose, and depositing all such receipts in a depository bank or banks duly qualified according to law or investing and reinvesting such receipts in securities authorized in this section. Time deposits shall be withdrawable and certificates of deposit and investments shall mature and shall bear interest payable at times and in amounts which, in the judgment of the governing body or its treasurer or other officer or committee to which it has delegated investment decisions, will provide cash at the times and in the amounts required for the purposes of the debt service fund, provided however, that the governing body may authorize the purchase of longer term investments subject to an agreement to repurchase such investments at times and prices sufficient to yield the amounts estimated to be so required. Repurchase agreements may be entered into with a bank qualified as depository of money held in the debt service fund, or with any national or state bank in the United States which is a member of the federal reserve system and whose combined capital and surplus equals or exceeds S10,000,000, or a reporting dealer to the federal reserve bank of New York. MS 475.66 Subd. 2: Repurchase Agreements Investments may be held in safekeeping with any federal reserve bank, any bank authorized under the laws of the United States or any state to exercise corporate trust powers, including but not limited to the bank from which the investment is purchased, cr a reporting dealer to RESOLUTION NO. 90 -105 MS 475.56 Subd. 4. Exhibit 1 2 of 4 the federal reserve bank of New York, provided that the municipality's ownership of all securities in which the fund is invested is evidenced by written acknowledgments identifying the securities by the names of the issuers, maturity dates, interest rates, and serial numbers or other distinguishing marks. MS 475.66 Subd. 3: United States Treasury obligations, federal agency issues, specified investment company shares, state and local general obligations, bankers acceptances and commercial paper: Subject to the provisions of any resolutions or other instruments securing obligations payable from a debt service fund, any balance in the fund may be invested (a) in any security which is a direct obligation of or is guaranteed as to payment of principal and interest by the United States or any agency or instrumentality of the United States, (b) in shares of an investment company registered under the federal investment company act of 1940, whose shares are registered under the federal securities act of 1933, and whose only investments are in securities described in the preceding clause, (c) in any security which is a general obligation of the state of Minnesota or any of its municipalities, (d) in bankers acceptances of United States banks eligible for purchase by the Federal Reserve System, or (e) in commercial paper issued by United States corporations or their Canadian subsidiaries that is of the highest quality and matures in 270 days or less. The fund may also be used to purchase any obligation, whether general or special, of an issue which is payable from the fund, at such price, which may include a premium, as shall be agreed to by the holder, or may be used to redeem any obligation of such an issue prior to maturity in accordance with its terms. The securities representing any such invest- ment may be sold or hypothecated by the municipality at any time, but the money so received remains a part of the fund until used for the purpose for which the fund was created. Any obligation held in the debt service fund from which it is payable may be cancelled at any time unless otherwise provided in a resolution or other instrument securing obligations payable from the fund. Exhibit '1, 3 of 4 RESOLUTION NO. 90 105 MS 475.76 all subdivisions: Reverse Repurchase Agreements Subd. 1: A reverse repurchase agreement may be entered into by a munici- pality, subject to the provisions of this section, only with a bank qualified as depository of funds of the municipality, or with any national or state bank in the United States which is a member of the federal reserve system and whose combined capital and surplus equals or exceeds 510,000,000, or with a reporting dealer to the federal reserve bank of New York. Subd. 2: Reverse repurchase agreements shall not be included in computing the net debt of a municipality, and may be. made without an election or public sale, and the interest payable thereon shall not be subject to the limitation in section 475.55. The interest shall not be deducted or excluded from gross income of the recipient for the purpose of state income, corporate franchise, or bank excise taxes or, if so provided by federal law, for the purpose of federal income tax. Subd. 3: Reverse repurchase agreements shall be made on behalf of the municipality only by its treasurer or other officer designated pursuant to law or charter as custodian of funds and securities held by it, or by a deputy of the officer, when authorized by a resolution of its governing body, and subject to any limitations imposed by the governing body. They may be made in writing or orally, provided that confirmation of an oral agreement is made by the other party by wire or in writing trans- mitted or mailed within one business day thereafter. The agreement or confirmation shall state the sale date and price, the repurchase date and price, and the issuer, designation, principal amount, coupon interest rata, if any, maturity data, and redemption date, if any, of the security. Subd. 4: In the event of failure by a bank or dealer to redeliver a security under a reverse repurchase agreement upon tender of the repurchase price by the municipality at the repurchase date, the obligation of the municipality to repurchase shall cease, and the bank or dealer shall be liable to the municipality for any amount by which the market price of the security at that date exceeds the repurchase price. In the event of failure by a municipality to tender the repurchase price when due under an agreement, the obligation of the bank or dealer to redeliver shall cease, and the municipality shall be liable to the bank or dealer for any amount by which the repurchase price exceeds the market price of the security at the repurchase date. The market price of a security for the purpose of this subdivision shall be deemed to be the average of bid prices quoted, as of the pertinent date, by two or more banks or dealers referred to in subdivision 1, other than the purchaser. Any amount for which either party to a reverse repurchase agreement is liable under the provisions of this subdivision shall be recoverable by action, and may be offset against any existing or subsequent liability owed to the defaulting party, other than a liability of a bank as trustee, custodian, paying agent, or other fiduciary. Any amount for which the municipality becomes liable shall be included in computing its net debt, whether or not it causes the net debt of the municipality to exceed any limit otherwise applicable. Exhibit 1 4 of 4 Subd. 5: Reverse repurchase agreements entered into in accordance with the foregoing provisions shall be valid and binding, whether or not they conform to the following limitations. However, the execution of an agreement that does not conform constitutes misconduct on the part of the responsible officer, subject to a penalty as provided in section 609.43, if the term of the agreement exceeds: RESOLUTION NO. 90 105 (a) A period of 30 consecutive days, including the sale date but not including the repurchase date; or (b) A period which, with the aggregate periods of all agreements made within the preceding 12 months with respect to one security or two or more identical securities, exceeds 90 days, whether or not the period from the first sale to the last repurchase exceeds 12 months. RESOLUTION NO. 90 -105 ization thereof.- EXHIBIT 2 M5 118 Subd. .005 and .01: Public funds depositories and collatal- 118.005 DESIGNATION, PROTECTION OF DEPOSIT. Subd. 1. The governing body of every municipality, as defined in section 118.01, which has the power to receive and disburse funds, shall designate as a depository of the funds such national, insured state banks or tnr'ft institutions as defined in section b1A.02, subdivision 23, as it may aeon proper. Subd. 2. In the event the bank or insured thrift institution selected as a depository is a member of the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation, the custodian of the funds may deposit an amount not to exceed the maximum amount of insurance on the aeposits. in the event it is aestrec to aeoosit a Greater amount in any bank or thrift institution prior to the aecosit, the coverninc body or officer snail reouire the Dank or tnri t institution to furnish a bond. executed by a corporate surety company authorized to do business in the state in a sum at least equal to the estimated sum to be deposited in excess of the maximum amount of insurance. In lieu of the bond, the depository shall assign to the custodian of the funds collateral security in accordance with section 118.01. 118.01 DEPOSITORY BONDS. Any bank, trust company, or thrift institution authorized to do business in this state, designated as a depository of funds of a municipality, as provided by law may, in lieu of the corporate or personal surety bond r¢- auired to be furnished to secure the funds, deoosit with the custodian of the funds. the bonds. certificates of indebtedness. or warrants, except bonds secured by real estate, as are teaalfy authorized investments for savings banks under the laws of the state, or the bonds of any of the insular oossessions of the United States, or the bonds of any state. or its' aaencv, the payment of the orincioal and interest of which. or either, is provided for otherwise than by direct taxation. or notes secured by first mortoates of future maturitv..upon which interest is not oast due. an improved real estate free from deiinouent taxes, within the county wherein the deoository is located. or within counties immediately ad.ioininc the countv in the state of Minnesota. The total in amount of the collateral computed at its market value shall be at least ten Percent mare than the limit of deposit which would be permitted if a corporate or personal surety bond was furnished. The depository may at its discretion furnish both a bond and collateral aggregating the required amount. Any collateral so deposited shall be accompanied by an assignment thereof to RESOLUTION NO. 90 -105 EXHIBIT 2 Page Two the municipality designating the depository, which assignment shall recite that the depository shall pay over to the treasurer or his order on demand or, if a time deposit, when due, free of exhange or any other charges, all moneys deposited therein at any time during the period the collateral shall be so deposited and to pay the interest thereon when due at the agreed rate; and that, in case of any.default upon the part of the depository, the governing body of the municipality making the designation shall have full power and authority to sell the collateral, or as much thereof as may be necessary to realize the full amount due the municipality and to pay .over any surplus to the depository or its assigns. A depository may in its discretion deposit collateral of a value less than the total designation and may from time to time, during the period of its designation, deposit additional collateral and make withdrawals of excess collateral or substitute other collateral for that on deposit or any part thereof. Authority is vested in the treasurer to return the collateral to the depository when the trust so created is terminated and he shall, in the case of a reduction of the deposit, permit the depository to withdraw the excess portion thereof. All interest on the collateral so deposited when collected shall be paid to the depository so long as it is not in default. Before any collateral is deposited with the treasurer it shall first be approved by the same authority that designated the depository, but no such authority shall be necessary for the withdrawal of collateral. The closing of a depository shall be deemed a default upon the part of the depository and no demand upon the part of the municipality or its treasurer shall be necessary to establish the default. If a depository shall close, any time deposit placed therein shall immediately become due and payable. If both bond and collateral are furnished by a depository, all or any part of the collateral may be withdrawn without in any way impairing the full force and effect of the bond unless it shall contain a provision that the collateral shall not be withdrawn without the consent of the surety thereon. If a corporate surety bond is furnished by a depository, it shall be in a penal sum not to exceed the amount designated as the limit of deposit therein, nowithstanding any other provisions of law to the contrary. At no time shall the treasurer maintain a deposit in any depository against collateral in excess of 90 percent of the market value thereof. Any provision of law authorizing any municipality to designate banks ad depositories shall be construed to include trust companies and thrift institutions authorized to do business. All bonds furnished under the provisions of this section shall be approved by the governing bond of the municipality making the designation and filed in the office of the county auditor as provided by section 124.05, and all collateral deposited under the provisions of this section shall be approved by the governing body of the munici- pality making such designation and after such approval deposited with the treasurer of such municipality, unless the governing body of such municapility shall by resolution fix and determine some other place for the safe keeping of such collateral. Such RESOLUTION NO. 90 -105 EXHIBIT 2 Page Three collateral shall not be redeposited in the bank, trust company or thrift institution furnishing the same. Any depository pledging such securities, at any time it deems it advisable or desirable, may substitute obligations of the United States of America for all or any part of the securities pledged, except that no such depository shall substitute obligations of the United States which mature within one year from the date such obligations are first considered as a part of the depository's reserve and which reserves are required by Minnesota Statutes 1967, Sections 48.22 or SIA.20. The collateral so substituted shall be approved by the governing body of the municipality making such designation at its next official meeting. Such securities so substituted shall, at the time of substitution, have a market value sufficient, together with the market value of the original securities for which no substitution is made, to equal or exceed $110 for every $100 of public deposits. In the event of substitution the holder or custodian of the securities shall, on the same day, forward by registered or certified mail to the public corporation and the depository, a receipt specifically describing and identifying both the securities so substituted and those released and returned to the depository. "Municipality" for the purpose of this section means county, city, town, school district, hospital district, public authority, public corporation, public commission, special district, policy or firefighter's relief association, any other statutory retirement association holding funds intended for retirement benefits for employees of a municipality, any other political subdivision, or agency of the state or of its subdivisions.