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HomeMy WebLinkAbout1997-060 CCRadoption: Member a�hk �� introduced the following resolution and moved its • RESOLUTION NO. 91- Q RESOLUTION APPROVING AN AMENDED INVESTMENT POLICY WHEREAS, the safe and effective investment of money is essential to the sound fiscal management of the City; and WHEREAS, the existence of a written investment police is a necessary tool to protect the City and staff and to guide management in the investment of City money; and WHEREAS, the City has had a written investment policy since 1990; and WHEREAS, a new investment policy based upon recommendations of the Government Finance Officers Association, Minnesota State Statutes, the City Charter, and the Financial Commission has been written. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Brooklyn Center, Minnesota, that the attached Investment Policy is hereby adopted. • 3 lay ) ion`i Date ATTEST: City Clerk Mayor The motion for the adoption of the foregoing resolution was duly seconded by member -k6t4 L65rAn , and upon vote being taken thereon, the following voted in favor thereof: (Nirna,)<r&X9f%f95 kj+)-)16Fn Carmvd` j L�br� IS r�� V1J l.asrYtn, J�ber+ Pee"-- and the following voQ against the same: t, due whereupon said resolution was declared duly passed and adopted. 0 0 Res Na, CITY OF BROOKLYN CENTER INVESTMENT POLICY I. SCOPE This investment policy applies to all of the investment activities of the City, except for the Employee Deferred Compensation Agency Fund and the proceeds of refunding bond issues where the investment of such proceeds is specifically governed by the bond escrow agreement. H. OBJECTIVE 1. SAFETY Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and • interest rate risk. A. Credit Risk Credit risk is the risk of loss due to failure of the security issuer or backer. Credit risk may be mitigated by: • Limiting investments to the safest types of securities; and • Pre -qualifying the financial institution, broker/dealer, intermediaries, and advisors with which an entity will do business; and • Diversifying the investment portfolio so that potential losses on individual securities will be minimized. B. Interest Rate Risk Interest rate risk in the risk that the market value of securities in the portfolio will fall due to changes in general interest rate. 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. • 1 NQS, No, q -7-(W 2. LIQUIDITY The investment.. -portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is 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 should contain a large component of securities with active secondary or resale markets. 3. 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 is of least importance compared to the safety and liquidity objectives described above. The core of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall be held to maturity -with the following exceptions: I. Liquidity needs of the portfolio require that the security be sold. 2. A securityof declining credit could be sold earl to minimise loss of g Y principal. 4. STABLE EARNINGS Since investment earnings are included in the budgeted revenues of the City, it is important that these earnings be stable and predicable through at least the next budget cycle. This points to the need to purchase securities of various maturities so that at least half of the portfolio will remain for two or more years with known interest rates. III. STANDARDS OF CARE 1. PRUDENCE 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 an overall portfolio. Investment officials acting in accordance with this policy and exercising due • 2 �.es. No , q1` 60 diligence shall be relieved of personal responsibility for an individual security's . credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the purchase and sale of securities are carried out in accordance with the terms of this policy. 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. 2. ETHICS AND CONFLICTS OF INTEREST Officials involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. 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. Officials shall refrain from undertaking personal investment transactions • with the same individual with who business is conducted on behalf of the City. 3. DELEGATION OF AUTHORITY Authority to manage the investment program is derived from Minnesota State Statutes, Chapter 118A and Brooklyn Center City Charter Chapter 6, Section 6.04 and is granted to the City Manager, City Treasurer, and Assistant City Treasurer. Responsibility for the operation of the investment program may be delegated by the City Manager to the City Treasurer, who shall carry out the program consistent with this policy. No person may engage in an investment transaction except as provided under the terms of this policy. The City Treasurer shall be responsible to the City Manager for all transactions undertaken and shall establish a system of controls to regulate the execution of all investment transactions. 4. TRAINING To ensure the competence of its investment officials, the City shall provide the opportunity for the officials to attend such investment training programs as are available and suitable. Res No. q-7-6° • N. SAFEKEEPING AND CUSTODY 1. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS A resolution shall be submitted to the City Council at least annually to designate depositories of city funds. This shall include institutions and dealerlbrokers where accounts are maintained for banking services, purchase and sale of investment securities, and the custody of securities. The City Treasurer shall provide to each broker or institution, a written statement of investment restrictions which shall include a provision that all future investments are to be made in accordance with Minnesota Statutes governing the investment of public funds, prior to completing an initial transaction, and annually thereafter. An annual review of the depositories shall be conducted by the City Treasurer. Requests for Proposals for banking services and custodian for investment securities shall be conducted on a periodic basis as defined in the Policy and Procedure on Requests for Proposals for Financial Professional Services. 2. INTERNAL CONTROLS • The Ci tyTreasurer is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City 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 the cost of a control should not exceed the benefits likely to be derived and the valuation of costs and benefits requires estimates and judgements by management. Internal controls shall include the following: is a. Control of Collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. b. Custodial safekeQing, Securities purchased from any bank or dealer shall be placed with an independent third party for custodial safekeeping or held in an account with the Federal Reserve Bank of Minneapolis. C. Avoidance of physical delivery securities Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss 0 des . No, q-7-60 . or destruction. The potential for fraud and loss increases with physical delivered securities. d. Clear delegation of authority to suhnrdinate staff members Officials must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure. e. Written confirmation _of-teleohone tiansaEtions_ for _ investments and wire transfers. Due to the potential for errors and improprieties arising from telephone transactions, all transactions should be supported by written communications and approved by the appropriate official. Written communications may be via fax on letterhead. Institutions and broker/ dealers shall be provided with a list of authorized signers. f. Development of a wire transfer agreement with institutions and broker/ dea e . This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. • g. Independent Audit The City's independent auditors shall conduct a thorough review of the City's investment portfolio and transactions as part of their engagement. • 3. DELIVERY VERSES PAYMENT All trades where applicable will be executed by delivery verse payment (DVP). This ensures that securities are deposited in the eligible financial institution prior to the release of funds. Securities will be held by a third parry custodian. V. SUITABLE AND AUTHORIZED INVESTMENTS 1. INVESTMENT TYPES Consistent with Minnesota Statutes Chapter 118A, the following investments will be permitted by this policy: a. Securities that are the direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations 5 ReS'No, V-60 created by an act of Congress; including governmental bills, notes, bonds, and other securities. b. Commercial paper issued by U.S. corporations or their Canadian subsidiaries that is rated in the highest quality by at least two nationally recognized rating agencies and matures in 270 days or less. C. Time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of U.S. banks. d. Repurchase agreements and reverse repurchase agreements may be entered into with financial institutions identified by Minnesota Statutes Chapter 118A. e. Securities lending agreements may be entered into with financial institutions identified by Minnesota Statutes Chapter 118A. f. Minnesota joint powers investment trusts may be entered into with trusts identified by Minnesota Statutes Chapter 118A. • g. Money market mutual funds regulated by the Securities and Exchange Commission and whose portfolios consist only of short term securities permitted by Minnesota Statutes Chapter 118A. C7 h. Bonds of the City of Brooklyn Center issued in prior years, may be redeemed at current market price, which may include a premium, prior to maturity using surplus funds of the debt service fund set up for that issue. Such repurchased bonds shall be canceled and removed from the obligation of the fund. 2. SECURITIES NOT PURCHASED Derivative securities which obtain their value by the calculation of some portion of the value of another security shall not be purchased. Mortgage backed securities, even if insured by a Federal Agency, shall not be purchased. Securities which represent the principal or interest payments stripped off from an original issue security shallnot be purchased. 0 �es. No, q-7-60 • 3. COLLATERALIZATION To the extent that deposits in bank accounts, certificates of deposit, and repurchase agreements exceed the available federal deposit insurance, collateral shall be furnished by the financial institution in accordance with Minnesota Statutes Chapter 118A 4. MAXIMUM MATURITIES When purchasing investments, the Treasurer will attempt to match the maturity to future cash flow requirements. The city will not invest in securities maturing more than ten years from the date of purchase. No more than ten percent of the city's Portfolio at any time shall be invested in securities with maturities of more than five years. VI. REPORTING 1. The City Treasurer shall prepare a monthly investment report to the City Manager which shall include a succinct management summary; a list of significant transactions such as purchases, sales, and maturities of investments; a list of • investments by type, a list of investments by maturity, a calculation of average yield on the portfolio, and a statement of interest earned. This report will be prepared in a manner which will allow the City Manager to ascertain whether investment activities during the month have conformed to the investment policy. J 2. A statement of the market value of the portfolio shall be issued at least annually. This will review the investment portfolio in terms of value and subsequent price volatility. 7