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HomeMy WebLinkAbout4.f. Amend Investment Policy F-5 �: ' CITY OF ROSEMOUNT ~ EXECUTIVE SUMMARY FOR ACTION CITY COUNCIL MEETING DATE: December 2Q, 1994 AGENDA ITEM: Amend Investment Policy F-5 AGENDA SECTION. Consent PREPARED BY: Jeff May, Finance Director AGENDA�� � )� �` `t 1 ATTACHMENTS: Policy F-5 APPROVED BY: Attached for your consideration is an amended investment Policy (F-5). There are finro changes on page four of the document, both under the heading "Maximum Maturities". The first changes the term of investments for operating funds from one year to three years. The retum on the increased length of time is usually substantial and manageable on our part if entered into with care. The second change is to switch the title from Community Center Fund to Arena Fund, which will reflect , the fact that the Arena is the only portion of the fund that will remain as an enterprise fund for 1995. RECOMMENDED ACTION: Motion to approve the amended lnvestment Policy F-5. COUNCIL ACTION: i CITY OF ROSEMOUNT I POLICY TITLE: INVESTMENT POLICY �' i POLICY NUMBER: F - 5 '� i PROPOSED BY: FINANCE I DATE APPROVED II BY CITY COUNCIL: JUNE 7, 1994 (Amended December 20, 1994) , PURPOSE j The purpose of this policy is to establish specific guidelines the City of Rosemount will ! use in the investment of City funds. It will be the responsib�lity of the City Treasurer , (Finance Director) or the City Administrator to invest City funds in order to attain a I market rate of return while preserving and protecting the capital of the overall portfolio. '' Investments will be made, based on statutory constraints, in safe, low risk instruments. '�, SCOPE i, I The Finance Director or City Administrator is responsible for #he investing of all funds � in the custody of the City, including, but not necessarily Iimited to, the General Fund, ��, Special Revenue Funds, Debt Senrice Funds, Capital Project Funds, Enterprise I, Funds(Water, Sewer, Storm Water & Community Center) and Agency Funds. �� i PRUDENCE � Prudent Man Rule - "Investment shall be made with the exercise of that judgment and I care, under circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the managernent of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as welf as the probable income to be derived.° OBJECTIVE There are three main objectives of all investment activities that are prioritized as follows: A. Safety - Safety of principal is the first priority in the investment activities of the City of Rosemount. Avoiding capital losses shall be the primary objective of each investment transaction that the City enters inta B. Liquidity - The City's portfolio will contain instruments that contain a balance of liquidity to provide the City the ability to meet all operating requirements which might be reasonably anticipated. Page 2 - Policy F-5 C. Rate of Retum - An investment wili be purchased with the best rate or retum considering its safety. DELEGATION OF AUTHORtTY The Finance Director or City Administratar will be respansible for making investment decisions on a daily basis and monitoring the portfolio. Also, they wilf be responsible , for ensuring the amounts of cash available for inves#ment and the time period for which the funds may be invested with a reasonable level of confidence in relation to necessary cash flows for the City's operations. CONFLICT OF INTEREST I'� Any City official involved in the investment process shall refrain from personal II business activity that could conflict with proper execution of the investment program or i which could irnpair his/her ability to make impartial investment decisions. � DESIGNATED DEPOSITORIES II In accordance with Minnesota Statutes, Section 118.005, it shall be the policy of the � City to authorize the Finance Director or the City Administrator the ability, by ', resolution, to designate all depositories for all City checking and investrnent deposits. ' AUTHORIZED AND SUITABLE JNVESTMENTS I! Minnesota Statutes, Section 475.66, Subdivision 3, lists atl permissible investments for municipalities. This list establishes tMe maximum investment risk permitted for a Minnesota municipality. The City of Rosemoun# will not authorize its ernployees to invest in ali of these investments, staying consistent with its number one priority of safety of capitaL The following are investments the City will be authorized to invest in: 1. Govemmental Securities Instruments such as bonds, notes, bills, mortgages and ather securities which are direct obligations of the federal govemment or its agencies, with the principal fully guaranteed by the U.S. government or its agencies. The City will not invest in any mortgage or mortgage related security unless a retum of principal is completely guaranteed by a federal entity. 2. Certificate of Deposit: A negotiable or nonnegotiable instrurnent issued by commercial banks and insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). (See "Collateralization") Page 3 - Policy F-5 I 3. Repurchase Agreement: An investment which consists of two simultaneous �! transactions, where an investor purchases securities from a bank or dealer. At the same time, the seiling bank or dealer agrees to repurchase the securities at the same : price plus interest at some agreed-upon future date. The security purchased is the colfateral protecting the investment. (See "Collateralization") 4. Reverse Repurchase Agreement: Opposite of a repurchase agreement. The investor owns the security and sells it to the bank or dealer. 5. Prime Commercial Paper: An investment used by corporations to finance receivables. A short-term(matures in 270 days or fess) unsecured promissory note is issued for a maturity specified by the purchaser. Corporations market their paper through dealers who in turn market the paper to investors. 6. Any security which is a general obligation o# the State of Minnesota or any of its municipalities. 7. Bankers acceptances of United States banks eligibie for purchase by the Federal Reserve System. COLLATERALIZATION Collateralization will be required on two types of inves#ments, Certificates of Deposit and Repurchase Agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 110 percent of the market value of principal and accrued interest. Collatera{ shall be deposited in the name of the City of Rosemount, Minnesota, subject to release by the City's Finance Director or City Administrator. All investment securities purchased by the Gity shalt be held in third party safe keeping by an institution designated as primary agent. The primary agent shall issue a safe keeping receipt ta the City listing the specific instrument rate maturity and other pertinent information. All deposits will be insured or collateralized in accordance with Minnesota Statutes Chapter 118. DIVERSIFICATION The City will attempt to diversify its investments according to type and maturity. The portfolio, as much as possible, will contain both short-term and long-term investments. The long-term portion of the portfolio, meaning five years and beyond, will not exceed ten percent of the total funds in the portfolio. This is done to reduce overalt market risk of rates changing. , Page 4 - Policy F-5 MAXIMUM MATURITIES City operating funds are not to be invested for a term exceeding three years. Operating funds include, but may not be limited to, the General Fund, the Water Utility Fund, the Sewer Utility Fund, the Storm Water Utility Fund and the Arena Fund. Funds that fiave a use that is other than for operation have no restrictions on length. The City of Rosemount invests its funds with the assurance that it will meet its current short-term cash flow needs. INTERNAL CONTROL The investment portfolio of the City is to be audited by an extemal auditor annually. This review provides intemal controls by assuring compliance with policies and procedures. INVESTMENT REPORTING The Finance Director or City Administrator will provide at minimum, a quarterly report to the City Council of the City's investment portfolio. This report will list all investments held by the City at the time of the report with all pertinent information associated with each of those investments. BROKER REPRESENTATIONS Beginning January 1, 1994, municipalities must obtain from their brokers certain representations regarding future investments. Minnesota Sfatutes, Section 475.66, Subdivision 6, requires municipalities to provide each broker with information regarding the municipality's investment restrictions. Before engaging in investment #ransactions with the City of Rosemount, the supervising officer at the securities broker/dealer shall submit a certification. The document wiq state that the officer has reviewed the investment policies and objectives, as well as applicable state law, and agrees to disclose potential conflicts of interest or risk to public funds that might arise out of business transactions between the firm and the City of Rosemount. All financial II institutions shall agree'to undertake reasonable effors to preclude imprudent !,, transactions involving the City's funds. � CONCLUSION The intent of this policy is to ensure the safety of all City funds. The main goal of the City will be to achieve a market rate of retum while maintaining the safety of its principaL It is felt that this policy will ensure this.