HomeMy WebLinkAbout4.f. Amend Investment Policy F-5 .: CITY OF RQSEMOUNT
EXECUTIVE SUMMARY FOR ACTION
CITY COUNCIL MEETING DATE: August 16, 1994
AGENDA ITEM: Amend Investment Policy F-5 AGENDA SECTION:
Consent
PREPARED BY: Jeff May, Finance Director AGENDA���,� � ,
��
ATTACHMENTS: Policy F-5 APPROVED BY:
Attached for your consideration is an amended Jnvestment Policy (F-5). There is a minor addition
added on page two of the document (changes are shaded). This is a matter of interpretation that
one of the investment firms that we have had conversations with felt was important. Staff believed
that the policy, as originally written, said the same thing, but the firm felt that we would be better
served by actually stating the additional verbage even though it was already implied in the wording
we already had.
R C MMENDED ACTION:
Motion to approve the amended Investment Policy F-5.
C4UNCIL ACTION: .r-
.
CITY OF ROSEMOUNT
POLICY TITLE: INVESTMENT POLICY
' POLICY NUMBER: F - 5 �
PROPOSED BY: FINANCE
DATE APPROVED
BY CITY COUNCIL: JUNE 7, 1994 {Amended August 16, 1994)
PURPOSE
The purpose of this policy is to establish specific guidelines the City af Rosemount will
use in the investment of City funds, It will be the responsibility of the City Treasurer
(Finance Director) or the City Administrator to invest City funds in order to attain a
market rate of return while preserving and protecting the capital of the overall portfolio.
lnvestments will be made, based on statutory constraints, in safe, low risk instruments.
SCOPE
The Finance Director or City Administrator is responsible for the investing of all funds
in the custody of the City, including, but not necessarily limited to, the General Fund,
Special Revenue Funds, Debt Service Funds, Capital Project Funds, Enterprise
Funds(Water, Sewer, Storm Water & Community Center) and Agency Funds.
PRUDENCE
Prudent Man Rule - "Investment shall bemade with the exercise of that judgment and
care, under circumstances then prevailing, which men of prudence, discretian and
intelligence exercise in the management of their own affairs, not for speculation, but
for investment, considering the probable safety of their capital as weli as the probable
income to be derived.°
OBJECTIVE
There are three main objectives of all investment activities that are priaritized 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
. �.a--- liquidity to provide the City the ability to meet all operating requirements whichi.�__
might be reasonably anticipated.
Page 2 - Policy F-5
C. Rate of Return - An investment will be purchased with the best rate or return
considering its safety. -
DELEGATION OF AUTHORITY
The Finance Qirector or City Administrator will be responsible for making investment
decisions on a daily basis and monitoring the portfolio. Also, they will be responsible
for ensuring the amounts of cash available for investment 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 aperations.
CONFLICT OF INTEREST
Any City official involved in the investment process shall refrain from personal
business activity that could conflict with proper execution of the investment program or
which could impair his/her abiGty to make impartial investment decisions.
DESIGNATED DEPOSITORIES
In accordance with Minnesota Statutes, Section 118.Q05, it shall be the policy of the
City to authorize the Finance Director or the City Administrator #he ability, by
resolution, to designate all depositaries for all City checking and investrnent deposits.
AUTHORIZED AND SUITABLE INVESTMENTS
Minnesota Statutes, Section 475.66, Subdivision 3, lists alf permissible investments for
municipalities. This list establishes the maximum investment risk.permitted for a
Minnesota municipality. The City of Rosemount will not autharize its employees to
invest in all of these investments, staying consistent with its number one priarity of
safety of capital. The following are investments the City will be authorized to invest in:
1. Governmental Securities: Instruments such as bands, notes, bills, mortgages and
other securities which are direct obligations of the federal government or it�;:���Ci:�i�,
..:.
with the principal fully guaranteed by the U.S. government �:::it�:��et���s The City
will not invest in any mortgage or mortgage related security unless a return of principal
is completely guaranteed by a federal entity.
2. Certificate of Deposit: A negotiable or nonnegotiable instrument issued by
commercial banks and insured up to $100,000 by the Federal Deposit Insurance
Corporation (FDIC). (See "Collateralization")
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Page 3 - Policy F-5
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 selfing 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
coflateral protecting the investment. (See "Collateralization")
4. Reverse Repurchase Agreement: �pposite 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 less} 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 af the State of Minnesota or any of its
municipalities.
7. Bankers acceptances of United States banks eligible for purchase by the Federal
Reserve System.
COLLATERALIZATION
Collateralization will be required on twa types of investments, Certificates of Deposit
and Repurchase Agreements. Jn order ta 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. Callateral 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 City shall be
held in third party safe keeping by an institution designated as primary agent. The
primary agent shall issue a safe keeping receipt to 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, wili not exceed
ten percent of the tatal funds in the portfolia This is done to reduce overall market
risk of rates changing.
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Page 4 - Policy F-5
MAXIMUM MATURITIES
City operating funds are not to be invested for a term exceeding one year. 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 Community Center Fund.
Funds that have 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 external auditor annually.
This review provides internal controls by assuring compliance with policies and
pracedures.
INVESTMENT REPORTING
The Finance Director or City Administrator will provide at minimum, a quarterly report
to the City Counci( of the City's investment portfolia. 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 REPRESENTATI�NS
Beginning January 1, 1994, municipalities must obtain from their brokers certain
representations regarding future investments. Minnesota Statutes, 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 will 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
institutions shall agree to undertake reasonable effors to preclude imprudent
transactions involving the City's funds.
CONCLUSION
The intent af this policy is to ensure the safety of all City funds. fihe main goal of the
City will be to achieve a market rate of return while maintaining the safety of its
principal. It is felt that this policy will ensure this.