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HomeMy WebLinkAboutReso 2006-925 RESOLUTION NO. 2006-~S A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, AMENDING RESOLUTION NO. 2005-861 TO APPROVE A REVISED INVESTMENT POLICY OF THE CITY OF SUNNY ISLES BEACH; PROVIDING THE CITY MANAGER WITH THE AUTHORITY TO DO ALL THINGS NECESSARY TO EFFECTUATE THIS RESOLUTION; PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Section 166.21, Florida Statutes provides the City with the authority to invest surplus funds in certain securities; and WHEREAS, The City Commission has the desire to invest surplus funds in accordance with state law; and WHEREAS, by adopting an investment policy the City will be able to earn higher returns on its investments; and WHEREAS, the City Commission wishes to revise the investment policy to include ceIiain provisions. NOW THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, AS FOLLOWS: Section 1. Approval of a Revised Investment Policy. The City Commission hereby approves the Revised Investment Policy attached hereto as Exhibit "A". Section 2. Authorization of City Manager. The City Manager is hereby authorized to do all things necessary to effectuate this Resolution. Section 4. Effective Date. This Resolution will be become effective upon adoption. PASSED and ADOPTED this IB~ay of ~fW ,2006. rywJ / ATTEST: ~~~~ Jane A. ines, MC, CIty Clerk APPROVED AS TO FORM AND LEGAL S FFICIENCY Moved by: G m)"(\,\s~) 0 tU ~ T l:l1l1-~ V\C<i:.. tfJAYo~ B~ E2.1N Second by: VOTE AS FOLLOWS: 5-0 Mayor Edelcup Vice Mayor Brezin Commissioner Goodman Commissioner Iglesias Commissioner Thaler ---1.L(Y es)_(No) V(Yes)_(No) L./(Yes)_(No) vtYes)_(No) ~es)_(No) 2 CITY OF SUNNY ISLES BEACH INVESTMENT/PORTFOLIO POLICY PURPOSE It is the intent of this policy to provide the Finance Director or designee sufficient latitude to effectively manage the City's financial assets so as to protect the principal, provide sufficient liquidity and maximize the return on investments within an acceptable exposure to risk. In an effort to accomplish the aforementioned, this policy identifies various portfolio parameters addressing investment instruments, issuer diversification, maturity constraints, investment ratings, and liquidity. SCOPE This investment policy applies to all financial assets held or controlled by the City of Sunny Isles Beach, except for pension and deferred compensation funds. All financial assets held or controlled by the City, not otherwise classified as restricted assets requiring separate investing, shall be identified as " 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. Funds group included: I General Fund 2 Special Revenue Funds 3 Debt Service Funds 4 Capital Projects 5 Enterprise Funds 6 Internal Service Funds 7 Agency Funds 8 Any new fund group created by the City, unless specifically exempted by the City Commission. Page I of 12 INVESTMENT OBJECTIVES The following investment objectives will be applied in the management of City funds. The investment objective order of the priority shall be safety of capital, liquidity of funds, and investment income, in that order. 2 Safety of principal is regarded as the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. Each investment transaction shall be entered into with every effort to prevent capital losses, whether they are from securities defaults, theft, or the impact of adverse market conditions. 3 The City will maintain sufficient liquidity to enable the City to meet operating requirements, which might be reasonably anticipated. 4 The City will employ mechanisms to reduce risks by diversifying its investments between specific security types and individual financial institutions. 5 The City will strive to maximize the return of the portfolio and to preserve the purchasing power but will avoid assuming unreasonable investment risk. 6 Funds of the City will be invested in accordance with Florida State Statutes 166.261, 280, 218,415, these policies, and written administrative procedures. 7 The funds are in general, passively invested. PERFORMANCE MEASUREMENT The City seeks to optimize return on investment within the constraints of safety and liquidity. The investment portfolio shall be designed with the objective of exceeding the average return earned on investments held by the Page 2 of 12 State Board of Administration Local Government Surplus Funds Investment Pool ("SBA"). DELEGATION OF AUTHORITY The Finance Director or designee is responsible for investment decisions and activities, under the direction of the City Manager. The day-to-day administration of the cash management program is handled by the Finance Director. No person may engage in an investment transaction except as provided under the terms of the policy and the procedures so established. Positions authorized as investment signatories are the Mayor, City Manager, Vice Mayor, City Clerk, Finance Director and the designee. The persons holding these positions are also authorized to initiate or approve a wire transfer transaction in accordance with applicable policies and procedures. PRUDENCE AND ETHICAL STANDARDS The standard or prudence to be applied by the Finance Director or designee shall be the "Prudent Person" rule, which states: "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 from the investment." The "Prudent Person" rule can be applied in the context of managing the overall portfolio. The Finance Director or designee and staff, acting in accordance with the written procedures and exercising due diligence, shall not be held personally responsible for a specific security's credit risk or market price changes, provide that these deviations are reported immediately and that appropriate action is taken to control adverse developments. LISTING OF AUTHORIZED INVESTMENTS Although investments may be on the authorized list, only those securities with an active secondary market may be purchased from the list. The Finance Director or the designee may purchase/sell investments securities, at prevailing market rates, in the following authorized investment Page 3 of] 2 vehicles: (a) the Local Government Surplus Funds Trust Fund and any other investment plan or investment trust developed by the Florida League of Cities, the Florida Association of Counties, the Florida Association of Court Clerks, or similar state or national associations, approved by the City. (b) Negotiable direct obligations of or obligations the principal and interest of which are unconditionally guaranteed by the United States Government or its agencies. (c) Non-negotiable interest-bearing time certificates of deposits or savings accounts in state or federal banks, state or federal savings and loan associations as permitted and/or prescribed by chapter 280 of the Florida Statutes. (d) Government Sponsored Enterprises including but not limited to Federal Farm Credit banks, Federal Home Loan Bank or its district banks, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, including Federal Home Loan Mortgage Corporation Participation Certificates, Student Loan Marketing Association or obligations guaranteed by the Government National Mortgage Association. (e) State or local government taxable and tax exempt debt, general obligation and/or revenue bonds rated at least "Aa" by Moody's or "AA" by Standard & Poor's for long-term debt or rated at least MIG -2 by Moody's or SP-2 Standard & Poor's for short-term debt. (f) Real estate, so long as the acquisition and sale complies with applicable federal and state laws and regulations in addition to applicable City Charter provisions, if any, and the city Code of Ordinances. MATURITY AND LIQUIDITY REQUIREMENTS To the extent possible, the City will attempt to match its investments with overall anticipated cash flow requirements. The average maturity of the Page 4 of 12 portfolio as a whole may not exceed five (5) years. This calculation also applies to the expected average life of asset-backed securities and mortgage -backed securities (rather than the stated final maturity). Limitation percentages of the portfol io are measured from the date the securities are acquired. Unless matched to a specific cash flow requirement, the City will not directly invest in securities with an expected average life of more than twenty (20) years from the date of purchase. No more than 30% of the City's total investment portfolio shall be placed in securities with an expected average maturity of more than five (5) years. PORTFOLIO COMPOSITION The following are the authorities for investments and limits on security issues, issuers, and maturities as established within this policy. The Finance Director or the investment adviser/manager shall have the option to fUliher restrict investment in selected instruments, to conform to then-present market conditions. A. Investment Plans and Trusts I. Authority to Invest The Finance Director or the designee may invest in the following: a. Local Government Surplus Trust Fund "Trust Fund" b. Any intergovernmental investment trust developed by the Florida Interlocal Cooperation Act as provided in Section 163.0 I. c. Any other investment plan or investment trust developed by the Florida League of Cities, the Florida Association of Counties, the Florida Association of Court Clerks, the State Board of Administration or similar state 0 national associations approved by the City. 2. P0I1folio Composition A maximum of 100% of the p0l1folio may be invested 111 the Page 5 of 12 "Trust Fund". Bond proceeds may be deposited in the "Trust Fund" until alternative investments have been purchased. B. Government Securities 3. Authority to Purchase The Finance Director or designee may invest in negotiable direct obligations of the U.S. Government. Such securities will include the following: Direct Obligations: 1 Treasury Bills 2 Treasury Notes 3 Treasury Bonds 4. P0l1folio composition The portfolio may be comprised of 100% direct government obligations including the securities held under overnight repurchase agreements. 5. Maturity Limitations The maximum length to maturity of any direct investment in government obligations is five (5) years. C. Federal Agencies 6. Authority to Purchase The Finance Director or designee may invest in obligations the principal and interest of which are unconditionally guaranteed by the U.S. Government and issued through Federal agencies. Such securities will include but not be limited to: Government National Mortgage Association (GNMA) Page 6 of 12 7. Portfolio Composition Federal Agencies may comprise 100% of the portfolio. 8. Limits on Individual Issuers A maximum of 100% of the p011folio may be invested 111 anyone Federal Agency. 9. Maturity Limitations The maximum expected average life for an investment 111 Federal Agency securities is five (5) years. D. Non-negotiable Interest Bearing Time Certificates of Deposit (CDs) I O.Authority to Purchase The Finance Director or the investment adviser/manage may invest in non-negotiable interest-bearing time certificates of deposit or savings accounts in state or federal banks, state or federal savings and loan associations as permitted and/or prescribed by Chapter 280 of the Florida Statute. 2. Portfolio Composition A maximum of 50% of the portfol io may be invested in non- negotiable CDs. 3. Limits on Individual Issuers a. All issues must be approved as "Qualified Public Depositories" by the State of Florida, as required by the Florida Security for Public Deposits Act Chapter 280, Florida Statutes. b. A maximum of 50% of the portfolio may be invested with a maximum maturity of 5 years from date of purchase. Page 7 of]2 4. Maturity Limitations a. A maximum of 50% of the portfolio may be invested with a maximum maturity of 5 years from date of purchase. E. Government Sponsored Enterprises II.Authority to Purchase Securities include but are not limited to obligations of the: 2 Federal National Mortgage Association (FNMA) 3 Federal Farm Credit Banks (FFCB) 4 Federal Home Loan Bank or its District Banks (FHLB) 5 Federal Home Loan Mortgage Corporation (Freddie- Macs) 6 Federal Home Loan Mortgage Corporation paIiici pation certi ficates 12.Portfolio Composition The portfolio may be comprised of 100% Government Sponsored Enterprises Federal Instruments. I3.Limits on Individual Issuers A maximum expected average life for an investment in any government Sponsored Enterprise is five (5) years for fixed rate securities and five (5) years for variable rate securities. INTERFUND LOANS OR TRANSFERS Nothing in the Investment Policy prohibits any interfund transfers or loans to the extent otherwise permitted by law. Such interfund transfers or loans shall not be governed by this Investment Policy. Page 8 of 12 RISK AND DIVERSIFICATION It is the policy of the City of Sunny Isles Beach to diversify its investment portfolio. Assets held shall be diversified to control the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer, specific instrument, class of instruments, and a dealer or bank through whom these investments are bought and sold. Diversification strategies shall be reviewed and revised periodically as deemed necessary by the appropriate management staff. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS Certificates of Deposit shall be placed only with financial institutions, which qualify under Chapter 280 of the Florida Statues or financial institutions that are selected by the City Commission. Other securities shall be purchased only 1) through the "primary government securities dealer" as designated by the Federal Reserve Bank, 2) regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule) 3) through the Florida State Board of Administration (SBA), 4) through a money manager appointed by the City. 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 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. SELECTION OF INVESTMENT MANAGERS I) Request for Proposal (RFP) or Letters of Interest 2) Interview the respondents 3) The City Commission approves the selection and authorized a contract to be signed. SALE OF SECURITIES When the invested funds are needed in whole or in part for the purposes originally intended or for more optimal investments, investments may be sold at the then-prevai ling market price with the proceeds placed into the proper account or fund. Page 9 of 12 Securities may be traded for other similar seCUritIes to improve yield, maturity, credit risk or market risk, provided any of the following occurs with respect to the replacement security: The yield has been increased, or 2 The maturity has been reduced, or 3 The quality of the investment has been improved, or 4 The Risk from a market decline has been reduced. THIRD-PARTY CUSTODIAL AGREEMENTS All assets shall be held by a third party, and all securities purchased by, and all collateral obtained by, the City shall be property designated as an asset of the City. No withdrawals of assets, in whole or in pa1i, shall be made except by an authorized Finance Department staff member. Securities transactions between a broker- dealer and the Custodian involving purchase or sale of securities by transfer of money or securities should be made on a " delivery vs. payment" base to ensure that the Custodian will have the security or money as appropriate, in hand at the conclusion of the transaction. Collateral for public deposits is controlled by the State of Florida through Chapter 280 of the Florida Statutes. The City is under no obligation to secure additional collateral beyond the provisions set fOlih in Chapter 280, except in the case of Repurchase Agreements. Collateral requirements for Repurchase Agreements will be contained in a Master Repurchase Agreement executed between the City and The broker/dealer or bank. All investment securities purchased except for Certificates of Deposits shall be held in safekeeping at an institution designated by the Finance Director. The institution shall issue a safekeeping receipt and shall send a periodic report (at least quarterly) listing all securities held in safekeeping for verification by the Finance Department. Certificates of Deposits issued by a local bank may be held in safekeeping at that institution. A safekeeping receipt/conformation shall be issued to the City to be kept on file. An exception is made for non-negotiable bank celiificates of deposit, \vhich would require physical delivery without the Page I 0 0 f ] 2 systematic handling found commonly with book entry securities. The Custodian(s) for the City's two defined benefits pension plans may be selected for the safekeeping of the City's securities where applicable. MASTER REPURCHASE AGREEMENT All approved institutions and dealers transacting repurchase agreements shall execute and perform as stated in the Master Repurchase Agreement. All repurchase agreement transaction shall adhere to requirements of the Master Repurchase Agreement. INTERNAL CONTROLS The Finance Depmiment staff will establish and monitor a system of written internal control procedures. The controls are designed to prevent losses of public funds arising from fraud, employee error, and misrepresentation by third parties. Unanticipated changes in financial markets, or imprudent actions by employees and officers of the entity. The controls will ensure proper accounting and repOliing of the securities transactions. This policy will allow for review of such controls by independent auditors as part of the independent annual financial audit of the City. CONTINUING EDUCATION The Finance Department staff are encouraged and expected to attend continuing education seminars concerning matters related to investment. Such staff members must annually complete 8 hours of continuing education subiects of courses of study related to investment practices and products. REPORTING Reports of the City's investment activity shall be prepared on a qualierly (3 months) basis. The reports will include investment securities by class or type, book value, income earned/accrued, and market value as of report date. The Finance Director or designee will submit quarterly (3 months) repOlis to the City Commission. The City's Comprehensive Annual Financial RepOli (CAFR) will include similar investment disclosures as part of the footnotes. Page 11 of 12 POLICY REVIEW AND AMENDMENT The Finance Director shall review these policies in their entirety on an annual basis. The policy may be amended in writing from time to time by the City Commission. AUDITS Certified Public Accountants conducting audits of the City shall report as paJ1 of the audit, whether or not the City has complied with applicable law relating to investment of surplus funds. EXISTING INVESTMENTS Any investments currently held that do not meet the guidelines of the policy shall be exempted tl'om the requirements of this policy. At maturity or liquidation, such monies so invested shall be reinvested only as provided for in this policy. The Finance Director 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. EFFECTIVE DATE This policy shall become effective immediately upon its adoption by the City Commission. Page 12 0 f 12 TO: FROM: DATE: RE: City of Sunny Isles Beach 18070 Collins Avenue Sunny Isles Beach, Florida 33160 (305) 947-0606 City Hall (305) 949-3113 Fax (305) 947-2150 Building Department (305) 947-5107 Fax City Commission Norman S. Edelcup, Mayor Roslyn Brezin, Vice Mayor Gerry Goodman, Commissioner Danny Iglesias, Commissioner Lewis J. Thaler, Commissioner A. John Szerlag, City Manager Hans Ottinot, City Attorney Jane A. Hines, City Clerk MEMORANDUM Jean Watson, Finance Director Linda K. Dosal, Assistant Finance Director Priscilla Walker, Deputy City Clerk~W~ May 22, 2006 Approval of Revised Investment Policy At its regular meeting of May 18, 2006, the City Commission adopted Resolution No. 2006-925, which approved a revised Investment Policy for the City. Attached is a copy of the approving resolution to assist you in processing this item. Thank you. :pw Attachments cc: A. John Szerlag, City Manager Hans Ottinot, City Attorney Investment Policy Revision Trans Memo TO: FROM: DATE: RE: City of Sunny Isles Beach 18070 Collins Avenue, Suite 250 Sunny Isles Beach, Florida 33 160 (305) 947-0606 City Hall (305) 949-3113 Fax (305) 947-2150 Building Department (305) 947-5107 Fax City Commission Norman S. Edelcup, Mayor Roslyn Brezin. Vice Mayor Gerry Goodman, Commissioner Lewis Thaler, CommissIOner Danny Iglesias. Coml1l1ssioner A. John Szerlag, Cily Manager Hans Ottinol. City AI/orney Jane A. Hines, CMC, City Clerk MEMORANDUM The Honorable City commis~~ Hans Ottinot, City Attorne\; 1 - May 18, 2006 Revised Investment Policy Recommendation: It is recommended that the attached Resolution be approved. Reasons: As you may recall, the City adopted its first Investment Policy recently. The initial policy did not contain provisions relating to internal controls, continuing education, reporting, and a master re-purchase agreement. These provisions are basic statutory requirements, which create a system of checks and balances relating to the investment of surplus funds. Please note that the new provisions are underlined. HO/pr /Attachment Agenda Item Date