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HomeMy WebLinkAboutReso 2009-1500 RESOLUTION NO. 2009-J ~OC A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, APPROVING A REVISED INVESTMENT POLICY OF THE CITY OF SUNNY ISLES BEACH, ATTACHED HERETO AS EXHIBIT "A"; AUTHORIZING THE CITY MANAGER TO DO ALL THINGS NECESSARY TO EFFECTUATE THIS RESOLUTION; PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Section 166.21, of the Florida Statutes provides the City with the authority to invest surplus funds in certain securities; and WHEREAS, the City Commission desired to invest surplus funds in accordance with State law by adopting an investment policy to earn higher returns on its investments; and WHEREAS, on November 17,2005 via Resolution No. 2005-861, the City Commission adopted an Investment Policy, and on May 17, 2006 via Resolution No. 2006-925, that Policy was revised; and WHEREAS, the City Commission now wishes to again revise the Investment Policy to update, eliminate and incorporate certain provisions including a divestment requirement mirrored after the State Investment Policy Guidelines which prohibits doing business with any company that engages in business with the countries of Iran and Sudan. 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 3. Effective Date. This Resolution will be become effective upon adoption. PASSED and ADOPTED this 1 ih day of December 2009. ATTEST: d~J\~ Jane A. Hines, CMC, qty Clerk APPROVED AS TO FORM A~IENCY Hani6ttinot, City Attorney VOTE AS FOLLOWS: 4-0- \ Mayor Edelcup Vice Mayor Thaler Commissioner Brezin Commissioner Goodman- ~<;~ Commissioner Scholl Moved by: C~~~~2.11J Second by: (l.J)~ S'c:.\-\\lLL -.lL(Yes)_(No) V(Yes)_(No) -----lLCY es )_(No) (Yes) (No) - - v(Yes) (No) - - 2 - City of Sunny Isles Beach - Investment Policy PURPOSE The purpose of this policy is to set forth the investment objectives and parameters for the management of public funds of the City. These policies are designed to ensure the prudent management of public funds, the availability of operating and capital funds when needed and a competitive investment return. I. SCOPE This investment policy applies to the investment of public funds in excess of amounts needed to meet current expenses, which includes cash and investment balances of City funds. This policy does not apply to the City's pension funds, including those funds in chapters 175 and 185 or funds related to the issuance of debt where there are other existing policies or indentures in effect which govern the investment of such funds. This policy shall be construed and applied so as to comply with Section 218.415, F.S. II. INVESTMENT OBJECTIVES Investment objectives include safety of capital, liquidity of funds and investment income, in that order. The following objectives will be applied in the management of the City's funds: A. Safety of Capital The primary objective of the City's investment program is the protection of public funds. Investments 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, of the impact of adverse market conditions. The objective will be to mitigate credit risk and interest rate risk. 1. Credit Risk - The City will minimize credit risk, the risk of loss due to the failure of the security issuer or backer, by: a) Limiting investments to the authorized securities listed in this policy b) Diversifying the investment portfolio on any investments below AM rating so that potential losses on individual securities will be minimized. 2. Interest Rate Risk - The City will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates, by: Exhibit "A" .... a) 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; b) Investing operating funds only in the authorized securities listed in this policy. B. Liquidity of Funds The City's investment strategy will provide sufficient liquidity to meet the City's operating, payroll and capital requirements. To the extent possible, an attempt will be made to match investment maturities with known cash needs and anticipated cash flow requirements. Since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. A portion of the portfolio also may be placed in money market mutual funds or local government investment pools which offer same-day liquidity for short-term funds. C. Investment Income The City's investment portfolio shall be designed with the intent of attaining a competitive rate of return throughout the budgetary and economic cycles, taking into account the City's investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. III. 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 probably 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 this policy and exercising due diligence, shall not be held personally responsible for a specific security's credit risk or market price changes. A. Ethics and Conflicts of Interest The City's staff 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. All employees involved in the investment process shall disclose to the City any material financial interests in financial institutions that conduct business with the City, and they shall further disclose any material personal financial/investment positions that could be related to the performance of the City's investment program. Applicable ethics standards provided by the City Charter, City Code, Section 2-11.1 of the Miami-Dade County Code, and Part III of Chapter 112, F.S., shall be complied with. C. Designation of Investment Officer 3 The Finance Director is designated as investment officer of the City and is responsible for investment decisions and the day-to-day administration of the cash management program. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures so established. The City may request the assistance of, or, appoint an outside investment manager as "Agent" for the City's cash reserves. The "Agent" for the City shall have discretion over the purchase and sale of securities within and subject to compliance with this investment policy. Such investment manager must be registered under the Investment Advisor Act of 1940. Such firm will be a national firm with a local presence. The Finance Director shall consult with the City Manager as necessary regarding the City's investment activity. Positions authorized as investment signatories are the City Manager, Assistant City Manager - Services and Finance Director. IV. LISTING OF AUTHORIZED INVESTMENTS The following investments will be permitted by this policy as consistent with Section 218.415 (16) F.S. Those investments not listed in this section are prohibited. A. United States Government Securities Negotiable direct obligations or obligations the principal and interest of which are unconditionally guaranteed by the United States Government. Such securities will include, but not be limited to the following: ~ Treasury Bills ~ Treasury Notes ~ Treasury Bonds ~ Treasury Strips ~ Treasury Securities - State and Local Government Series ("SLGS") ~ Treasury Inflation Protection Securities ("TIPS") Portfolio Composition A maximum of 100% of available funds may be invested in the United States Government Securities with the exception of Treasury Strips which are limited to 10% of available funds. Maturity Limitations The maximum length to maturity of any direct investment in the United States Government Securities is ten (10) years from the date of purchase. B. United States Government Agencies Bonds, debentures or notes which may be subject to call, issued or guaranteed as to principal and interest by the United States Governments agencies. Such securities will include, but not be limited to the following: 4 ~ United States Export -Import Bank - Direct obligations or fully guaranteed certificates of beneficial ownership ~ Farmer Home Administration - Certificates of beneficial ownership ~ Federal Financing Bank - Discount notes, notes and bonds ~ Federal Housing Administration Debentures ~ FDIC guaranteed notes ("TLGP" bonds) ~ Government National Mortgage Association ("GNMA") - GNMA guaranteed mortgage-backed bonds - GNMA guaranteed pass-through obligations ~ General Services Administration ~ New Communities Debentures - United States Government guaranteed debentures ~ United States Public Housing Notes and Bonds - United States Government guaranteed public housing notes and bonds ~ United States Department of Housing and Urban Development Project notes and local authority bonds ~ Federal Farm Credit Bank ("FFCB") ~ Federal Home Loan Bank or its City Banks ("FHLB") ~ Federal National Mortgage Association ("FNMA") ~ Federal Home Loan Mortgage Corporation ("Freddie-Macs") including Federal- Home Loan Mortgage Corporation participation certificates Portfolio Composition A maximum of 100% of available funds may be invested in United States Government agencies. Limits on Individual Issuers A maximum of 100% of available funds may be invested in individual United States Government agencies. Maturity Limitations The maximum length to maturity for an investment in any United States Government agency security is ten (10) years from the date of purchase. C. Interest Bearing Time Deposit or Savings Account Non-negotiable interest bearing time certificates of deposit or savings accounts in banks organized under the laws of Florida or the United States provided that such deposits are secured by collateral as prescribed by the Florida Security for Public Deposits Act, Chapter 280, Florida Statutes. Portfolio Composition A maximum of 100% of available funds may be invested in non-negotiable interest bearing time certificates of deposit. Limits on Individual Issuers A maximum of 50% of available funds may be deposited with anyone (1) issuer. 5 Limits on Maturities The maximum maturity on any certificate shall be no greater than ten (10) years from the date of purchase. D. The Florida Local Government Surplus Funds Trust Fund (State Board of Administration - SBA) Portfolio Composition A maximum of 50% of available funds may be invested in the SBA. E. Intergovernmental Investment Pools Investment Authorization Intergovernmental investment pools that are authorized pursuant to the Florida Interlocal Cooperation Act, as provided in Section 163.01, Florida Statutes and provided that said funds contain no derivatives. Portfolio Composition A maximum of 50% of available funds may be invested in intergovernmental investment pools. F. Registered Investment Companies (Money Market Mutual Funds) Registered with the Securities and Exchange Commission with the highest credit quality rating from a nationally recognized rating agency; portfolio is limited to direct obligations of the United States Government or any agency or instrumentality thereof. Portfolio Composition A maximum of 100% of available funds may be invested in money market funds. Limits of Individual Issuers A maximum of 100% of available funds may be invested with anyone (1) money market fund. V. PROHIBITIONS The purchase of derivative instruments as defined by the Government Account Standards Board ("GASB") or any investment instrument which is structured to derive a rate of return from an investment source other than the originally purchased investment is strictly prohibited. VI. INVESTMENT PARAMETERS To the extent possible, the City shall attempt to match its investments with anticipated 6 cash flow requirements. Unless matched with a specific cash flow, the City will not directly invest in securities maturing more than ten (10) years from the date of purchase. Average life will be used as the maturity for mortgage-backed securities and the intergovernmental pool investments. Because of inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as Local Government Investment Pools, or money market funds to ensure that appropriate liquidity is maintained to meet ongoing obligations. VII. SAFEKEEPING AND CUSTODY A. Authorized Investment Institutions and Dealers The City shall only purchase investments from the State Board of Administration, Florida Municipal Investment Trust, financial institutions which are qualified as public depositories by the Treasurer of the State of Florida, primary security dealers (or their agents) as designated by the Federal Reserve Bank of New York, or by secondary securities dealers (or their agents) who act as investment banking arms of local qualified banking institutions. B. Delivery vs. Payment All trades where applicable will be executed by delivery versus payment ("DVP") to ensure that securities are deposited in an eligible financial institution prior to the release of funds. Securities will be held by a third-party custodian as evidenced by safekeeping receipts. C. Bid Requirements Investments will be chosen based on liquidity needs and market conditions. The investments will be competitively bid when feasible and appropriate. Except as required by law, the bid deemed to be the most responsive to the needs of the City must be selected. D. Internal Controls The Finance Director 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 judgments by management. Accordingly, the Finance Director shall establish a process for an annual independent review as part of the annual financial audit to assure compliance with the policies and procedures. The internal controls shall address the following points: 1. Control of collusion - Collusion is a situation where two (2) or more employees are 7 working in conjunction to defraud their employer. 2. Separation of transaction authority from accounting and record keeping - By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. 3. Custodial safekeeping - All securities, with the exception of certificates of deposit, shall be held with a third-party custodian; and all securities purchased by, and all collateral obtained by the City should be properly designated as an asset of the City. The securities must be held in an account separate and apart from the assets of the financial institution. No withdrawal of such securities, in whole or in part, shall be made from safekeeping except by the Finance Director as authorized herein, or by their respective designee. 4. Certificates of Deposit issued by a local bank or savings and loan association may be held in safekeeping at that institution. The institution shall issue a copy of the certificate of deposit, a safekeeping receipt, or some other confirmation of the purchase that is satisfactory to the Finance Director. This will be kept on file in the Finance Department and will indicate the amount, interest rate, issue date and maturity date of the certificate of deposit. 5. Avoidance of physical delivery securities - Book entry securities are much easier to transfer and account for since actual delivery is never taken. Physical delivery securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. 6. Clear delegation of authority to subordinate staff members - Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. 7. Written confirmation of telephone transactions for investments and wire transactions - Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions should be supported by written communications and approved by appropriate personnel. VIII. CONTINUING EDUCATION The Finance Director shall annually complete eight (8) hours of continuing education in subjects or courses of study related to investment practices and products. IX. REPORTING The Finance Director shall provide a quarterly investment report to the City Manager. The report shall list investments by fund and type and include the book value, income earned and market value as of the report date. 8 X. SECURITIES DISPOSITION A. Every security purchased under this section on behalf of the governing body of the City must be properly earmarked and: 1. If registered with the issuer or its agents, must be immediately placed for safekeeping in a location that protects the governing body's interest in the security; 2. If in book entry form, must be held for the credit of the governing body by a depository chartered by the Federal Government, the state, or any other state or territory of the United States which has a branch or principal place of business in this state as defined in s. 658.12, or by a national association organized and existing under the laws of the United States which is authorized to accept and execute trusts and which is doing business in this state, and must be kept by the depository in an account separate and apart from the assets of the financial institution; or 3. If physically issued to the holder but not registered with the issuer or its agents, must be immediately placed for safekeeping in a secured vault. XI. SALE OF SECURITIES When the invested funds are needed in whole or in part for the purposes originally intended or for more optimal investments, the City may sell such investments at the then- prevailing market price and place the proceeds into the proper account or fund of City. XII. PRE-EXISTING CONTRACT Any public funds subject to a contract or agreement existing on November 19, 2009 may not be invested contrary to such contract or agreement. XIII. AUDITS Certified public accountants conducting audits of the City pursuant to s. 218.39 shall report, as part of the audit, whether or not the City has complied with section 218.415 , F.S., and this Investment Policy. XIV. AUTHORIZED DEPOSITS In addition to the investments authorized for the City in subsection (VIII), as authorized by paragraph (23) of Section 218.415, F.S., the City may deposit any portion of surplus public funds in its control or possession in accordance with the following conditions: A. The funds are initially deposited in a qualified public depository, as defined in s. 280.02, selected by the City. B. The selected depository arranges for the deposit of the funds in certificates of deposit 9 in one (1) or more federally insured banks or savings and loan associations, wherever located, for the account of the City. C. The full amount of principal and accrued interest of each such certificate of deposit is insured by the Federal Deposit Insurance Corporation. D. The selected depository acts as custodian for the City with respect to such certificates of deposit issued for its account. E. At the same time the City's funds are deposited and the certificates of deposit are issued, the selected depository receives an amount of deposits from customers of other federally insured financial institutions, wherever located, equal to or greater than the amount of the funds initially invested by the City through the selected depository. xv. PROHIBITED INVESTMENTS The City is prohibited from investing in any company that engages in business with any countries that are on the prohibited list as part of the Protecting Florida's Investment Act (Chapter 2007-88 FS). The City Manager may promulgate specific requirements for the implementation of this provision based upon criteria applied by the Local Government Surplus Funds Trust Fund for such purpose. XVI. INVESTMENT POLICY REVIEW The Finance Director shall review this Investment Policy on an annual basis. Any recommended changes to this policy must be approved by the City Manager and subsequently by the City Commission. 10 Preview Page 1 of2 City of Sunny Isles Beach 18070 Collins Avenue Sunny Isles Beach, Florida 33160 (305) 947-0606 City Hall (305) 949-3113 Fax MEM1)RANDUM TO: The Honorable Mayor and City Commission FROM: Douglas Haag, Assistant City Manager - Finance DATE: 12/1712009 RE: Revised Investment Policy RECOMMENDA TION: Approve the attached revised investment policy that includes a prohibition against doing business with any company that engages in business with the countries of Iran and Sudan. REASONS: Initially, this was intended to be only a minor change to the City's current investment policy by adding a statement to accomplish the above divestment requirement which is mirrored after the state investment policy guidelines. However, after closer review, it was felt that it was time for a 'redo' of the overall investment policy which was originally adopted in 2005 and updated in 2006. Some of the changes to the policy include: . More closely align to Florida Statute, especially in the divestment area . Eliminate unnecessary items such as repurchase agreements . More clearly define delegation of authority . Eliminate redundancies in the areas of authorized investments . Eliminate inconsistencies in the areas of investment objectives, performance measurements, maturities, etc. . Eliminate areas that are not applicable to an investment policy such as interfund loans http://sibagenda.sibfl.net/agenda/Preview.aspx?I temID= 136&MeetingID=0&MeetingDate... 12/8/2009 Preview Page 2 of2 This revised policy should provide the City the needed security and flexibility based on the events of the past few years. However, it is also important that the policy be reviewed periodically to see if any changes are in order. ATTACHMENTS: . Resolution . Proposed Investment Policy http://sibagenda.sibfl.net/agenda/Preview .aspx?I temID= 13 6&MeetingID=0&MeetingDate... 12/8/2009