HomeMy WebLinkAbout2013-04-22 - Finance-Accounting Committee Meeting Agenda PacketYorba Linda
Water District
AGENDA
YORBA LINDA WATER DISTRICT
FINANCE - ACCOUNTING COMMITTEE MEETING
Monday, April 22, 2013, 12:00 PM
1717 E Miraloma Ave, Placentia CA 92870
1. CALL TO ORDER
2. ROLL CALL
COMMITTEE
Director Phil Hawkins, Chair
Director Gary T. Melton
STAFF
Stephen Parker, Finance Manager
3. PUBLIC COMMENTS
Any individual wishing to address the committee is requested to identify themselves and state the matter on
which they wish to comment. If the matter is on this agenda, the committee Chair will recognize the individual for
their comment when the item is considered. No action will be taken on matters not listed on this agenda.
Comments are limited to matters of public interest and matters within the jurisdiction of the Water District.
Comments are limited to five minutes.
4. ACTION CALENDAR
This portion of the agenda is for items where staff presentations and committee discussions are needed prior to
formal committee action.
4.1. Investment Report for Period Ending March 31, 2013
Recommendation. That the Committee recommend the Board of Directors receive
and file the Investment Report for the Period Ending March 31, 2013.
4.2. Adopting a Public Investment Policy
Recommendation. That the Committee recommend the Board of Directors adopt a
resolution setting forth a Public Funds Investment Policy and rescinding Resolution
No. 11 -24.
5. DISCUSSION ITEMS
This portion of the agenda is for matters such as technical presentations, drafts of proposed policies, or similar
items for which staff is seeking the advice and counsel of the Committee members. This portion of the agenda
may also include items for information only.
5.1. March 2013 Budget to Actual Results
5.2. Draft Reserve Policy for FY 2013/14
5.3. Broker Dealer Approval
5.4. CaIPERS Rate Increase (Verbal Report)
5.5. Future Agenda Items and Staff Tasks
6. ADJOURNMENT
6.1. The date and time of the Finance - Accounting Committee meeting in May is yet to be
determined.
Items Distributed to the Committee Less Than 72 Hours Prior to the Meeting
Pursuant to Government Code section 54957.5, non - exempt public records that relate to open session agenda items
and are distributed to a majority of the Committee less than seventy -two (72) hours prior to the meeting will be available
for public inspection in the lobby of the District's business office located at 1717 E. Miraloma Avenue, Placentia, CA
92870, during regular business hours. When practical, these public records will also be made available on the District's
internet website accessible at http: / /www.ylwd.com /.
Accommodations for the Disabled
Any person may make a request for a disability - related modification or accommodation needed for that person to be
able to participate in the public meeting by telephoning the Executive Secretary at 714 - 701 -3020, or writing to Yorba
Linda Water District, P.O. Box 309, Yorba Linda, CA 92885 -0309. Requests must specify the nature of the disability and
the type of accommodation requested. A telephone number or other contact information should be included so the
District staff may discuss appropriate arrangements. Persons requesting a disability - related accommodation should
make the request with adequate time before the meeting for the District to provide the requested accommodation.
Meeting Date:
To:
From:
Presented By:
Prepared By:
Subject:
SUMMARY:
AGENDA REPORT
April 22, 2013
Finance - Accounting Committee
Steve Conklin, Acting General
Manager
Stephen Parker, Finance Dept:
Manager
Delia Lugo, Senior Accountant
Investment Report for Period Ending March 31, 2013
ITEM NO. 4.1
Finance
Staff is submitting the March 2013 Monthly Investment Reports for the Committee's review.
STAFF RECOMMENDATION:
That the Committee recommend the Board of Directors receive and file the Investment Report for
the Period Ending March 31, 2013.
DISCUSSION:
The Investment Portfolio Report presents the market value and percent yield for all District
investments by institution. The Investment Report Summary includes budget and actual interest and
average term portfolio information as well as market value broken out by reserve categories.
The total yield for the month ending March 31, 2013 is 0.63 %.
The overall decrease in the investment balance from the previous month is approximately $612,000.
A couple of the larger balance changes include a decrease in the Water Capital projects of
$164,000 due to the spending on CIP projects and a decrease in the Reserve for Debt Service of
$711,000 due to the March 31, 2013 Debt Service interest payment in the amount of $893,075.
STRATEGIC PLAN:
FR 1 -F: Continue to Record and Report the Fairly Stated Financial Activities of the District in a
Timely and Transparent Manner to the Board of Directors and Member Agencies
ATTACHMENTS:
Description: Type:
Invst Rpt 3- 13.xlsx Investment Report for Period Ending March 31, 2013 Backup Material
Invst Agenda Backup -Mar 2013.xlsx Agenda Backup Backup Material
Yorba Linda Water District
Investment Portfolio Report
March 31, 2013
Market % Percent
Value Cost of Total Institution Yield
Checking Account:
$ 117,495 $ 117,495 Wells Fargo Bank
$ 117,495 $ 117,495 0.70% Total 0.00%
Money Market Accounts:
$ 54,950 $ 54,950
1,539,760 1,539,760
Wells Fargo Money Market 0.05%
Bank of the West 0.35%
$ 1,594,710 $ 1,594,710 9.45% Total 0.34%
Federal Home Loan Bank:
2,146,252 $ 2,147,096 US Bank (2008 Bond Reserve) 1.35%
$ 2,146,252 $ 2,147,096 12.71% 1.35%
Pooled Investment Accounts:
$ 2,034,493 $ 2,034,493 Local Agency Investment Fund 0.29%
740,874 740,874 Ca1TRUST Short Term 0.30%
10,250,100 10,224,874 Ca1TRUST Medium Term 0.67%
$ 13,025,466 $ 13,000,240 77.15% 0.59%
$ 16,883,923 $ 16,859,542 100%
Total Investments 0.66%
Per Government Code requirements, the Investment Report is in compliance with the Yorba
Linda Water District's Investment Policy, and there are adequate funds available to meet
budgeted and actual expenditures for the next six months.
Delia Lugo, Senior Accountant
3/31/13
Investment Summary Report
Below is a chart summarizing the yields as well as terms and maturities for the month of March 2013:
Avg. Portfolio
Avg. Portfolio
# of
Month Yield Without
Yield With
Days to
of 2013 CaITRUST
CaITRUST
Maturity
March 0.61%
0.66%
72
Below is are charts comparing operating fund interest for current and prior fiscal years.
Actual Interest
Monthly - March
Year -to -Date
3/31/2012 3/31/2013
$ 29,417 $ 8,058
$ 189,289 $ 85,729
Budget 2011/2012 2012/2013
Interest Budget, March YTD $ 142,500 $ 112,500
Interest Budget, Annual $ 190,000 $ 150,000
Interest earned on investments is recorded in the fund that owns the investment.
Investment Summary Comparison Between Current and Previous Month
The distribution of investments in the portfolio both in dollars and as a percentage of the total portfolio by funds
is as follows:
February 2013
% Alloc
March 2013
% Alloc
Fund Description
Balance
2/28/2013
Balance
3/31/2013
Water Operating Reserve
$ 2,425,961
14.14%
$ 2,913,971
17.38%
Water Emergency Reserve
1,006,804
5.87%
1,007,509
6.01%
Water Capital Project Reserve
7,923,881
46.19%
7,759,937
46.28%
Water Reserve for Debt Service
1,329,881
7.75%
619,302
3.69%
Maintenance Reserve
187,029
1.09%
200,529
1.20%
COP Revenue Bond 2008 - Reserve
2,164,398
12.62%
2,146,252
12.80%
Sewer Operating
16,231
0.09%
16,242
0.10%
Sewer Emergency Reserve
1,005,797
5.86%
1,006,502
6.00%
Sewer Capital Project Reserve
1,095,433
6.39%
1,096,184
6.54%
$ 17,155,415
100.00%
$ 16,766,428
100.00%
Wells Fargo
Bank Checking
Water Operating
186,157
(60,565)
Sewer Operating
154,692
178,060
340,849
117,495
Totals
$ 17,496,264
$ 16,883,923
AGENDA REPORT
Meeting Date: April 22, 2013
To: Finance - Accounting Committee
From: Steve Conklin, Acting General
Manager
Presented By: Stephen Parker, Finance
Manager
Prepared By: Stephen Parker, Finance
Manager
Dept:
ITEM NO. 4.2
Finance
Reviewed by Legal: Pending
Subject: Adopting a Public Investment Policy
STAFF RECOMMENDATION:
That the Committee recommend the Board of Directors adopt a resolution setting forth a Public
Funds Investment Policy and rescinding Resolution No. 11 -24.
DISCUSSION:
The California Government Code says "the treasurer or chief fiscal officer of a local agency may
annually render to the legislative body of that local agency and any oversight committee of that local
agency, a statement of investment policy, which should be considered at a public meeting." As
such, the attached resolution is being presented to the Finance - Accounting Committee for review
before being submitted for consideration by the Board.
This fiscal year, the California Municipal Treasurer's Association (CMTA) came out with an
Investment Policy Certification Program. As staff investigated what it would take to have the
District's policy meet the standards of the certification program, it became apparent that a
considerable number of changes were necessary, since the policy had not had a significant
"makeover" in well over a decade. Staff believes that this policy will meet the standards of CMTA's
Certification Program.
The majority of the changes to the policy offer clarity for District policies and procedures and have
the District's policy conform with best practices. The policy reflects the California Government
Code's (CGC) allowable investments and the Districts' allowable investments side by side. As the
majority of the District's previously authorized investments had limits at the CGC threshold, there
were no significant changes to authorized investments. The exception being that Certificates of
Deposits was added as an authorized investment. The District previously utilized that Certificates of
Deposit despite them not being authorized in the current policy.
As there were significant changes from the previous policy, a red -lined version is not provided.
However, for comparison purposes, the previously adopted Investment Policy has also been
attached.
Legal counsel has yet to complete their review of the new language, and due to the number of
changes, that review could be extensive. Should the review take a significant amount of time, the
policy will be delayed in going to the Board. Should there be a large number changes, staff will
present the Committee with a revised version before going to the full Board.
STRATEGIC PLAN:
FR 2 -C: Implement an Approach to Ensure Reserves are Responsibly Funded
PRIOR RELEVANT BOARD ACTION(S):
The District's current investment policy was adopted by Resolution No. 11 -24 on December 22,
2011.
ATTACHMENTS:
rvame: Description: Type:
Resolution No 13 -XX Investment Policy.docx Resolution Backup Material
Investment Policy May 2013.docx Investment Policy Backup Material
Resolution No. 11 -24 - Investment Policy.pdf Current Investment Policy Backup Material
RESOLUTION NO. 13 -XX
RESOLUTION OF THE BOARD OF DIRECTORS
OF THE YORBA LINDA WATER DISTRICT
SETTING FORTH PUBLIC FUNDS INVESTMENT POLICY
AND RESCINDING RESOLUTION NO. 11 -24
WHEREAS, California Government Code (CGC) Section 53600 sets forth guidelines
for the investment of public funds and
WHEREAS, the current Yorba Linda Water District (Yorba Linda Water District or
District) Investment Policy was adopted by Resolution No. 11 -08 on
December 22, 2011; and
WHEREAS, the District is in possession of public funds that are not required for
immediate expenditure, and are available for investment; and
WHEREAS, a policy setting forth guidelines for the investment of said funds is
necessary for compliance with the principles of sound financial
management; and
WHEREAS, the Board of Directors of the Yorba Linda Water District desire to adopt
the Investment Policy set forth herein.
NOW, THEREFORE, BE IT RESOLVED by Board of Directors of the Yorba Linda
Water District as follows:
Section 1. Exhibit 1 (Investment Policy — Yorba Linda Water District) is hereby
adopted and deemed implemented concurrent with passage and adoption
of this Resolution.
Section 2. That Resolution 11 -24 is hereby rescinded immediately upon adoption of
this Resolution.
PASSED AND ADOPTED this 9th day of May 2013 by the following called vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
Gary Melton, President
Yorba Linda Water District
Resolution No. 13 -XX Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -24
ATTEST:
Steven R. Conklin, Secretary
Yorba Linda Water District
Reviewed as to form by General Counsel:
Arthur G. Kidman, Esq.
Kidman Law, LLP
Resolution No. 13 -XX Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -24
FMYorba Linda
Water District
INVESTMENT POLICY
BOARD OF DIRECTORS
Gary T. Melton, President
Robert R. Kiley, Vice President Michael J. Beverage, Board Member
Ric Collett, Board Member Phil Hawkins, Board Member
Steven R. Conklin, Acting General Manager
May 2013
TABLE OF CONTENTS
Section 1
Policy
Section 2
Scope
Section 3
Delegation of Authority
Section 4
Investment Objectives
Section 5
Prudence
Section 6
Ethics and Conflicts of Interest
Section 7
Authorized Broker /Dealers
Section 8
Authorized Investments
Section 9
Review of Investment Portfolio
Section 10
Investment Pools
Section 11
Collateral ization
Section 12
Safekeeping and Custody
Section 13
Diversification and Maximum Maturities
Section 14
Internal Controls
Section 15
Performance Standards
Section 16
Reporting
Section 17
Investment Policy Adoption
Appendix "A"
Description of Authorized Investments and Restrictions
Appendix "B"
Glossary
Investment Policy —May 2013
SECTION 1: POLICY
1.1 It is the policy of the Yorba Linda Water District ( "District ") to invest public
funds in a manner which ensures the safety and preservation of capital while
meeting reasonably anticipated operating expenditure needs, achieving a
reasonable rate of return and conforming to all state and local statutes
governing the investment of public funds.
1.2 The purpose of this policy is to provide guidelines for the prudent
investment of funds of the Yorba Linda Water District ( "District ") and to
outline the policies for maximizing the efficiency of the District's cash
management. The District's goal is to enhance the economic status of the
District consistent with the prudent protection of the District's investments.
This investment policy has been prepared in conformance with all pertinent
existing laws of the State of California.
SECTION 2: SCOPE
2.1 This Investment Policy applies to all funds and investment activities of the
District, except for the proceeds from capital project financing instruments,
which are invested in accordance with provisions of their specific
documents. These funds are accounted for as Enterprise Funds and are
identified in the District's Comprehensive Annual Financial Report.
SECTION 3: DELEGATION OF AUTHORITY
3.1 The authority of the Board of Directors to invest funds is derived from
Section 53601 of the California Government Code ( "CGC "). Section 53607
of the CGC grants the Board of Directors the authority to delegate that
authority. Therefore, management responsibility for the investment program
is hereby delegated to the District's Treasurer, who shall be responsible for
all transactions undertaken and shall establish a system of controls to
regulate the activities of subordinate officials and their procedures in the
absence of the Treasurer. The Treasurer shall establish procedures for the
management of investment activities, including the activities of staff
consistent with this Policy.
3.2 The Treasurer may retain the services of an outside investment advisor or
manager as approved by the Board to assist with the District's investment
program. Any investment advisor selected shall make all investment
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Investment Policy —May 2013
decisions and transactions in strict accordance with State law, and this
Policy.
SECTION 4: INVESTMENT OBJECTIVES
4.1 The primary objectives, in priority order, of the District's investment
activities shall be:
4.1.1 Safety: Safety and preservation of principal is the foremost objective
of the investment program. Investments shall be selected in a manner
that seeks to ensure the preservation of capital in the District's overall
portfolio. This will be accomplished through a program of
diversification, more fully described in Section 11, and maturity
limitations, more fully described in section 12, in order that potential
losses on individual securities do not exceed the income generated
from the remainder of the portfolio.
4.1.2 Liquidity: The District's investment portfolio will remain
sufficiently liquid to enable the District to meet all operating
requirements which might be reasonably anticipated. Securities
should mature concurrent with cash needs to meet anticipated
demands.
4.1.3 Return on Investments: The District's investment portfolio shall be
designed with the objective of attaining the best yield or returns on
investments, taking into account the investment risk constraints and
liquidity needs. Return on investment is of secondary importance
compared to the safety and liquidity objectives.
SECTION 5: PRUDENCE
5.1 The standard of prudence to be used by the designated representative shall
be the "prudent investor" standard and shall be applied in the context of
managing the overall portfolio. The meaning of the standard of prudent
investor is explained in CGC Section 53600.3, which states that "when
investing, reinvesting, purchasing, acquiring, exchanging, selling or
managing public funds, a trustee shall act with care, skill, prudence, and
diligence under the circumstances then prevailing, including, but not limited
to, the general economic conditions and the anticipated needs of the agency,
that a prudent person acting in a like capacity and familiarity with those
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Investment Policy —May 2013
matters would use in the conduct of funds of a like character and with like
aims, to safeguard the principal and maintain the liquidity needs of the
agency."
5.2 The Treasurer and delegated investment officers, acting in accordance with
District procedures and the Policy and exercising due 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 appropriate action is taken to control adverse
developments.
5.3 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.
SECTION 6.0: ETHICS AND CONFLICTS OF INTEREST
6.1 Officers and employees 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 their ability to make
impartial investment decisions. Employees and investment officials shall
disclose to the District's General Manager any material financial interests in
financial institutions that conduct business with the District's boundaries,
and they shall further disclose any large personal financial /investment
positions that could be related to the performance of the District.
SECTION 7: AUTHORIZED BROKER/DEALERS
7.1 The Treasurer will maintain a list of authorized broker /dealers and financial
institutions that are approved for investment purposes. Broker /dealers will
be selected for credit worthiness and must be authorized to provide
investment services in the State of California. These may include "primary"
dealers or regional dealers that qualify under Securities & Exchange
Commission Rule 15(C)3 -1 (uniform net capital rule). No public deposit will
be made by the broker /dealer except in a qualified public depository as
established by the established state laws. Before a financial institution or
broker /dealer is used, they are subject to investigation and approval by the
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Investment Policy —May 2013
Treasurer or his /her designated representative, and must submit the
following:
7.1.1 Certification of having read and understood this investment policy
resolution and agreeing to comply with the District's investment
policy;
7.1.2 Proof of Federal Investment Regulatory Authority certification;
7.1.3 Proof of State of California registration;
7.1.4 Audited financial statements for the institution's three (3) most recent
fiscal years;
7.1.5 References of other public- sector clients that similar services are
provided to.
7.2 If a third party investment advisor is authorized to conduct investment
transactions on the District's behalf, the investment advisor may use their
own list of approved independent broker /dealers and financial institutions.
The investment advisor's approved list must be made available to the
District upon request.
SECTION 8: AUTHORIZED INVESTMENTS
8.1 The District is provided a broad spectrum of eligible investments under the
CGC Sections 53684 and 53601 et seq. Within the investments permitted by
the CGC, the District seeks to further restrict eligible investment to the
investments listed below. Percentage holding limits listed in this section
apply at the time the security is purchased. Ratings, where shown, specify
the minimum credit rating category required at purchased without regard to
+/- or 1,2,3 modifiers, if any.
8.2 The purchase of any investment permitted by the CGC, but not listed as an
authorized investment in this Policy is prohibited without the prior approval
of the Board of Directors.
8.3 Within the context of these limitations, the following investments are
authorized:
M
Investment Policy —May 2013
TABLE 1
Permitted Investments * /
Deposits
CA Government Code
% of Portfolio Limits /
Maturity Limits
YL"
% of Portfolio Limits /
Maturity Limits
Collateralized Bank Deposits"
No % limit, 5 years
No % limit, 5 years
Certificates of Deposit#
No % limit, 5 years
No % limit, 5 years
Local Agency Investment Fund
(LAIF)^
No % or maturity limit
No % or maturity limit
County Pooled Investment Funds'
No % or maturity limit
No % or maturity limit
Joint Powers Authority Funds
(CalTRUST & CAMP)'
No % or maturity limit
No % or maturity limit
U.S. Treasury Obligations
No % limit, 5 years
No limit, 5 years
U.S. Agency Obligations
No % limit, 5 years
No % limit, 5 years
Negotiable Certificates of Deposit#
30% portfolio, 5 years
30% portfolio, 5 years
Money Market Funds*
20 %, 10% per issuer, no limit
20 %, 10% per issuer, no limit
Medium -Term (or Corporate) Notes*
30% portfolio, 5 years
30% portfolio, 5 years
Bankers Acceptances*
40 %, 30% per issuer, 180
days
10% max, 5% per issuer, 180
days
Commercial Paper*
25 %, 10% per issuer, 270
days
25% max, 5% per issuer, 270
days
* Please see Appendix A for more detailed descriptions and additional restrictions
^ Please see Section 10 for additional restrictions
# Please see Section 11 for additional restrictions
Investment Policy —May 2013
SECTION 9: REVIEW OF INVESTMENT PORTFOLIO
9.1 The securities held by the District must be in compliance with Section 8
Authorized Investments at the time of purchase. The Treasurer shall at least
quarterly review the portfolio to verify that all securities are in compliance
with Section 8 Authorized Investments. In the event a security held by the
District is subject to a credit rating change that brings it below the minimum
credit ratings specified in Section 8 Authorized Investments, the Treasurer
should notify the Finance - Accounting Committee - and through the
Committee's minutes, the Board - of the change. The course of action to be
followed will then be decided on a case -by -case basis, considering such
factors as the reason for the change, prognosis for recovery or further rate
drops, and the market price of the security.
SECTION 10: INVESTMENT POOLS
10.1 A thorough investigation of any investment pool or mutual fund is required
prior to investing, and on a continual basis. The investigation will, at a
minimum, obtain the following information:
10.1.1 A description of eligible investment securities, and a written
statement of investment policy and objectives;
10. 1.2 A description of interest calculations and how it is distributed, and
how gains and losses are treated;
10. 1.3 A description of how the securities are safeguarded (included the
settlement processes), and how often the securities are priced and the
program audited;
10. 1.4 A description of who may invest in the program, how often and what
size deposit and withdrawal are allowed;
10. 1.5 A schedule for receiving statements and portfolio listings;
10. 1.6 Are reserves, retained earnings, etc. utilized by the pool /fund;
10. 1.7 A fee schedule and when and how it is assessed;
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Investment Policy —May 2013
10.1.8 Is the pool /fund eligible for bond proceeds and /or will it accept such
proceeds.
SECTION 11: COLLATERALIZATION
11.1 Bank Deposits: Under provisions of the CGC, California banks and savings
and loan associations are required to secure the District's deposits by
pledging government securities with a value of 110% of principal and
accrued interest. State law also allows financial institutions to secure
District deposits by pledging first trust deed mortgage notes having a value
of 150% of the District's total deposits.
11.2 Certificates of Deposit /Negotiable Certificates of Deposit: The market
value of securities that underlay certificates of deposit shall be valued at
110% of the market value of principal and accrued interest. The Treasurer,
at his /her discretion may waive the collateral requirement for deposits up to
the maximum dollar amount which are covered by the Federal Deposit
Insurance Corporation.
SECTION 12: SAFEKEEPING AND CUSTODY
12.1 All security transactions entered into by the District shall be conducted on a
delivery- versus - payment (DVP) basis. Securities will be held by a third
party custodian designated by the Treasurer and evidenced by safekeeping
receipts. The only exception to the foregoing shall be depository accounts
and securities purchases made with (i) local government investment pools,
and (ii) money market mutual funds, since those purchased securities are not
deliverable.
SECTION 13: DIVERSIFICATION AND MAXIMUM MATURITIES
13.1 The District will diversify its investments by security type and institution.
With the exception of U.S. Treasuries, U.S. Agency Securities, FDIC
Insured Certificates of Deposit and authorized pools, no more than 30% of
the District's total investment portfolio will be invested in a single security
type or with a single financial institution.
13.2 To the extent possible, the district will attempt to match its investments with
anticipated cash flow requirements. Unless matched to a specific cash flow
and approved in advance by the Board of Directors, the District will not
Investment Policy —May 2013
directly invest in securities maturing more than 5 years from the date of
purchase.
SECTION 14: INTERNAL CONROLS
14.1 The external auditors will annually review the investments and general
activities associated with the investment program. This review will provide
internal control by assuring compliance with the Investment Policy and
District policies and procedures.
SECTION 15: PERFORMANCE STANDARDS
15.1 The investment portfolio will be designed with the objective of obtaining a
rate of return throughout budgetary and economic cycles, commensurate
with the investment risk constraints and the cash flow needs.
15.2 The District's investment strategy is passive. The performance of the
District's investment portfolio will be evaluated and compared to an
appropriate benchmark in order to assess the success of the investment
portfolio relative to the District's Safety, Liquidity and Return on
Investments objectives. This review will be conducted annually with the
Finance - Accounting Committee.
SECTION 16: REPORTING
16.1 Subject to the CGC Section 41004, 53607 and 53646(b), the Treasurer will
provide monthly investment reports to the District's Finance - Accounting
Committee and quarterly reports to the Board of Directors which provide a
clear picture of the status of the current investment portfolio. The report
should include comments on market conditions, discussions regarding
changes in portfolio balances and possible changes in the portfolio structure
going forward. Schedules in the monthly reports should include at a
minimum the following:
16.1.1 A list of individual securities held at the end of the previous reporting
period by authorized investment category;
16.1.2 Average life and final maturity of all investments listed;
16.1.3 Interest rates on said investments;
Investment Policy —May 2013
16.1.4 Par value, amortized book value and market value;
16.1.5 Percentage of the portfolio represented by each investment category.
SECTION 17: INVESTMENT POLICY ADOPTION
17.1 The District's Investment Policy will be adopted by resolution of the Board
of Directors. The policy will be reviewed on an annual basis and
modification, if any, must be approved by the Board of Directors.
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Investment Policy —May 2013
APPENDIX "A"
DESCRIPTION OF AUTHORIZED INVESTMENTS AND RESTRICTIONS
The following descriptions of authorized investments, maximum maturities and
limits are included here to assist in the administration of this policy.
1) COLLATERALIZED BANK DEPOSITS
Cash will be deposited only in Federal Deposit Insurance Corporation or
Federal Savings and Loan Insurance Corporation (FSLIC) insured
institutions or fully collateralized certificates of deposit. Collateral for a
given investment must be 110 percent of principal for government securities
collateral and 150 percent of principal for first mortgage collateral. The
institution must maintain a net worth to asset ratio of at least 3.0 percent, and
a positive earnings record. The bank or savings and loan must be located in
California. The maximum maturity shall be five years. No limit will be
placed on the percentage total invested in this category.
2) CERTIFICATES OF DEPOSIT — Government Code Section 53601.8
The District may invest in collateralized certificates of deposits issued by
commercial banks and savings and loans (Government Code Sections
53601(h) and 53635(h)). A written depository contract is required with all
institutions that hold District deposits. Securities placed in a collateral pool
must provide coverage for at least 110 percent of all deposits that are placed
in the institution. Acceptable pooled collateral is governed by California
Government Code Section 53651. All banks are required to provide the
District with a regular statement of pooled collateral. This report will state
that they are meeting the 110 percent collateral rule (Government Code
Section 53652(a)), a listing of all collateral with location and market value,
plus an accountability of the total amount of deposits secured by the pool.
Deposits of up to $250,000 are allowed in any institution that insures its
deposits with the FDIC, regardless of Moody's Investors Service or Standard
and Poor's Corporation ratings. As per section 53638 of the California
Government Code, any deposit shall not exceed that total paid -up capital and
surplus of any depository bank, nor shall the deposit exceed the total net
worth of any institution. As long as deposits are within FDIC limits, no
limit will be placed on the percentage total invested in this category.
10
Investment Policy —May 2013
3) THE STATE LOCAL AGENCY INVESTMENT FUND (LAIF) —
Government Code Section 16429.1
The LAIF is a special fund in the California State Treasury and an
investment alternative for California's local governments and special
districts created and governed pursuant to CGC Section 16429.1 et seq. and
managed by the State Treasurer's Office. The District, with the consent of
the Board of Directors, is authorized to remit money not required for the
District's immediate need, to the State Treasurer for deposit in this fund for
the purpose of investment. Principal may be withdrawn on one day's notice.
The fees charged by LAIF are limited by statute. Investment of District
funds in LAIF shall be subject to investigation and due diligence prior to
investing, and on a continual basis to a level of review described in Section
10 Investment Pools. No limit will be placed on the percentage total in this
category.
4) ORANGE COUNTY TREASURER'S COMMINGELD INVESTMENT
POOL ( OCCIP) — Government Code Section 53684
The OCCIP is a money market investment pool managed by the Orange
County Treasurer's Office. OCCIP is more fully described in the glossary at
Appendix B. The District has no funds invested in OCCIP at this time.
Investment of District funds in OCCIP would be subject to investigation and
due diligence prior to investing, and on a continual basis to a level of review
described in Section 10 Investment Pools. No limit will be placed on the
percentage total in this category.
5) THE INVESTMENT TRUST OF CALIFORNIA (CALTRUST) —
Government Code Section 53601(p)
The Investment Trust of California (CaITRUST) is a local government
investment pool organized as a joint powers authority pursuant to California
Government Code Section 6509.7. Wells Capital Management, a wholly -
owned subsidiary of Wells Fargo, is the portfolio manager for each of the
CaITRUST funds. Investment of District funds in CalTRUST shall be
subject to investigation and due diligence prior to investing, and on a
continual basis to a level of review described in Section 10 Investment
Pools. No limit will be placed on the percentage total in this category.
11
Investment Policy —May 2013
6) CALIFORNIA ASSSET MANAGEMENT PROGRAM (CAMP) —
Government Code Section 53601(p)
The Trust is currently governed by a Board of five Trustees, all of whom are
officials or employees of Public Agencies. The Trustees are responsible for
setting overall policies and procedures for the Trust. The Program's
Investment Adviser and Administrator is Public Financial Management, Inc.
The amounts deposited in this category shall be limited to bond proceeds
and are to be invested for the purpose of arbitrage management only. The
District has no funds invested in CAMP at this time. Investment of District
funds in OCCIP would be subject to investigation and due diligence prior to
investing, and on a continual basis to a level of review described in Section
10 Investment Pools. Proceeds may be invested in the Treasury Portfolio
and /or the Money Market Portfolio. No limit will be placed on the
percentage total in this category.
7) U.S. TREASURY OBLIGATIONS — Government Code Section 53601(b -d)
United States Treasury notes, bonds, bills or certificates of indebtedness, or
those for which the faith and credit of the United States are pledged for the
payment of principal and interest. The maximum maturity shall be limited
to five years. No limit will be placed on the percentage total invested in this
category.
8) U.S. AGENCY OBLIGATIONS — Government Code Section 53601(f)
Federal agency or United States government- sponsored enterprise senior
debt obligations, participations, mortgaged- backed securities or other
instruments, including those issued by or fully guaranteed as to principal and
interest by Federal agencies or United States government- sponsored
enterprises. Examples of these securities include Federal National Mortgage
Association, Federal Farm Credit Bank, Federal Home Loan Mortgage
Corporation and Federal Home Loan Bank. The maximum maturity shall be
limited to five years with no limit placed on the percentage total in this
investment category.
12
Investment Policy —May 2013
9) NEGOTIABLE CERTIFICATES OF DEPOSIT — Government Code
Section 53601(1)
Investments are limited to deposits issued by a nationally or state - chartered
bank, a savings association or a federal association (as defined by Section
5102 of the Financial Code), a state or federal credit union, or by a state -
licensed branch of a foreign bank.
Individual investments shall be limited to Federal Deposit Insurance
Corporation - insured limits of $250,000. The maximum maturity is limited to
five years and the maximum percentage allowable for investment is 30
percent of the investment portfolio in the aggregate.
10) MONEY MARKET FUNDS — Government Code Section 53601(1)(2)
Shares of a beneficial interest issued by diversified management
companies that are money market funds registered with the Securities and
Exchange Commission.
The company shall have met either of the following criteria: (A) attained
the highest ranking or the highest letter and numerical rating provided by
not less than two nationally recognized rating services and (B) retained an
investment adviser registered or exempt from registration with the
Securities and Exchange Commission with not less than five years of
experience managing money market mutual funds with assets under
management in excess of five hundred million dollars ($500,000,000). A
maximum of 20 percent of the portfolio may be invested in this category,
and a maximum of 10 percent of the portfolio may be invested in any
single issuer.
If the District has funds invested in a money market fund, a copy of the
fund's information statement shall be maintained on file. In addition, the
Treasurer should review the fund's summary holdings on a quarterly basis.
13
Investment Policy —May 2013
11) MEDIUM -TERM (OR CORPORATE) NOTES — Government Code
Section 53601(k)
Medium -term notes are defined as all corporate and depository institution
debt securities with a maximum remaining maturity of five years or less.
The corporation must be domestic, the notes must be domestic and the
notes must be issued in the United States. The corporation must be rated A
or its equivalent or better by a nationally recognized rating service. The
maximum maturity is limited to five years and the maximum percentage
allowable for investment is 30 percent of the investment portfolio in the
aggregate.
12) BANKERS' ACCEPTANCES — Government Code Section 53601 (g)
Bankers' acceptances, otherwise known as bills of exchange or time drafts,
are drawn on and accepted by a commercial bank. Purchases are limited to
bankers' acceptances issued by domestic or foreign banks, which are
eligible for purchase by the Federal Reserve System. Eligible bankers'
acceptances are restricted to issuing financial institutions with a short-term
debt rating of at least "A -1" or its equivalent by a nationally recognized
rating service. The maximum term may not exceed 180 days and the
maximum percentage allowable for investment is 30 percent of the
portfolio in the aggregate.
13) COMMERCIAL PAPER— Government Code Section 53601(h)
Commercial paper rated the highest ranking or of the highest letter and
number ratings as provided for by a nationally recognized rating service.
The entity that issues the commercial paper shall meet two sets of criteria:
(1) The corporation shall be organized and operating within the United
States, shall have total assets in excess of $500,000,000, and shall issue
debt, other than commercial paper, if any, that is rated A or higher by a
nationally recognized rating service. (2) The corporation shall be organized
within the United States as a special purpose corporation, trust, or limited
liability company, has program wide credit enhancements including, but
not limited to, over collateral ization, letters of credit, or surety bond; has
commercial paper that is rated "A -1" or higher, or equivalent by a
nationally recognized statistical- rating organization. Eligible commercial
paper may not exceed 270 days' maturity and may not represent more than
the 25 percent of the investment portfolio in the aggregate.
14
Investment Policy —May 2013
APPENDIX "B"
GLOSSARY
AGENCIES: Federal agency securities and /or Government- sponsored enterprises.
ASKED: The price at which securities are offered.
BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a
bank or trust company. The accepting institution guarantees payment of the bill, as
well as the issuer.
BENCHMARK: A comparative base for measuring the performance or risk
tolerance of the investment portfolio. A benchmark should represent a close
correlation to the level of risk and the average duration of the portfolio's
investments.
BID: The price offered by a buyer of securities. (When you are selling securities,
you ask for a bid.) See Offer.
BROKER: A broker brings buyers and sellers together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity
evidenced by a Certificate. Large - denomination CD's are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property, which a
borrower pledges to secure repayment of a loan. Also refers to securities pledged
by a bank to secure deposits of public monies.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official
annual report of the District. It includes five combined statements for each
individual fund and account group prepared in conformity with GAAP. It also
includes supporting schedules necessary to demonstrate compliance with finance-
related legal and contractual provisions, extensive introductory material, and a
detailed Statistical Section.
COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the
bondholder on the bond's face value. (b) A certificate attached to a bond
evidencing interest due on a payment date.
15
Investment Policy —May 2013
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions,
buying and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of
securities: delivery versus payment and delivery versus receipt. Delivery versus
payment is delivery of securities with an exchange of money for the securities.
Delivery versus receipt is delivery of securities with an exchange of a signed
receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or
derived from, the movement of one or more underlying index or security, and may
include a leveraging factor, or (2) financial contracts based upon notional amounts
whose value is derived from an underlying index or security (interest rates, foreign
exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price of a security and its maturity
when quoted at lower than face value. A security selling below original offering
price shortly after sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non - interest bearing money market instruments that
are issued a discount and redeemed at maturity for full face value (e.g., U.S.
Treasury Bills.)
DIVERSIFICATION: Dividing investment funds among a variety of securities
offering independent returns.
DURATION: A measure of the sensitivity of the price (the value of principal) of a
fixed- income investment to a change in interest rates. Duration is expressed as a
number of years. Rising interest rates mean falling bond prices, while declining
interest rates mean rising bond prices.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to
supply credit to various classes of institutions and individuals, e.g., S &L's, small
business firms, students, farmers, farm cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal
agency that insures bank deposits, currently up to $250,000 per entity.
16
Investment Policy —May 2013
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded.
This rate is currently pegged by the Federal Reserve through open - market
operations.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale
banks (currently 12 regional banks), which lend funds and provide correspondent
banking services to member commercial banks, thrift institutions, credit unions and
insurance companies. The mission of the FHLBs is to liquefy the housing related
assets of its members who must purchase stock in their district Bank.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like
GNMA was chartered under the Federal National Mortgage Association Act in
1938. FNMA is a federal corporation working under the auspices of the
Department of Housing and Urban Development (HUD). It is the largest single
provider of residential mortgage funds in the United States. Fannie Mae, as the
corporation is called, is a private stockholder -owned corporation. The
corporation's purchases include a variety of adjustable mortgages and second
loans, in addition to fixed -rate mortgages. FNMA's securities are also highly liquid
and are widely accepted. FNMA assumes and guarantees that all security holders
will receive timely payment of principal and interest.
FEDERAL RESERVE SYSTEM: The central bank of the United States created
by Congress and consisting of a seven member Board of Governors in Washington,
D.C., 12 regional banks and about 5,700 commercial banks are members of the
system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or
Ginnie Mae): Securities influencing the volume of bank credit guaranteed by
GNMA and issued by mortgage bankers, commercial banks, savings and loan
associations, and other institutions. Security holder is protected by full faith and
credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA
or FHA mortgages. The term "pass - throughs" is often used to describe Ginnie
Maes.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into
cash without a substantial loss of value. In the money market, a security is said to
be liquid if the spread between bid and asked prices is narrow and reasonable size
can be done at those quotes.
17
Investment Policy —May 2013
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all
funds from political subdivisions that are placed in the custody of the State
Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could
presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all
future transactions between the parties to repurchase— reverse repurchase
agreements that establishes each party's rights in the transactions. A master
agreement will often specify, among other things, the right of the buyer - lender to
liquidate the underlying securities in the event of default by the seller borrower.
MATURITY: The date upon which the principal or stated value of an investment
becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills,
commercial paper, bankers' acceptances, etc.) are issued and traded.
OFFER: The price asked by a seller of securities. (When you are buying
securities, you ask for an offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and sales of government and
certain other securities in the open market by the New York Federal Reserve Bank
as directed by the FOMC in order to influence the volume of money and credit in
the economy. Purchases inject reserves into the bank system and stimulate growth
of money and credit; sales have the opposite effect. Open market operations are the
Federal Reserve's most important and most flexible monetary policy tool.
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit
daily reports of market activity and positions and monthly financial statements to
the Federal Reserve Bank of New York and are subject to its informal oversight.
Primary dealers include Securities and Exchange Commission (SEC)- registered
securities broker - dealers, banks, and a few unregulated firms.
IN
Investment Policy —May 2013
PRUDENT PERSON RULE: An investment standard. In some states the law
requires that a fiduciary, such as a trustee, may invest money only in a list of
securities selected by the custody state —the so- called legal list. In other states the
trustee may invest in a security if it is one which would be bought by a prudent
person of discretion and intelligence who is seeking a reasonable income and
preservation of capital.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not
claim exemption from the payment of any sales or compensating use or ad valorem
taxes under the laws of this state, which has segregated for the benefit of the
commission eligible collateral having a value of not less than its maximum liability
and which has been approved by the Public Deposit Protection Commission to
hold public deposits.
RATE OF RETURN: The yield obtainable on a security based on its purchase
price or its current market price. This may be the amortized yield to maturity on a
bond the current income return.
REPURCHASE AGREEMENT (REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a fixed price on a
fixed date. The security "buyer" in effect lends the "seller" money for the period of
the agreement, and the terms of the agreement are structured to compensate him
for this.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby
securities and valuables of all types and descriptions are held in the bank's vaults
for protection.
SECONDARY MARKET: A market made for the purchase and sale of
outstanding issues following the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to
protect investors in securities transactions by administering securities legislation.
SEC RULE 15(C)3 -1: See Uniform Net Capital Rule.
19
Investment Policy —May 2013
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises
(FHLB, FNMA, SLMA, etc.) and Corporations, which have imbedded options
(e.g., call features, step -up coupons, floating rate coupons, derivative -based
returns) into their debt structure. Their market performance is impacted by the
fluctuation of interest rates, the volatility of the imbedded options and shifts in the
shape of the yield curve.
TREASURY BILLS: A non - interest bearing discount security issued by the U.S.
Treasury to finance the national debt. Most bills are issued to mature in three
months, six months, or one year.
TREASURY BONDS: Long -term coupon- bearing U.S. Treasury securities issued
as direct obligations of the U.S. Government and having initial maturities of more
than 10 years.
TREASURY NOTES: Medium -term coupon- bearing U.S. Treasury securities
issued as direct obligations of the U.S. Government and having initial maturities
from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission
requirement that member firms as well as nonmember broker - dealers in securities
maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called
net capital rule and net capital ratio. Indebtedness covers all money owed to a firm,
including margin loans and commitments to purchase securities, one reason new
public issues are spread among members of underwriting syndicates. Liquid capital
includes cash and assets easily converted into cash.
YIELD: The rate of annual income return on an investment, expressed as a
percentage. (a) INCOME YIELD is obtained by dividing the current dollar income
by the current market price for the security. (b) NET YIELD or YIELD TO
MATURITY is the current income yield minus any premium above par or plus any
discount from par in purchase price, with the adjustment spread over the period
from the date of purchase to the date of maturity of the bond.
20
RESOLUTION NO. 11 -24
RESOLUTION OF THE BOARD OF DIRECTORS
OF THE YORBA LINDA WATER DISTRICT
SETTING FORTH PUBLIC FUNDS INVESTMENT POLICY
AND RESCINDING RESOLUTION NO. 11 -08
WHEREAS, California Government Code (CGC) Section 53000 sets forth guidelines
for the investment of public funds and
WHEREAS, the current Yorba Linda Water District (Yorba Linda Water District or
District) Investment Policy was adopted by Resolution No. 11 -08 on May
12, 2011; and
WHEREAS, the District is in possession of public funds that are not required for
immediate expenditure, and are available for investment; and
WHEREAS, a policy setting forth guidelines for the investment of said funds is
necessary for compliance with the principles of sound financial
management; and
WHEREAS, the Board of Directors of the Yorba Linda Water District desire to adopt
the Investment Policy set forth herein.
NOW, THEREFORE, BE IT RESOLVED by Board of Directors of the Yorba Linda
Water District as follows:
Section 1: Public funds held for investment by the District may be categorized as
follows:
a] Those funds that are allocated for immediate expenditure on
District operations as authorized by the Board of Directors at their
bimonthly meetings;
b) Those funds that are allocated for use in an intermediate time
frame, such as budgeted purchases, that have not been delivered;
c] Those funds that are allocated for future use which do not fall into
the above categories. This policy sets forth guidelines for funds
that are identified as "available for investment."
Section 2: Delegated representative and standards and procedures for the operation
of the investment program as follows:
Reso € Lit ion No. 11 -2 4 Sett ing Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -08
a] The authority of the Board of Directors to invest funds is derived
from Section 53601 of the CGC. Section 53507 of the CGC grants
the Board of Directors the authority to delegate that authority.
Therefore, Tthe responsibility to invest, reinvest, sell or exchange
securities is hereby delegated to the District's Treasurer for a
period of one year. The Board of Directors may renew the
delegation of authority pursuant to state law each year.
bi The standard of prudence to be used by the designated
representative shall be the "prudent investor" standard and shall be
applied in the context of managing the overall portfolio. The
meaning of the standard of prudent investor, means investment,
reinvestment, purchasing, acquiring, exchanging, selling or
managing public funds shall be made with care, skill, prudence and
diligence, under circumstances then prevailing, including but not
limited to, the general economic conditions and the anticipated
needs of the agency, which a prudent person, acting in a like
capacity and familiarity with those matters would use in the conduct
of funds of a like character and with like aims, to safeguard the
principal and maintain the liquidity needs of the District.
Section 3: The Treasurer or his/her designated representative shall maintain a cash
flow analysis for projecting cash available for investments. All funds not
required for immediate or intermediate use may be invested in accordance
with this policy. The total funds invested at any time pursuant to this
policy will constitute the District's "investment portfolio ".
Section 4: Priorities regarding the investment of District held public funds are:
a) The safety of funds. Safety of principal is the foremost objective of
the investment portfolio. Investments shall be undertaken in a
manner that seeks to ensure the preservation of capital in the
overall portfolio.
b) The maintenance of sufficient liquidity to meet all operating
requirements that may be reasonably anticipated. Securities
should mature concurrent with cash needs to meet anticipated
demands.
C) The investment portfolio shall be designed with the objective of
attaining the best yield or returns on investments, taking into
account the investment risk constraints and liquidity needs. Return
on investment is of secondary importance compared to the safety
and liquidity objectives.
Resolution No. 11 -24 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -08 2
Section 5: The District may invest funds that are available for direct investment in the
following categories:
a) Banks or Savings and Loans
Cash will be deposited only in Federal Deposit Insurance
Corporation or Federal Savings and Loan Insurance Corporation
(FSLIC) insured institutions or fully collateralized certificates of
deposit. Collateral for a given investment must be 110 percent of
principal for government securities collateral and 150 percent of
principal for first mortgage collateral. The institution must maintain
a net worth to asset ratio of at least 3.0 percent, and a positive
earnings record. The bank or savings and loan must be located in
California. The maximum maturity shall be five years. No limit will
be place on the percentage total invested in this category.
b) Negotiable Certificates of Deposit.
Investments are limited to deposits issued by a nationally, or
California- chartered bank, a California savings association or a
federal association (as defined by Section 5102 of the Financial
Code), a state or federal credit union, or by a California licensed
branch of a foreign bank. (Government Code Section 53601(i)).
Deposits shall be limited to those financial institutions which
maintain a rating equivalent to "A" or higher by one of the nationally
recognized statistical rating organizations (NRSRO), and individual
investments shall be limited to Federal Deposit Insurance
Corporation - insured limits of $250,000. The maximum maturity is
limited to five years and the maximum percentage allowable for
investment is 30 percent of the investment portfolio in the
aggregate.
c) The State Local Agency Investment Fund (LAIF).
No limit will be placed on the percentage total in this category.
d) Orange County Treasurer's Commingled Investment Pool —
Government Code Section 53684
No limit will be placed on the percentage total in this category.
Resolution No. 11 .24 Setting Forth Public f=unds Investment Policy and Rescinding Resolution No. 11 -08 3
e) California Asset Management Program
The amounts deposited in this category shall be limited to bond
proceeds and are to be invested for the purpose of arbitrage
management only. Proceeds may be invested in the Treasury
Portfolio and/or the Money Market Portfolio. No limit will be placed
on the percentage total in this category.
f) Treasury Bills, Notes and Bonds — Government Code Section
53601(b -d)
The District will require physical delivery of these securities to an
acceptable safekeeping account in the District's name and must be
properly insured. The maximum maturity shall be limited to five
years. No limit will be placed on the percentage total invested in
this category.
g) Obligations Issued by Federal Agencies and U.S. Government
Sponsored Enterprises — Government Code Section 53601 (f)
The District will require physical delivery of these securities to an
acceptable safekeeping account in the District's name and must be
properly insured. Examples of these securities include Federal
National Mortgage Association, Federal Farm Credit Bank, Federal
Home Loan Mortgage Corporation and Federal Home Loan Bank.
The maximum maturity shall be limited to five years and the
maximum investment of 50 percent of the investment portfolio in
the aggregate.
h) Corporate Bond -- Government Code Section 53601(k)
The District will require electronic delivery of these securities to an
acceptable safekeeping account in the District's name, which must
be properly insured. The corporation must be domestic, the notes
must be domestic and the notes must be issued in the United
States. The corporation must be rated A or its equivalent or better
by a nationally recognized rating service. The maximum maturity is
limited to five years and the maximum percentage allowable for
investment is 30 percent of the investment portfolio in the
aggregate.
Resolution No. 11 -24 Setting Forth Public Funds Investment Poi icy and Rescinding Resolution No. 11 -68 4
i} Banker's Acceptance -- Government Code Section 53601 (8)
The District will require physical delivery of these securities to an
acceptable safekeeping account in the District's name and must be
properly insured. The maximum term may not exceed 180 days
and the maximum percentage allowable for investment is 10
percent of the portfolio in the aggregate.
j} Commercial Paper — Government Code Section 53601(h)
The District will require physical delivery of these securities to an
acceptable safekeeping account in the District's name and must be
properly insured. Commercial paper rated the highest ranking or of
the highest letter and number ratings as provided for by a nationally
recognized statistical- rating organization. The entity that issues the
commercial paper shall meet two sets of criteria: (1) The
corporation shall be organized and operating within the United
States, shall have total assets in excess of five hundred million
dollars ($500,000,000), and shall issue debt, other than commercial
paper, if any, that is rated A or higher by a nationally recognized
statistical - rating organization. (2) The corporation shall be
organized within the United States as a special purpose
corporation, trust, or limited liability company, has program wide
credit enhancements including, but not limited to, over
collateralization, letters of credit, or surety bond; has commercial
paper that is rated "a -1" or higher, or equivalent by a nationally
recognized statistical- rating organization. Eligible commercial
paper may not exceed 270 days' maturity and may not represent
more than the 25 percent of the investment portfolio in the
aggregate.
k) Investment Trust of California (the CalTRUST JPA pool) -
Government Code Section 53601(p)
No limit will be placed on the percentage total in this category.
I} Money Market Funds
Shares of a qualified money market fund, as defined in CGC
section 53601, must meet the criteria described therein.
Resolution Na 11 -24 Setti ng Forth Pubic Funds Investment Pc1icy and Rescinding Resolution No. 11 -08 5
Section 6: All investments of sums of less than $100,000 do not require approval of
the Board of Directors or need to be collateralized. Such investments,
however, must be made in saving institutions covered by federal deposit
insurance.
Section 7: Investment of sums greater than $100,000 and less than $1,000,000 in a
single institution is authorized in institutions that comply with the following
parameters:
a) Collateral requirements as set forth in Section 5, (a) herein;
b) Institution established as a business in California for a minimum of
three years;
c) Must show a profit for the most recent two consecutive years;
d) A capital ratio of six percent for banks, and five percent for savings
& loans;
e) No more than three percent foreclosures;
f) Financial rating of "excellent" or "superior'.
Section 8: All investments greater than $1,000,000 in one institution, with exception
of LAIF, Investment Trust of California (the CalTRUST JPA pool) and
Orange County Treasurer's Commingled Investment Pool (OCIP), require
approval of the Board of Directors
Section 9: When the District uses the services of a broker /dealer to purchase
securities, they shall be selected for credit worthiness. These may include
"primary" dealers or regional dealers. Each security purchased through a
brokerldealer shall be registered in the name of Yorba Linda Water
District. No deposit of cash and/or securities shall be made by the
brokerldealer except in a qualified public depository as established by
state law and Section 5(a) of this resolution. Before a brokerldealer is
used, they are subject to investigation and approval by the Treasurer or
his/her designated representative and must submit the following:
a) Certification of having read and understood this investment policy
resolution and agreeing to comply with the District's investment
policy;
b) Proof of National Association of Security Dealers certification and
state registration;
Resolution No. 11 -24 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -08 6
c) Compliance with federal capital adequacy regulations and provide
documentation of financial solvency;
d) Provide audited financial statements within 120 days of fiscal year
end;
e) Provide similar services to other public- sector clients.
Section 10: Policy on repurchase and reverse repurchase agreements and derivative
products:
a) The District staff is not authorized to initiate investments in
repurchase or reverse repurchase agreements or "plain vanilla
OTC and/or "more complex over the counter (OTC) derivative
products," as defined below, however, staff is authorized to deposit
in L.AIF provided LAIF invests no more than ten percent of their
total portfolio in repurchase or reverse repurchase agreements and
does not use derivative products defined below.
b) A "plain vanilla OTC" derivative product is defined by the U.S.
General Accounting Office as a financial instrument whose market
value is derived from a reference rate, index, or a value of an
:underlying asset. OTC derivatives are privately negotiated
contracts and are not traded on organized exchanges.
c3 A "more complex OTC" derivative product is defined by the U.S.
General Accounting Office to have at least one of the following
characteristics:
1. Their prices tend to be difficult to obtain, because they are
often available from only a few dealers;
2. The payments required by the derivative are calculated on
the basis of more than one interest, rate, currency, asset or
other factor;
3. The derivative contract has terms that are not determined
until some future Date;
4. The contract involves a term that acts as a multiplier or
increases the leverage of the rate(s) used to compute
payments;
5. The contract may entail potentially unlimited risk;
Resolution No. 11 -24 sett ing Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -08 7
Section 11: The Treasurer or his/her designated representative shall submit a monthly
investment portfolio report through the Finance - Accounting Committee to
the Board of Directors. Additionally, the Treasurer or his/her designated
representative shall submit a comprehensive report for Board approval
each quarter. This report shall include but not be limited to:
a) A list of the previous month's investments;
b) Institutions where investments were placed;
c) Dates of transactions;
d) Dates of maturity;
e) Interest rates on said investments;
f) Investment categories' percent of total portfolio.
Section 12: Ethics and Conflicts of Interest
All officials, staff members and consultants who make or participate in
making investment decisions on behalf of the District, will refrain from
personal business activity that could conflict with the execution of the
investment function or which may impair the ability to make impartial
investment decisions. Officials, staff members, and consultants will
disclose to the General Manager any financial interests with a financial
institution, provider, dealer or broker conducting business with the District.
Officials, staff members and consultants will further disclose any personal
financial positions that could be related to the performance of the District's
portfolios;
Section 13: Safekeeping and Custody
All cash and securities in the District's Investment portfolio, including those
that are being managed by the delegated representative shall be held in
the District's name by a third party bank trust department, acting as agent
for the District under the terms of a custody agreement executed by the
bank and the District.
All securities will be received and delivered using delivery - versus payment
procedures. The District's safekeeping agent will only release payment for
a security after the security has been properly delivered. The only
exception to the foregoing shall be depository accounts and securities
purchases made with 0) local government investment pools, and 00
money market mutual funds, since the purchased securities are not
deliverable.
Resolution No. 11 -2A setting Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -b8 8
Section 14: Maximum Securities
To the extent possible, the District will attempt to match investments with
anticipated cash flow requirements. Pursuant to state law, no investment
shall have a maturity in excess of five years.
That Resolution 11 -08 is hereby rescinded immediately upon adoption of this
Resolution.
PASSED AND ADOPTED this 22nd day of December 2011 by the following called vote:
AYES: Directors Beverage,
NOES: None
ABSTAIN: Yon E
ABSENT: Norte
ATTEST:
Collett, Hawkins, Kiley and Melton
K nneth R. Vecchiarelli, Secretary -
Yorba Linda Water District
Reviewed as to form by General Counsel:
Arthur G. Kidman, Esq.
Kidman, Behrens & Tague LLP
Phil Hawkins, President
Yorba Linda Water District
Resolution No. 11 -24 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 11 -QS 9
Meeting Date:
To:
From:
Presented By:
Prepared By:
Subject:
DISCUSSION:
AGENDA REPORT
April 22, 2013
Finance - Accounting Committee
Steve Conklin, Acting General
Manager
Stephen Parker, Finance Dept:
Manager
Delia Lugo, Senior Accountant
March 2013 Budget to Actual Results
ITEM NO. 5.1
Finance
Attached are the District's budget to actual summary results for the Water Fund, Sewer Fund and a
combined statement for both funds pertaining to the reporting month of March 2013.
For the month of March 2013, the District water revenue is 74.3% of annual budget, which is 2.9%
higher when compared to the historical trend for this point in the year. Variable water costs are
higher than budgeted due to the District's intentional strategy to use a greater percentage of the
more expensive imported water in the first half of the year due to MWD's rate increase that went into
effect January 2013 in addition to more water is being sold than budgeted.
The Water Fund saw a significant increase in Other Non - Operating Revenue in the current month,
primarily as a result of receiving the refund for the Tier 2 Contingency Fund from MWDOC in the
amount of $177,664. The majority of the Water Fund's individual Supplies and Services expenses
are trending above or near budget for reasons previously reported, however the net Supplies and
Services is trending right at budget.
Overall, Sewer Supplies and Services expenses are trending slightly over budget. This is due to the
Water Fund's pass - throughs plus Sewer's Maintenance fund being over budget due to Sewer
Asphalt Paving not being budgeted ($30,000) and Sewer Line Repairs already being at budget
due to more work occurring than anticipated.
STRATEGIC PLAN:
FR 1 -F: Continue to Record and Report the Fairly Stated Financial Activities of the District in a
Timely and Transparent Manner to the Board of Directors and Member Agencies
ATTACHMENTS:
Name:
March 2013 consolidated stmt.xlsx
March 2013 Water Stmt.xlsx
March 2013 Sewer Stmt.xlsx
Description:
March 2013 Consolidated Statement
March 2013 Water Statement
March 2013 Sewer Statement
Type:
Backup Material
Backup Material
Backup Material
Yorba Linda Water District
Summary Financial Report
Water & Sewer Funds
For Nine Months Ending March 31, 2013
Revenue (Operating):
Water Revenue (Residential)
Water Revenue (Commercial & Fire Det.)
Water Revenue (Landscape /Irrigation)
Water Revenue (Service Charge)
Sewer Charge Revenue
Locke Ranch Assessments
Other Operating Revenue
Total Operating Revenue:
Revenue (Non- Operating)
Original
YTD
YTD
YTD
Budget
Actual
Under(Over)
% of
FY 2013
FY 2013
Budget
Budget
$15,405,197
$11,237,725
$4,167,472
72.95%
1,822,665
1,424,238
398,427
78.14%
4,035,121
3,074,870
960,251
76.20%
3,755,191
2,781,582
973,609
74.07%
1,548,682
1,145,044
403,638
73.94%
198,433
122,983
75,450
61.98%
643,737
555,881
87,856
86.35%
27,409,026
20,342,323
7,066,703
74.22%
Interest
170,000
85,729
84,271
50.43%
Property Tax
1,244,320
829,722
414,598
66.68%
Other Non - Operating Revenue
494,437
655,021
(160,584)
132.48%
Total Non - Operating Revenue:
1,908,757
1,570,472
338,285
82.28%
Total Revenue
29,317,783
21,912,795
7,404,988
74.74%
Expenses (Operating)
Variable Water Costs (G.W., Import & Power)
12,953,024
11,013,944
1,939,080
85.03%
Salary Related Expenses
7,648,891
5,350,059
2,298,832
69.95%
Supplies & Services
3,849,602
2,874,716
974,886
74.68%
Total Operating Expenses
24,451,517
19,238,719
5,212,798
78.68%
Expenses (Non- Operating):
Interest on Long Term Debt
2,011,395
1,354,657
656,738
67.35%
Other Expense
124,210
36,032
88,178
29.01%
Total Non - Operating Expenses:
2,135,605
1,390,689
744,916
65.12%
Total Expenses
26,587,122
20,629,408
5,957,714
77.59%
Net Income (Loss) Before Capital Contributions
2,730,661
1,283,387
1,447,274
47.00%
Capital Contributions
-
350,819
350,819
0.00%
Net Income (Loss) Before Depreciation
2,730,661
1,634,206
1,798,093
59.85%
Depreciation &Amortization
6,602,339
5,087,132
1,515,207
77.05%
Total Net Income (Loss)
($3,871,678)
($3,452,926)
($418,752)
89.18%
Yorba Linda Water District
Water Fund
For Nine Months Ending March 31, 2013
Mar YTD YTD YTD
Budget Actual Actual Under(Over) % of
FY 2013 FY 2013 FY 2013 Budget Budget
Revenue (Operating)
Water Revenue (Residential)
$15,405,197
945,736
$11,237,725
$4,167,472
72.95%
Water Revenue (Commercial & Fire Det.)
1,822,665
117,327
1,424,238
398,427
78.14%
Water Revenue (Landscape /Irrigation)
4,035,121
192,362
3,074,870
960,251
76.20%
Water Revenue (Service Charge)
3,755,191
313,035
2,781,582
973,609
74.07%
Other Operating Revenue
585,929
46,969
512,672
73,257
87.50%
Total Operating Revenue:
25,604,103
1,615,429
19,031,087
6,573,016
74.33%
Revenue (Non- Operating):
Interest
Property Tax
Other Non - Operating Revenue
Total Non - Operating Revenue:
Total Revenue
Expenses (Operating):
Variable Water Costs (G.W., Import & Power)
Salary Related Expenses
Supplies & Services:
Communications
Contractual Services
Data Processing
Dues & Memberships
Fees & Permits
Board Election
Insurance
Materials
District Activities, Emp Recognition
Maintenance
Non - Capital Equipment
Office Expense
Professional Services
Training
Travel & Conferences
Uncollectible Accounts
Utilities
Vehicle Equipment
Supplies & Services Sub -Total
Total Operating Expenses
Expenses (Non- Operating):
Interest on Long Term Debt
Other Expense
Total Non - Operating Expenses:
Total Expenses
150,000
6,592
73,396
76,604 48.93%
1,244,320
67,532
829,722
414,598 66.68%
490,262
214,692
650,602
(160,340) 132.70%
1,884,582
288,816
1,553,720
330,862 82.44%
27,488,685 1,904,245 20,584,807 6,903,878 74.88%
12,953,024
821,321
11,013,944
1,939,080
85.03%
6,741,403
714,012
4,738,946
2,002,457
73.49%
280,232
10,701
148,035
132,197
52.83%
455,041
38,677
307,914
147,127
67.67%
125,866
-
88,236
37,630
70.10%
57,609
887
51,702
5,907
89.75%
139,165
12,474
115,811
23,354
83.22%
47,988
-
-
47,988
0.00%
259,656
43,883
247,447
12,209
95.30%
451,506
69,986
450,115
1,391
99.69%
17,298
1,596
14,048
3,250
81.21%
307,065
(4,852)
209,630
97,435
68.27%
109,782
15,332
98,907
10,875
90.09%
37,702
(935)
31,349
6,353
83.15%
740,578
49,323
544,833
195,745
73.57%
41,353
(91)
14,282
27,071
34.54%
40,833
4,461
17,822
23,011
43.65%
36,270
568
1,814
34,456
5.00%
79,050
4,823
59,377
19,673
75.11%
282,400
26,735
212,714
69,686
75.32%
3,509,393
273,568
2,614,036
895,357
74.49%
23,203,820 1,808,901 18,366,926 4,836,894 79.15%
2,009,777 151,184 1,354,657 655,120 67.40%
118,210 2,895 36,032 82,178 30.48%
2,127,987 154,079 1,390,689 737,298 65.35%
25,331,807 1,962,980 19,757,615 5,574,192 78.00%
Net Income (Loss) Before Capital Contributions 2,156,878 (58,735)
827,192
1,329,686
38.35%
Capital Contributions - -
193,770
193,770
0.00%
Net Income (Loss) Before Depreciation 2,156,878 (58,735)
1,020,962
1,523,456
47.34%
Depreciation &Amortization 5,332,175 498,206 4,119,789 1,212,386 77.26%
Total Net Income (Loss) ($3,175,297) ($556,941) ($3,098,827) ($76,470) 97.59%
Yorba Linda Water District
Sewer Fund
For Nine Months Ending March 31, 2013
Supplies & Services:
Communications
Contractual Services
Data Processing
Dues & Memberships
Fees & Permits
Board Election
Insurance
Materials
District Activities, Emp Recognition
Maintenance
Non - Capital Equipment
Office Expense
Professional Services
Training
Travel & Conferences
Uncollectible Accounts
Utilities
Vehicle Equipment
Supplies & Services Sub -Total
Total Operating Expenses
Expenses (Non- Operating):
Interest Expense
Other Expense
Total Non - Operating Expenses:
23,018
805
Mar
YTD
YTD
YTD
3,227
Budget
Actual
Actual
Under(Over)
O/C of
6,980
FY 2013
FY 2013
FY 2013
Budget
Budget
Revenue (Operating):
84.75%
12,155
864
11,451
704
Sewer Charge Revenue
$1,548,682
$126,887
$1,145,044
$403,638
73.94%
Locke Ranch Assessments
198,433
8,919
122,983
75,450
61.98%
Other Operating Revenue
57,808
3,793
43,209
14,599
74.75%
Total Operating Revenue:
1,804,923
139,599
1,311,236
493,687
72.65%
Revenue (Non- Operating):
120.32%
18,269
2,097
11,792
6,477
Interest
20,000
1,466
12,333
7,667
61.67%
Other Non - Operating Revenue
4,175
-
4,419
(244)
105.84%
Total Non - Operating Revenue:
24,175
1,466
16,752
7,423
69.29%
Total Revenue
1,829,098
141,065
1,327,988
501,110
72.60%
Expenses (Operating):
9.52%
5,950
419
5,016
934
Salary Related Expenses
907,488
79,607
611,113
296,375
67.98%
Supplies & Services:
Communications
Contractual Services
Data Processing
Dues & Memberships
Fees & Permits
Board Election
Insurance
Materials
District Activities, Emp Recognition
Maintenance
Non - Capital Equipment
Office Expense
Professional Services
Training
Travel & Conferences
Uncollectible Accounts
Utilities
Vehicle Equipment
Supplies & Services Sub -Total
Total Operating Expenses
Expenses (Non- Operating):
Interest Expense
Other Expense
Total Non - Operating Expenses:
23,018
805
10,016
13,002
43.51%
34,280
3,227
23,696
10,584
69.12%
9,474
-
6,980
2,494
73.68%
4,583
207
3,884
699
84.75%
12,155
864
11,451
704
94.21%
3,612
-
-
3,612
0.00%
19,544
3,303
19,352
192
99.02%
34,519
1,472
12,875
21,644
37.30%
1,302
120
1,055
247
81.03%
71,405
4,043
85,911
(14,506)
120.32%
18,269
2,097
11,792
6,477
64.55%
2,823
(70)
2,360
463
83.60%
36,882
2,148
21,953
14,929
59.52%
4,747
40
4,895
(148)
103.12%
3,418
85
1,052
2,366
30.78%
2,730
100
260
2,470
9.52%
5,950
419
5,016
934
84.30%
51,499
(298)
38,132
13,367
74.04%
340,209
18,562
260,680
79,529
76.62%
1,247,697 98,169 871,793 375,904 69.87%
1,618 - 1,618 0.00%
6,000 - 6,000 0.00%
7,618 7,618 0.00%
Total Expenses 1,255,315 98,169 871,793 383,522 69.45%
Net Income (Loss) Before Capital Contributions
573,783 42,896 456,195
117,588
79.51%
Capital Contributions
- - 157,049
157,049
0.00%
Net Income (Loss) Before Depreciation
573,783 42,896 613,244
274,637
106.88%
Depreciation & Amortization
Total Net Income (Loss)
1,270,164 109,103 967,343 302,821 76.16%
($696,381) ($66,207) ($354,099) ($28,184) 50.85%
AGENDA REPORT
Meeting Date: April 22, 2013
To: Finance - Accounting Committee
From: Steve Conklin, Acting General
Manager
Presented By: Stephen Parker, Finance Dept:
Manager
Prepared By: Stephen Parker, Finance
Manager
Subject: Draft Reserve Policy for FY 2013/14
DISCUSSION:
ITEM NO. 5.2
Finance
Attached is a draft and red -line version of the financial reserves policy for FY 2013/14 for the
Finance - Accounting Committee to review. This draft policy is an update from what was presented to
the Committee last month.
The difference from the previous version is the addition of a Debt Service Reserve, which is
currently funded annually and listed in monthly Investment Reports, but is not mentioned in the
District's financial reserves policy. The initial impact of adding the Debt Service Reserve would
include staff funding the reserve by moving any excess Operating Reserve balances to the Debt
Service Reserve to establish the reserve's minimum level. After that initial move, no further annual
funding beyond what is funded through existing rates would be necessary. The other impact of this
addition would be raising the minimum reserve threshold by the Debt Service Reserve balance of
$2.7 million.
STRATEGIC PLAN:
FR 2 -A: Review the Reserve Policy and Funding Levels Annually
ATTACHMENTS:
Name
Description:
Financial Reserves Policy FY 13.14 4.18.13.docx Draft Reserve Policy
Financial Reserves Policy FY 13.14 red
Draft Reserve Policy -Red Line
line 4.18.13.pdf
Type:
Backup Material
Backup Material
RESERVE POLICY
A. GENERAL POLICY:
Maintaining adequate reserves is an essential part of sound financial management. The Yorba
Linda Water District Board of Directors realizes the importance of reserves in providing reliable
service to its customers, financing of long -term capital projects and funding availability for
emergencies should the need arise. Interest derived from reserve balances shall be credited to the
reserve account from which it was earned.
B. CATEGORIES:
YLWD shall accumulate, maintain and segregate its reserve funds into the following categories:
Restricted and Designated Reserves
1. Board Designated Reserves; and
2. Contractually Restricted Reserves.
C. SCOPE:
This policy will assist the Board of Directors in establishing:
1. Target levels for reserve funds;
2. Requirements for the use of reserve funds; and
3. Periodic review requirements for each reserve.
D. PERIODIC REVIEW:
Staff and the YLWD Board shall review the reserve balances and targets annually as a part of the
annual budget process. The Finance - Accounting Committee will continue to review all reserve
and investment balances monthly, with a quarterly report going to the full Board.
E. RESTRICTED AND DESIGNATED RESERVES:
1. Board Designated Reserves:
These are reserve funds earmarked for the purpose of funding such items as new capital
facilities, repair or replacement of existing facilities and general operating reserves designated
for a specific purpose and use by the Board of Directors.
1.0 Operating Reserve
A. Definition and Purpose — Established to cover temporary cash flow deficiencies that
occur as a result of timing differences between the receipt of operating revenue and
expenditure requirements and unexpected expenditures occurring as a result of doing
business.
April 18, 2013 Page 1 of 4
B. Target Level — The Government Finance Officers Association (GFOA) recommends
that funding should be no less than one to two months (or 8% - 17 %) of the District's
annual operating budget. The District's current target will be a minimum of 8% and a
maximum of 17% of the annual operating budget for both the water and sewer funds.
C. Events or Conditions Prompting the Use of the Operating Reserve — This reserve may
be utilized as needed to pay outstanding operating expenditures prior to the receipt of
anticipated operating revenues.
1.1 Emergency Reserve
A. Definition and Purpose — Established to provide protection recovery to the District
and its customers for losses arising from an unplanned event or circumstance. The
reserve level combined with YLWD's existing insurance policies should adequately
protect YLWD and its customers in the event of a loss.
B. Target Level —Established at a minimum level equal to $1,000,000 for the water fund
and shall accumulate interest and annual contributions as determined by the District's
annual operation to a maximum level of $4,000,000. The target for sewer will be a
minimum of $250,000 and a maximum of $1,000,000.
C. Events or Conditions Prompting the Use of the Emergency Reserve — This reserve
shall be utilized to cover unexpected losses experienced by the District as a result of a
disaster or other unexpected loss. Any reimbursement received by the District from
insurance companies as a result of a submitted claim shall be deposited back into the
reserve as replenishment for the loss.
1.2 Capital Replacement Reserve
A. Definition and Purpose — Established to provide capital repair and replacement
funding as the District's infrastructure deteriorates over its expected useful life.
B. Target Level —The Board - approved 2010 Asset Management Plan recommended that
the annual contribution to this reserve be at a minimum level of $1,820,000 for the
water fund and $345,000 for the sewer fund, less money set aside for the Maintenance
Reserve. Funding with available funds based on the District's operations shall be
allocated quarterly.
C. Events or Conditions Prompting the Use of the Capital Replacement Reserve —
Through the annual budget process, staff shall recommend anticipated asset
replacement projects. The Board of Directors shall take action to approve
recommended project appropriations from the capital replacement reserve. Should
unplanned replacement be necessary during any fiscal year, the Board of Directors
may take action to amend the budget and appropriate needed funds as required.
1.3 Maintenance Reserve
A. Definition and Purpose — Established to provide funding for non - scheduled capital
asset repair and replacement.
April 18, 2013 Page 2 of 4
B. Target Level — $200,000 subject to an annual review.
C. Events or Conditions Prompting the Use of the Maintenance Replacement Reserve —
Unplanned failure of assets including but not limited to pumps, motors and major
facility repairs.
1.4 Debt Service Reserve
A. Definition and Purpose — Established to provide funding for semi - annually scheduled
debt service payments.
B. Target Level — The District's highest annual debt service payment — currently
$2,723,509.
C. Events or Conditions Prompting the Use of the Debt Service Reserve — Semi - annual
debt service payments will be made out of this fund, with funding on the water rate
replenishing the fund annually.
1.5 Employee Liabilities Reserve
A. Definition and Purpose — The purpose is to cover employees' accrued vacation and
other compensatory time and to ensure the complete funding associated with the
liability incurred for employees whom have met the requirements necessary for
district paid health benefits at retirement.
B. Target Level — The annual contribution will be $100,000 ($93,000 for water and
$7,000 for sewer) to be evaluated and /or adjusted annually thereafter based on an
analysis of current employees' vacation and sick time accrued and actuarial
determinations of future retiree costs. As of November 2, 2011, an actuary
determined that the District's Other Post Employment Benefit (OPEB) liability was
$1,433,197. When combined with a liability on the District's books for vacation,
compensatory and sick time of $1,063,572 at June 30, 2012, the target is projected to
be approximately $2,500,000 for the combined water and sewer enterprises.
C. Events or Conditions Prompting the Use of the Employee Liabilities Reserve — This
reserve may be used in the event that operating funds are not adequate to meet
vacation, compensatory and sick time paid out or retiree medical cost obligations
within the current year.
2. Contractually Restricted Reserves:
These are funds held to satisfy limitations set by external requirements established by creditors,
grant agencies or law. Examples include stipulated bond covenants and reserves held with a
fiscal agent.
2.0 US Bank 2008 COP Reserve
A. Definition and Purpose — Established to cover reserve requirements held with a
designated fiscal agent (US Bank) for the 2008 Certificates of Participation.
April 18, 2013 Page 3 of 4
B. Target Level — Funding shall be held in an amount equal to $2,147,096.
C. Events or Conditions Prompting the Use of the Contractually Restricted Reserve —
This reserve may be utilized as needed by the fiscal agent to pay any outstanding debt
service payments not covered by the District within the specified billing and due
dates.
End of Policy Document
April 18, 2013 Page 4 of 4
RESERVE POLICY
A. GENERAL POLICY:
Maintaining adequate reserves is an essential part of sound financial management. The Yorba
Linda Water District Board of Directors realizes the importance of reserves in providing reliable
service to its customers, financing of long -term capital projects and funding availability for
emergencies should the need arise. Interest derived from reserve balances shall be credited to the
reserve account from which it was earned.
B. CATEGORIES:
YLWD shall accumulate, maintain and segregate its reserve funds into the following categories:
Restricted and Designated Reserves
1. Board Designated Reserves; and
2. Contractually Restricted Reserves.
C. SCOPE:
This policy will assist the Board of Directors in establishing:
1. Target levels for reserve funds;
2. Requirements for the use of reserve funds; and
3. Periodic review requirements for each reserve.
D. PERIODIC REVIEW:
Staff and the YLWD Board shall review the reserve balances and targets annually as a part of the
annual budget process. The Finance - Accounting Committee will continue to review all reserve
and investment balances monthly, with a quarterly report going to the full Board.
E. RESTRICTED AND DESIGNATED RESERVES:
1. Board Designated Reserves:
These are reserve funds earmarked for the purpose of funding such items as new capital
facilities, repair or replacement of existing facilities and general operating reserves designated
for a specific purpose and use by the Board of Directors.
1.0 Operating Reserve
A. Definition and Purpose — Established to cover temporary cash flow deficiencies that
occur as a result of timing differences between the receipt of operating revenue and
expenditure requirements and unexpected expenditures occurring as a result of doing
business.
itine 14, 201 - April 18, 2013 Page 1 of 3�4
B. Target Level — The Government Finance Officers Association (GFOA) recommends
that funding should be no less than one to two months (or 8% - 17 %) of the District's
annual operating budget. The District's current target will be a minimum of 8% and a
maximum of 17% of the annual operating budget for both the water and sewer funds.
C. Events or Conditions Prompting the Use of the Operating Reserve — This reserve may
be utilized as needed to pay outstanding operating expenditures prior to the receipt of
anticipated operating revenues.
1.1 Emergency Reserve
A. Definition and Purpose — Established to provide protection recovery to the District
and its customers for losses arising from an unplanned event or circumstance. The
reserve level combined with YLWD's existing insurance policies should adequately
protect YLWD and its customers in the event of a loss.
B. Target Level —Established at a minimum level equal to $1,000,000 for the water fund
and shall accumulate interest and annual contributions as determined by the District's
annual operation to a maximum level of $4,000,000. The target for sewer will be a
minimum of $250,000 and a maximum of $1,000,000.
C. Events or Conditions Prompting the Use of the Emergency Reserve — This reserve
shall be utilized to cover unexpected losses experienced by the District as a result of a
disaster or other unexpected loss. Any reimbursement received by the District from
insurance companies as a result of a submitted claim shall be deposited back into the
reserve as replenishment for the loss.
1.2 Capital Replacement Reserve
A. Definition and Purpose — Established to provide capital repair and replacement
funding as the District's infrastructure deteriorates over its expected useful life.
B. Target Level —The Board - approved 2010 Asset Management Plan recommended that
the annual contribution to this reserve be at a minimum level of $1,820,000 for the
water fund and $345,000 for the sewer fund, less money set aside for the Maintenance
Reserve. Funding with available funds based on the District's operations shall be
allocated quarterly.
C. Events or Conditions Prompting the Use of the Capital Replacement Reserve —
Through the annual budget process, staff shall recommend anticipated asset
replacement projects. The Board of Directors shall take action to approve
recommended project appropriations from the capital replacement reserve. Should
unplanned replacement be necessary during any fiscal year, the Board of Directors
may take action to amend the budget and appropriate needed funds as required.
1.3 Maintenance Reserve
A. Definition and Purpose — Established to provide funding for non - scheduled capital
asset repair and replacement.
itine 14, 201 - April 18, 2013 Page 2 of _'�-4
B. Target Level — $200,000 subject to an annual review.
C. Events or Conditions Prompting the Use of the Maintenance Replacement Reserve —
Unplanned failure of assets including but not limited to pumps, motors and major
facility repairs.
1.4 Debt Service Reserve
A. Definition and Purpose — Established to provide funding for semi - annually scheduled
debt service payments.
B. Target Level — The District's highest annual debt service payment — currently
$2,723,509.
C. Events or Conditions Prompting the Use of the Debt Service Reserve — Semi - annual
debt service payments will be made out of this fund, with funding on the water rate
replenishing the fund annually_
1.5 Employee Liabilities Reserve
A. Definition and Purpose — The purpose is to cover employees' accrued vacation and
other compensatory time and to ensure the complete funding associated with the
liability incurred for employees whom have met the requirements necessary for
district paid health benefits at retirement.
B. Target Level — The annual contribution will be $100,000 ($93,000 for water and
$7,000 for sewer) to be evaluated and /or adjusted annually thereafter based on an
analysis of current employees' vacation and sick time accrued and actuarial
determinations of future retiree costs. The afnatiat of aet ar-ily detefmi ea
eent -ibttt e ffs �As of November 2, 2011, an actuary determined that the District's
Other Post Employment Benefit (OPEB) eests that the Dist iet has undeFfunded and
liability was
$1,433,197. When combined with a liability on the District's books for
vacation, compensatory and sick time of $1,09 9363,572 at June 30, 2011-2012, the
target is projected to be approximately $1,1Q2,500,000 for the combined water
and sewer enterprises.
C. Events or Conditions Prompting the Use of the Employee Liabilities Reserve — This
reserve may be used in the event that operating funds are not adequate to meet
vacation, compensatory and sick time paid out or retiree medical cost obligations
within the current year.
2. Contractually Restricted Reserves:
These are funds held to satisfy limitations set by external requirements established by creditors,
grant agencies or law. Examples include stipulated bond covenants and reserves held with a
fiscal agent.
itine 14, 201 - April 18, 2013 Page 3 of 34
2.0 US Bank 2008 COP Reserve
A. Definition and Purpose — Established to cover reserve requirements held with a
designated fiscal agent (US Bank) for the 2008 Certificates of Participation.
B. Target Level — Funding shall be held in an amount equal to $2,147,096.
C. Events or Conditions Prompting the Use of the Contractually Restricted Reserve —
This reserve may be utilized as needed by the fiscal agent to pay any outstanding debt
service payments not covered by the District within the specified billing and due
dates.
End of Policy Document
itine 14, 201 - April 18, 2013 Page 4 of �4
AGENDA REPORT
Meeting Date:
April 22, 2013
To:
Finance - Accounting Committee
From:
Steve Conklin, Acting General
Manager
Presented By:
Stephen Parker, Finance
Manager
Prepared By:
Stephen Parker, Finance
Manager
Subject:
Broker Dealer Approval
DISCUSSION:
Dept:
ITEM NO. 5.3
Finance
Staff has completed the process of vetting Peter Becker, Institutional Investments at Time Value
Investments, Inc. as a broker /dealer. Resolution No. 11 -24 adopted the current investment policy.
Section 9 states:
Before a broker /dealer is used, they are subject to investigation and approval by the General
Manager or the designated representative and must submit the following:
• Certification of having read and understood this investment policy resolution and agreeing to
comply with the District's investment policy;
• Proof of National Association of Security Dealers certification and state registration;
• Compliance with federal capital adequacy regulations and provide documentation of financial
solvency;
• Provide audited financial statements within 120 days of fiscal year end;
• Provide similar services to other public- sector clients.
Mr. Becker currently provides broker /dealer services in southern California for the City of Del Mar,
City of Lawndale and the City of Temple City, among others.
Staff has submitted a revised investment policy in this month's Committee meeting. Once the
investment policy is approved by the Board, staff will begin to use the four vetted broker /dealers for
individual investments, which will help to diversify the District's portfolio.