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HomeMy WebLinkAbout2010-03-11 - Resolution No. 10-03 ' RESOLUTION 10-03 RESOLUTION OF THE BOARD OF DIRECTORS OF THE YORBA LINDA WATER DISTRICT SETTING FORTH PUBLIC FUNDS INVESTMENT POLICY AND RESCINDING RESOLUTION NO. 09-01 WHEREAS, California Government Code (CGC) Section 53600, et seq. sets forth guidelines for the investment of public funds and WHEREAS, the current District's Investment Policy was adopted by Resolution No. 09- 01 on January 22, 2009; 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: ' a) The authority of the Board of Directors to invest funds is derived from Section 53607 of the CGC The responsibility to invest, reinvest, sell or exchange securities is hereby delegated to the General Manager or Finance Director for a period of one year The Resolution No 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09-01 1 Board of Directors may renew the delegation of authority pursuant to state law each year. b) The standard of prudence to be used by the designated representative shall be the "prudent investor" standard and shall be applied in the contest 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 General Manager 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. Section 5: The District may invest funds that are available for direct investment in the following categories: ' a) Banks or Savings and Loans Resolution No. 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09-01 2 ' 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) The State Local Agency Investment Fund (LAIF). The amounts deposited in this category are limited to $10 million plus bond proceeds. No limit will be placed on the percentage total in this category. C) Orange County Treasurer's Commingled Investment Pool - Government Code Section 53684 The amounts deposited in this category are limited to $10 million plus bond proceeds. No limit will be placed on the percentage total in this category d) 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 e) 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 ' f) Obligations Issued by Federal Agencies and U S. Government Sponsored Enterprises - Government Code Section 53601 (f) Resolution No. 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09-01 3 ' 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 Land Bank 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. g) 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 domestic and 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. ' h) Banker's Acceptance - Government Code Section 53601(g) 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. i) 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 Resolution No. 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09.01 4 ' 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. j) Investment Trust of California (the CalTRUST JPA pool) - Government Code Section 53601(p) The amounts deposited in this category are limited to $10 million plus bond proceeds. No limit will be placed on the percentage total in this category k) Money Market Funds Shares of a qualified money market fund, as defined in CGC section 53601, must meet the criteria described therein. 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. Resolution No. 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09-01 5 ' 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 broker/dealer shall be registered in the name of Yorba Linda Water District. No deposit of cash and/or securities shall be made by the broker/dealer except in a qualified public depository as established by state law and Section 3(1) of this resolution. 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: 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; 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 LAIF 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. c) A "more complex OTC" derivative product is defined by the U S t General Accounting Office to have at least one of the following characteristics: Resolution No. 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09-01 6 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; Section 11: The General Manager or his designated representative shall submit a monthly investment portfolio report through the Finance-Accounting Committee to the Board of Directors. Additionally, the General Manager or his 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 Resolution No. 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09-01 7 ' 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 (i) local government investment pools, and (ii) money market mutual funds, since the purchased securities are not deliverable. 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 No. 09-01 is hereby rescinded immediately upon adoption of this Resolution. PASSED AND ADOPTED this 11th day of March, 2010 by the following called vote: AYES- Directors Beverage, Collett, Hawkins, Mills and Summerfield NOES: None ABSTAIN: None ABSENT None William R. Mills, Presi nt Yorba Linda Water District Resolution No. 10-03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No. 09-01 8 ' ATTEST Ken Vecchiarelli, Secretary Yorba Linda Water District Reviewed as to form by General Counsel: A` h r . Kidman, Esq. McCormick, Kidman & Behrens Resolution No. 10.03 Setting Forth Public Funds Investment Policy and Rescinding Resolution No 09-01 9