HomeMy WebLinkAbout2001-09-13 - Resolution No. 01-151
RESOLUTION 01-15
RESOLUTION OF THE BOARD OF DIRECTORS
OF THE YORBA LINDA WATER DISTRICT
SETTING FORTH PUBLIC FUNDS INVESTMENT POLICY
AND RESCINDING RESOLUTION 99-09
WHEREAS, the Government Code Section 53600 sets forth guidelines for the investment of public
fiends and requires that the Board of Directors review the District's Investment Policy
annually; and,
WHEREAS, the District's Investment Policy was adopted by Resolution No. 96-04 on April 25,
1996, and last reviewed in September 1998: and,
WHEREAS, the District is in possession of public finds that are not required for immediate
expenditure, and are available for investment; and,
WHEREAS, a policy setting forth guidelines for the investment of said finds 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 the 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:
(1) Those funds that are allocated for immediate expenditure on District operations as
authorized by the Board of Directors at their bimonthly meetings;
(2) Those funds that are allocated for use in an intermediate time frame, such as budgeted
purchases that have not been delivered;
(3) 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:
(1) The Board of Directors delegates the authority for investing District Funds to the
General Manager, who may in turn delegate this authority to a designated
representative. The designated representative shall act in accordance with established
written procedures and internal controls for the operation of the investment of the
investment program consistent with this investment policy.
(2) The standard of prudence to be used by the designated representative shall be the
"prudent person" standard and shall be applied in the context of managing the overall
portfolio. The meaning of the standard of prudence means investments shall be made
with judgement 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.
(3) Officers and employees involved in the investment process shall refrain from personal
business activity that could conflict with the proper execution and management of the
investment program, or that could impair their ability to make impartial decisions.
Section 3: The General Manager or his 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.
Section 4: Priorities regarding the investment of District held public funds are:
(1) The safety of the 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.
(2) 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.
(3) The investment portfolio shall be designed with the objective of attaining the best
yield or return 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:
(1) Banks or Savings and Loans
Cash will be deposited only in Federal Deposit Insurance Corporation or FSLIC
insured 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.
(2) 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.
(3) Orange County Treasurer's Commingled Investment Pool
The maximum amount deposited in this category is limited to $5 million. No limit
will be placed on the percentage total in this category.
(4) California Arbitrage 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.
(5) Treasury Bills, Notes and Bonds - Government Code Section 53601 (a-c)
The District will require physical delivery of these securities to an acceptable
safekeeping account in the District 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.
(6) Obligations Issued by Government Agencies - Government - Government Code
Section 53601 (e)
The District will require physical delivery of these securities to an acceptable
safekeeping account in the District 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% of the portfolio in the aggregate.
(7) Medium-Term Notes - Government Code Section 53601 (j)
The District will require physical delivery of these securities to an acceptable
safekeeping account in the District name and must be properly insured. The
corporation must be domestic and the notes must be issued in the United States. The
corporation must be rated AA or better by a nationally recognized rating service. The
maximum maturity is limited to five years and the maximum percentage allowable for
investment is 10% of the portfolio in the aggregate.
(8) Banker's Acceptances - Government Code Section 53601 (f)
The District will require physical delivery of these securities to an acceptable
safekeeping account in the District name and must be properly insured. The maximum
term may not exceed 180 days and the maximum percentage allowable for investment
is 10% of the portfolio in the aggregate.
(9) Commercial Paper - 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
corporation must be domestic and the notes must be issued in the United States. The
Corporation must also have total assets in excess of five hundred million dollars
($500,000,000). The corporation must be rated AA or better by a nationally
recognized rating service. The maximum maturity is limited to 270 days and the
maximum percentage allowable for investment is five percent of the portfolio in the
aggregate.
Section 6: All investments of sums of less than $100,000 does not require approval of the Board of
Directors or need to be collateralized. Provided, however that such investments must be made in
saving institutions covered by federal deposit insurance.
Section 7: Investments 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: and
(1) Collateral requirements as set forth in Section 5, (1) herein.
(2) Institution established as a business in California for a minimum of three years.
(3) Must show a profit for the most recent two consecutive years.
(4) A capital ratio of. six percent for Banks; and five percent for Savings & Loans.
(5) No more than three percent foreclosures.
(6) AIDC Financial rating of "excellent" or "superior".
Section 8: All investments greater than $1,000,000 in one institution, with the exception of LAIF,
requires 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 by 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:
(1) Certification of having read and understood this Investment Policy Resolution and
agreeing to comply with the District's investment policy.
(2) Proof of National Association of Security Dealers certification and state registration.
(3) Compliance with Federal capital adequacy regulations and provide documentation of
financial solvency.
(4) Provide Audited financial statements with in 120 days of fiscal year end.
(5) Provide similar services to other public-sector clients.
Section 10: Policy on Repurchase and Reverse Repurchase Agreements, and Derivative Products.
(1) The District staff is not authorized to initiate investments in Repurchase or Reverse
Repurchase Agreements or "Plain Vanilla OTC" and/or "More Complex OTC
"Derivative Products, as defined below, provided, however, that the staff is authorized
to deposit in the LAIF so long as 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.
(2) A "Plain Vanilla OTC" Derivative Products 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.
(3) A "More Complex OTC" Derivative Products is defined by the U. S. General
Accounting Office to have at least one of the following characteristics:
a. Their prices tend to be difficult to obtain because they are often available from
only a few dealers.
b. The payments required by the derivative contract are calculated on the basis of
more than one interest rate, currency, asset, or other factor.
C. The derivative contract has terms that are not determined until some future date.
d. The Contract involves a term that acts as a multiplier or increases the leverage of
the rate(s) used to compute payments.
e. The Contract can entail potentially unlimited risk.
Section 11:
Quarterly the General Manager or his designated representative shall furnish the Board
of Directors with and Investment Portfolio Report including, but not limited to:
(1)
A list of the previous month's investments;
(2)
Institutions where investments were placed;
(3)
Dates of transactions;
(4)
Dates of maturity;
(5)
Interest rates on said investments;
(6)
Investment categories percent of total portfolio.
Section 12: That Resolution 99-09 and all-conflicting Minute Orders are hereby rescinded
immediately upon adoption of this Resolution.
0
PASSED AND ADOPTED this 13th day of September, 2001 by the following called vote:
1
Ayes:
Armstrong, Beverage, Korn, Summerfield
Noes:
None
Absent:
Abramowitz
Abstain:
None
President, Paul R. Armstrong
Yorba Linda Water District