HomeMy WebLinkAbout2003-07-10 - Resolution No. 03-06RESOLUTION 03-06
RESOLUTION OF THE BOARD OF DIRECTORS
OF "THE YORBA LINDA WATER DISTRICT
SETTING FORTH PUBLIC FUNDS INVESTMENT POLICY
AND RESCINDING RESOLUTION 01-1-5
WHEREAS, the Government Code Section 53600 sets forth guidelines for the
investment of public funds 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. 01-15 on
September 13, 2001, and last reviewed in July 11, 2002: and,
WHEREAS, the District is in possession of public funds that are not required for
immediate expenditure, and are available for investment; and,
kN:IIEREAS, 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 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.
The investment portfolio shall be designed with the objective of attaining
the best yield or return on investments, taking into accounts 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 1 50 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 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
(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 (t)
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 recluirc i)hvsical 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 &
I owns.
(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, and Orange County Treasurer's Commingled Investment Pool
(OCIP) 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"
lealers or regional dealers, Each security purchased through a broker/dealer shall be
registered in the name of Yorba Linda %Nlater 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.
l I 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.
C. The Contract can entail potentially unlimited risk.
Section 11: The General Manager or his designated representative shall furnish the Board
of Directors with an Investment Portfolio Report each month. Additionally, the General
Manager or his designated representative shall submit a comprehensive report for Board
approval each quarter. This report shall include, but no be 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 01-15 and all-conflicting Minute Orders are hereby
rescinded immediately upon adoption of this Resolution.
PASSED AND ADOPTED this 10th day of July, 2003 by the following called vote:
Ayes: Paul R. Armstrong, Michael J. Beverage, Arthur C. Korn
Noes: None
Absent: John W. Summerfield, William R. Mills
Abstain: None
Paul R. Armstrong, Presiding 0 r
Yorba Linda Water District J
Wil iam J. ertson, Secretary
Yorba Linda Water District