HomeMy WebLinkAbout1990-044-04/17/1990-ADOPTING CASH MANAGEMENT INVESTMENT POLICY RESOLUTION 90-44
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ADOPTING A CASH MANAGEMENT AND INVESTMENT POLICY
WHEREAS, Article V, Section 11 of the Charter of the City of Fort
Collins requires the cash balance of the City shall be deposited or
invested in accordance with the ordinances of the City; and
WHEREAS, it is in the best interests of the City for the Financial
Officer to engage in a prudent investment practice designed to protect
investment principal and maximize the return on the City's investments.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT
COLLINS as follows:
Section 1 . That the investment program previously adopted as
Resolution 82-70 be, and the same is hereby discontinued.
Section 2. That the Financial Officer of the City of Fort Collins or
his duly authorized representative be, and hereby is, authorized and
empowered to invest and administer the funds of the City of Fort Collins in
accordance with the Cash Management and Investment Policy of the City of
Fort Collins, attached hereto as Exhibit A and made a part hereof.
Section 3. That in order to accomplish the investments authorized
herein, the Financial Officer be, and hereby is, fully authorized and
empowered to transfer, convert, endorse, sell , assign, set over and deliver
any and all shares of stock, bonds, debentures, notes, certificates,
warrants, evidences of indebtedness or other securities now or hereafter
held in the name or owned by the City of Fort Collins or its pension funds
and to make, execute, and deliver under the seal of the City or otherwise
any and all written instruments of assignments or transfer.
Passed and adopted at a regular meeting of the Council of the City of
Fort Collins this 17th day of April , A.D. 1990.
ayor
ATTEST:
"Yc t�"-
City Clerk 6
Exhibit A
CITY OF FORT COLLINS, COLORADO
CASH MANAGEMENT AND INVESTMENT POLICY
April 17, 1990
The Financial Officer of the City of Fort Collins, Colorado is charged with
the responsibility to invest funds of the City. Currently, these funds
must be placed in investments appropriately authorized by the City of Fort
Collins Ordinance No. 108, 1988. The following Investment Policy
prescribes the manner in which the program authorized by that ordinance
will be administered to ensure effective and sound fiscal management.
I . SCOPE
This policy shall apply to the investment of all general and special
funds of the City of Fort Collins (hereinafter referred to as the "the
City") over which it exercises financial control , including the City
of Fort Collins Firefighters Pension and General Employees Retirement
funds.
II . OBJECTIVES
The City's principal cash management and investment objectives are:
A. Preservation of capital through the protection of investment
principal .
B. To maximize the cash available for investment.
C. Maintenance of sufficient liquidity to meet the City's cash needs.
D. Diversification of investments to avoid incurring unreasonable
risk regarding a specific security, maturity period , or
institution.
E. To maximize the rate of return for prevailing market conditions
for eligible securities.
F. Conformance with all Federal , State and other legal requirements.
Administrative Note:
This Cash Management and Investment Policy supersedes the policy adopted by
Resolution 82-70 of the Council of the City of Fort Collins, "Approving a
Cash Management and Investment Program and Authorizing the Director of
Finance to Administer the Program" .
1
III . DELEGATION OF AUTHORITY
Responsibility for the collection and investment of all City funds is
assigned to the Financial Officer by the Charter, subject to direction
of Council by resolution. The Financial Officer may appoint other
members of the Finance Department to assist in the cash management and
investment functions.
The City Manager shall appoint an investment committee, consisting of
the Financial Officer and at least two (2) other employees of the City
knowledgeable in the area of governmental investments. The purpose of
the investment committee shall be to provide advice to the Financial
Officer regarding the operation of the cash management and investment
program. The investment committee shall review and discuss the
economic outlook for the ensuing investment period , the
diversification and maturity structure of the portfolio, potential
risks to the investment of City funds, and the conformance of the cash
management and investment program to the adopted policies. The
investment committee shall also review the actual rate of return on
the portfolio as compared to the target rate of return.
The Financial Officer shall have the discretion to appoint one or more
Investment Advisors, registered with the Securities and Exchange
Commission under the Investment Advisors Act of 1940, to assist in the
management of a portion of the City's assets. Such appointment shall
be determined using the City's authorized purchasing procedures for
selecting professional services. All investments made through such
Investment Advisors shall be within the guidelines of this Investment
Policy with regard to the City's assets.
A list of individuals and institutions who are authorized to purchase,
sell and wire securities or funds on behalf of the City shall be
maintained by the Financial Officer. Such list shall be provided to a
financial institution prior to the City conducting any investment
transactions with said institution.
The Financial Officer shall be responsible for all investment
decisions and activities, and shall establish written administrative
procedures for the operation of the City's investment program
consistent with the Investment Policy. The Financial Officer and
designees acting within the guidelines of this investment policy shall
not be held personally liable for specific investment transactions.
IV. FINANCIAL OFFICER'S PROGRAM RESPONSIBILITIES
A. Safekeeping
1. Wireable investment securities purchased by the City will be
delivered by book entry and held in third party safekeeping by
a Federal Reserve member financial institution designated as
the City's depository.
2
2. The purchase of wireable securities shall be on a
delivery-versus-payment basis. Sale of wireable securities
shall be on a payment-versus-delivery basis.
3. Nonwireable securities may be:
a. Held in safekeeping with a firm recognized as a Primary
Dealer by the Federal Reserve Board of New York with the
following provisions:
(1) The dollar value of securities held by any firm shall
not exceed the firm's insurance limits for the City's
account.
(2) Firms must supply the City with documentation
supporting their insurance limits as well as the name
of their insurers. Such documentation shall be
maintained by the Financial Officer. (3) City staff
shall monitor and update the insurance data required
by this section on a quarterly basis.
b. Physically delivered and held in third party safekeeping
by a Federal Reserve member financial institution approved
by the City.
B. Reporting
On a quarterly basis, a report shall be prepared listing all of
the investments held by the City, transaction summaries and
performance results. The quarterly investment report shall be
submitted in a timely manner to the City Manager. A summary
investment report shall be published in a newspaper of local
publication, or other suitable publication of general local
circulation on an annual basis.
C. Performance Review
1 . The Financial Officer and designated investment staff shall
meet at least quarterly to review the portfolio's adherence to
appropriate risk levels and to compare the portfolio's total
return to the established investment objectives and goals.
2. Cash and investment performance standards, to be determined
quarterly, shall include:
a. Optimal daily cash balance to be maintained in both the
demand account and savings account.
b. The yield as a measure of net return to be achieved on
investments.
c. The percentage of cash balances to be invested daily.
3
3. The Financial Officer shall periodically establish a benchmark
yield for the City's investments which shall be equal to the
average yield on the U.S. Treasury security which most closely
corresponds to the portfolio's actual weighted average
maturity.
4. The Financial Officer, in order to determine the actual rate
of return to the City on any portion of the portfolio managed
by an investment advisor, shall include all of the advisor's
expenses and fees in the computation of the rate of return.
D. Investment Transactions
1 . All investment transactions initiated by the City must be
executed with brokers-dealers and financial institutions that
have been authorized by the City. Each city-initiated
transaction for publicly-traded funds must be competitively
transacted with at least two authorized broker-dealers or
financial institutions.
2. In order to insure that the City receives competitive pricing,
a record shall be maintained for all bids and offerings
initiated by the City for securities transactions.
E. The Financial Officer shall :
1 . Prepare a cash budget in order to determine cash needs time
horizons, and the availability of cash to invest.
2. Analyze market conditions of the various investment securities
on a daily basis to determine the maximum yield obtainable.
3. Prepare investment assumptions as to market conditions, cash
availability and starting mix of investment securities.
4. Prepare investment strategies or actions to be taken based
upon assumptions and actions to be taken in the event of an
unexpected drop in cash flow or unexpected revenues.
5. Whenever possible, pool cash from the various City Funds to
enhance investment capabilities, thus maximizing investment
income . Interest income will be distributed to the
participating funds in proportion to each fund's level of
contribution.
6. Prepare strategies that will maximize amount of cash available
for investment.
F. The Financial Officer shall promulgate administrative procedures
as deemed necessary.
4
V. PRUDENCE
The standard of prudence to be used for managing the City's assets is
the "prudent investor" rule, which states, "Investments shall be made
with judgment and care, under circumstances then prevailing, which
persons of prudence, discretion and intelligence exercise in the
management of their own affairs, not for speculation, but for
investment considering the probable safety of their capital as well as
the probable income to be derived. "
VI . ELIGIBLE INVESTMENTS
A. As a home rule City, Fort Collins may adopt a list of acceptable
investment instruments differing from those outlined in CRS
24-75-601 .1, "Legal Investment of Public Funds" . The City Council
has adopted Ordinance No. 108, 1988 of the Council of the City of
Fort Collins "Providing for the Investment and Deposit of Public
Funds and Moneys of the City of Fort Collins" (hereinafter
referred to as "Ordinance No. 108, 1988") .
B. The following is an outline of authorized investments with certain
additional qualifications. It is intended to define the
administrative boundaries within which these investments will be
conducted:
1 . Any securities now or hereafter designated as legal investment
for municipalities in any applicable statute of the State of
Colorado.
2. Interest-bearing accounts or time certificates of deposit at
state or federally-chartered savings and loan associations in
Colorado which have been designated as depositories for public
moneys by the State of Colorado.
3. Interest-bearing accounts or time certificates of deposit in
state or national banks doing business in Colorado which have
been designated as depositories for public moneys by the State
of Colorado.
4. Obligations of the United States Government, such as treasury
bills, treasury notes and treasury bonds.
5. Obligations issued by any agency, instrumentality or public
corporation of the United States.
6. Obligations issued by or on behalf of the City.
7. Obligations issued by or on behalf of any state of the United
States, any political subdivision, agency, instrumentality or
public corporation thereof having an investment grade rating
from Moody ' s Investors Service or Standard & Poor' s
Corporation Investment Grade means one of the top three
highest rating categories.
5
8. Prime-rated bankers acceptances shall have a maturity of six
months or less and be issued on domestic banks or branches of
foreign banks domiciled in the U.S. and operating under U.S.
banking laws.
9. Prime-rated commercial paper shall have a maturity of six
months or less and be issued on U.S. corporations which are
rated A-1 by Moody's, P-1 by Standard and Poor's or 1+ by Duff
and Phelps, Inc.
10. Guaranteed investment contracts of domestically-regulated
insurance companies having a claims-paying ability rating of
"AA" or better from Standard & Poor's Corporation and have a
rating of A+ from Best Rating Services.
11 . Repurchase and reverse repurchase agreements of any marketable
security described in Ordinance No. 108, 1988 which afford the
City a perfected security interest in such security.
Repurchase Agreements shall be collateralized at a minimum of
102 percent of the dollar value of the transaction. The
transaction shall be on a delivery-versus-payment basis to the
City's depository bank's account at the Federal Reserve Bank.
12. Local government investment pools authorized under the laws of
the State of Colorado.
13. Shares in any money market fund or account, unit investment
trust or open- or closed-end investment company, all of the
net assets of which are invested in securities described in
this section, to the extent not prohibited by Colorado
Constitution Article XI, Section 2 or by the Colorado Revised
Statutes. City investment in such funds or trusts shall be
limited to funds and trusts which meet the following
conditions:
a. Fund or trust shall have a stated maturity limit not
exceeding one year.
b. The fund or trust shall be "no-load" i .e. , no commission
fee shall be charged on purchases or sales of shares.
c. The investment advisor or administrator of the fund or
trust must be specifically prohibited from conducting
securities transactions with its sponsoring institution.
d. The net asset value per share of the fund or trust shall
be held constant at a certain amount (usually $1 .00 per
share) .
C. In addition to those investments listed in subsection B above,
pension funds may be invested as follows:
1 . Equipment trust certificates;
6
2. Real property and loans secured by first mortgages or deeds of
trust on real property; participation guarantee agreements
with domestically-regulated life insurance companies;
3. Tax certificates issued by any county treasurer of Colorado
upon any real property located within the State of Colorado;
and
4. Common or preferred stock or debt obligations, convertible or
otherwise, of private corporations organized under the laws of
any state in the United States.
VII . INVESTMENT DIVERSIFICATION
It is the intent of the City to diversify the investment instruments
within the portfolio to avoid incurring unreasonable risks inherent in
over-investing in specific instruments, individual financial
institutions or maturities. The asset allocation in the portfolio
should be flexible, depending upon the outlook for the economy and the
securities markets.
VIII . INVESTMENT MATURITY AND LIQUIDITY
Eighty percent of the City's investments, excluding pension funds,
shall be limited to maturities not exceeding five years. In addition,
the weighted average maturity life of the total portfolio, excluding
pension funds, at no time shall exceed two years. The City shall at
all times maintain ten percent of its total investment portfolio in
instruments maturing in 120 days or less.
IX. INVESTMENT AGREEMENT
Before any repurchase agreements shall be executed with an authorized
broker-dealer or financial institution, a Master Repurchase Agreement,
approved as to form and content by the City Attorney, must be signed
between the City and that broker-dealer or financial institution. The
Financial Officer shall maintain a file of all Master Repurchase
Agreements. The purchase and sale of all deliverable securities shall
be on a delivery-versus-payment basis or in case of a sale, on a
payment-versus-delivery basis.
X. SALE OF INVESTMENT AT A LOSS
The City seeks an active, rather than passive, management of its
portfolio assets. Assets may be sold at a loss only if the Financial
Officer or designee decides, based upon sufficient analysis, that the
sale of the security is in the best long-term interest of the City.
Sufficient analysis shall be provided to support each investment
decision in which a loss is realized. This documentation shall be
kept at least two (2) years from the date of sale.
7
XI. SELECTION OF BANKS AND SAVINGS AND LOANS
A. As outlined in Section 2 of Ordinance No. 108, 1988: "The City
may deposit public funds and moneys in any bank or savings and
loan association located in the State of Colorado as now or
hereafter provided in any applicable statute of the State of
Colorado or in a bank or savings and loan association located
outside the State of Colorado, provided that such deposit is
insured by the Federal Deposit Insurance Corporation or
collateralized as provided under the laws governing deposit of
public funds of the state in which such institution is located. "
B. In addition, the City shall maintain a list of authorized banks
and savings and loans which meet the following criteria and are
eligible to provide banking services to the City. To be eligible
for authorization, a bank or savings and loan must meet the
minimum credit criteria (described below) of a credit analysis
provided by a commercially available bank rating service. Banks
or savings and loans failing to meet the minimum criteria, or in
the judgment of the Financial Officer no longer offering adequate
safety to the City, will be removed from the list. Although a
bank or savings and loan is on the qualified list, it will still
be required to pledge collateral on all deposits and investments,
pursuant to State law.
C. The City shall utilize a commercially available bank rating
service to perform a credit analysis on banks and savings and
loans. The bank rating guidelines will be calculated using
publicly available financial information obtained from the release
of the preliminary reports of condition and reports on income from
the Federal Reserve. Data obtained from the bank rating service
will include factors covering the following: overall rating,
liquidity policy, credit risk policy, interest rate policy,
profitability and capital policy.
D. The following are the minimum credit criteria for a bank or
savings and loan:
1 . The overall credit rating must be average or above according
to nationally-recognized rating firms.
2. The credit risk and capital policy rating must be average or
above, or its equivalent, regardless of the overall credit
rating, and
3. The institution must qualify as a depository of public funds
in Colorado as defined in CRS 24-75-603.
E. The Financial Officer shall maintain a file of all credit rating
analysis reports performed for the City.
8
XII . ETHICS AND CONFLICTS OF INTEREST
City officers and employees involved in the investment process shall
adhere to the rules of conduct concerning conflicts of interest as
stated in Art. IV, Section 9(b) of the Charter of the City Of Fort
Collins, Colorado.
XIII . POLICY REVISIONS
This Investment Policy will be reviewed periodically by the City
Manager and the Financial Officer and may be amended by City Council
as conditions warrant.
Prepared by: '��'^'�' Date:
Alan James Krcmarik
Financial Officer
Effective Date:
9