Bellflower City Council
January 12, 2023

14-G

TO: Honorable Mayor and Members of the City Council

ATTENTION: Jeffrey L. Stewart, City Manager

FROM: Tae Rhee, Director of Finance/City Treasurer

SUBJECT: Consideration and possible action to adopt Resolution No. 23-01 – A Resolution adopting the Investment Policy.

DATE: January 12, 2023

EXECUTIVE SUMMARY

Senate Bill No. 1489, signed into law by the Governor on September 18, 2022, amended certain provisions that affect local governments’ investment policies and procedures. Of significance to the City of Bellflower’s Investment Policy is the extension of the submission deadline for the monthly Treasurer’s Reports to the City Council and City Manager from 30 days to 45 days following the end of the reporting month. Staff proposes to incorporate this change to the report deadline into the City’s Investment Policy.

RECOMMENDATION TO CITY COUNCIL

1) Adopt Resolution No. 23-01; or

2) Alternatively, discuss and take other action related to this item.

FISCAL IMPACT

None.

ATTACHMENTS

Resolution No. 23-01 ..................................................................................................... 2 Exhibit A - Investment Policy .......................................................................................... 4 - 1 -

CITY OF BELLFLOWER

RESOLUTION NO. 23-01

A RESOLUTION ADOPTING THE INVESTMENT POLICY

THE CITY COUNCIL DOES RESOLVE AS FOLLOWS:

SECTION 1: The City Council finds and declares as follows:

A. Government Code § 53646 allows the City Treasurer, or City Treasurer's designee, to provide the City Council an investment policy for consideration;

B. Government Code § 53607 allows the City Council to delegate investment authority to the City Treasurer, who may then designate persons to implement such authority, on an annual basis; and

C. The City Treasurer proposed that the City Council consider the Investment Policy attached as Exhibit A.

SECTION 2: After due consideration, the City Council finds that the Investment Policy conforms with applicable laws and adopts it for use on behalf of the City of Bellflower. The City Council also delegates the investment authority to the City Treasurer who is authorized to implement the Investment Policy on the City's behalf.

SECTION 3: This Resolution does not affect any penalty, forfeiture, or liability incurred before, or preclude prosecution and imposition of penalties for any violation occurring before, this Resolution’s effective date. Any such amended part will remain in full force and effect for sustaining action or prosecuting violations occurring before the effective date of this Resolution.

SECTION 4: If any part of this Resolution or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or applications and, to this end, the provisions of this Resolution are severable.

SECTION 5: The Mayor, or presiding officer, is authorized to affix a signature to this Resolution signifying its adoption by the City Council of the City of Bellflower and the City Clerk, or her duly appointed deputy, is directed to attest thereto.

SECTION 6: This Resolution will become effective immediately upon adoption.

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City of Bellflower
Resolution No. 23-01

PASSED, APPROVED, AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF BELLFLOWER ON THIS 12TH DAY OF JANUARY 2023.

________________________________
Sonny R. Santa Ines, Mayor

ATTEST:

________________________________
Mayra Ochiqui, City Clerk

APPROVED AS TO FORM:

________________________________
Karl H. Berger, City Attorney

ATTACHMENT:

Exhibit A - Investment Policy

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CITY OF BELLFLOWER

INVESTMENT POLICY
(Refer Resolution No. 23-01)

It is the policy of the City of Bellflower to invest public funds in a manner, which will provide the maximum security with liquidity to meet the daily cash flow demands of the City while earning a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds.

This investment policy applies to all financial assets of the City. These funds are accounted for in the City's Annual Comprehensive Financial Report and include:

 General Fund  Debt Service Funds
 Special Revenue Funds  Internal Service Fund
 Capital Projects Funds  Fiduciary/Trust/Agency Funds  Enterprise Fund

Investments must 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.

 The standard of prudence to be used by investment officials must be the "prudent person" standard and be applied in the context of managing an overall portfolio.

Investment officers acting in accordance with the investment policy and exercising due diligence are 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.

The primary objectives, in priority order, of the City's investment activities are:

1. Safety: Safety of principal is the foremost objective of the investment program.

Investments of the City must be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.

2. Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements, which might be reasonably anticipated.

3. Return on Investments: The City's investment portfolio must be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with the City's investment risk constraints and the cash flow characteristics of the portfolio.

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City of Bellflower
Resolution No. 23-01 - Investment Policy

Management responsibility for the investment program is hereby delegated to the Treasurer, who must invest under the terms of this policy. The Treasurer is responsible for all transactions undertaken and must establish and maintain an adequate system of controls to regulate the investment activities. Under the authority granted by the City Council, no person may engage in an investment transaction covered by the terms of this policy unless directed by the Treasurer. Functioning under the delegated authority, the Treasurer may establish accounts with qualified financial institutions and brokers/dealers for the purpose of effecting investment transactions in accordance with this Policy. Such agreements may include: safekeeping, overnight passbook sweep accounts, wire transfer agreements, banking service contracts and collateral/depository agreements.

Investments can be purchased only through well-established, financially sound institutions and brokers/dealers. Those desiring to become qualified bidders for investment transactions will be given a copy of the City’s Investment Policy. These entities must then return a signed cover letter indicating that the City’s Investment Policy has been read and understood.

Officers and employees involved in the investment process must 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 must disclose to the City Manager any material financial interests in financial institutions that conduct business within this jurisdiction, and they must further disclose any large personal financial and investment positions that could be related to the performance of the City, particularly with regard to the time of purchases and sales.

Authorized Instruments:

Certain investments are prohibited under Government Code Section 53601.6 (or Government Code Sections 53630, et seq.) Included in the prohibition are inverse floaters, range notes, and interest only mortgage strips.

Allowable investment instruments are defined in Government Code Sections 53600, et seq. If the Government Code is further revised to allow additional investments or is changed regarding the limits on certain categories of investments, the City may be required to conform to these changes, excluding those changes that are prohibited by this policy. The City Council is empowered to authorize the following types of investments and deposits:

 Bankers Acceptances that are eligible for purchase by the Federal Reserve System.

 Certificates of Deposit.
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City of Bellflower
Resolution No. 23-01 - Investment Policy

 Negotiable Certificates of Deposit issued by nationally or state-chartered banks.

 Broker-assisted, private sector entity-assisted Certificates of Deposit (e.g., Certificate of Deposit Account Registry Service or CDARS).

 Commercial Paper issued by corporations that are organized and operating within the United States.

 State of California Local Agency Investment Fund.

 Medium-Term Notes issued by corporations organized and operating within the United States.

 Money market funds (whose portfolio consists of one or more of the foregoing legal investments).

 Mutual Funds.

 Passbook savings and money market accounts (federally insured or otherwise collateralized).

 Obligations of the U.S. Government, its agencies and instrumentalities.

Investment of proceeds from bonds, certificates of participation, and other debt instruments issued by the City will be made in accordance with the terms of the trust agreement which is separately approved by the City Council with respect to each of the debt instruments. This policy will not govern investment of City funds deposited in the California Public Employees' Retirement System, California Joint Powers Insurance Authority, and Deferred Compensation Plans.

Deposits
 Checking Accounts
 Passbook Savings Accounts
 Money Market Accounts

Funds must be deposited in state or national banks, state or federal savings associations, or state or federal credit unions in the State of California. The bank or savings and loan must secure all deposits with government securities having a market value of at least 110% of the total amount of the deposits, or with first trust deed mortgage notes having a value of at least 150% of the deposits. The City Treasurer may waive security for the first $250,000 of a deposit, which is federally insured, provided that the City receives a higher interest rate.
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City of Bellflower
Resolution No. 23-01 - Investment Policy

The legal restrictions identifying the investment percentage for any one category, maximum dollar limits, and other significant criteria are identified in the following table:

Permitted Investments State Legal
Limit (% of $)
Maximum
Maturity * Other Constraints
Bankers Acceptances 40% 180 Days No more than 30% of the City’s funds may be invested in the bankers acceptances of
any one commercial bank.

Commercial Paper 25% 270 Days Highest rating as provided for by Moody's, S&P, or Fitch. Must be issued by U.S.
corporations with assets in excess of
$500,000,000 and a “A” or higher rating for
other debt.

Local Agency Investment Fund
(LAIF)

N/A N/A
Los Angeles County Treasury Pool N/A N/A
Investment Trust of California,
CalTRUST

N/A N/A
Medium Term Notes 30% 5 Years Rated "A" or better by a nationally recognized rating service. Must be issued
by corporations organized and operating
within the U.S.

Mutual Funds (money market
funds, not federally insured)
20% N/A Mutual Funds invested as defined in
Government Code Section 53601 (a) to (j)
or (m) or (n) and Money Market Funds
registered with SEC; Highest rating from at
least 2 national rating organizations; No
more than 10% in any one Mutual Fund.

Negotiable Certificates of Deposit 30% 5 Years
Broker-Assisted, Private Sector
Entity-Assisted Certificates of
Deposit (e.g., CDARS)
30% 5 Years
Certificates of Deposit Unlimited 5 Years Must be FDIC insured or collateralized at 110% with government securities or 150%
with first trust deeds.

Passbook Savings and Money
Market Accounts (federally insured
or otherwise collateralized)
Unlimited Unlimited
Securities of the U.S. Government
including its agencies and
sponsored enterprises
Unlimited 5 Years
Securities of any State including its
agencies
Unlimited 5 Years
Securities of any local agency
within California
Unlimited 5 Years
Bonds of any local agency Unlimited 5 Years

* Maximum term unless expressly authorized by the City Council and within the prescribed time frame for said approval.

In the event of a ratings downgrade of a security in the City’s portfolio by any of the applicable rating agencies (Standard and Poor’s, Moody’s, Fitch, etc.) to a rating category below the minimum required for purchase, the City Treasurer may take any appropriate course of action for the said security for the best interest of the City.

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City of Bellflower
Resolution No. 23-01 - Investment Policy

Pursuant to Government Code Section 53646, the City Treasurer may provide monthly investment reports to the City Council and City Manager. The Treasurer's report must be submitted within forty-five (45) days following the end of the month and include the following information:

 List of all investments and deposits owned by the City.  Type of each investment.
 Issuer of each investment.
 Date of each investment's maturity.
 Par and dollar amount invested on all securities, investments and moneys held by the City.
 Current market value of the investment portfolio as of the date of the report and the source(s) of the valuation for the securities held by the City and under management of any outside party that is not also a local agency or the State of California Local Agency Investment Fund.
 If applicable, a description of any of the local agency’s funds, investments, or programs, that are under the management of contracted parties, including lending programs.
 A statement as to whether the City's investments comply with this Statement of Investment Policy.
 A statement denoting the ability of the City to meet its expenditure requirements for the next six months.

The City's investment policy may be amended annually by resolution of the City Council.

This investment policy will be reviewed at least annually by City Treasurer to ensure its consistency with the overall objectives of preservation of principal, liquidity and yield, and its relevance to current law and financial and economic trends. Any amendments to the policy must be forwarded to City Council for approval. - 8 -

City of Bellflower
Resolution No. 23-01 - Investment Policy

GLOSSARY

Accrued Interest: Interest earned but not yet received.

Agencies: Federal agency securities and/or Government-sponsored enterprises.

Amortization: An accounting practice of gradually decreasing (increasing) an asset’s book value by spreading its depreciation (accretion) over a period of time.

Amortized Cost: Cost of investments adjusted for amortized premiums and discounts.

Amortized cost is used to maintain comparability with market value.

Annual Comprehensive Financial Report (ACFR): The official annual report for the fiscal year ending June 30. 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.

Arbitrage Regulation: Law to control the use of profit making by purchasing securities on one market for immediate resale on another in order to profit from a price difference.

Asked Price: The price that a broker or a dealer offers to sell securities.

Bankers Acceptances: Investment vehicle created to facilitate international commercial trade transactions. The bank accepts responsibility to repay a loan to the holder of the investment vehicle created in a commercial transaction. The credit worthiness of Bankers Acceptances is enhanced because they are secured by the issuing bank, the goods themselves, and the importer. Bankers Acceptances are sold on a discounted basis.

Basis Point: One basis point is one hundredth of one percent (0.0001).

Bid Price: The price a broker dealer offers to purchase securities.

Bond: A financial obligation for which an issuer promises to pay the bondholder a specified stream of future cash flows, including periodic interest payments and a principal repayment.

Bond Indenture: Written agreement specifying the terms and conditions for issuing bonds, stating the form of the bond being offered for sale, interest to be paid, the maturity date, call provisions and protective covenants, if any, collateral pledged, the repayment schedule, and other terms. It describes the legal obligations of a bond issuer and the powers of the bond trustee, who has the responsibility for ensuring that interest payments are made to registered bondholders.
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City of Bellflower
Resolution No. 23-01 - Investment Policy

Book value: The value at which a debt security is shown on the holder’s balance sheet.

Book value is the acquisition cost less amortization of premium or accretion of discount.

Broker: A broker brings buyers and sellers together for a commission. He does not take a position.

Certificate of Deposit: A deposit federally insured up to $250,000 at a set rate for a specified period of time.

Certificate of Deposit Account Registry Service or (CDARS): A service with a network of financial institutions that allows investors to obtain FDIC insurance coverage on deposits of up to $50 million through a single member institution.

Collateralization: To secure a debt in part or in full by pledge of collateral, asset pledged as security to ensure payment or performance of an obligation.

Commercial Paper: Short-term IOU, or unsecured money market obligation, issued by prime rated commercial firms and financial companies, with maturities from 2 days up to 270 days. A promissory note of the issuer used to finance current obligations, and is a negotiable instrument.

Coupon: a) The annual rate of interest that a bond’s issuer promises to pay the bond holder on the bond’s face value. b) A certificate attached to a bond evidencing interest due on the payment date.

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: Securities industry term indicating payment is due when the buyer has securities on hand or a book entry receipt.

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). No securities that have the possibility of a negative coupon may be purchased (Government Code Section 53601.6).

Discount: The difference between the market price and the face value of a security when it is selling below the face value.

Discount Securities: Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value (e.g., U.S. Treasury Bills).

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City of Bellflower
Resolution No. 23-01 - Investment Policy

Diversification: Dividing investment funds among a variety of securities offering independent returns.

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 deposit.

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 that 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 charted 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 the 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 Open Market Committee (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money.

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 that 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 FMHA mortgages. The term "passthrough" is often used to describe Ginnie Maes.
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City of Bellflower
Resolution No. 23-01 - Investment Policy

Interest-Only Strips: Mortgage-backed instrument where investor receives only the interest, no principal, from a pool of mortgages. Issues are highly interest rate sensitive.

Cash flows vary between interest periods. As well, the maturity date may occur earlier than that stated if all loans within the pool are pre-paid. High prepayments on underlying mortgages can return less to the holder that the dollar amount invested.

Investment Trust of California, CalTRUST: A number of California public agencies have created a Joint Powers Authority (JPA) – the Investment Trust of California, commonly known as CalTRUST – for the purpose of pooling local agency assets for investing. Membership in the CalTRUST program is open to any Public Agency in California. In 2015, there are over 100 CalTRUST participants. CalTRUST invests in fixed income securities eligible for local agency investment pursuant to California Government Code Sections 53601 and 53635. A Board of Trustees supervises and administers the investment programs of the JPA. CalTRUST maintains and administers four pooled accounts within the program: Money Market, Short-Term, Medium-Term, and Long-Term.

Laddered Portfolio: Bond investment portfolio with securities in each maturity range (e.g., monthly) over a specified period of time (e.g., five years).

Leverage: Investing with borrowed money with the expectation that the interest earned on the investment will exceed the interest paid on the borrowed money.

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.

Local Agency Investment Fund (LAIF): A voluntary investment program offering participating agencies the opportunity to participate in a major portfolio which daily invests hundreds of millions of dollars, using the investment expertise of the State Treasurer’s Office Investment staff at no additional cost to the taxpayer. Investment in LAIF, considered a short-term investment, is readily available for cash withdrawal on a daily basis.

Los Angeles County Treasury Pool: Similar to LAIF, the County of Los Angeles provides an investment pool service for other governmental agencies. Government Code Section 53684 allows local agencies to deposit excess funds in the Los Angeles County Treasury Pool for the purpose of investment by the County Treasurer and Tax Collector.

Market Risk: The risk that market interest rates will rise causing a loss of value in investments held. All investments made by the City involve a degree of market risk. See also “Unrealized Gains (Losses).”

Market Value: The price at which a security is trading and could presumably be purchased or sold.
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City of Bellflower
Resolution No. 23-01 - Investment Policy

Master Repurchase Agreement: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establish 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.

Medium-Term Notes: Pursuant to the Government Code Section 53601(j), a Medium- Term Note is an obligation of a domestic corporation or depository institution having a rating of “A” or better by a nationally recognized rating service. These notes may not have maturity in excess of five years. Investments in medium term notes may not exceed 30% of the City's idle funds.

Modified Duration: A measure of the sensitivity that the value of a fixed-income security has to changes in market rates of interest. Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk. Modified duration identifies the potential gain/loss in value before the gain/loss actually occurs. It is a prospective measurement, e.g., a modified duration of 1.5 indicates that when and if a 1% change in market interest rates occurs, a 1.5% change in the value of a security will result. Investments with modified durations of one to three are considered to be relatively conservative.

Money Market: The market in which short-term debt instruments (bills, commercial paper, bankers' acceptances, etc.) are issues and traded.

Mutual Funds: Mutual Funds qualifying for City investment must restrict their portfolios to issues approved by the same state investment statute that defines investment alternatives for cities. In addition these Mutual Funds must adhere to Federal statutes regarding the size of the Mutual Fund and its safety, must attain the highest ranking of two of the three largest rating services or must retain an investment advisor registered with the Securities and Exchange Commission with not less than 5 years experience investing assets of at least five hundred million dollars. Investments in Mutual Funds may not exceed 20% of the City's idle funds (Government Code Section 53601(k)).

Negotiable Certificates of Deposit: These types of Certificates of Deposit are issued by banks. They are not collateralized, that is, they are backed by the credit worthiness of the issuing institution rather than by specific pledged assets. They are issued payable to the bearer in denominations from $1 to $5 million with maturities of from 2 weeks to 5 years. They may be traded many times before maturity, with the price fluctuating with market conditions. The amount of the Certificate of Deposit may not exceed the issuing bank's shareholder's equity (Government Code Sections 53601(h) and 53638).

Offer: The price asked by a seller of securities (when you are buying securities, you ask for an offer). See Asked and Bid.

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City of Bellflower
Resolution No. 23-01 - Investment Policy

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.

Passbook Savings Account: These accounts pay a low rate of interest, compounded daily on their balances.

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 statement 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.

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.

Pooled Investment: Grouping of resources for the common advantage of the participants.

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: A repurchase agreement is the purchase of a security with the contractual obligation to sell such a security back at a future time at a fixed price.

The predetermined price differential between the selling and buy back price constitutes the interest earnings. The repurchase agreement may have a life of only one day. A minimum investment of $1 million is customarily required. The collateralization level for Repurchase Agreements will be 102% of the market value of the principal and accrued interest. Repurchase agreements may only be made with primary dealers (Government Code Section 53601(i)).

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.

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City of Bellflower
Resolution No. 23-01 - Investment Policy

Securities and Exchange Commission (SEC): Agency created by Congress to protect investors in securities transactions by administering securities legislation.

Securities of A Local Agency within California: Bonds, notes, warrants, or other evidences of indebtedness of a local agency within California including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency.

Securities of Any State Including Its Agencies: Registered state warrants (California only) or treasury notes or bonds of any state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the state or by a department, board, agency, or authority of the state.

Securities of the U.S. Government Including Its Agencies and Sponsored Enterprises: United States Treasury Notes, bonds, bills or certificates of indebtedness are backed by the full faith and credit of the United States. Although not general obligations of the United States, securities of U.S. agencies and sponsored enterprises have high safety ratings. The following are the examples: Federal Intermediate Credit Bank (FICB), Federal Land Bank (FLB), Federal Home Loan Bank (FHLB), Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC), Government National Mortgage Association (GNMA), Tennessee Valley Authorities (TVA), Student Loan Association Notes (SLMA) and Small Business Administration (SBA).

Structured Notes: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations that 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.

Sweep Account: Short-term income fund into which all un-invested cash balances from the non-interest bearing checking account are automatically transferred on a daily basis.

Third-Party Custodian: Corporate agent, usually a commercial bank, who, acting as trustee, holds securities under a written agreement for a corporate client and buys and sells securities when instructed. Custody services include securities safekeeping, and collection of dividends and interest. The bank acts only as a transfer agent and makes no buy-sell recommendations.

Time Certificates of Deposit: Deposit account paying interest for a fixed term, with the understanding that funds cannot be withdrawn before maturity without giving advance notice.

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.
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City of Bellflower
Resolution No. 23-01 - Investment Policy

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.

Unrealized Gains (Losses): Increases (decreases) in the value of investments representing the difference between the amortized cost of the investments and their current market value. Increases (decreases) in value are caused primarily by changes in market interest rates subsequent to purchasing the investments. Increases (decreases) in value indicate two things: (1) The portfolio has a potential gain (loss) in principal if the securities are sold; and (2) The portfolio is over performing (under performing) the current market for similar investments. An increase in value indicates the portfolio is earning relatively more interest than current market conditions, and a decrease in value indicates that the portfolio is earning relatively less interest than current market conditions.

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.

Zero Accrual Periods: A period of time in which an investment accumulates no interest.

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