City Council Agenda ReportItem # _____
Meeting Date: March 11, 2024
Subject: Appropriate Funds and Award a Construction Contract for the Civic Center North Human Resources Tenant Improvements Project
Recommended Action
Staff recommends that the City Council:
1. Appropriate $546,336.00 of unallocated Civic Center Fund;
2. Appropriate $205,740.95 of unallocated General CIP Fund;
3. Approve the design documents for the Civic Center North Human Resources Tenant Improvements project;
4. Affirm the CEQA determination of Categorical Exemption;
5. Accept all responsive bids and award the construction contract to Zone 4 Construction, Inc. of San Carlos, California in the amount of $1,621,145.00; and
6. Authorize the City Manager or his designee to execute all necessary contracts to complete the project.
Background
The Civic Center North Human Resources Tenant Improvements project consists of three main elements:
•Tenant Improvements,
•HVAC System Replacement, and
•HVAC Control Modernization.
On November 22, 2021, the City Council approved the use of American Rescue Plan Act (ARPA) funds for the HVAC system and associated improvements at Civic Center North as part of the Civic Center North HVAC System Replacement project. Furthermore, the FY2022-23 and FY2023-24 Capital Improvement Program allocated funds for the Civic Center North Human Resources Tenant Improvements and the Civic Center North HVAC Control Modernization projects.
This combined project proposes to improve the unfinished and underutilized portions of the first floor of the Civic Center North building for the relocation of the City’s Human Resources Department offices, perform pre-and post-air balance of the HVAC system for the first and second floors, replace an outdated rooftop Air Handler Unit (AHU), and upgrade any obsolete components, software, hardware, and controls.
Appropriate Funds and Award a Construction Contract for the Civic Center North Human Resources Tenant Improvements Project Meeting Date: March 11, 2024
Discussion
The construction bid documents were prepared by HGA of San Francisco, California.
The project’s Notice of Inviting Bids was advertised on January 24, 2024. On February 5, 2024, twenty- six (26) contractors attended the mandatory pre-bid meeting at the Civic Center North building. On February 21, 2024, five (5) bids were received by the City. The five (5) bids and Engineer’s Estimate are summarized as follows:
Bidder Total Base Bid Comments
1. Zone 4 Construction, Inc. $1,621,145.00 Responsive Bid
2. Buhler Commercial $1,794,492.00 Responsive Bid
3. Zoleman Construction, Inc. $1,940,000.00 Responsive Bid
4. B.E.A.M. Construction Enterprises, Inc. $1,978,000.00 Non- Responsive Bid
5. Arana Group Inc. $2,011,416.00 Responsive Bid
Engineer’s Estimate $1,325,685.00
Determination of the lowest responsive bidder was based on the lowest total base bid. Zone 4 Construction, Inc. of San Carlos, California, has been in business since 2001. This bidder holds the required Class B contractor’s license, which is current and in good standing. The contractor’s reference for work performed for the City of Redwood City, Palo Alto Unified School District, and Peninsula Health Care District are acceptable.
The low bid for this project is 22.3% higher than the Engineer’s estimated cost. In the Bay Area’s current construction industry market, increased cost for skilled labor and equipment has affected the bid prices of qualified contractors.
The current lease for the Human Resources Department offices at 295 89 th Street will expire on November 30, 2024. The relocation of Human Resources Department to a city owned facility provides for long term stability and cost savings for the city.
The existing HVAC system for the first and second floor is outdated and needs to be improved for proper ventilation, air circulation, efficiency, and increased system reliability.
If the overall project is awarded as recommended, construction is anticipated to commence in April 2024 and be completed by the end of 2024.
Appropriate Funds and Award a Construction Contract for the Civic Center North Human Resources Tenant Improvements Project Meeting Date: March 11, 2024
Fiscal Impact
The total estimated construction cost for the subject project is $2,107,488.50, which includes the $1,621,145.00 construction contract, and an additional $486,343.50 (30%) for construction contingency, inspection, contract administration, and staff time. $1,563,751.80 is the total estimated construction cost (including contingency) for the tenant improvements on the first floor of the Civic Center North building. $1,019,813.55 is available in General CIP Fund project account 31-313-909 – Civic Center North Tenant Improvements. An additional $543,938.25 is needed to fully fund the tenant improvements associated with the project. $543,736.70 is the total estimated construction cost (including contingency) for the HVAC system replacement and control modernization of the Civic Center North building. $220,598.00 is available in General CIP Fund project account 31-313-929 – Civic Center North HVAC, and $115,000 is available in General CIP Fund project account 31-313-505 – Civic Center North HAVA Control. An additional $208,138.70 is needed to fully fund the HVAC portion of the project.
This action will appropriate $546,336.00 of unallocated Civic Center Fund and $205,740.95 of unallocated General CIP Fund to fully fund the Civic Center North Human Resources Tenant Improvements Project.
Summary/Conclusion
Staff recommends that the City Council:
1. Appropriate $546,336.00 of unallocated Civic Center Fund;
2. Appropriate $205,740.95 of unallocated General CIP Fund;
3. Approve the design documents for the Civic Center North Human Resources Tenant Improvements project;
4. Affirm the CEQA determination of Categorical Exemption;
5. Accept all responsive bids and award the construction contract to Zone 4 Construction, Inc. of San Carlos, California in the amount of $1,621,145.00; and
6. Authorize the City Manager or his designee to execute all necessary contracts to complete the project.
Staff is available to provide additional information desired by the Mayor or Council Members.
Appropriate Funds and Award a Construction Contract for the Civic Center North Human Resources Tenant Improvements Project Meeting Date: March 11, 2024
Respectfully submitted,
Richard Chiu, Jr.
Director of Public Works
Attachments:
1. Project Location Map
2. Civic Center North Human Resources Tenant Improvements Plans and Specifications are available for viewing at the City Clerk’s Office
LAKE MERCEDGOLF ANDCOUNTRYCLUB
CITYHALL
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CIVIC CENTER NORTHHUMAN RESOURCESTENANT IMPROVEMENTS
SAN MATEO COUNTY, CALIFORNIA
CIVIC CENTER NORTHHUMAN RESOURCESTENANT IMPROVEMENTS
City Council Agenda Report Item #______
Meeting Date: March 11, 2024
Subject: 2024 Statement of Investment Policy Update
Recommended Action
Adoption of the City’s updated Statement of Investment Policy.
Background
In order to comply with State law, the City must annually review our investment policy at a public meeting. As a trustee and fiduciary, the City Council is a subject to the prudent investor standard, and must annually delegate investment responsibility to the City Treasurer through the adoption of our Statement of Investment Policy.
The City has contracted with Chandler Asset Management to review and update the City’s Statement of Investment Policy to ensure the City is in compliance with California Government Code and that it meets the City’s Investment objectives.
Discussion
The modifications made to the Investment Policy to achieve the City’s Investment objectives include:
III. Investment Objectives - Return on Investments
•Revise language involving expectations of returns
IV. Standards of Care (B.) Ethics and Conflicts of Interest •Use thorough language mirroring CA Government Code
VI. Authorized and Suitable Investments
•Revise format and parameter descriptions to list form, rather than tables, for Authorized and Suitable Investments
•Remove Reverse Repurchase Agreements from Authorized Investments •Include additional asset classes permitted under CA Government Code o Other CA LGIPs i.e. CAMP, CalTRUST, California CLASS o Corporate Medium Term Notes (MTNs)
o Asset-Backed, Mortgage-Baked, Mortgage Pass-Through, and Collateralized Mortgage Obligations
o Supranationals
VIII. Diversification, Maximum Maturities, and Credit Quality •Expand language defining (1) Mitigating Credit Risk (2) Mitigating Market Risk
IX. Performance [Evaluation]
•Address risk and legal constraints
•Include language referencing and setting a benchmark to assess performance
City Council Agenda Report
Subject: 2024 Statement of Investment Policy Update
Meeting Date: March 11, 2024
XII. Appendix A-Investment Types; XIII. Glossary of Investment Terms •Remove both appendixes and combine both into a single Glossary of Investment Terms Summary/Conclusion
Consideration and adoption of the City’s updated Statement of Investment Policy is necessary to stay in conformance with state law, as well as have a formal document which clearly outlines our Investment Policy and purpose for the investment of the City’s funds.
I am available to provide any additional information desired by the Mayor or Council members.
Respectfully submitted,
Daneca Halvorson
City Treasurer
Attachment: Statement of Investment Policy
cc with attachment: City Manager
City Attorney
City Clerk
CITY OF DALY CITY, CALIFORNIA
STATEMENT OF INVESTMENT
POLICY
2024
2024
2024
CITY OF DALY CITY
STATEMENT OF INVESTMENT
POLICY
TABLE OF CONTENTS
I. INTRODUCTION .................................................................................................................. 4 II. SCOPE .................................................................................................................................... 4 III. INVESTMENT OBJECTIVES ............................................................................................. 4 IV. STANDARDS OF CARE ....................................................................................................... 5 V. SAFEKEEPING AND CUSTODY ....................................................................................... 5 VI. AUTHORIZED AND SUITABLE INVESTMENTS .......................................................... 7 VII. PROHIBITED INVESTMENT VEHICLES AND PRACTICES ................................... 12 VIII. INVESTMENT POOLS/MUTUAL FUNDS ..................................................................... 13 IX. COLLATERALIZATION .................................................................................................. 13 X. DIVERSIFICATION, MAXIMUM MATURITES, AND CREDIT QUALITY ............ 14 XI. PERFORMANCE EVALUATION .................................................................................... 16 XII. INVESTMENT REPORTING ............................................................................................ 16 XIII. AUTHORITY TO INVEST MONIES................................................................................ 17 XIV. ADOPTION .......................................................................................................................... 17 XV. GLOSSARY OF INVESTMENT TERMS ........................................................................ 18
I. INTRODUCTION
Moneys not required for immediate expenditure by the City of Daly City shall be invested in compliance with governing provisions of law and this policy. The City will maintain adequate cash availability while ensuring that principal invested is protected from loss. Only after those two overriding requirements are met will the City strive for maximum yield on invested idle funds.
II. SCOPE
This investment policy applies to all financial assets under direct control of the City of Daly City.
These funds are accounted for in the City's Annual Comprehensive Financial Report (ACFR) and include the General Fund, Special Revenue Funds, Capital Project Fund, Enterprise Funds, Internal Service Funds, certain Agency Funds, and other funds that may be created from time to time.
This policy does not apply to investment activities of moneys held by a trustee or fiscal agent and pledged to the payment or security of bonds or other indebtedness, or obligations under a lease, installment sale, or certificates of participation, or assets of the City-sponsored Deferred Compensation Plan. Such funds are invested in accordance with statutory provisions governing the issuance, or in accordance with the ordinance, resolution, indenture, or agreement of the City which provides for the issuance, or the instructions of the participants. These funds are identified in the ACFR as Cash with Fiscal Agent, debt service components of certain Enterprise Funds, or as Amounts Due Participants in the Deferred Compensation Plan.
III. INVESTMENT OBJECTIVES
The primary objectives, in priority order, of the City of Daly City's investment activities shall be:
A. Safety
Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The goal will be to mitigate credit risk and interest rate risk.
B. Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated.
C. Return on Investments
The investment portfolio will be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints for safety and liquidity needs.
IV. STANDARDS OF CARE
A. Prudence
The City adheres to the guidance provided by the "prudent investor standard," which obligates a fiduciary to ensure that investments shall be made with the exercise of that degree of judgment and care, under circumstances then prevailing, which pe rsons of prudence, discretion and intelligence exercise in the management of individual business matters, not for speculation but for investment. Exercise of prudence considers the probable safety of capital as well as the probable income to be derived.
This standard of prudence shall be applied in the context of managing an overall portfolio.
Investment officials acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal res ponsibility for an individual security's credit risk or market price changes, provided that deviations from expectation are reported in a timely fashion, and appropriate action is taken to control adverse developments.
B. Ethics and Conflicts of Interest
All participants in the investment process shall act as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public review and evaluation.
Thus, employees and officials involved in the investment process shall refrain from personal business activity that could create a conflict of interest or the appearance of a conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions.
Employees and investment officials shall disclose to the Finance Director any material interests in financial institutions with which they conduct business, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking any personal investment transactions with the same individual with whom business is conducted on behalf of the City.
All participants in the investment process are required to comply with terms of the Political Reform Act, Fair Political Practices Commission Regulations promulgated thereunder (2 C.C.R. §§ 18110 through 18998), the City’s Conflict of Interest Policy, including, without limitation, filing of Form 700, notification and recusal obligations, and Government Code section 1090 prohibitions.
V. SAFEKEEPING AND CUSTODY
A. Authorized Financial Dealers and Institutions
1. Broker/Dealers
A list will be maintained of financial institutions and depositories authorized to provide investment services. In addition, a list will be maintained of approved security broker/dealers selected by conducting a process of due diligence. These may include ‘primary” dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15c3- 1 (uniform net capital rule).
The Treasurer shall determine which financial institutions are authorized to provide investment services to the City. Institutions eligible to transact investment business with City include:
a. Primary government dealers as designated by the Federal Reserve Bank; b. Nationally or state-chartered banks;
c. The Federal Reserve Bank; and,
d. Direct issuers of securities eligible for purchase.
All broker/dealers who desire to become qualified for investment transactions must supply the following (as appropriate):
• Proof of Financial Industry Regulatory Authority certification • Proof of State registration
• Certification of having read the City’s investment policy, including a statement that the dealer shall make a good faith effort to ensure that recommended investments conform to this policy • Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines
• Evidence of adequate insurance coverage
Selection of financial institutions and broker/dealers authorized to engage in transactions with the City shall be at the sole discretion of the City, except where the City utilizes an external investment adviser in which case the City may rely on the adviser for selection.
2. Financial Institutions
The Treasurer shall establish selection criteria for approval of institutions to do business with the City of Daly City. To qualify for consideration, an institution must have an office in California and that office must perform the transactions with the City. Additionally, all financial institutions who desire to become depositories must supply the following (as appropriate):
• Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines
• Proof of state registration
• Evidence of adequate insurance coverage
Upon adoption, and when changes are made thereafter, the City shall send a copy of the current investment policy to all parties doing business with the City. Confirmation of receipt of this policy shall be considered evidence that the dealer understands the City's investment policies and intends to show the City only appropriate investments.
3. Competitive Transactions
The Treasurer shall obtain competitive bid information on all purchases of investment instruments purchased on the secondary market (excluding FDIC Insured certificates of deposit). A competitive bid can be executed through a bidding process involving at least three separate brokers/
financial institutions or through the use of a nationally recognized trading platform.
If the City is offered a security for which there is no readily available competitive offering on the same specific issue, then the Treasurer shall document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities as the same original issue price.
If the City hires an investment adviser to provide investment management services, the adviser must provide documentation of competitive pricing execution on each transaction. The investment adviser will retain documentation and provide upon request.
B. Delivery Versus Payment
Securities transactions, including collateral for repurchase agreements, shall be executed on a delivery vs. payment (DVP) basis. Funds are not wire-transferred until securities are delivered into safekeeping with the City's third- party custodian. The custodial relationship is subject to an agreement for services which may be separate from the agreement for other banking services. The safekeeping requirement does not apply to LAIF, purchase of mutual funds or securities which are physically delivered to the City.
C. Third-Party Safekeeping
Securities will be held by an independent third-party safekeeping institution selected by the City.
All securities will be evidenced by safekeeping receipts in the City’s name. The safekeeping institution shall annually provide a copy of its most recent report on internal controls - Service Organization Control Reports (formerly 70, or SAS 70) prepared in accordance with the Statement on Standards for Attestation Engagements (SSAE) No. 16 (effective June 15, 2011.)
D. Internal Control
The City Treasurer shall establish a system of internal controls, which shall be documented in writing. These controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of the City.
VI. AUTHORIZED AND SUITABLE INVESTMENTS
The City’s investments are governed by California Government Code, Sections 53600 et seq .
Within the investments permitted by the Code, the City seeks to further restrict eligible investments to the guidelines listed below. In the event a discrepancy is found between this policy and the Code, the more restrictive parameters will take precedence. Percentage holding limits listed in this section apply at the time the security is purchased.
Any investment currently held at the time the policy is adopted which does not meet the new policy guidelines can be held until maturity and shall be exempt from the current policy. At the time of the investment’s maturity or liquidation, such funds shall be reinvested only as provided in the
current policy.
An appropriate risk level shall be maintained by primarily purchasing securities that are of high quality, liquid, and marketable. The portfolio shall be diversified by security type and issuer to avoid incurring unreasonable and avoidable risks regarding specific security types or individual issuers.
1. M
UNICIPAL SECURITIES include obligations of the City of Daly City, the State of California and any local agency within the State of California, provided that:
• The securities are rated in a rating category of “A” or its equivalent or better by at least one “NRSRO”.
• No more than 5% of the total portfolio may be invested in any single issuer. • No more than 30% of the total portfolio may be in Municipal Securities. • The maximum maturity does not exceed five (5) years.
2. M
UNICIPAL SECURITIES (REGISTERED TREASURY NOTES OR BONDS) of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue - producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.
• The securities are rated in a rating category of “A” or its equivalent or better by at least one nationally recognized statistical rating organization (“NRSRO”). • No more than 5% of the total portfolio may be invested in any single issuer. • No more than 30% of the total portfolio may be in Municipal Securities. • The maximum maturity does not exceed five (5) years.
3. U.S. TREASURIES and other government obligations for which the full faith and credit of the United States are pledged for the payment of principal and interest. There are no limits on the dollar amount or percentage that the City may invest in U.S. Treasuries, provided that:
• The maximum maturity does not exceed five (5) years.
4. F
EDERAL AGENCIES or United States Government -Sponsored Enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There are no limits on the dollar amount or percentage that the City may invest in Federal Agency or Government-Sponsored Enterprises (GSEs), provided that:
• No more than 30% of the total portfolio may be invested in any single Agency/GSE issuer. • No more than 20% of the total portfolio may be invested in callable agency securities. • The maximum maturity does not exceed five (5) years.
5. BANKER’S ACCEPTANCES, provided that:
• They are issued by institutions which have short-term debt obligations rated “A-1” or its equivalent or better by at least one NRSRO; or long-term debt obligations which are rated in a rating category of “A” or its equivalent or better by at least one NRSRO. • No more than 40% of the total portfolio may be invested in Banker’s Acceptances. • No more than 5% of the total portfolio may be invested in any single issuer. • The maximum maturity does not exceed 180 days.
6. COMMERCIAL PAPER, provided that the securities are issued by an entity that meets all of the following conditions in either paragraph (a) or (b) and other requirements specified below:
a. SECURITIES issued by corporations:
(i) A corporation organized and operating in the United States with assets more than $500 million.
(ii) The securities are rated “A-1” or its equivalent or better by at least one NRSRO. (iii) If the issuer has other debt obligations, they must be rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
b. S
ECURITIES issued by other entities:
(i) The issuer is organized within the United States as a special purpose corporation, trust, or limited liability company.
(ii) The securities must have program -wide credit enhancements including, but not limited to, overcollateralization, letters of credit, or a surety bond. (iii)The securities are rated “A-1” or its equivalent or better by at least one NRSRO.
• No more than 10% of the outstanding commercial paper of any single issuer. • No more than 25% of the City’s investment assets under management may be invested in Commercial Paper. Under a provision sunsetting on January 1, 2026, no more than 40% of the total portfolio may be invested in Commercial Paper if the City’s investment assets under management are greater than $100,000,000.
• No more than 5% of the total portfolio may be invested in any single issuer. • The maximum maturity does not exceed 270 days.
7. N
EGOTIABLE CERTIFICATES OF DEPOSIT (NCDS), issued by a nationally or state-chartered bank, a savings associati on or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank, provided that:
• The amount of the NCD insured up to the FDIC limit does not require any credit ratings. • Any amount above the FDIC insured limit must be issued by institutions which have short -term debt obligations rated “A -1” or its equivalent or better by at least one NRSRO; or long- term obligations rated in a rating category of “A” or its equivalent or better by at least one NRSRO. • No more than 30% of the total portfolio may be invested in NCDs (combined with CDARS). • No more than 5% of the total portfolio may be invested in any single issuer.
• The maximum maturity does not exceed five (5) years.
8. FEDERALLY INSURED TIME DEPOSITS (Non-Negotiable Certificates of Deposit) in state or federally chartered banks, savings and loans, or credit unions, provided that:
• The amount per institution is limited to the maximum covered under federal insurance. • No more than 20% of the total portfolio will be invested in a combination of federally insured and collateralized time deposits.
• The maximum maturity does not exceed five (5) years.
9. COLLATERALIZED TIME DEPOSITS (Non-Negotiable Certificates of Deposit) in state or federally chartered banks, savings and loans, or credit unions in excess of insured amounts which are fully collateralized with securities in accordance with California law, provided that:
• No more than 20% of the total portfolio will be invested in a combination of federally insured and collateralized time deposits.
• The maximum maturity does not exceed five (5) years.
10. P
LACEMENT SERVICE DEPOSITS, provided that:
• No more than 30% of the total portfolio may be invested in a combination of Certificates of Deposit, including CDARS.
• Under a provision sunsetting on January 1, 2026, no more than 50% of the portfolio may be invested in deposits through a placement service, including Certificates of Deposit, if the Agency is a city, district or local agency that does not pool money with other local agencies. • The maximum maturity does not exceed five (5) years.
11. COLLATERALIZED BANK DEPOSITS. The City’s deposits with financial institutions will be collateralized with pledged securities per California Government Code, Section 53651. There are no limits on the dollar amount or percentage that the City may invest in collateralized bank deposits.
12. R
EPURCHASE AGREEMENTS collateralized with securities authorized under California Government Code, maintained at a level of at least 102% of the market value of the Repurchase Agreement. There are no limits on the dollar amount or percentage that the City may invest, provided that:
• Securities used as collateral for Repurchase Agreements will be delivered to an acceptable third party custodian.
• Repurchase Agreements are subject to a Master Repurchase Agreement between the City and the provider of the repurchase agreement. The Master Repurchase Agreement will be substantially in the form developed by the Securities Industry and Financial Markets Association (SIFMA). • The maximum maturity does not exceed one (1) year.
13. STATE OF CALIFORNIA LOCAL AGENCY INVESTMENT FUND (LAIF), provided that:
• The City may invest up to the maximum amount permitted by LAIF. • LAIF’s investments in instruments prohibited by or not specified in the City’s policy do not exclude the investment in LAIF itself from the City’s list of allowable investments, provided LAIF’s reports allow the Treasurer to adequately judge the risk inherent in LAIF’s portfolio.
14. LOCAL GOVERNMENT INVESTMENT POOLS
• Including Other LGIPs permitted by the City, including San Mateo County Treasurer’s Pool, CalTRUST, California Asset Management Program (CAMP), and California Class, or Shares of beneficial interest issued by a joint powers authority organized pursuant to Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (q), inclusive. Each share shall represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained an investment adviser that meets all of the following criteria: (1) The adviser is registered or exempt from registration with the Securities and Exchange Commission. (2) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (q), inclusive. (3) The adviser has assets under management in excess of five hundred million dollars ($500,000,000). • There is no issuer limitation for Local Government Investment Pools
15. C
ORPORATE MEDIUM TERM NOTES (MTNS), provided that:
• The issuer is a corporation organized and ope rating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. • The securities are rated in a rating category of “A” or its equivalent or better by at least one NRSRO.
• No more than 30% of the total portfolio may be invested in MTNs. • No more than 5% of the total portfolio may be invested in any single issuer. • The maximum maturity does not exceed five (5) years.
16. ASSET-BACKED, MORTGAGE-BACKED, MORTGAGE PASS-THROUGH SECURITIES, AND COLLATERALIZED MORTGAGE OBLIGATIONS FROM ISSUERS NOT DEFINED IN SECTIONS 3 AND 4 OF THE AUTHORIZED INVESTMENTS SECTION OF THIS POLICY, provided that:
• The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO. • No more than 20% of the total portfolio may be invested in these securities. • No more than 5% of the total portfolio may be invested in any single Asset-Backed or Commercial Mortgage security issuer.
• The maximum maturity does not exceed five (5) years.
17. MUTUAL FUNDS AND MONEY MARKET MUTUAL FUNDS that are registered with the Securities and Exchange Commission under the Investment Company Act of 1940, provided that:
a. MUTUAL FUNDS that invest in the securities and obligations as authorized under California Government Code, Section 53601 (a) to (k) and (m) to (q) inclusive and that meet either of the following criteria:
(i) Attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
(ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience investing in the securities and obligati ons authorized by California Government Code, Section 53601 and with assets under management in excess of $500 million.
• No more than 10% of the total portfolio may be invested in shares of any one mutual fund.
b. M
ONEY MARKET MUTUAL FUNDS registered with th e Securities and Exchange Commission under the Investment Company Act of 1940 and issued by diversified management companies and meet either of the following criteria:
(i) Have attained the highest ranking or the highest letter and numerical rating provided by not less than two (2) NRSROs; or
(ii) Have retained an investment adviser registered or exempt from registration with the Securities and Exchange Commission with not less than five years’ experience managing money market mutual funds with assets under management in excess of $500 million.
• No more than 20% of the total portfolio may be invested in the shares of any one Money Market Mutual Fund.
c. No more than 20% of the total portfolio may be invested in these securities.
18. S
UPRANATIONALS, provided that:
• Issues are US dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank. • The securities are rated in a rating category of “AA” or its equivalent or better by a NRSRO. • No more than 30% of the total portfolio may be invested in these securities. • No more than 10% of the total portfolio may be invested in any single issuer. • The maximum maturity does not exceed five (5) years.
VII. PROHIBITED
INVESTMENT VEHICLES AND PRACTICES
• State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options.
• In accordance with Government Code, Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited.
• Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S.
Government that could result in a zero- or negative -interest accrual if held to maturity are permitted.
• Trading securities for the sole purpose of speculating on the future di rection of interest rates is prohibited.
• Purchasing or selling securities on margin is prohibited. • The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited.
• The purchase of foreign currency denominated securities is prohibited. • The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited.
VIII. INVESTMENT
POOLS/MUTUAL FUNDS
The City shall conduct a thorough investigation of any pool or mutual fund prior to making an investment, and on a continual basis thereafter. Annually, the City Treasurer shall seek responses to the following questions from any investment pool or mutual fund in which the City invests:
• A description of eligible investment securities, and a written statement of investment policy and objectives.
• A description of interest calculations and how it is distributed, and how gains and losses are treated. • A description of how the securities are safeguarded (including the settlement processes), and how often the securities are priced and the program audited. • A description of who may invest in the program, how often, and what size deposit and withdrawal are allowed.
• A schedule for receiving statements and portfolio listings. • Are reserves, retained earnings, etc. utilized by the pool/fund? • A fee schedule, and when and how it is assessed.
• Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
IX. COLLATERALIZATION
C
ERTIFICATES OF DEPOSIT (CDS). The City shall require any commercial bank or savings and loan association to deposit eligible securities with an City of a depository approved by the State Banking Department to secure any uninsured portion of a Non-Negotiable Certificate of Deposit.
The value of eligible securities as defined pursuant to California Government Code, Section 53651, pledged against a Certificate of Deposit shall be equal to 150% of the face value of the CD if the securities are classified as mortgages and 110% of the face value of the CD for all other classes of security.
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OLLATERALIZATION OF BANK DEPOSITS. This is the process by which a bank or financial institution pledges securities, or other deposits for the purpose of securing repayment of deposited funds. The City shall require any bank or financial institution to comply with the collateralization criteria defined in California Government Code, Section 53651.
REPURCHASE AGREEMENTS. The City requires that Repurchase Agreements be collateralized only by securities authorized in accordance with California Government Code:
• The securities which collateralize the repurchase agreement shall be priced at Market Value, including any Accrued Interest plus a margin. The Market Value of the securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against t hose securities.
• Financial institutions shall mark the value of the collateral to market at least monthly and increase or decrease the collateral to satisfy the ratio requirement described above. • The City shall receive monthly statements of collateral.
X. DIVERSIFICATION,
MAXIMUM MATURITES, AND CREDIT QUALITY
The City will diversify its investments by security type, maturity, and institution in order to reduce market and credit risks associated with concentrating investments in specific security types, maturity segments, or in individual financial institutions. Diversification strategies shall be established by the Treasurer and will be determined based on our investment objectives of Safety, Liquidity, and Return. There is no minimum Portfolio percentage and/or dollar limit for diversification. The maximum Portfolio percentage and/or dollar limits for diversification are indicated in Section VI, Authorized and Suitable Investments.
To the extent possible, the City will attempt to match its investments w ith anticipated cash flow requirements. Generally, no investment shall be made in any security which, at the time of the investment, has a term remaining to maturity in excess of five years. However, the City Council specifically grants the authority to the City Treasurer to invest a maximum of $14,000,000 of the City’s portfolio in Government National Mortgage Association securities which, at the time of investment, have terms remaining to maturity in excess of five years. Additionally, the City Council may grant express authority to exceed this term for this or other individual investments.
1. Mitigating Credit Risk in the Portfolio . Credit risk is the risk that a security or a portfolio will lose some or all its value due to a real or perceived change in the ability of the issuer to repay its debt. The City will mitigate credit risk by adopting the following strategies:
• The diversification requirements included in the “Authorized Investments” section of this policy are designed to mitigate credit risk in the portfolio.
• No more than 5% of the total portfolio may be deposited with or invested in securities issued by any single issuer unless otherwise specified in this policy. • The City may elect to sell a security prior to its maturity and record a capital ga in or loss in order to manage the quality, liquidity or yield of the portfolio in response to market conditions or City’s risk preferences.
• If a security owned by the City is downgraded to a level below the requirements of this policy, making the security ineligible for additional purchases, the following steps will be taken:
• Any actions taken related to the downgrade by the investment manager will be communicated to the Treasurer in a timely manner.
• If a decision is made to retain the security, the situation will be monitored and reported to the City Council.
2. Mitigating Market Risk in the Portfolio . Market risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates. The City recognizes that, over time, longer-term portfolios have the potential to achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. The City will mitigate market risk by providing adequate liquidity for short-term cash needs, and by making longer -term investments only with funds that are not needed for current cash flow purposes.
The City further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. The City, therefore, adopts the following strategies to control and mitigate its exposure to market risk:
• The City will maintain a minimum of six months of budgeted operating expenditures in short term investments to provide sufficient liquidity for expected disbursements.
• The maximum stated final maturity of individual securities in the portfolio will be five (5) years, except as otherwise stated in this policy.
• The duration of the portfolio will generally be approximately equal to the duration (typically, plus or minus 20%) of a Market Benchmark, an index selected by the City based on the City’s investment objectives, constraints and risk tolerances.
No more than 5% of the portfolio may be invested in any one issuer, exc luding Treasuries and Federal Agency issuers, California LGIPs such as Local Agency Investment Fund (LAIF), CAMP, CalTRUST, San Mateo County Treasurer’s Pool, and FDIC Insured/ Collateralized investments.
Investments into the State of California Local Investment Fund and the San Mateo County Investment Pool meet our diversification requirements.
The City will diversify its investments by security type, maturity, and institution in order to reduce market and credit risks associated with concentrating investments in specific security types, maturity segments, or in individual financial institutions. Diversification strategies shall be established by the Treasurer and will be determined based on our investment objectives of Safety, Liquidity, and Return. T here is no minimum Portfolio percentage and/or dollar limit for diversification. The maximum Portfolio percentage and/or dollar limits for diversification are indicated in Section VI, Authorized and Suitable Investments.
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. Generally, no investment shall be made in any security which, at the time of the investment, has a term remaining to maturity in excess of five years. However, the City Council specifically grants the authority to the City Treasurer to invest a maximum of $14,000,000 of the
City’s portfolio in Government National Mortgage Association securities which, at the time of investment, have terms remaining to maturity in excess of five years. Additionally, the City Council may grant express authority to exceed this term for this or other individual investments.
XI. PERFORMANCE EVALUATION
The investment portfolio will be managed in accordance with the parameters specified within this policy. The portfolio should obtain a market average rate of return during a market/economic environment of stable interest rates, taking into account the City’s risk constraints, the cash flow characteristics of the portf olio, and state and local laws, ordinances or resolutions that restrict investments.
The Treasurer shall monitor and evaluate the portfolio’s performance relative to the chosen market benchmark(s), which will be included in the Treasurer’s quarterly report. The Treasurer shall select an appropriate, readily available index to use as a market benchmark. Benchmarks may change over time based on changes in market conditions or cash flow requirements.
XII. INVESTMENT REPORTING
The City Treasurer will make quarterly reports to the City Council within 45 days after the end of quarter. The reports will include the following informational items:
• A listing of all securities, investments, and moneys held by the City, showing the type of investment, issuer, date of maturity, rate of interest earned over the quarter, par, and dollar amount invested.
• A description of any of the City’s funds, investments, or programs that are under the management of contracted parties, including lending programs.
• With respect to all securities held by the City, and under management of any outside party that is not also a local agency of the State of California Local Agency Investment Fund, the report shall also include a current market value as of the date of the report, and shall include the source of this same valuation.
• The transaction details of any transactions in the City’s portfolio, including reinvestments, purchases, and sales of securities.
• A statement that the portfolio conforms to this Statement of Investment Policy or the manner in which the portfolio is not in compliance.
• A statement of the City’s ability to meet its cash pool expenditure requirements for the next six months or provide an explanation as to why sufficient money shall, or may, not be available.
XIII. AUTHORITY TO INVEST MONIES
Pursuant to Government Code § 53600 et. Seq., with the annual adoption of this Statement of Investment Policy, the City Council hereby delegates the authority to invest or reinvest funds of the City, and sell or exchange securities so purchased, to the City Treasurer for a one-year period, who will thereafter assume full responsibility for those transactions until the delegation of authority is revoked or expires, in accordance with this Statement of Investment Policy.
XIV. ADOPTION
The investment policy shall be adopted by resolution of the City Council of the City of Daly City.
The policy shall be reviewed at a public meeting on an annual basis by the City Council and any modifications to the policy must be approved by the City Council.
XV. GLOSSARY OF INVESTMENT TERMS
AGENCIES. Shorthand market terminology for any obligation issued by a government -sponsored entity (GSE), or a federally related institution . Most obligations of GSEs are not guaranteed by the full faith and credit of the US government. Examples are:
FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry.
FFCB issues discount notes and bonds.
FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market. FHLB issues discount notes and bonds.
FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called “FreddieMac” issues discount notes, bonds and mortgage pass-through securities.
FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as “FannieMae, ” issues discount notes, bonds and mortgage pass-through securities.
GNMA. The Government National Mortgage Association, known as “GinnieMae,” issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government.
PEFCO. The Private Export Funding Corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government.
TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA currently issues discount notes and bonds.
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by pools of revolving lines of credit.
AVERAGE LIFE. In mortgage-related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected.
BANKER’S ACCEPTANCE. A money market instrument created to facilitate international trade transactions.
It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which “accepts” the obligation to pay the investor.
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ENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy.
BROKER. A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from their own position.
CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its maturity.
The main cause of a call is a decline in interest rates. If interest rates decline, the issuer will likely call its current securities and reissue them at a lower rate of interest.
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ERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a certificate.
CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement service that allows local agencies to purchase more tha n $250,000 in CDs from a single financial institution (must be a participating institution of CDARS) while still maintaining FDIC insurance coverage.
Intrafi is an entity providing this service. CDARS facilitates the trading of deposits between the California institution and other participating institutions in amounts that are less than $250,000 each, so that FDIC coverage is maintained.
COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies.
COLLATERALIZED BANK DEPOSIT. A bank deposit that is collateralized at least 100% (principal plus interest to maturity). The deposit is collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities.
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OLLATERALIZED TIME DEPOSIT. Time deposits that are collateralized at least 100% (principal plus interest to maturity). These instruments are collateralized using assets set aside by the issuer such as Treasury securities or other qualified collateral to secure the deposit in excess of the limit covered by the Federal Deposit Insurance Corporation.
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OMMERCIAL PAPER. The short-term unsecured debt of corporations.
COUPON. The rate of return at which interest is paid on a bond.
CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer.
DEALER. A dealer acts as a principal in security transactions, selling securities from and buying securities for their own position.
DELIVERY VS. PAYMENT (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser’s agent.
DISCOUNT. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short -term securities, such as T -bills and banker’s acceptances, are known as discount securities. They sell at a discount from par and return the pa r value to the investor at maturity without additional interest. Other securities, which have fixed coupons, trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality.
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IVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk.
DURATION. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a security to changes interest rates.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC). The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.
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EDERALLY INSURED TIME DEPOSIT. A time deposit is an interest-bearing bank deposit account that has a specified date of maturity, such as a certificate of deposit (CD). These deposits are limited to funds insured in accordance with FDIC insurance deposit limits.
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IDUCIARY. A person or organization that acts on behalf of another person(s) or organization that puts their clients’ interest ahead of their own as they are bound both legally and ethically to act in the other’s best interests.
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EVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing.
LIQUIDITY. The speed and ease with which an asset can be converted to cash.
LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government entities and certain non-profit organizations in California that is managed by the State Treasurer’s Office.
LOCAL GOVERNMENT INVESTMENT POOL. Investment pools that range from the State Treasurer’s Office Local Agency Investment Fund (LAIF) to county pools, to Joint Powers Authorities (JPAs). These
funds are not subject to the same SEC rules applicable to money market mutual funds.
MAKE WHOLE CALL. A type of call provision on a bond that allows the issuer to pay off the remaining debt early. Unlike a call option, with a make whole call provision, the issuer makes a lump sum payment that equals the net present value (NPV) of future coupon payments that will not be paid because of the call. With this type of call, an investor is compensated, or "made whole." MARGIN. The difference between the market value of a security and the loan a broker makes using that security as collateral.
MARKET RISK. The risk that the value of securities will fluctuate with cha nges in overall market conditions or interest rates.
MARKET VALUE. The price at which a security can be traded.
MATURITY. The final date upon which the principal of a security becomes due and payable. The investment’s term or remaining maturity is measured from the settlement date to final maturity.
MEDIUM TERM NOTES. Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts on either a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences.
MODIFIED DURATION. The percent change in price for a 100 -basis point change in yields. Modified duration is the best single measure of a portfolio’s or security’s exposure to market risk.
MONEY MARKET. The market in which short-term debt instruments (T-bills, discount notes, commercial paper, and banker’s acceptances) are issued and traded.
MONEY MARKET MUTUAL FUND. A mutual fund that invests exclusively in short -term securities.
Examples of investments in money market funds are certificates of deposit and U.S. Treasury securities. Money market funds attempt to keep their net asset values at $1 per share.
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ORTGAGE PASS-THROUGH SECURITIES. A securitized participation in the interest and principal cash flows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security.
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UNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and operating expenses.
MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund’s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds, and money market instruments, as set forth in the individual fund’s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio.
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ATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO). A credit rating agency that the Securities and Exchange Commission in the United States uses for regulatory purposes.
Credit rating agencies provide assessments of an investment's risk. The issuers of investments, especially debt securities, pay credit rating agencies to provide them with ratings. The three most prominent NRSROs are Fitch, S&P, and Moody's.
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EGOTIABLE CERTIFICATE OF DEPOSIT (CD). A short -term debt instrument that pays interest and is issued by a bank, savings or federal association, state or federal credit union, or state -licensed branch of a foreign bank. Negotiable CDs are traded in a secondary market.
PAYDOWN. A reduction in the principal amount owed on a bond, loan, or other debt.
PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that par ticipates for statistical reporting purposes in compiling data on activity in the U.S. Government securities
market.
PRUDENT INVESTOR (PRUDENT PERSON) RULE. A standard of responsibility which applies to fiduciaries.
In California, the rule is stated as “Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes.”
REPURCHASE AGREEMENT. Short-term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller’s point of view, the same transaction is a reverse repurchase agreement.
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AFEKEEPING. A service to bank customers whereby securities are held by the bank in the customer’s name.
SECURITIES AND EXCHANGE COMMISSION (SEC). The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of securities markets and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States.
SECURITIES AND EXCHANGE COMMISSION (SEC) RULE 15C3-1. An SEC rule setting capital requirements for brokers and dealers. Under Rule 15c3-1, a broker or dealer must have sufficient liquidity in order to cover the most pressing obligations. This is defined as having a certain amount of liquidity as a percentage of the broker/dealer's total obligations. If the percentage falls below a certain point, the broker or dealer may not be allowed to take on new clients and may have restrictions placed on dealings with current client.
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TRUCTURED NOTE. A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate.
Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements.
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UPRANATIONAL. A Supranational is a multi- national organization whereby member states transcend national boundaries or interests to share in the decision making to promote economic development in the member countries.
TOTAL RATE OF RETURN. A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains, and losses in the portfolio.
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TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds.
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REASURY BILLS. All securities issued with initial maturities of one year or less are issued as discounted instruments and are called Treasury bills. The Treasury currently issues three- and six- month T-bills at regular weekly auctions. It also issues “cash management” bills as needed to smooth out cash flows.
TREASURY NOTES. All securities issued with initial maturities of two to ten years are called Treasury notes and pay interest semi-annually.
TREASURY BONDS. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually.
YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost.