DATE:
November 15, 2022
TO:
Mayor and Council Members
City Council, as Successor Agency to the Hesperia Community Redevelopment Agency Chair and Board Members, Hesperia Housing Authority
Chair and Commissioners, Community Development Commission Chair and Board Members, Hesperia Fire Protection District Chair and Board Members, Hesperia Water District
FROM:
Nils Bentsen, City Manager
BY:
Casey Brooksher, Director of Administrative Services
Anne Duke, Deputy Finance Director
Virginia Villasenor, Senior Accountant
SUBJECT:
2022-23 Statement of Investment Policy
RECOMMENDED ACTION
It is recommended that the Council/Board/Commission adopt Joint Resolution No. 2022-57, Successor Agency to the Hesperia Community Redevelopment Agency Resolution No.
SA 2022-01, Hesperia Housing Authority Resolution No. HHA 2022-06, Community Development Commission Resolution No. CDC 2022-03, Hesperia Fire Protection District Resolution No. HFPD 2022-05, and Hesperia Water District Resolution No. HWD 2022-12, amending the Fiscal Year 2022-23 Statement of Investment Policy.
BACKGROUND
The City Treasurer is authorized to invest public funds in accordance with California Government Code (CGC) Sections 53600 et seq. and 5922(d). The Statement of Investment Policy (Policy) that guides the investment activity of the City, Successor Agency to the Hesperia Redevelopment Agency, Hesperia Housing Authority, Community Development Commission, Fire District, and Water District was adopted by the City Council as required by Senate Bill 564. Government Code Section 53646, added by the same bill, also requires that the City Council review and adopt the Policy annually. The external auditors of the Council/Agency/Authority/Commission/Districts also review the Statement of Investment Policy during the annual financial audit process.
ISSUES/ANALYSIS
During the past year, all funds under the control of the City Treasurer that were available for investment were placed with the State Local Agency Investment Fund (L.A.I.F.). The quarterly interest rates on funds invested with L.A.I.F. for the last four fiscal years are provided below:
Fiscal Year (FY) 2021-22 L.A.I.F. interest rates are at or above the rate of return of short-term investments (three - month maturity) of similar safety rating as demonstrated in the following chart provided from the Federal Reserve:
US Government Securities Rate of Interest with a three - month maturity per the Federal Reserve System
The advantage of investing in L.A.I.F is that the funds are available the same day, based upon the cash management needs of the City. L.A.I.F. is part of the Pooled Money Investment Account that was created by statute and governed by a five-member board chaired by the State Treasurer. Under Government Code Section 16429.3, funds deposited are excluded from being transferred or seized by any State Agency. L.A.I.F. increased its deposit limit from $65 to $75 million, effective January 1, 2020. The FY 2022-23 Budget assumes an annual average interest rate of 0.41%. Due to grant and reimbursement-funded construction projects included in the FY 2022-23 Budget such as the Ranchero Road and other street improvement projects, the ability to draw funds same day (free of penalties) to pay peak cash flow obligations is important in the City’s ability to effectively manage cash for City operations. For this reason, continued investments with LAIF are recommended.
The Statement of Investment Policy has been reviewed by staff to ensure it continues to conform to the Association of Public Treasurers of the United States and Canada Model Investment Policy and California Local Agency Investment Guidelines. There were no approved changes to the local agency investment related codes during the 2021 Legislative session. The 2022 Local Agency Investment Guidelines (LAIG) presented by the California Debt and Investment Advisory Commission (the 2022 Guidelines) reflect the most current investment statutes. However, the 2022 LAIG includes minor formatting and grammatical corrections as well as the addition of a discussion in Chapter 2 on securities issued by departments or authorities of the State of California. In addition, a paragraph related to a 2020 temporary federal rule change (IRS Notice 2020-25) that extended the holding period of variable rate debt subject to a qualified tender purchased by the issuing agency was deleted. The time-limited authority of the temporary rule change expired. These changes did not impact the City’s investment policy.
In addition to the limited changes referenced above, the dates referenced in the Policy have been updated to reflect that the Policy has been reviewed for any potential impact in statutory changes. These changes to the Policy are as shown in a “track changes” version (Attachment 2) of the draft Statement of Investment Policy for Fiscal Year (FY) 2022-23. These changes have also been included in the “clean” version (Attachment 1) of the FY 2022-23 Policy and are recommended for approval.
FISCAL IMPACT
Adoption of the Statement of Investment Policy has no direct financial impact on the City’s Budget.
ALTERNATIVE(S)
Failure to adopt a Statement of Investment Policy would result in an audit exception and the requirement to advise investors of the deviation from statutory requirements.
Provide alternative direction to staff.
ATTACHMENT(S)
Statement of Investment Policy for FY 2022-23 (clean)
Statement of Investment Policy for FY 2022-23 (track changes) Joint Resolution No. 2022-57, SA 2022-01, HHA 2022-06, CDC 2022-03, HFPD 2022-05, and HWD 2022-12 City of Hesperia STAFF REPORT City of Hesperia STAFF REPORT City of Hesperia
STAFF REPORT
City of Hesperia
STAFF REPORT
Staff Report to the City Council, Chairman, and Board Members 2022-23 Statement of Investment Policy
November 15, 2022