Agenda Item
City Council
Item #: 3.38. 4/12/2022 File #: 22-0186
TO: Honorable Mayor and Members of the City Council
THRU: Rob Houston, City Manager
FROM: Richard A. Rohm, City Treasurer
Will Kolbow, Assistant City Manager/Administrative Services Director
1. SUBJECT
Annual review and approval of the Statement of Investment Policy for Fiscal Year 2022-23.
Resolution No. 11384.
2. SUMMARY
The Investment Advisory Committee met this past February with the Chandler Investment Services (Chandler), the City’sinvestment management firm. During that meeting, Chandler explained that they conducted an extensive review of the City’scurrent Statement of Investment Policy to bring it up to date with current trends and laws governing public sector investments. They then provided recommendations to further the best interest of the City’s investment strategy. As such, the Investment Advisory Committee reviewed and approved changes to the City’s Statement of Investment Policy.
3. RECOMMENDED ACTION
Adopt Resolution No. 11384. A Resolution of the City Council of the City of Orange approving and adopting a Statement of Investment Policy for Fiscal Year 2022-23.
4. FISCAL IMPACT
None.
5. STRATEGIC PLAN GOALS
Goal 2: Be a fiscally healthy community
b: Analyze future fiscal needs and potential revenue opportunities.
6. DISCUSSION AND BACKGROUND
The California Government Code Section 53646 requires that the Statement of Investment Policy (SIP) be reviewed and approved by the legislative body on an annual basis. The City’sInvestment Policy is one of the most conservative policies in the State and it is proposed that the very conservative features of the policy be maintained. Many of the allowable investments under the State Code are not permitted in the City’spolicy. In addition, the policy puts additional specific limits on U.S. Government Agency investments.
In collaboration with the Investment Advisory Committee (IAC), Chandler Asset Management and staff recently reviewed the City’s investment policy to capture recent changes to California City of Orange Printed on 4/7/2022Page 1 of 3
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Item #: 3.38. 4/12/2022 File #: 22-0186
staff recently reviewed the City’s investment policy to capture recent changes to California Government Code (Code) Section 53601 and those areas that govern the investment of public funds.
Staff also reviewed the City’s policy to ensure the inclusion of the latest best practices from recognized industry groups such as Government Finance Officers Association (GFOA), California Society of Municipal Finance Officers (CSMFO), California Municipal Treasurers Association (CMTA), and the Association of Public Treasurers of the United States and Canada (APTUSC).
The proposed revisions to the SIP have been reviewed and approved by the IAC. It is important to note that one recommended change from Chandler involving SB 998 and negative interest securities was rejected by the IAC and therefore, not included in the recommended changes to the City Council. We believe the recommendations listed below take into consideration the desire to retain the predominant language of a well-written policy yet address best practices for the upcoming year.
These proposed investment policy changes are listed as follows:
· Section 2: Operations and Procedures:
o 2.1 Scope: Recommendation to replace the term CAFR (Comprehensive Annual Financial Report) with ACFR (Annual Comprehensive Financial Report) to be in line with GFOA recommendation.
o 2.4 Authorized Financial Institutions and Dealers: Recommendation to update the list of authorized institutions to transact business with and update language to include competitive bid process.
· Section 3: Permitted Investments
o 3.1 Investments Authorized
§ Agency Bonds: Recommendation to include the risk management language limiting the number of callable agency securities to 20% and adjust the amount of the purchase of any single issuer to be 30%, in line with Best Practices; § Commercial Paper: Recommendation to increase the limit for commercial paper to be in line with Best Practices and CA government code, as well as up to date with the passing of SB 998
§ Medium Term Notes: Recommendation to increase the maximum concentration of medium term notes to be 30%, in line with Best Practices and CA government code;
§ Permitted investments: Recommendation to include Pass-Through Securities and Supranationals under permitted investments;
§ NRSRO language: Recommendation to update NRSRO language including rating category for Commercial Paper, Medium Term Notes and Municipal City of Orange Printed on 4/7/2022Page 2 of 3
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Item #: 3.38. 4/12/2022 File #: 22-0186
Bonds.
o 3.3 Mitigating Risk in the portfolio:
§ Credit Risk: Recommendation to update the downgrade language; § Market Risk: Recommendation to update this section to reduce emphasis on laddering, remove term structure limitations and update language to include comment about improving opportunities.
· Section 4: Reporting, Review and Audits
o 4.1 Monthly Reports: Recommendation to update language as AIMR is no longer valid.
· Glossary: CAM recommends the inclusion of new terms to the Glossary.
7. ATTACHMENTS
· Resolution No. 11384
· Statement of Investment Policy
· Statement of Investment Policy - Redline
City of Orange Printed on 4/7/2022Page 3 of 3
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