PISMO BEACH COUNCIL AGENDA REPORT
Agenda Item #9.E
SUBJECT/TITLE:
ANNUAL REVIEW AND APPROVAL OF INVESTMENT POLICY
RECOMMENDATION:
Approve the City of Pismo Beach Investment Policy.
EXECUTIVE SUMMARY:
The primary purpose of this agenda item is to present the City of Pismo Beach Investment Policy for City Council review and approval. California Government Code Section 53646 (a) (2) provides that “In the case of any other local agency [other than county government], the treasurer or chief fiscal officer of the local agency may annually render to the legislative body of that local agency and any oversight committee of that local agency a statement of investment policy, which the legislative body of the local agency shall consider at a public meeting. Any change in the policy shall also be considered by the legislative body of the local agency at a public meeting." The City’s Investment Policy was last approved on January 4, 2022.
The Administrative Services Director/City Treasurer reviewed the existing Investment Policy and has no changes to the Policy at this time. The policy complies with the California Government Code and best practices and is certified by the California Municipal Treasurers Association Investment Policy certification program.
Recommendation
Staff recommends that Council approve the City of Pismo Beach Investment Policy (Attachment 1).
FISCAL IMPACT:
As the proposed Investment Policy is the same as the existing policy, approving the Investment Policy does not have a significant financial impact. The Policy promotes the City’s objectives to safeguard the principal, remain liquid, and strive for maximum investment returns. The amount invested in various investment securities is dependent on the cash flow needs of the City and the market dictates the earnings on the majority of the City’s portfolio.
ALTERNATIVES:
1. The City Council may make its own changes, or may provide direction to the City Treasurer to develop information for possible future recommendations.
ATTACHMENTS:
1. 2023 City of Pismo Beach Investment Policy
Council Agenda 1-17-2023 9.E-1
Submitted by: Meeting Date: January 17, 2023
Nadia Feeser, Administrative Services Director / City Treasurer City Manager Approval:
Council Agenda 1-17-2023 9.E-2
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1.0Policy
TheCityofPismoBeach(“City”)shallinvestpublicfundsinsuchamannerastocomply withstateandlocallaws;ensureprudentmoneymanagement;providefordailycash flowrequirements;andmeettheobjectivesofthePolicy,inpriorityorderofSafety, Liquidity,andReturnoninvestment.
CaliforniaGovernmentCodeSection53646(a)(2)statesthattheCityTreasurermay annuallysubmitaninvestmentpolicytotheCityCouncilforconsiderationatapublic meeting.ThisinvestmentpolicyconformstoallpertinentexistinglawsoftheStateof California,includingCaliforniaGovernmentCodeSections53600etseq.
2.0Scope
ThisinvestmentpolicyappliestoallfinancialassetsandinvestmentactivitiesoftheCity. InvestmentsfortheCitywillbemadeonallfundsidentifiedintheComprehensiveAnnual FinancialReport(CAFR)onapooledbasis,includingtheGeneralFund,SpecialRevenue Funds,CapitalProjectFunds,DebtServiceFunds,EnterpriseFunds,InternalServiceFunds, FiduciaryFunds,andanyfundssubsequentlycreated.
ThisinvestmentpolicydoesnotapplytoBondProceeds,DeferredCompensationFunds, RetirementorRetireeHealthCaresavings/trusts/plans.CaliforniaGovernmentCode Section5922(d)authorizesproceedsofbondstobeinvestedinaccordancewithrelated offeringdocumentation.TheseCodeSectionsrecognizetheuniqueneedsandobjectives ofsuchproceeds.Likewise,DeferredCompensationPlansarecoveredunderCalifornia GovernmentCode.
3.0Prudence
TheCityTreasurerisauthorizedtomakeinvestmentdecisionsonbehalfoftheCity investingpublicfundssubjecttotheprudentinvestmentstandard.ThePrudentInvestor Standard(CaliforniaGovernmentCodeSection53600.3)states,that“wheninvesting, reinvesting,purchasing,acquiring,exchanging,sellingormanagingpublicfunds,atrustee shallactwithcare,skill,prudenceanddiligenceunderthecircumstancesthenprevailing, including,butnotlimitedto,thegeneraleconomicconditionsandtheanticipatedneed ofthe[City],thataprudentpersoninalikecapacityandfamiliaritywiththosematters woulduseintheconductoffundsofalikecharacterandwithlikeaims,tosafeguardthe principalandmaintaintheliquidityneedsofthe[City]”.Thestandardofprudencetobe usedbyinvestmentofficialsshallbeappliedinthecontextofmanaginganoverall portfolio.
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4.0Objectives
Theprimaryobjectives,inpriorityorder,oftheCity’sinvestmentactivities(per CAGovtCodeSection53600.5)shallbe:
4.1.Safety:Safetyofprincipalistheforemostobjectiveoftheinvestmentprogram. InvestmentsoftheCityshallbeundertakeninamannerthatseekstoensurethe preservationofcapitalintheoverallportfolio.Toattainthisobjective,the Citywilldiversifyitsinvestmentsbyinvestingfundsamongavarietyofsecurities withindependentreturns.
4.2.Liquidity:TheCity’sinvestmentportfoliowillremainsufficientlyliquidtoenable theCitytomeetalloperatingrequirementswhichmightbereasonably anticipated.
4.3.ReturnonInvestments:TheCity’sinvestmentportfolioshallhavetheobjectiveof attainingacomparativeperformancemeasurementoranacceptablerateof returnthroughoutbudgetaryandeconomiccycles.Thesemeasurementsshould becommensuratewiththeCity’sinvestmentriskconstraintsidentifiedinthe InvestmentPolicyandthecashflowcharacteristicsoftheportfolio.
5.0DelegationofAuthority
CaliforniaGovernmentCodeSection53601statesthatthelegislativebodyofalocal agency(i.e.,theCityCouncil)isauthorizedtoinvestsurplusmoneysasspecifiedinthat codesection.InaccordancewithCaliforniaGovernmentCodeSection53607,this authoritymaybedelegatedtotheCityTreasurerforaoneͲyearperiodbytheCity Council.Subjecttoreview,theCityCouncilmayrenewthedelegationofauthorityunder thiscodesectioneachyear.
ThePismoBeachCityCouncildelegatesitsauthoritytoinvestorreinvestCityfundsto theCityTreasurer,whoisalsotheAdministrativeServicesDirector.TheCityTreasurer willberesponsibleforallinvestmenttransactionsandshallestablishasystemofcontrols toregulatetheactivitiesofCityofficialsinvolvedinanyaspectoftheinvestmentprogram. InthecaseoftheCityTreasurer’sabsence,theCityCouncildelegatesinvestment authorityinthefollowingorderto(1)FinanceManagerand(2)CityManager.
DutiesandResponsibilities
5.1.CityTreasurer(AdministrativeServicesDirector):Chargedwithresponsibilityforall publicfundsandsecuritiesbelongingtoorunderthecontroloftheCity,andfor thedepositandinvestmentofthosefundsinaccordancewiththeprinciplesof soundtreasurymanagementandinaccordancewiththeapplicablelaws, ordinances,andpoliciesadoptedbytheCity.
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5.2.AdministrativeServicesDepartmentStaff:Chargedwithrecordinginvestment activityintheaccountingrecordsandwithverifyingtheTreasurer'srecordswith brokerconfirmations,bankstatements,andsafekeepingrecords.
5.3.FinanceManager:Chargedwithresponsibility(intheabsenceoftheTreasurer)for allpublicfundsandsecuritiesbelongingtoorunderthecontroloftheCityandfor theirdeposit.Dutiesrelatedtoinvestmentactivitiesshallbeperformedbystaff otherthanthoseresponsiblefortheaccountingofthoseinvestments.
5.4.CityCouncil:MaydelegatetotheCityTreasurerforaoneͲyearperiodtheauthority toinvesttheCity'sfunds.Subjecttoreview,theCityCouncilmayrenewthe delegationofthisauthorityeachyear.TheCityCouncilmayalsoannually considerandapproveawrittenStatementofInvestmentPolicyatapublic meeting.AnychangetotheInvestmentPolicyatanytimeshallalsobeconsidered bytheCityCouncilatapublicmeeting.
6.0EthicsandConflictsofInterest
Officersandemployeesinvolvedintheinvestmentprocessshallrefrainfrompersonal businessactivitythatcouldconflictwithproperexecutionoftheinvestmentprogram,or whichcouldimpairtheirabilitytomakeimpartialinvestmentdecisions.Employeesand investmentofficersshalldiscloseanymaterialfinancialinterestinfinancialinstitutions thatconductbusinesswiththisCity,andtheyshallfurtherdiscloseanylargepersonal financial/investmentpositionsthatcouldberelatedtotheperformanceoftheCity’s portfolio.
7.0 AuthorizedFinancialDealersandInstitutions
7.1.TheTreasurerwillmaintainalistofapprovedfinancialinstitutionsauthorizedto provideinvestmentservicestotheCityintheStateofCalifornia.Acompetitivebid process,whenpractical,willbeusedtoplaceallinvestmentpurchases,otherthan thosethatareclassifiedas“newissue”securities.Onanannualbasis,the Treasurershallrecommendalistofatleasttwobroker/dealerswhoare authorizedtoprovideinvestmentservices.ThelistshallbeapprovedbytheCity Council.Allbroker/dealerswhowishtobeconsideredforthelistmustmeetthe followingminimumrequirements:
7.1.aMustbea“primary”orregionaldealerthatqualifiesundertheSecurities andExchangeCommissionRule15C3Ͳ1(UniformNetCapitalRule)
7.1.bMustbeexperiencedinpublicagencyinvestingandinvestmentproducts andfamiliarwiththeCaliforniaGovernmentCodeasrelatedto investmentsforlocalgovernmentalagencies
7.1.cMusthavebeeninbusinessforatleastthreeyears
7.1.dMustsupplytheTreasurerwiththefollowing:
•currentauditedfinancialstatements,
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•proofofFinancialIndustryRegulatoryAuthority(FINRA) certification,
•tradingresolution,
•depositorycontracts,
•proofofStateofCaliforniaregistration,
•completedbroker/dealerquestionnaire,and
•certificationofhavingreadtheCity’sinvestmentpolicy.
7.1.eTheTreasurershallconsiderthecreditworthinessofinstitutions.
7.2.Ifathirdpartyinvestmentadvisorisauthorizedtoconductinvestment transactionsontheCity’sbehalf,theinvestmentadvisormayusetheirown listofapprovedbroker/dealersandfinancialinstitutions.Theinvestmentadvisor’s approvedlistmustbemadeavailabletotheCityuponrequest.
7.3.Nopublicdepositshallbemadeexceptinaqualifiedpublicdepositoryas establishedbytheestablishedstatelaws.
7.4.Anannualreviewofthefinancialconditionandregistrationsofqualifiedbidders willbeconductedbytheTreasurer.Acurrentauditedfinancialstatementis requiredtobeonfileforeachfinancialinstitutionandbroker/dealerinwhichthe Cityinvests.
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8.0AuthorizedandSuitableInvestments
CaliforniaGovernmentCodeSection53601,53601.6,53601.8,53635,53635.2, 53638and53684includeanumberofrequirementsonhowandwherepublicmoney maybeinvested.TheCityisempoweredbystatutetoinvestinthefollowingtypesof securities:
PermittedInvestments
CityDollarLimit,
MaximumPercentageof
PortfolioLimit
Maturity
Limit
LocalAgencyInvestmentFund(LAIF)$50million,100%None AgencyIssues(Government
SponsoredEnterprise,orGSE,
instruments
50%5years
NegotiableCertificatesofDeposits30%5years
PublicFundsCheckingorSavings
Account
100%None
SharesofBeneficialInterest(i.e.,
moneymarketmutualfunds)
20%(10%inanyone
mutualfund)
None
U.S.TreasuryIssues100%5years
StateofCaliforniaIssues30%5years
IssuesofEntitiesoutsideofCalifornia30%5years
IssuesofOtherCaliforniaentities30%5years
CityofPismoBeachBonds100%5years
CorporateBonds30%,minimumratingbyat
leastoneofthefollowing,anda
maximumof10%perissuer:
S&PA,Moody’sA2,FitchA
5years
CommercialPaper25%orportfolio;10%
perissuer;Ratingof
‘A1/P1’orhigherfrom
S&PandMoody’s
270
days
AnyStateofCalifornialegislativeactionthatfurtherrestrictsallowablematurities, investmenttypesorpercentageallocationswillbeincorporatedintotheCity’sPolicyand supersedesanyandallpreviousapplicablelanguage.IftheCityisholdinganinvestment thatissubsequentlyprohibitedbyalegislativechange,theCitymayholdthatinvestment, ifitisdeemedprudentbytheInvestmentOfficer,untilthematuritydatetoavoidan unnecessaryloss.
9.0ReviewofInvestmentPortfolio
ThesecuritiesheldbytheCitymustbeincompliancewithSection8.0Authorizedand SuitableInvestmentsatthetimeofpurchase.Becausesomesecuritiesmaynotcomply withSection8.0AuthorizedandSuitableInvestmentssubsequenttothedateofpurchase, theTreasurershallatleastquarterlyreviewtheportfoliotoidentifythosesecuritiesthat Council Agenda 1-17-2023 9.E-7
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donotcomply.TheTreasurershallestablishprocedurestoreporttotheCityCouncil, majorandcriticalincidencesofnoncomplianceidentifiedthroughthereviewofthe portfolio.
10.0InvestmentPools/MutualFunds
Athoroughinvestigationofthepool/fundisrequiredpriortoinvesting,andonacontinual basis.Thereshallbeaquestionnairedevelopedwhichwillanswerthefollowinggeneral questions:
10.1.Adescriptionofeligibleinvestmentsecurities,andawrittenstatementof investmentpolicyandobjectives.
10.2.Adescriptionofinterestcalculationsandhowitisdistributed,andhowgains andlossesaretreated.
10.3.Adescriptionofhowthesecuritiesaresafeguarded(includingthesettlement processes),andhowoftenthesecuritiesarepricedandtheprogramaudited.
10.4.Adescriptionofwhomayinvestintheprogram,howoften,whatsizedepositand withdrawalareallowed.
10.5.Ascheduleforreceivingstatementsandportfoliolistings
10.6.Adescriptionofhowthepool/fundmaintainreserves,retainedearnings,etc.or isallincomeafterexpensesdistributedtoparticipants
10.7.Afeeschedulethatdiscloseswhenandhowfeesareassessed.
10.8.Theeligibilityofthepool/fundtoinvestinbondproceedsandadescriptionofits practices.
11.0Collateralization
Collateralizationisrequiredoncertificatesofdepositsandsweepcheckingaccounts.In ordertoanticipatemarketchangesandprovidealevelofsecurityforallfunds,the collateralizationlevelwillbe(110%)ofmarketvalueofprincipalandaccruedinterest.
TheCitychoosestolimitcollateraltothefollowing:certificatesofdeposits,sweep checkingaccounts,andagencyissues.Collateralwillalwaysbeheldbyanindependent thirdpartywithwhomtheentityhasacurrentcustodialagreement.Aclearlymarked evidenceofownership(safekeepingreceipt)mustbesuppliedtotheentityandretained.
TheTreasurer,atherdiscretion,maywaivethecollateralrequirementsforcertificatesof depositsupto$250,000whicharefullyinsuredbytheFederalDepositInsurance Corporation.
12.0SafekeepingandCustody
Allsecuritieswillbereceivedanddeliveredonadeliveryversuspayment(DVP)basis. Securitieswillbeheldbyathirdpartycustodian/safekeepingaccountdesignatedbythe Treasurerandevidencedbysafekeepingreceipts.Saidsecuritiesshallbeheldinamanner thatestablishesthegovernmententity’srightofownership.Theonlyexceptiontothe foregoingshallbedepositoryaccountsandsecuritiespurchasesmadewith:LAIF,time certificatesofdepositandmoneymarketmutualfundshelddirectlywithissuing institution,sincethepurchasedsecuritiesarenotdeliverable. Council Agenda 1-17-2023 9.E-8
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13.0Diversification
TheCityrecognizesthatinvestmentriskscanresultfromissuerdefaults,marketprice changes,orvarioustechnicalcomplicationsleadingtotemporaryilliquidity.Tominimize theCity’sexposuretothesetypesofrisk,theportfolioshouldbediversifiedamong severaltypesofinstitutions,instruments,andmaturities.TheTreasurershallminimize defaultriskbyprudentlyselectingonlyinstrumentsandinstitutions,whichatthetimeof placementhavebeenevaluatedfortheirfinancialviabilityandcompliancewiththis policy.
Noindividualinvestmenttransactionshallbeundertakenthatjeopardizesthetotal capitalpositionoftheoverallportfolio.Riskshallalsobemanagedbysubscribingtoa portfoliomanagementphilosophythathelpstocontrolmarketandinterestrateriskby matchinginvestmentswithcashflowrequirements.Seesection9.0Authorizedand SuitableInvestments,whichliststheCity’smaximumpercentagelimitsandpromotesa diverseportfolio.
14.0MaximumMaturities
Totheextentpossible,theCitywillattempttomatchitsinvestmentswithanticipatedcash flowrequirements.Matchingmaturitieswithcashflowdateswillreducetheneedtosell securitiespriortomaturity,thusreducingmarketrisk.Unlessmatchedtoaspecific cashflowandapprovedbyCityCouncil,theCitywillnotdirectlyinvestinsecurities maturingmorethan5yearsfromthedateofpurchase.
15.0InternalControls
TheTreasurershallestablishanannualprocessofindependentreviewbyanexternal auditor.Thisreviewwillprovideinternalcontrolbyassuringcompliancewithpoliciesand procedures.
•Properdocumentationobtainedfromconfirmationandcashdisbursementwire transfersisrequiredforeachinvestmenttransaction. •Timelybankreconciliationisconductedtoensureproperhandlingofalltransactions. •Theinvestmentportfolioandallrelatedtransactionsarereviewedandbalancedto appropriategeneralledgeraccountsbytheAdministrativeServicesDepartmentona monthlyandquarterlybasis.
16.0PerformanceStandards
Theinvestmentportfolioshallbedesignedwiththeobjectiveofobtainingarateof returnthroughoutbudgetaryandeconomiccycles,commensuratewithinvestmentrisk constraintsandcashflowneeds.
TheCity’sbasicinvestmentstrategyistobuyandholdinvestmentsuntilmaturity However,theTreasurermaysellasecurityduetoadversechangesincreditriskordueto unexpectedcashflowneeds.
Council Agenda 1-17-2023 9.E-9
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TheMarketYieldbenchmarkusedbytheTreasureristodeterminewhethermarketyields arebeingachievedandshallbetherateofreturnfromthefollowingindices:LocalAgency InvestmentFund(LAIF)and6Ͳmonthand1ͲyearTreasuryBills.
17.0InvestmentReporting
InaccordancewithCaliforniaGovernmentCodeSection53607,theTreasurershallfile amonthlyinvestmentreportwiththeCityClerkwhowillplacethereportontheagenda ofthenextregularCityCouncilmeeting.TheTreasurershallreviewandrendermonthly andquarterlyinvestmentportfolioreportstotheCityManagerandCityCouncil. •Themonthlyreportshallincludeanaccountingofallreceipts,disbursements,and fundbalances.
•Thequarterlyreportsshallincludethebookandmarketvalueofthecash investment,theclassificationoftheinvestment,thenameoftheinstitutionorentity, therateofinterest,andthematuritydatesforallsecurities. •Thequarterlyreportwillincludeastatementofcomplianceoftheportfoliowith theinvestmentpolicyoranexplanationastowhytheportfolioisnotincompliance perGovernmentCode53646(b)(2).
•Thequarterlyreportwillincludeastatementonavailabilityoffundstomeetits obligationswithinthenextsixmonthsperGovernmentCode53646(b)(3).
18.0InvestmentPolicyAdoption
TheCity’sInvestmentPolicyshallbeadoptedbyresolutionannuallybytheCityCouncil. ThepolicyshallbereviewedannuallybytheCityCouncilandanymodificationsmade theretomustbeapprovedbytheCityCouncil.
19.0Glossary
AGENCIES:Federalagencysecuritiesand/orGovernmentͲsponsoredenterprises.ASK PRICE:Thepriceatwhichsecuritiesareoffered.
BEARMARKET:Aperiodofgenerallypessimisticattitudesanddecliningmarketprices.
BENCHMARK:Acomparativebaseformeasuringtheperformanceorrisktoleranceofthe investmentportfolio.Abenchmarkshouldrepresentaclosecorrelationtothelevelofriskand theaveragedurationoftheportfolio’sinvestments.
BIDPRICE:Thepriceofferedbyabuyerofsecurities.(Whenyouaresellingsecurities,youaskfor abid.)SeeOffer.
BOND:AninterestͲbearingsecurityissuedbyacorporation,quasiͲgovernmentalagencyorother body,whichcanbeexecutedthroughabankortrustcompany.Abondisaformofdebtwithan interestrate,maturity,andfacevalue,andisusuallysecuredbyspecificassets.Mostbonds haveamaturityofgreaterthanoneyear,andgenerallypayinterestsemiͲannually. Council Agenda 1-17-2023 9.E-10
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BONDRATING:Theclassificationofabond’sinvestmentquality.
BOOKVALUE:Theamountatwhichasecurityiscarriedonthebooksoftheholderorissuer.The bookvalueisoftenthecost,plusorminusamortization,andmaydiffersignificantlyfromthe marketvalue.
BROKER:Abrokerbringsbuyersandsellerstogetherforacommission.
BULLMARKET:Aperiodofgenerallyoptimisticattitudesandincreasingmarketprices.
CERTIFICATEOFDEPOSIT(CD):AtimedepositwithaspecificmaturityevidencedbyaCertificate. LargeͲdenominationCD’saretypicallynegotiable.
COLLATERAL:Securities,evidenceofdepositorotherproperty,whichaborrowerpledgesto securerepaymentofaloan.Alsoreferstosecuritiespledgedbyabanktosecuredepositsof publicmonies.
COMMERCIALPAPER:ShortͲtermobligationswithmaturitiesrangingfrom2to270daysissued bybanks,corporations,andotherborrowerstoinvestorswithtemporarilyidlecash.Such instrumentsareunsecuredandusuallydiscounted,althoughsomeareinterestͲbearing.
COMMISSION:Thebroker’soragent’sfeeforpurchasingorsellingsecuritiesforaclient.
COMPREHENSIVEANNUALFINANCIALREPORT(CAFR):Theofficialfinancialannualreportofthe City.Itincludesfivecombinedstatementsforeachindividualfundandaccountgroupprepared inconformitywithGAAP.Italsoincludessupportingschedulesnecessarytodemonstrate compliancewithfinanceͲrelatedlegalandcontractualprovisions,extensiveintroductory material,andadetailedStatisticalSection.
COUPON:(a)Theannualrateofinterestthatabond’sissuerpromisestopaythebondholderon thebond’sfacevalue.(b)Acertificateattachedtoabondevidencinginterestdueonapayment date.
DEALER:Adealer,asopposedtoabroker,actsasaprincipalinalltransactions,buying andsellingforhisownaccount.
DEBENTURE:Abondsecuredonlybythegeneralcreditoftheissuer.
DEFAULTRISK:Thisistheriskthatacompanyorindividualwillbeunabletomaketherequired paymentsontheirobligation.Standardmeasurementtoolstogaugedefaultriskincludecredit ratingsbyNationallyRecognizedStatisticalRatingOrganizations(NRSROs).
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DELIVERYVERSUSPAYMENT:Therearetwomethodsofdeliveryofsecurities:deliveryversus paymentanddeliveryversusreceipt.Deliveryversuspaymentisdeliveryofsecuritieswithan exchangeofmoneyforthesecurities.Deliveryversusreceiptisdeliveryofsecuritieswithan exchangeofasignedreceiptforthesecurities.
DISCOUNT:Thedifferencebetweenthecostpriceofasecurityanditsmaturitywhenquotedat lowerthanfacevalue.Asecuritysellingbeloworiginalofferingpriceshortlyaftersalealsois consideredtobeatadiscount.
FEDERALRESERVESYSTEM:ThecentralbankoftheUnitedStateswhichconsistsofaseven memberBoardofGovernors,12regionalbanksandapproximately5,700commercialbanks thataremembers.
DISCOUNTSECURITIES:NonͲinterestbearingmoneymarketinstrumentsthatareissueda discountandredeemedatmaturityforfullfacevalue(e.g.,U.S.TreasuryBills).
DIVERSIFICATION:Dividinginvestmentfundsamongavarietyofsecuritiesofferingindependent returns.
DURATION:Ameasureofthesensitivityoftheprice(thevalueofprincipal)ofafixedͲincome investmenttoachangeininterestrates.Durationisexpressedasanumberofyears.Rising interestratesmeanfallingbondprices,whiledeclininginterestratesmeanrisingbondprices.
FEDERALCREDITAGENCIES:AgenciesoftheFederalgovernmentsetuptosupplycredittovarious classesofinstitutionsandindividuals,e.g.,S&L’s,smallbusinessfirms,students,farmers,farm cooperatives,andexporters.
FEDERALDEPOSITINSURANCECORPORATION(FDIC):Afederalagencythatinsuresbankdeposits, currentlyupto$250,000perentity.
FEDERALFUNDSRATE:TherateofinterestatwhichFedfundsaretraded.Thisrateiscurrently peggedbytheFederalReservethroughopenͲmarketoperations.
FEDERALOPENMARKETCOMMITTEE(FOMC):ConsistsofsevenmembersoftheFederalReserve BoardandfiveofthetwelveFederalReserveBankPresidents.ThePresidentoftheNewYork FederalReserveBankisapermanentmember,whiletheotherPresidentsserveonarotating basis.TheCommitteeperiodicallymeetstosetFederalReserveguidelinesregardingpurchases andsalesofGovernmentSecuritiesintheopenmarketasameansofinfluencingthevolumeof bankcreditandmoney.
FISCALYEAR:Anaccountingortaxperiodcomprisinganytwelvemonthperiod.The City’sfiscalyearbeginsonJuly1.
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FULLFAITHANDCREDIT:TheunconditionalguaranteeoftheUnitedStatesgovernmentbacking adebtforrepayment.
INTERESTRATE:Theinterestpayableeachyearonborrowedfunds,expressedasapercentageof theprincipal.
INVESTMENT:Useofcapitaltocreatemoremoney,eitherthroughincomeͲproducingvehiclesor throughmoreriskͲorientedventuresdesignedtoresultincapitalgains.
INVESTMENTPORTFOLIO:Acollectionofsecuritiesheldbyabank,individual,institution,or governmentagencyforinvestmentpurposes.
LAIF:tradenamefortheCaliforniaStateLocalAgencyInvestmentFund.Chapter730,Statutesof 1976oftheStateofCalifornia,establishedtheLAIF.TheLAIFenableslocalgovernmental agenciestoremitmoneynotrequiredforimmediateneedstotheStateTreasurerforthe purposeofinvestment.Inordertoderivethemaximumrateofreturnpossible,theState TreasurerhaselectedininvestthesemonieswithStatemoniesasapartofthePooledMoney InvestmentAccount.Eachlocalgovernmentalunithastheexclusivedeterminationofthelength oftimeitsmoneywillbeondepositwiththeStateTreasurer.Attheendofeachcalendarquarter, allearningsderivedfrominvestmentsaredistributedbytheStaterespectiveamountsdeposited intheLAIFandthelengthoftimesuchamountsremainedtherein.Priortothedistribution,the State’scostofadministeringtheprogramaredeductedfromtheearnings.TheCalifornia GovernmentCodestatesthatmoniesplacedfordepositinLAIFareintrustinthecustodyofthe StateTreasurerandcannotbeborrowedorbewithheldfromtheCity.Further,therightofthe CitytowithdrawitsdepositedmoneyfromtheLAIFupondemandmaynotbealtered, impaired,ordeniedinanywaybyanyStateofficialoragencybasedupontheState’sfailureto adoptabudgetbyJuly1ofeachnewfiscalyear.
LIQUIDITY:Aliquidassetisonethatcanbeconvertedeasilyandrapidlyintocashwithouta substantiallossofvalue.Inthemoneymarket,asecurityissaidtobeliquidifthespreadbetween bidandaskedpricesisnarrowandreasonablesizecanbedoneatthosequotes.
MARKETRISK:Thisistheriskthatthevalueofasecuritywillraiseordeclineasaresultof changesinmarketconditions.
MARKETVALUE:thepriceatwhichasecurityiscurrentlybeingsoldinthemarket.MATURITY: thedatethattheprincipalorstatedvalueofdebtinstrumentbecomesdue andpayable.
MONEYMARKET:ThemarketinwhichshortͲtermdebtinstruments(bills,commercialpaper, bankers’acceptances,etc.)areissuedandtraded.
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MUTUALFUND:Aninvestmentcompanythatpoolsmoneyandcaninvestinavarietyof securities,includingfixedͲincomesecuritiesandmoneymarketinstruments.Mutualfundsare regulatedbytheInvestmentCompanyActof1940andmustabidebySecuritiesandExchange Commission(SEC)disclosureguidelines.
NEGOTIABLECERTIFICATESOFDEPOSIT:Fixeddepositcertificatethatmaybenegotiated(traded) toathirdparty.Theinstitutionissuingthecertificatepromisestopayfacevalueplusaccrued interestatmaturityorsemiͲannuallyifmaturityisoveroneyear.
NRSRO:ThisacronymstandsforNationallyRecognizedStatisticalRatingOrganization,whichisa creditratingagencythatissuescreditratingsthattheU.S.SecuritiesandExchangeCommission (SEC)permitsotherfinancialfirmstouseforcertainregulatorypurposes.NRSROsinclude Standard&Poor’s,Moody’s,andFitchratings.
OFFER:Thepriceaskedbyasellerofsecurities.(Whenyouarebuyingsecurities,youaskforan offer.)SeeAskedandBid.
OPENMARKETOPERATIONS:Purchasesandsalesofgovernmentandcertainothersecuritiesin theopenmarketbytheNewYorkFederalReserveBankasdirectedbytheFOMCinorderto influencethevolumeofmoneyandcreditintheeconomy.Purchasesinjectreservesintothe banksystemandstimulategrowthofmoneyandcredit;saleshavetheoppositeeffect.Open marketoperationsaretheFederalReserve’smostimportantandmostflexiblemonetarypolicy tool.
PORTFOLIO:Thecollectionofsecuritiesheldbyanindividualorinstitution.Thecombinedholding ofmorethanonestock,bond,commodity,realestateinvestment,cashequivalent,orother asset.Thepurposeofaportfolioistoreduceriskbydiversification.
PRINCIPAL:Thefaceorparvalueofaninstrument.
PRIMARYDEALER:Agroupofgovernmentsecuritiesdealerswhosubmitdailyreportsofmarket activityandpositionsandmonthlyfinancialstatementstotheFederalReserveBankofNewYork andaresubjecttoitsinformaloversight.PrimarydealersincludeSecuritiesandExchange Commission(SEC)ͲregisteredsecuritiesbrokerͲdealers,banks,andafewunregulatedfirms.
QUALIFIEDPUBLICDEPOSITORIES:Afinancialinstitutionwhichdoesnotclaimexemptionfrom thepaymentofanysalesorcompensatinguseoradvaloremtaxesunderthelawsofthisstate, whichhassegregatedforthebenefitofthecommissioneligiblecollateralhavingavalueof notlessthanitsmaximumliabilityandwhichhasbeenapprovedbythePublicDeposit ProtectionCommissiontoholdpublicdeposits.
Council Agenda 1-17-2023 9.E-14
Attachment 1
CityofPismoBeachInvestmentPolicy
13 CityofPismoBeachInvestmentPolicyJanuary17,2023
RATEOFRETURN:1)Theyieldwhichcanbeattainedonasecuritybasedonitspurchasepriceor itscurrentmarketprice.2)Incomeearnedonaninvestment,expressedasapercentageofthe costoftheinvestment.
RATING:Thedesignationusedbyinvestors’servicestoratethequalityofasecurity’s creditworthiness.Moody’sratingsrangefromthehighestAaa,downthroughAa,A,Bbb,Ba, B,etc.whileStandardandPoor’sratingrangefromthehighestAAA,downthroughAA,A, BBB,BB,B,etc.
REFINANCING:Rollingovertheprincipalonsecuritiesthathavereachedmaturityorreplacing themwiththesaleofnewissues.Theobjectmaybetosaveinterestcostsortoextendthe maturityoftheloan.
SAFEKEEPING:Aserviceofferedtocustomersforafee,wheresecuritiesareheldinthevaultsfor protection.
SECONDARYMARKET:Amarketmadeforthepurchaseandsaleofoutstandingissues followingtheinitialdistribution.
SECURITIES&EXCHANGECOMMISSION:AgencycreatedbyCongresstoprotectinvestorsin securitiestransactionsbyadministeringsecuritieslegislation.
SECRULE15(C)3Ͳ1:SeeUniformNetCapitalRule.
SECURITIES:investmentinstrumentssuchasbonds,stocksandotherinstrumentsof indebtednessorequity.
SPREAD:Thedifferencebetweentwofiguresorpercentages.Forexample,itmaybethe differencebetweenthebidandaskedpricesofaquote,orbetweentheamountpaidwhen boughtandtheamountreceivedwhensold.
TREASURYBILLS(TͲBILL):U.S.TreasuryBillsareshortͲterm,directobligationsoftheU.S. Governmentissuedwithoriginalmaturitiesof13weeks,26weeksand52weeks;soldinminimum amountsof$10,000inmultiplesof$5,000abovetheminimum.TreasuryBillsareissuedinbook entryformonlyandaresoldonadiscountbasis.
TRUSTEE:Abankdesignatedasthecustodianoffundsandtheofficialrepresentativefor bondholders.
UNDERWRITER:Adealerbankorfinancialinstitutionwhicharrangesforthesaleanddistribution ofalargebatchofsecuritiesandassumestheresponsibilityforpayingthenetpurchaseprice.
Council Agenda 1-17-2023 9.E-15
Attachment 1
CityofPismoBeachInvestmentPolicy
14 CityofPismoBeachInvestmentPolicyJanuary17,2023
UNIFORMNETCAPITALRULE:SecuritiesandExchangeCommissionrequirementthatmember firmsaswellasnonmemberbrokerͲdealersinsecuritiesmaintainamaximumratioof indebtednesstoliquidcapitalof15to1;alsocallednetcapitalruleandnetcapitalratio. Indebtednesscoversallmoneyowedtoafirm,includingmarginloansandcommitmentsto purchasesecurities,onereasonnewpublicissuesarespreadamongmembersofunderwriting syndicates.Liquidcapitalincludescashandassetseasilyconvertedintocash.
U.S.GOVERNMENTAGENCIES:InstrumentsissuedbyvariousU.S.governmentagenciesmostof whicharesecuredonlybythecreditworthinessoftheparticularagency.
YIELD:Therateofannualincomereturnonaninvestment,expressedasapercentage.(a)INCOME YIELDisobtainedbydividingthecurrentdollarincomebythecurrentmarketpriceforthe security.(b)NETYIELDorYIELDTOMATURITYisthecurrentincomeyieldminusanypremium aboveparorplusanydiscountfromparinpurchaseprice,withtheadjustmentspreadoverthe periodfromthedateofpurchasetothedateofmaturityofthebond. Council Agenda 1-17-2023 9.E-16
Attachment 1
CityofPismoBeachInvestmentPolicy
15 CityofPismoBeachInvestmentPolicyJanuary17,2023
LISTOFAPPROVEDBROKER/DEALERS
MultiͲBankSecurities,Inc.
Attn:PeterYanezAccount
Executive
2400E.Commercial,Suite812
Ft.Lauderdale,FL33308
855Ͳ928Ͳ0111/800Ͳ967Ͳ9045
[email protected]
MutualSecurities,Inc.
Attn:ReneMolina
GeneralSecuritiesPrincipal
300112IvyGlennDrive,Suite145
LagunaNiguel,CA92677
866Ͳ899Ͳ5544
[email protected]
LISTOFAPPROVEDCUSTODIANSFORSAFEKEEPINGOFSECURITIES
USBank
Attn:AprilBeauchamp
RelationshipManager
1CaliforniaStreet,Suite1000
SanFrancisco,CA94111
415.774.2268
[email protected]
Council Agenda 1-17-2023 9.E-17
Attachment 1