January 11, 2022
Finance Department
DATE: January 11, 2022
TO: Mayor Butt and Members of the City Council
FROM:
(List all relevant/responsive staff
persons)
Belinda Brown, Finance Director
Delmy Cuellar, Accounting Manager
Subject:
(This will appear on the agenda)
Annual review and adoption of swap policy for fiscal year 2021-2022
FINANCIAL IMPACT: The adoption of and adherence to financial policies can be measured by factors such as:
• Minimizing borrowing costs;
• Better management of the City's debt and
investment portfolios; and
• Providing fiscal security during times of unforeseen
economic downturns.
PREVIOUS COUNCIL
ACTION:
(List all dates items were heard or
council action took place)
N/A
STATEMENT OF THE
ISSUE:
Staff is requesting that City Council review and approve the City’s Swap Policy, which should be done on an annual basis.
AGENDA
REPORT
January 11, 2022
RECOMMENDED ACTION:
(This will appear on the agenda)
REVIEW the Swap Policy for Fiscal Year 2021-2022; and
ADOPT the re solution approving said policy – Finance
Department (Belinda Brown 510-620-6740).
DISCUSSION:
Municipal governments provide a wide range of services that have an impact on public safety and quality of lif e for community members. Prudent use of resources helps determine how effectively these services are provided on an ongoing basis. In addition to managing revenues and expenditures, it is also the municipal finance official's responsibility to focus on management practices that will enable the City to better control its financial resources on a continuing basis.
Swap Policy
Interest rate swap agreements have become recognized and establishe d financial tools by municipal issuers throughout the nation. The use of these products has become such a regular tool that the Government Finance Officers Association (GFOA) has adopted an official position, viewing swap policies governing the use and management of such swaps as a "Recommended Practice".
Since the scope of interest rate swaps is beyond that of the traditional fixed rate long term bonds covered by the Debt Policy, it is important for the City to maintain a policy that will provide guidance in selecting, implementing, and administering all swap s related to City bond issues. Standard & Poor's Rating Agency assigns Debt Derivative Profile (DDP) scores to individual swap transactions, with the lowest score of "1" equating to no risk and highest score of "4" meaning "high risk". By adhering to the guidelines established in its Swap Policy, the City has successfully achieved a DDP score of "1.5" (low risk) on all of its swap transactions.
DOCUMENTS ATTACHED:
Attachment 1 - Resolution Adopting Fiscal Year 2021-22 Swap Policy Attachment 2 - Fiscal Year 2021-22 Swap Policy