FOR THE COUNCIL MEETING OF JUNE 20, 2023
COUNCIL AGENDA REPORT
TO: City Council
FROM: City Manager
Prepared by: Director of Finance
SUBJECT: 2023 Investment Policy
Description:
The City Council will consider the annual Investment Policy for which the primary objectives are for the safety, liquidity, and yield of the City’s investment activities.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATION:
Adopt a Resolution approving the City of Santa Maria’s 2023 Investment Policy.
BACKGROUND:
California Government Code Section 53646 requires the Treasurer or Chief Fiscal Officer to annually submit a written Investment Policy to the City Council at a public meeting.
Typically, the investment policy is updated for changes in regulations and pres ented to the City Council every June.
Senate Bill 1489 (SB 1489), also known as the Local Government Omnibus Act of 2022, was passed and made a number of changes to Code Sections 53601 and 53646 , including several that impact the investment of public funds and the reporting practices of public agencies. On December 20, 2022, the City Council approved the amended 2022 Investment Policy that incorporated SB 1489 changes effective January 1, 2023.
DISCUSSION:
The Investment Policy incorporates objectives a nd policies from a variety of notable sources such as the California Municipal Treasurers' Association, the California Association of County Treasurers and Tax Collectors, the California Society of Municipal Finance Officers, the State of California Local Agency Investment Fund (LAIF), and Joint Powers Authority (Local Government Investment Pools).
The City’s Investment Policy:
1. Appoints the Director of Finance as the Investment Officer of the City; and
2. Assigns responsibility for investments to the Investment Officer; and 2 3. Establishes an Investment Oversight Committee consisting of the City Manager, Director of Finance, City Attorney, and a City Councilmember; and
4. Defines the investment objectives as:
a. Safety: Safety of principal is the foremost objective of the investment program; and
b. Liquidity: The funds of the City shall be maintained liquid enough to meet all anticipated requirements; and
c. Yield and Average Market Rate of Return: After considering safety and liquidity, the investment program shall seek a market-average rate of return; and
d. Diversification: The portfolio shall be sufficiently diversified to avoid unreasonable risk; and
e. Prudence: Sets standards to be used by the Investment Officer as "prudent investor" (Government Code Section 53600.3); and
f. Public Trust: All participants in the investment process are custodians of public funds and trust.
5. Requires that the City Treasurer submit a monthly investment report to the City Council; and
6. Authorizes and defines the suitable investments for City funds; and
7. Requires that a written system of internal controls be designed to prevent losses from fraud, employee error, misrepresentation of third parties, unanticipated changes in financial markets, or imprudent actions by investment officers of the City; and
8. Requires that the Investment Policy be annually reviewed by the City’s Investment Oversight Committee and submitted to the City Council for adoption.
The Investment Policy indicates that the types of authorized investments are those types of investments allowed in Government Code Section 53600.3, and limited to:
1. LAIF; and
2. Obligations of the Federal or State government; and
3. Certificates of Deposit; and
4. Bankers' Acceptances/Commercial Paper; and
5. Money Market Mutual Funds; and
6. Medium-term Corporate Notes; and
7. California and California Local Agency Municipal Obligations; and
8. Supranationals; and
9. Joint Powers Authority (Local Government Investment Pools).
In addition to the investments listed above, government statutes authorize the use of other investment instruments, such as reverse repurchase agreements and derivatives; however, the Investment Officer is not authorized to purchase or use reverse repurchase agreements or derivatives in any form. Reverse repurchase agreements constitute short- term borrowing using securities as collateral. Derivatives are contracts whose value is tied to the price of some other asset, such as stocks, bonds, commodities, or currencies.
Based on consultation with the City’s asset management advisor, the PFM Group, staff recommends no changes to the 2023 Investment Policy.
3 Investment Oversight Committee
The members of the Investment Oversight Committee have reviewed the policy and recommend that the City Council approve the 2023 Investment Policy as presented.
Fiscal Considerations
There are no direct costs associated with the Investment Policy. Investments are earning a fair market rate of return. Issues of safety and liquidi ty of funds comply with the Investment Policy.
Impact to the Community
Adherence to the provisions of the Investment Policy will continue to provide for the safe investment of public funds. The policy authorizes conservative investments and provides a framework for a "buy and hold" philosophy, as opposed to that of a "market trader."
ATTACHMENT A – Memorandum dated June 1, 2023 (The PFM Group)_2023-06-20