CITY OF SIGNAL HILL
STAFF REPORT
2175 Cherry Avenue • Signal
Hill, California 90755-3799
6/28/2022
AGENDA ITEM
TO:
HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
HONORABLE CHAIR
AND MEMBERS OF THE CITY COUNCIL AS SUCCESSOR AGENCY
FROM:
SHARON DEL ROSARIO
ADMINISTRATIVE SERVICES OFFICER/FINANCE DIRECTOR
SUBJECT:
RESOLUTIONS ADOPTING INVESTMENT POLICIES
Summary:
The City's Investment Policy is intended to provide guidelines for the prudent investment of the City's available resources and outline the policies for maximizing the efficiency of the City's cash management process. The ultimate goal of an Investment Policy is to enhance the economic status of the City while protecting its pooled cash. In accordance with California Government Code Section 53646(a), an annual rendering of the City’s Investment Policy shall be presented to the City Council for consideration. As part of this year’s adoption, the City Council will consider adding two additional investment options to provide greater diversification of the City’s investment portfolio. In addition, the City Council as Successor Agency will consider adoption of a companion policy addressing Successor Agency funds.
Recommendations:
City Council: Adopt a resolution, entitled:
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIGNAL HILL, CALIFORNIA,
ADOPTING ITS INVESTMENT POLICY FOR PUBLIC FUNDS
Successor Agency: Adopt a resolution, entitled:
A RESOLUTION OF THE CITY COUNCIL AS SUCCESSOR AGENCY OF THE CITY OF SIGNAL,
CALIFORNIA, ADOPTING ITS INVESTMENT POLICY FOR PUBLIC FUNDS CITY OF SIGNAL HILL Page 1 of 4 Printed on 6/23/2022
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Fiscal Impact:
There is no fiscal impact associated with the proposed recommendations.
Strategic Plan Objectives:
Goal No. 1: Ensure long-term fiscal sustainability.
Goal No. 6: Promote a transparent and open government.
Background and Analysis:
The primary objective of the City’s Investment Policy is to provide a framework of approved securities in which the City can legally invest. The Investment Policy drives the cash, treasury, and investment management functions of the City, and serves as a guide for setting and achieving program objectives, defining rules, establishing benchmarks, and reducing exposure to risk. It is also important to note that rating agencies pay close attention to the City’s Investment Policy and portfolio in determining its credit rating, which is a key element when seeking financing options.
The Investment Policy is based on State of California Government Code Sections 53600 through 53609 and 53630 through 53686. These laws, as well as guidelines set forth by the Association of Public Treasurers of the United States and Canada, the California Municipal Treasurers Association (CMTA), and the Government Finance Officers Association (GFOA), have aided City staff in policy development. The State laws and established guidelines encompass a broad array of allowable investments and investment standards to suit the different needs of California's local agencies.
Annual adoption of the City’s Investment policy provides an opportunity to regularly review the policy to ensure its consistency with the overall objectives of safety, liquidity, and yield, as well as its relevance to current law and economic trends. The City’s Wells Fargo investment broker reviews the policy periodically to ensure compliance with applicable State statutes and also makes recommendations for strategic changes to position the portfolio to maximize yield while maintaining safety and liquidity.
The current Investment Policy is more conservative than what is allowed by State law as it further restricts the percentage of allowable credit investments (Appendix C of Exhibit A to the Resolutions).
Wells Fargo recommends allowing for two additional investment options that would provide greater portfolio diversification opportunities while preserving the City’s conservative investment philosophy. 1) Supranationals - An organization formed by a group of countries through an international treaty with specific objectives such as promoting economic development. Supranational organizations also issue debt in the United States. The most commonly recognized debt is issued by the International Bank for Reconstruction and Development (IBRD or World Bank).
Section 53601(q) of the State of California Government Code allows local agencies to invest in bonds issued by one of the three supranationals: World Bank, International Finance Corporation (IFC), and Inter-American Development Bank (IADB), which were established by international treaties, incorporated into U.S. federal law by Congressional Acts and headquartered in Washington D.C. Currently, these entities carry the highest credit ratings (AAA) based on their financial structure, policies, performance and capital support from CITY OF SIGNAL HILL Page 2 of 4 Printed on 6/23/2022
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shareholders.
These investments must meet the following criteria:
· Maturity of five years or less;
· Eligible for purchase and sale within the US;
· In a rating category of “AA” or its equivalent or better by a nationally recognized statistical rating organization (NRSRO);
· No more than ten percent (10%) of the City’s total portfolio shall be invested in any one issuer of supranational obligations; and
· Cannot exceed thirty percent (30%) of the agency’s investment portfolio. 2) Municipal Bonds - Municipal Bonds including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the State or by a department, board, agency, or authority of the State are permissible investments for local agencies under Section 53601(c).
State of California Government Code permits local agencies to invest registered treasury notes or bonds of any of the other 49 states in addition to California, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by a state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.
Investments also include bonds, notes, warrants, or other evidences of indebtedness of a local agency within California, including bonds payable solely out of the revenues from a revenueproducing property owned, controlled, or operated by the local agency, or by a department, board, agency, or authority of the local agency.
In addition, these securities must be:
· Maturities not exceeding five years from the date of trade settlement; · Rated in at least the "A" category or its equivalent or better by a NRSRO; · No more than five percent (5%) of the City's total portfolio shall be invested in anyone municipal issuer; and
· Cannot exceed thirty percent (30%) of the agency’s investment portfolio.
The Investment Policy applies to the City's Pooled Investment Portfolio, Bond Proceeds Portfolio, and the Special Districts Portfolio. These portfolios encompass all funds under the oversight of the City Treasurer or approved designee.
Currently, the Finance Department presents the Schedule of Investments on a monthly basis. This level of disclosure exceeds the quarterly reporting requirement by the State. Staff intends to present the Investment Policy annually for adoption and will continue to present the Schedule of Investments monthly.
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Approved:
_________________________
Hannah Shin-Heydorn
Attachments
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