ACTION:
____________________________
Clerk/Secretary
Department: Finance Item No: C10
Prepared by: Matt McDonald, Finance Manager Meeting Date: June 14, 2022 Approved by:
Mike Sylvia, Director/Treasurer
Patrick Johnson, City Manager Agenda Location: Consent Calendar SUBJECT: DELEGATION OF INVESTMENT AUTHORITY TO THE CITY TREASURER FOR FISCAL YEAR 2022/23 AND REVISION OF CITY COUNCIL POLICY 700-07, INVESTMENT OF
CITY FUNDS
RECOMMENDATION: Adopt City Council Resolution No. 2022- , delegating investment authority to the City Treasurer for Fiscal Year 2022/23 and revising City Council Policy 700-07, Investment of City Funds.
CORRELATION TO CITY COUNCIL GOALS: Fiscal Responsibility.
PRIOR ACTION: On June 8, 2021, adopted City Council Resolution No. 2021-81, delegating investment authority to the City Treasurer for Fiscal Year 2021/22 and re-adopting City Council Policy 700-07 relating to the investment of public funds (Vote: 5-0).
A complete list of prior actions is included in the City Council Policy 700-07, Investment of City Funds (Exhibit 2, pages 14-15).
STATEMENT ON THE SUBJECT: City Council Policy 700-07, Investment of City Funds (the Policy), governs the investment of City funds in detail as determined by the requirements of California law and City Council policy. Section 53607 of the California Government Code (the Code) authorizes the City Council to delegate its authority to the City Treasurer for a one-year period to invest or reinvest the funds of the City and to sell or exchange securities purchased. The City Council may renew that delegation of authority each year.
Members of the Investment Advisory Committee (Committee) include Mayor Ritter, the City Manager, City Attorney, and four representatives of the community deemed to be qualified by virtue of education, training, experience, or background to service in the capacity of oversight to the City on financial investment matters. The Committee met on May 18, 2022, and recommend the delegation of authority to the City Treasurer for a one-year period and the proposed a revision to the Policy, which is summarized below.
Proposed Policy Revisions. The Committee recommends that the Policy be revised to enable the City to invest in the San Diego County Treasurer’s Investment Pool (SDCTIP). The SCTIP was established by the County Board of Supervisors to invest assets of the County, school districts in the County, and other AGENDA
REPORT
CITY COUNCIL
COMMUNITY DEVELOPMENT COMMISSION
SUCCESSOR AGENCY
BUENA SANITATION DISTRICT
JOINT POWERS FINANCING AUTHORITY
06/14/2022 C10 Page 1 of 21
Approved above recommendation, adopted City Council Resolution No. 2022-85.
Vote: 5-0
MEETING DATE: June 14, 2022 PAGE 2
SUBJECT: DELEGATION OF INVESTMENT AUTHORITY TO THE CITY TREASURER FOR FISCAL YEAR 2022/23 AND REVISION OF CITY COUNCIL POLICY 700-07, INVESTMENT OF
CITY FUNDS
public agencies in the region. The Committee recommends allowing a maximum of 25 percent of the City’s portfolio to be invested in SDCTIP.
The recommended change to the Policy is incorporated as section N, San Diego County Treasurer’s Investment Pool, shown in Exhibit 2. Each fiscal year, the City Council will continue to consider adoption of a resolution to provide delegation of its investment authority to the City Treasurer.
FISCAL IMPACT: There is no direct fiscal impact associated with the staff recommendation pertaining to the delegation of authority or proposed changes to the Policy.
EXHIBITS:
1. City Council Resolution No. 2022- , delegating investment authority to the City Treasurer for Fiscal Year 2022/23 and revising City Council Policy 700-07, Investment of City Funds
2. Red-lined City Council Policy 700-07, Investment of City Funds
3. Prior Actions Delegation of Authority to the City Treasurer and Adopting City Investment Policy
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00107809 1
RESOLUTION NO. 2022-
A RESOLUTION OF THE CITY COUNCIL OF THE CHARTERED CITY OF
VISTA, CALIFORNIA, DELEGATING INVESTMENT AUTHORITY TO THE CITY TREASURER FOR FISCAL YEAR 2022/23 AND REVISING CITY COUNCIL POLICY 700-07, INVESTMENT OF CITY FUNDS
The City Council of the City of Vista does resolve as follows:
1. Findings. The City Council hereby finds and declares the following:
A.Pursuant to Section 53646 of the California Government Code the City Treasurer has provided to the City’s Investment Advisory Committee and to the City Council a statement of City Council Policy 700-07, the City’s investment policy, including any changes recommended to the policy, which the City Council has considered at a public meeting.
B.City Council Policy 700-07, Investment of City Funds, governs the investment of City funds in accordance with the requirements of California Government Code and the City Council has determined that the policy should be revised.
C.Section 53607 of the California Government Code authorizes the City Council to delegate its authority to invest or reinvest the funds of the City, and to sell or exchange securities so purchased, to the City Treasurer for a one-year period, and may, subject to review, renew that delegation of authority each year.
D.The City Council desires to delegate its investment authority to the City Treasurer for Fiscal Year 2022/23 pursuant to Section 53607 of the California Government Code and City Council Policy 700-07.
2. Action.
A.The City Council revises City Council Policy 700-07 for Fiscal Year 2022/23 with the proposed changes detailed in Attachment 2.
B.The City Council hereby delegates its authority to invest or reinvest the funds of the City, and to sell or exchange securities so purchased, to the City Treasurer for Fiscal Year 2022/23, subject to the requirements of Government Code Section 53607 and City Council Policy 700-07.
[Continued on page 2.]
06/14/2022 C10 Page 3 of 21EXHIBIT 1
RESOLUTION NO. 2022-
CITY COUNCIL OF THE CHARTERED CITY OF VISTA
PAGE 2
00107809 1EXH1 Reso Investment Authority Delegation FY22-23.docx
3. Adoption. PASSED AND ADOPTED at a meeting of the City Council of the City of Vista held on June 14, 2022, by the following vote:
AYES:
NOES:
ABSTAIN:
APPROVED AS TO FORM:
WALTER C. CHUNG, ACTING CITY ATTORNEY
By:
JUDY RITTER, MAYOR
ATTEST:
KATHY VALDEZ, CITY CLERK
By:
APPROVED
Walter C. Chung
20220602105707
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Vista City Council Policy
700-07 (1)
700-07 INVESTMENT OF CITY FUNDS
PURPOSE
The purpose of this investment policy (“Policy”) is to provide guidelines for the prudent investment of the City of Vista’s (“City”) funds in conformance with all Federal, State and Local laws governing the investment of City monies, prudent money management and the “Code of Ethics on Professional Conduct” of the California Municipal Treasurer’s Association. The investment of bond proceeds will be further governed by the provisions of relevant bond documents.
POLICY
RESPONSIBILITY AND DELEGATION OF AUTHORITY
Pursuant to Section 53601 of the California Government Code, the City Council as the legislative body of the City has primary responsibility for investment of surplus monies, or monies held in sinking funds, in the City treasury. As authorized under Section 53607 of the Government Code, the City Council hereby delegates its authority to invest or reinvest the funds of the City, and to sell or exchange securities so purchased, to the City Treasurer who shall assume full responsibility for all such transactions. This delegation of authority shall be in effect for one fiscal year and subject to annual renewal by the City Council, or until such time as this delegation of authority may be revoked by the City Council.
Pursuant to Chapter 2.24 of the Vista Municipal Code, the City Manager shall appoint the Director of Finance or the Finance Manager to serve as the City Treasurer. The City Manager shall be responsible and accountable under this Policy to oversee the investment activities of the City Treasurer and to require the faithful performance of all administrative duties delegated under this Policy.
The City Manager may delegate investment management and decision authority, via written agreement, to one or more professional investment advisors/ managers who are duly qualified and registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. All agents engaged in this capacity shall make all investment decisions and transactions in strict accordance with state law and this investment policy.
The City Treasurer shall establish written procedures for the operation of the investment program consistent with this investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. Procedures shall include conducting a Request For Proposals (RFP) competitive process every five years if the City Manager has delegated investment management and decision authority to one or more professional 06/14/2022 C10 Page 5 of 21EXHIBIT 2
Vista City Council Policy
700-07 (2)
investment advisors/managers. No person may engage in an investment transaction except as provided under the terms of this Policy and the procedures established by the City Treasurer. The daily management responsibility for the investment program is assigned to the City Treasurer, who shall monitor and review all investment transactions for consistency with this Policy and shall establish a system of controls to regulate the activities of subordinate employees or outside money managers.
For the purposes of carrying out this Policy, any two of the following individuals, unless delegated to a professional investment advisor/manager, are hereby authorized to make investment decisions, in strict accordance with this Policy on behalf of the City:
City Manager
Director of Finance/City Treasurer
Finance Manager/Deputy City Treasurer
Such other individuals authorized, in writing, by the City Manager SCOPE
This Policy applies to all financial assets of the City, except for PERS funds (which are administered separately), interagency investments or transactions by and among the City and any of its dependent agencies (for example, Successor Agency, Buena Sanitation District, Community Development Commission, and Joint Powers Financing Authority), and bond proceeds. California Government Code Section 53601(m) permits money from bond proceeds, obligations under a lease, installment sales, or other agreements to be invested in any security that meets the statutory provisions governing the issuance of the bond or other agreements made by the issuing agency. If the bond documents are silent as to the permitted investments, bond proceeds will be invested in the securities permitted by the Policy. Notwithstanding the other provisions of this Policy, the percentage or dollar portfolio limitations listed elsewhere in the Policy do not apply to bond proceeds.
OBJECTIVES
The primary objectives, in priority order, of the City’s investment activities shall be:
A. Safety of Principal
Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of overall investment return.
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Vista City Council Policy
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B. Liquidity
The City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. Investments will be authorized only in “readily marketable” securities; i.e. those securities that are actively traded in the secondary market.
C. Return on Investment
The City’s investment portfolio shall be designed to attain a market average rate of return through economic cycles. Consistent with City’s safety and liquidity objectives and prudent investment principles, the City may seek to augment returns above the market average rate of return.
MATURITIES
The maturity date of new investments should not be further away than the time the City anticipates that it will need to utilize the funds. Cash flow estimates of when the City will need cash shall be prepared in a prudent manner. Maturities shall be selected to anticipate cash needs, thereby reducing the possibility of the need for forced investment liquidation.
To insure that investment funds are always available when needed, the City Treasurer or her/his designee will analyze, prepare and maintain a cash plan projection. Liquidity levels will be estimated by the City Treasurer or her/his designee biweekly.
Where this Policy does state an explicit limit, investments shall have a maturity of five years or less from the date of purchase, unless the City Council has granted express authority to make that investment either specifically or as a part of an investment program approved by the City Council no less than three months prior to the investment.
ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose any material financial interests in financial institutions that conduct business within this jurisdiction, and they shall further disclose any large personal financial/ investment positions that could be related to the performance of the City’s portfolio. Employees and officers shall subordinate their personal investment transactions to those of the City, particularly with regard to the timing of 06/14/2022 C10 Page 7 of 21
Vista City Council Policy
700-07 (4)
purchases and sales. The City Treasurer shall avoid any transaction that might impair public confidence in the City’s ability to govern effectively.
TRADING
The City shall not make investments for the purpose of speculation as the dominant criterion, such as anticipating an appreciation of capital value through changes in market rates.
REPORTING
The City Treasurer shall submit a monthly report of investments to the City Manager and the City Council within 60 days following the end of each month, or as close to that as is practical given the meeting schedule of the City Council.
The report shall identify the type of investment, name of the issuer, purchase and maturity dates, par and book values, coupon and yield to maturity rates, market value and source of valuation, weighted average maturity of the investments, and any funds, investments, or programs, including loans, that are under the management of contracted parties. It must include a listing of all investment transactions for the month, including purchases, sales, calls and maturities, and show any capital gain or loss on each transaction. The report shall state compliance of the portfolio to this Policy, or manner in which the portfolio is not in compliance. It shall also include a statement denoting the City’s ability to meet its expenditure requirements for the next six months, or provide an explanation as to why sufficient money shall, or may, not be available.
INTERNAL CONTROL
The City Treasurer shall establish an annual process of independent review of investments portfolio compliance with this Policy by an external auditor in conjunction with the annual audit.
QUALIFIED DEALERS
A competitive process, whenever practical, will be used for investment transactions. For any investment transaction not conducted directly with the issuer, it shall be the City’s policy to purchase securities only from authorized institutions and firms. No deposit of public funds shall be made except in a qualified public depository as established by state laws.
The City Treasurer shall maintain a list of authorized broker/dealers and financial institutions that are approved for investment purposes. All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply to the City evidence of the following, and any other information deemed appropriate by the City:
1. Must be in business for at least three (3) years,
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Vista City Council Policy
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2. Proof of Financial Industry Regulatory Authority (FINRA) certification,
3.Proof of state registration,
4. Certification of having read and understood and agreeing to comply with the City’s Policy and free of any conflicts of interest. Whenever this Policy is updated, the City shall send a copy of the Policy to all institutions approved to do business with the City, and
5. Evidence of adequate insurance coverage
If the City has contracted with an investment advisor to provide investment services, the investment advisor may use their own list of approved issuers, brokers/dealers and financial institutions to conduct transactions on the City’s behalf.
When two or more investment opportunities offer essentially the same maturity, yield, quality and liquidity, the City will seek to promote local economic development by giving priority to the 1) financial institutions based in Vista, and then 2) to other financial institutions in California.
SAFEKEEPING OF SECURITIES
To protect against potential losses by collapse of individual securities dealers, all deliverable securities owned by the City, including collateral on repurchase agreements, shall be held in safekeeping by a third party bank trust department acting as agent for the City under the terms of a custody agreement executed by the bank and by the City. All deliverable securities will be received and delivered using standard delivery-versus-payment procedures.
PRUDENCE
Pursuant to California Government Code Section 53600.3, the City Council and all persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the following prudent investor standard:
“When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency.” 06/14/2022 C10 Page 9 of 21
Vista City Council Policy
700-07 (6)
Investment officers acting in accordance with written procedures and this Policy and exercising due diligence will be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
AUTHORIZED INVESTMENTS
The City is further governed by California Government Code, Section 53600 et seq. Within the context of these limitations, the following investments are authorized, as further limited below. Percentage holding limits listed in this section are calculated based on book value at the time the security is purchased.
Issuer limits for corporate issuer are to be calculated across all security types. In the event that an investment originally purchased within policy guidelines is downgraded below the Policy requirements, the course of action to be followed by the City Treasurer, in consultation with the City’s investment advisor, will then be decided on a case-by-case basis, considering such factors as the reason for the downgrade, prognosis for recovery or further rating downgrades, and the market price of the security.
A.United States Treasury Securities. United States Treasury Bills, Bonds, and Notes, or those for which the full faith and credit of the United States are pledged for payment of principal and interest. There is no limitation as to the percentage of the portfolio which can be invested in this category.
B.Federal Agency Obligations. Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises. There is no limitation as to the percentage of the portfolio that may be invested in this category; however, the “prudent investor” rule shall apply to the amount invested in any single agency name.
C.U.S. Instrumentalities. United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States.
Purchases are limited to securities rated in a rating category of “AA” or its equivalent or better by a Nationally Recognized Statistical Rating Organization (NRSRO). A maximum of 30 percent of the portfolio may be invested in this category.
D.Commercial Paper. Commercial paper of “prime” quality of the highest ranking or of the highest letter and number rating as provided for by a 06/14/2022 C10 Page 10 of 21
Vista City Council Policy
700-07 (7)
NRSRO, and issued by a domestic corporation having assets in excess of $500 million and has debt other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or higher by an NRSRO.
Purchases of eligible commercial paper may not exceed 270 days to maturity. A maximum of 15 percent of the portfolio may be invested in this category. The amount invested with any one issuer shall not exceed 5 percent of the portfolio.
E.Medium-Term Notes. Medium-term notes, defined as all corporate and depository institution securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment under this subdivision shall be rated in a rating category of “A” or its equivalent or better by an NRSRO. A maximum of 30 percent of the portfolio may be invested in this category. The amount invested with any one issuer shall not exceed 5 percent of the portfolio.
F.Local Agency Investment Fund. The City may invest in the Local Agency Investment Fund (LAIF) established by the State Treasurer for the benefit of local agencies up to the maximum amount permitted by State Law, subject to the following:
Accurate and detailed accounting records must be maintained for the funds for each participating government. A separate account designated by name and number for each participant in the fund shall be kept to record individual transactions. A proportionate amount of interest earned must be credited to each account, and totals of all investments belonging to each participant shown. A monthly report showing the changes in investments made during the preceding month shall be furnished to each participant.
LAIF regulations provide that a city may have an account for each of the entities the City governs. The City Treasurer is authorized to establish and maintain one account for the City.
G.Negotiable Certificates of Deposit. Negotiable certificates of deposit issued by a nationally or state-chartered bank, a savings association or a federal association, a state or federal credit union, or by a federally licensed or state-licensed branch of a foreign bank. Purchases are limited to institutions which have long-term debt rated in a rating category of “A” or its equivalent or better and/or have short-term debt rated “A-1” or its equivalent or better by an NRSRO. A maximum of 30 percent of the portfolio may be invested in this category. The amount invested with any one issuer shall not exceed 5 percent of the portfolio. 06/14/2022 C10 Page 11 of 21
Vista City Council Policy
700-07 (8)
H.Bank Deposits. FDIC insured or fully collateralized demand deposit accounts, savings accounts, market rate accounts, certificates of deposits and other types of bank deposits in financial institutions located in California. The amount on deposit in any financial institution shall not exceed the shareholder’s equity. To be eligible to receive City deposits, the financial institution must have received a minimum overall satisfactory rating, under the Community Redevelopment Act, for meeting the credit needs of California Communities in its most recent evaluation. Bank deposits are required to be collateralized as specified under Government Code Section 53630 et seq. The Director of Finance/City Treasurer, at his/her discretion, may waive the collateralization requirements for any portion that is covered by federal deposit insurance. The City shall have a signed agreement with any depository accepting City funds per Government Code Section 53649. There is no limit on the percentage of the portfolio that may be invested in this category. However, a maximum of 10 percent of the portfolio may be invested in time deposits.
I.Placement Service Bank Deposits. Bank deposits placed with a private sector entity that assists in the placement of deposits with eligible financial institutions located in the United States. The full amount of the principal and the interest that may be accrued during the maximum term of each deposit shall at all times be insured by federal deposit insurance.
Placement Deposits shall meet all of the requirements of Government Code Section 53601.8. A maximum of 15 percent of the portfolio may be invested in this category.
J.State and Local Agency Bonds. Bonds issued by the State of California or any of the other 49 United States, or any local agency within California.
This includes bonds payable solely out of the revenues from a revenue- producing property owned, controlled, or operated by the State of California or any of the other 49 United States, or a local agency within California, or by a department, board, agency, or authority of California or any of the other 49 United States, or a local agency within California, including the City.
1. Securities must be rated in a rating category of “A” or its equivalent or better and/or have short-term debt rated “A-1” or its equivalent or better by an NRSRO. Unrated bonds are not permissible investments.
2. A maximum of 20 percent of the portfolio may be invested in this category. The amount invested with any one issuer shall not exceed 4 percent of the portfolio.
K.Local Government Investment Pools (LGIP). Shares of beneficial interest issued by a joint powers authority organized pursuant to Section 06/14/2022 C10 Page 12 of 21
Vista City Council Policy
700-07 (9)
6509.7. To be eligible for purchase, the LGIP shall meet all of the following conditions: (i) the LGIP shall comply with the requirements of California Government Code Section 53601(p), and (ii) the LGIP must seek to maintain a stable Net Asset Value (“NAV”). A maximum of 25 percent of the portfolio may be invested in this category.
The City Treasurer shall review the LGIP’s current information statement before investing City funds. Whenever the City has monies invested in a LGIP, a copy of the LGIP’s information statement shall be maintained on file. In addition, the City Treasurer should periodically a summary of the LGIP’s portfolio holdings.
L.Money Market Funds. Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission.
The company shall have met either of the following criteria: (A) attained the highest ranking or the highest letter and numerical rating provided by not less than two NRSROs and (B) retained an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years of experience managing money market mutual funds with assets under management in excess of five hundred million dollars ($500,000,000). Furthermore, the City shall limit investments to money market funds that seek to maintain a stable NAV. A maximum of 20 percent of the portfolio may be invested in this category.
The City Treasurer shall review the fund’s prospectus before investing City funds. Whenever the City has monies invested in a fund, a copy of the fund’s prospectus shall be maintained on file. In addition, the City Treasurer should periodically a summary of the fund’s portfolio holdings.
M.Asset-Backed Securities (ABS). A mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond. Securities eligible for investment under this subdivision shall be rated in a rating category of “AAA” or its equivalent or better by an NRSRO and have a maximum remaining maturity of five years or less. A maximum of 20 percent of the portfolio may be invested in this category. The amount invested with any one issuer shall not exceed 3 percent of the portfolio.
N. San Diego County Treasurer’s Investment Pool (SDCTIP) The City may invest in the SCTIP established by the County Board of Supervisors to invest the assets of the County, school districts in the County, and other public agencies in the region. A maximum of 25 percent of the portfolio may be invested in this category.
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Whenever the City has monies invested in the SDCTIP, the City Treasurer should periodically review SDCTIP’s investment policy and a summary of the pool’s holdings.
INELIGIBLE INVESTMENTS
The City shall not invest in any securities or investments not described herein, including but not limited to, common stocks, corporate bonds with a final maturity exceeding five years at the time of purchase, mutual funds (except no-load, open-ended money market mutual funds), banker’s acceptances, repurchase agreements, reverse repurchase agreements, inverse floaters, range notes, interest-only strips that are derived from a pool of mortgages, or any security that could result in zero interest accrual if held to maturity, except as authorized by Code Section 53601.6.
SWAPPING OF SECURITIES
A swap is the movement from one security to another and may be done for a variety of reasons, such as to increase yield, lengthen or shorten maturities, to take a profit, or to increase investment quality. Losses or gains on security swaps must be recorded as a completed sale and purchase.
INVESTMENT ADVISORY COMMITTEE
As provided by City Council Resolution No. 95-19 and updated with City Council Resolution No. 2016-72,the Investment Advisory Committee shall provide oversight and make recommendations to the City Treasurer with respect to investment activities and policies.
POLICY REVIEW
This Policy shall be reviewed at least annually to ensure its consistency with the overall objectives of safety of principal, liquidity, and rate of return, its compliance with current law, and its relevance to financial and economic trends. The City Treasurer shall annually submit this Policy to the City Council at a public meeting for approval. Any proposed changes with this Policy throughout the year shall also be considered by the City Council at a public meeting. 06/14/2022 C10 Page 14 of 21
Vista City Council Policy
700-07 (11)
GLOSSARY
Agencies: Entities of the Federal Government set up to supply credit to various classes of institutions (e.g. savings and loans, small business firms, farmers, housing agency groups, etc.).
Asset-backed Securities: The bonds or notes backed by loan paper or accounts receivable originated by banks, credit card companies, or other providers of credit.
Banker’s Acceptance: A time draft drawn on and accepted by a bank, the customary means of effecting payment for merchandise sold in import-export transactions, and a source of financing used extensively in international trade.
Bond: An interest-bearing or discounted government or corporate security that obligates the issuer to pay the bondholder a specified sum of money, usually at specific intervals, and to repay the principal amount at maturity.
Book Value: The value at which an asset is carried on a balance sheet.
Callables: Securities that the issuer has the right to redeem prior to maturity.
Collateral: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
Commercial paper: The short-term unsecured obligations with maturities ranging from 2 to 270 days issued by banks, corporations, and other borrowers.
Constant Maturity Treasury (CMT): A yield figure calculated by the Federal Reserve based on actively traded Treasury securities with a constant, fixed maturity.
Coupon: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s par value. (b) The certificate attached to a bond evidencing interest due on a payment date.
Debenture: A security secured only by the credit of the issuer.
Debt Instrument: A written promise to repay a debt.
Delivery Versus Payment: The simultaneous delivery of securities with an exchange of money for the securities.
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Derivative: A derivative is a financial instrument or obligation whose value, income, or return is based upon or linked to another asset, or index, or both, separate from the financial instrument or obligation itself.
Discount: The amount by which a security sells below its par value.
Discount Security: A non-interest bearing security issued at less than par value and redeemed at maturity for full par value.
Draft: A signed, written order by which one party (drawer) instructs another part (drawee) to pay a specified sum to a third party (payee). A time draft is a draft payable at a specified or determinable time in the future.
Floater: A debt instrument with a variable interest rate tied to another interest rate--for example, the rate paid by Treasury bills. A floating rate note pays more interest if the interest rate it is tied to rises and less interest if the rate falls. An inverse floater pays less interest if the interest rate it is tied to rises and more interest if the rate falls.
Liquidity: The ability to easily and rapidly convert assets into cash without a substantial loss.
Local Agency Investment Fund (LAIF): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment purposes.
Market Value: The price at which a security is trading and could presumably be purchased or sold.
Maturity Date: The date upon which the principal or stated value of an investment becomes due and payable.
Medium-term Note: A note with a maturity between one and ten years, although with bond, it is often shortened to mean between two and ten years.
Money Market: The market in which short-term debt instruments (bills, commercial paper, banker’s acceptances, etc.) are issued and traded.
Mortgage-backed Security: An obligation where interest and principal payments are derived from the cash flows of an underlying mortgage pool. For purposes of this definition, a federal agency obligation with a fixed or variable interest rate and a final maturity date, where payments of interest and principal are not derived from the interest and principal cash flows of a mortgage pool, is not a mortgage-backed security.
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Mutual Fund: A fund operated by an investment company that raises money from shareholders and invests it on their behalf. Profits are distributed to shareholders after the investment company deducts its management fee.
Nationally Recognized Statistical Rating Organization (NRSRO): A credit rating agency that issue credit ratings that the U.S. Securities and Exchange Commission (SEC) permits other financial firms to use for certain regulatory purposes. The largest three NRSROs are Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
Negotiable: Something that can be sold or transferred to another party.
Note: A written promise to pay a specified amount on demand or on a specified date.
Par Value: The value of a security as stated on its certificate or instrument. Also referred to as face value.
Premium: The amount by which a security sells above its par value.
Primary Dealer: A bank or investment dealer authorized to buy and sell government securities in direct dealing with the Federal Reserve Bank of New York in its execution of Fed open market operations. Such dealers must be qualified in terms of reputation, capacity, and adequacy of staff and facilities.
Repurchase Agreement: An agreement between a seller and a buyer, usually of U.S. Government securities, whereby the seller agrees to repurchase the securities at an agreed upon price on a stated date. Dealers also arrange reverse repurchase agreements, whereby they agree to buy the securities from an investor, and the investor agrees to repurchase them at a later date for a stated price.
Safekeeping: The storage and protection of a customer’s financial assets, valuable, or documents, provided as a service by an institution such as a bank or brokerage firm.
Secondary Market: The market where securities are bought and sold after their original issuance.
Security: An instrument that signifies an ownership position in a corporation (a stock), a creditor relationship with a corporation or governmental body (a bond), or rights to ownership.
Short-term: An investment with a maturity of one year or less, although with bonds it is often stretched to mean two years or less.
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Vista City Council Policy
700-07 (14)
Sinking Fund: Money accumulated on a regular basis in a separate account that is used to redeem debt securities or preferred stock issues.
Strip: The practice of separating a bond into its corpus (principal) and coupons (interest), which are then sold separately.
Time Deposit: A savings account or certificate of deposit held in a financial institution for a fixed term.
Treasury Bill: A non-interest bearing discount security maturing in one year or less issued by the U.S. Treasury to finance the national debt.
Treasury Bond: A long-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity of more than ten years.
Treasury Note: A medium-term coupon-bearing U.S. Treasury security issued as a direct obligation of the U.S. Government and having an initial maturity from two to ten years.
Unsecured: Not backed by the pledge of specific collateral.
Weighted Average Maturity: The sum of the amount of each investment multiplied by the number of days to maturity, divided by the total amount of investments.
Yield: The rate of annual return on an investment, expressed as a percentage.
Yield to maturity takes into account the total of annual interest payments, the purchase price, the value at maturity, and the amount of time remaining until maturity.
HISTORY
Adopted December 3, 1984.
Addition adopted January 9, 1989.
Revised April 25, 1995.
Revised May 9, 1995.
Addendum June 6, 1995.
Revised July 9, 1996.
Revised November 12, 1996.
Revised March 11, 1997.
Revised June 23, 1998.
Revised September 28, 1999.
Revised August 22, 2000.
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Vista City Council Policy
700-07 (15)
Revised February 13, 2001.
Re-adopted November 13, 2001.
Re-adopted February 25, 2003.
Revised June 22, 2004.
Re-adopted March 22, 2005.
Revised May 23, 2006.
Re-adopted August 14, 2007
Revised January 22, 2008
Revised May 26, 2009
Revised May 25, 2010
Revised December 14, 2010, Resolution No. 2010-162
Re-adopted January 24, 2012
Revised June 11, 2013, Resolution No. 2013-88
Revised December 10, 2013
Re-adopted June 10, 2014
Re-adopted June 23, 2015
Revised May 24, 2016, Resolution No. 2016-71
Revised November 15, 2016, Resolution No. 2016-162
Re-adopted June 13, 2017
Revised June 12, 2018, Resolution No. 2018-86
Revised June 11, 2019, Resolution No. 2019-76
Revised June 9, 2020, Resolution No. 2020-87
Revised June 8, 2021, Resolution No. 2021-81
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Vista City Council Policy
700-07 (16)
City of Vista
Investment Policy - Appendix A
APPENDIX A - REFERENCE GUIDE
Investment Type Maximum
Maturity
Maximum % of
Portfolio
Maximum % With
One Issuer
NRSRO Minimum
Rating Category
US Treasury Securities 5 years No Limit No Limit N/A
Federal Agency Obligations 5 years No Limit No Limit N/A US Instrumentalities 5 years 30% No Limit AA
Commercial Paper 270 days 15% 5% A
Medium-Term Notes 5 years 30% 5% A
Local Agency Investment Fund N/A $75M (1) N/A N/A
Negotiable Certificates of Deposit 5 years 30% 5% Long Term - A Short Term - A1
Bank Deposits N/A Limited (2) N/A N/A
Placement Service Bank Deposits N/A 15% Limited (3) N/A State and Local Agency Bonds 5 years 20% 4% A
Local Government Investment Pools N/A 25% No Limit N/A
Money Market Funds N/A 20% No Limit AAA
Asset Backed Securities 5 years 20% 3% AAA
(1) For reference only, the Local Agency Investment Fund currently limits regular accounts to a maximum of $75,000,000.00. The Policy limit is the current limit set by the State of California. (2) There is no limit that may be invested in this type; however, a maximum of 10% of the portfolio may be invested in time deposits. (3) At all times deposit must be fully insured by federal deposit insurance. 06/14/2022 C10 Page 20 of 21
DELEGATION OF INVESTMENT AUTHORITY TO THE CITY TREASURER
AND ADOPTING CITY INVESTMENT POLIY
PRIOR ACTIONS
On June 8, 2021, adopted City Council Resolution No. 2021-81, delegating investment authority to the City Treasurer for Fiscal Year 2021/22 and re-adopting City Council Policy 700-07 relating to the investment of public funds (Vote: 5-0).
On June 9, 2020, adopted City Council Resolution No. 2020-87, delegating investment authority to the City Treasurer for Fiscal Year 2020/21 and re-adopting City Council Policy 700-07 relating to the investment of public funds (Vote: 5-0).
On June 11, 2019, adopted City Council Resolution No. 2019-76, delegating investment authority to the City Treasurer for Fiscal Year 2019/20 and re-adopting City Council Policy 700- 07 relating to the investment of public funds (Vote: 5-0).
On June 12, 2018, adopted City Council Resolution No. 2018-86, delegating investment authority to the City Treasurer for Fiscal Year 2018/19 and re-adopting City Council Policy 700- 07 relating to the investment of public funds (Vote: 4-0, Rigby absent).
On June 13, 2017, adopted City Council Resolution No. 2017-74, delegating investment authority to the City Treasurer for Fiscal Year 2017/18 and re-adopting City Council Policy 700- 07 relating to the investment of public funds (Vote: 5-0).
On November 15, 2016, adopted City Council Resolution No. 2016-162, revising City Council Policy 700-07 relating to the investment of public funds (Vote: 5-0).
On December 3, 1984, adopted City Council Resolution No. 84-253, adopting investment policies pertaining to the investment of public funds (Vote: 4-0, McClellan absent). 06/14/2022 C10 Page 21 of 21EXHIBIT 3