Loading...
HomeMy WebLinkAbout2015 Rexburg Investment Policy DraftCITY OF REXBURG Resolution Number 2015-09 This resolution replaces any prior resolutions regarding an investment policy for the City of Rexburg. INVESTMENT POLICY 1. Purpose The purpose of this document is to provide guidelines for the prudent investment of public funds in a manner which maximizes security and provides maximum return in preserving and protecting funds while meeting the daily cash flow demands and conforming to all applicable federal, state and/or local statutes governing the investment of public funds. The Treasurer should invest idle public funds in a manner that recognizes that safety of principal is the top priority. The second priority is liquidity. It is the duty of the Treasurer to maintain an adequate percentage of the portfolio in short-term securities, which can be converted to cash if necessary to meet disbursement requirements. A high yield on investments ranks third in priority in the City's investment strategy. Yield should be considered only after the basic requirements of safety and liquidity have been met. 2. Standards of Care A. Prudence – The standard of prudence to be used should be the “prudent person” standard and should be applied in the context of managing an overall portfolio. Individuals acting in accordance with written procedures and this investment policy and exercising due diligence should be relieved of personal responsibility for an individual security’s credit risk or market price changes. The “prudent person” standard states that, “Investments should be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.” B. Ethics and Conflicts of Interest – Employees involved in the investment process should refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees should disclose any material interests in financial institutions with which they conduct business. They should further disclose any personal financial or investment positions that could be related to the performance of the investment portfolio. Treasury personnel should act in strict accordance with Federal and State laws and City ordinances and policies governing ethics and conflicts of interests. C. Delegation of Authority – Authority to manage the investment portfolio is granted to the City Treasurer, who should act in accordance with established procedures and internal controls for the operation of the investment portfolio consistent with this investment policy and may engage the Deputy Treasurer or other staff or contracted persons in performing his or her duties. No person may engage in an investment transaction except as provided under the terms of this policy. The Treasurer should be responsible for all transactions undertaken and should establish a system of controls to regulate the activities of subordinate officials. D. Investment Training- the Treasurer should be familiar with Federal, State, and local laws for governmental entities and investments to ensure compliance of investment programs through authorized financial advisors. It is recommended that at least annually the Treasurer should attend a training session sponsored by a professional organization, such as, but not limited to: Government Finance Officers Association (GFOA), Idaho City Clerks, Treasurers, and Finance Officers Association (ICCTFOA), or the Association of Public Treasurers of the United States or Canada (APT). Training should include some or all of the following components: investment controls, security risks, strategy risks, market risks, and compliance with Federal, State and local laws. The same training opportunities should also be provided to those staff members that have been delegated investment responsibilities as authorized by the City Treasurer. 3. Investment Objectives The City should invest idle funds based on the following objectives: A. Safety – The primary objective is the preservation of capital (safety of principal) and the safeguarding of public funds by mitigating credit and interest rate risk. a. Credit Risk – The City should minimize credit risk, which is the risk of loss due to the failure of the security issuer or backer by: i. Limiting investments to the safest types of securities; ii. Utilizing financial institutions, brokers/dealers, and advisors to those that are authorized and prequalified as set forth in the Investment Depositories/Institutions and Authorized Financial Dealers Section below. iii. Diversifying the investment portfolio through pooling with other governmental agencies or diversification by security and institution iv. All cash and time deposits should be either insured by the FDIC, insured by the National Credit Union Administration (NCUA) Share Insurance Fund, or be fully collateralized. The City Treasurer and designated staff should make every effort to make sure that cash deposited in savings and checking accounts at one institution do not exceed the FDIC or NCUA limits. v. The City should not accept, as depository collateral, any security that is not specifically allowed to be held as a direct investment by the City portfolio. b. Interest Rate Risk – The City should minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in the market interest rates by: i. Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations and capital projects, thereby avoiding the need to sell securities on the open market prior to maturity. B. Liquidity – The portfolio should remain liquid to meet all operating requirements that may be reasonably anticipated by: a. Structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands. b. Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist of securities with active secondary or resale markets, or alternatively, a portion of the portfolio may be placed in money market mutual funds or government investment pools which offer same or next-day liquidity for short- term funds. C. Yield – The investment portfolio should be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. The City’s general approach is to buy investments with the intention of holding the investment to maturity. a. The benchmark to be used shall be the State of Idaho Local Government Investment Pool annual rate of return for short term investments under 3 years. The benchmark to be used for investments of 3 or more years shall be the State of Idaho Diversified Bond Fund. b. Return on investment is of secondary importance compared to the safety and liquidity objectives. c. The core of investments should be limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. d.. Securities should not be sold prior to maturity with the following exceptions: i. An investment swap would improve the quality, yield, or target duration in the portfolio. ii. A security with declining credit may be sold early to minimize principle loss. iii. Liquidity needs of the portfolio require the security to be sold. iv. Direction from the City Council. 4. Scope This policy applies to the investment of all funds including but not limited to General Fund, Capital Projects, Debt Service Fund, Enterprise Funds, Internal Service Funds and Special Revenue Funds. Funds that fall outside the scope of this policy include retirement funds and certain bond issues. Pooling of Funds The City should consolidate (pool) cash and reserve balances from all funds, except for those legally restricted by statutes, to maximize investment earnings and to increase efficiencies with regard to investment pricing, safekeeping and administration. Investment income should be allocated to the various funds based on their respective participation and in accordance with generally accepted accounting principles. 5. Suitable and Authorized Investments 1) The Treasurer and/or those assigned by the Treasurer should invest money only in those investment instruments allowed by Idaho Code 50-1013. Legal investments for the city are as follows: (a)  Revenue bonds issued by the revenue bond act. (b)  City coupon bonds provided for under section 50-1019, Idaho Code. (c)  Local improvement district bonds provided for under chapter 17, title 50, Idaho Code. (d)  Time deposit accounts with public depositories. (e)  Bonds, treasury bills, interest-bearing notes, or other obligations of the United States, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. (f)  General obligation bonds of this state, or those for which the faith and credit of this state are pledged for the payment of principal and interest.