Agenda Item 6AAGENDA ITEM # 6A
OCTOBER 24, 2011
Some of the revisions are proposed simply to allow for portfolio growth and easier
management.
The proposed revisions accomplish the following:
1. To remove the policy table presentation and move the policy guidelines to each investment type
by inserting the percentage allocations and limits with the description of each investment. This
will make the document more user - friendly and more comparable to the way other cities describe
their policies.
2. To consolidate the provisions for treasury securities of under 6 months and over 6 months until
maturity eliminating the need for a Type A -1 and A -2.
3. To remove the fixed dollar limitations per issuer and replace them with percent of portfolio limits
allowing the relative composition of the allocations to change with the size of the portfolio.
4. To renumber the policy provisions.
5. To add Treasury Inflation Protected Securities (TIPS) as an allowable investment.
6. To add Money Market Funds of the highest credit quality rating, but restricting it to 25% of
available funds.
7. To remove the $1,000,000 per issue restriction on Government Agencies but retain the 50%
maximum exposure.
8. To remove the $1,000,000 per issue restriction on Government Sponsored Enterprises and change
the maximum exposure from 30% to 50 %.
9. To add the investment type Corporate Notes and Bonds By allowing these instruments, they
may also be allowed in the available fixed income mutual funds. This is common and will be
restricted to 5% of available funds with any individual issuer.
10. To change the investment type of Government Mutual Funds to Government \Corporate Fixed
Income Mutual Funds and change the allowable percentage from 30% to 80% with only 25% in
an individual issuer.
11. To remove the $1,000,000 per issuer limit for Local Government Investment Pools and replacing
it with a 10% per issuer limit while retaining the 20% of available assets.
12. To update the policy with an alternative to the three bid requirement so that investments
may be purchased utilizing the comparison to current market price method from sources
that provide current market prices, i.e. Bloomberg, or other similar industry providers.
RECOMMENDATION: The City Commission adopts Resolution 11 -24 amending the City
of Atlantic Beach Investment Policy.
ATTACHMENTS: Resolution 11 -24
Revised Atlantic Beach Investment Policy
REVIEWED BY CITY MAN
AGENDA ITEM # 6A
OCTOBER 24, 2011
RESOLUTION NO. 11 -24
A RESOLUTION OF THE CITY OF ATLANTIC BEACH, FLORIDA, AMENDING THE
INVESTMENT POLICY FOR CITY FUNDS, AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, Florida Statute 218.415 requires the City of Atlantic Beach to adopt a written investment
plan relating to the investment of municipal funds, and
WHEREAS, Sec 2 -73 of the Atlantic Beach Code, as amended by Ordinance no. 35 -95 -9, effective
September 25, 1995, authorizes the City Commission to adopt its written investment plan by resolution,
and
WHEREAS, the Director of Finance has proposed amending the current investment policy for the
purpose of making improvements to the policy, and
WHEREAS, it is the desire of the City Commission to adopt the revised Investment Policy, provided it
does not abrogate or conflict with any provision or covenant contained in any bond resolution or
ordinance of the City.
NOW THEREFORE, be it resolved by the City Commission of the City of Atlantic Beach, Florida as
follows:
Section 1. The City of Atlantic Beach hereby revised Investment Policy attached hereto is hereby
adopted pursuant to sec 218.415, Florida Statutes, and Section 2 -73, Atlantic Beach Code.
Section 2. Nothing in this resolution or the attached investment policy shall be interpreted or construed
to abrogate or conflict with any specific provision or covenant contained in any bond resolution or
ordinance of the City relating to the investment of bond proceeds available in specific funds or accounts.
Section 3. This Resolution shall take effect immediately upon its final passage and adoption.
PASSED by the City Commission this day of October, 2011.
ATTEST:
Donna L. Bartle, CMC
City Clerk
Approved as to form and Correctness:
Louis "Mike" Borno, Jr.
Mayor, Presiding Officer
Alan C. Jensen, Esquire
City Attorney
AGENDA ITEM # 6A
OCTOBER 24, 2011
City of Atlantic Beach, Florida
Investment Policy Statement
I. PURPOSE
The purpose of this policy is to set forth the investment objectives and parameters for the
management of public funds of the City of Atlantic Beach, Florida (hereinafter "City "). These
policies are designed to ensure the prudent management of public funds, the availability of
operating and capital funds when needed and an investment return competitive with
comparable funds and financial market indices.
II. SCOPE
In accordance with section 218.415, Florida Statutes, this investment policy applies to all
financial assets, and to the investment of principal, interest, reserve, construction,
capitalized interest, and redemption or escrow accounts created by ordinance or resolution
pursuant to the issuance of bonds where the investments are held by an authorized
depository.
This investment policy does not apply to pension fund assets held by the City of Atlantic
Beach (City) or for the benefit of the City by a third party custodian.
Ill. INVESTMENT OBJECTIVES
The investment objectives for the City's cash reserves are (in this order):
1. to ensure the safety and preservation of investment principal
2. provide for sufficient liquidity
3. Maximize the return on investment (yield) while controlling risk through
diversification
The City's investment portfolio shall be managed in a manner to attain a market rate of
return throughout budgetary and economic cycles while preserving and protecting capital in
the overall portfolio.
To attain these objectives, and to further reduce risk, diversification should be utilized such
that potential losses on individual securities do not exceed the income generated from the
remainder of the portfolio.
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AGENDA ITEM # 6A
OCTOBER 24, 2011
IV. DELEGATION OF AUTHORITY
The Finance Director is responsible for investment decisions and activities, under the
direction of the City Manager. The Finance Director shall develop and maintain written
administrative procedures for the operation of the investment program, consistent with
these policies.
V. INVESTMENT PERFORMANCE AND REPORTING
A portfolio report shall be provided monthly to the City Manager and the City Commission.
This report shall include a breakdown of the portfolio, as well as the performance during
the period.
VI. PRUDENCE AND ETHICAL STANDARDS
The City shall adopt the Prudent Person Rule, which states that: "Investments shall 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 from the investment."
VII. AUTHORIZED INVESTMENTS
The Finance Director shall purchase or sell investment securities at prevailing market rates.
All investments shall be limited to the following:
T A 7• US Se rities (eyeF G month
A. U.S. Treasury Securities
Invest in negotiable direct obligations, or obligations, the principal and interest of which are
unconditionally guaranteed by the United States Government. Such securities will include,
but not be limited to, the following:
1. Treasury Securities - State Government Series (SLGS)
2. Treasury Bills
3. Treasury Notes
4. Treasury Bonds
5. Treasury Strips
6. Treasury Inflation Protected Securities (TIPS)
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AGENDA ITEM # 6A
OCTOBER 24, 2011
A maximum of 100% of available funds may be invested in U.S. Treasury Securities.
The maximum length to maturity of any direct investment in U.S. Treasuries is 10 years from
the date of purchase.
B. Money Market Funds
Invest in Securities and Exchange Commission registered money market funds with the
highest credit quality rating from a nationally recognized rating agency.
A maximum of 100% of available funds may be invested in money market funds, with no
more than 25% of available funds invested in any individual issuer.
C. Demand Deposits
Invest in interest bearing demand deposit accounts whereby the City has access to the
funds by writing drafts against the money on deposit. Any such deposits are to be
secured by the Florida Security for Public Deposits Act, Chapter 280, Florida Statutes,
and provided that the bank or savings association is not listed with any recognized credit
watch information service.
A maximum of 100% of available funds may be invested in demand deposits.
D. Certificates of Deposit
Invest in non negotiable interest bearing time certificates of deposit or savings accounts
in banks or savings associations organized under the laws of Florida and or/ national
banks or saving associations organized under the laws of the United States and that any
such deposits are secured by the Florida Security of Public deposits Act, Chapter 280,
Florida Statutes, and provided that the bank or savings association is not listed with any
recognized credit watch information service.
A maximum of 50% of available funds may be invested in certificates of deposit with no
more than $2,000,000 invested in any individual issuer.
E. U.S. Government Agency Securities
Invest in bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by a United States Government agency, provided such obligations are
backed by the full faith and credit of the United States Government.
1. United States Export- Import Bank (direct obligations or fully guaranteed certificates
of beneficial ownership)
2. Farm Services Agency (FSA)
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AGENDA ITEM # 6A
OCTOBER 24, 2011
3. General Services Administration Participation Certificates (GSA)
4. Government National Mortgage Association (GNMA)
5. Small Business Administration (SBA)
6. Maritime Administration
A maximum of 50% of available funds may be invested in U.S. Government Agencies.
The decision to invest in one or more U.S. Government Agencies will be based on
current market conditions, individual bond inventory available, and competitive
investment yields.
The maximum length to maturity of any direct investment in U.S. Government Agencies
is 10 years on the date of purchase.
F. U.S. Government Sponsored Enterprises
Invest in bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by a United States Government agency (Federal Instrumentalities) which are
non -full faith and credit agencies limited to the following:
1. Federal Farm Credit Bank (FFCB)
2. Federal Home Loan Bank or its district banks (FHLB)
3. Federal National Mortgage Association (FNMA)
4. Federal Home Loan Mortgage Association (FHLMA)([Freddie Macs] including Federal
Home Loan Mortgage Corporation participation certificates)
A maximum of 50% of available funds may be invested in U.S. Government Sponsored
Enterprises The decision to invest in one or more U.S. Government Sponsored
Enterprises will be based on current market conditions, individual bond inventory
available, and competitive investment yields.
The maximum length to maturity of any direct investment in U.S. Government
Sponsored Enterprises is 10 years on the date of purchase.
G. Corporate Notes and Bonds
Invest in corporate notes and bonds issued by corporations organized and operating
within the Unites States or by depository institutions licensed by the Unites States that
have a long -term debt rating at the time of purchase of investment grade by a
nationally recognized rating agency.
A maximum of 50% of available funds may be invested in corporate notes and bonds,
with no more than 5% of available funds invested in any individual issuer.
The maximum length to maturity of any direct investment in corporate notes and bonds
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AGENDA ITEM # 6A
OCTOBER 24, 2011
is 10 years on the date of purchase.
H. Government \Corporate Fixed Income Mutual Funds
Invest in fixed income mutual funds as defined by the SEC; which primarily invest in
instruments as authorized for types A — G above. It is recognized that fixed income
mutual funds are governed by a prospectus. Decisions regarding the duration, maturity,
credit quality, and security selection are the responsibility of the fund's portfolio
manager and may be different from the individual authorized investments in this policy.
A maximum of 80% of available funds may be invested in fixed income mutual funds,
with no more than 25% of available funds invested in any individual issuer.
I. Local Government Investment Pools
Invest in a state or local government authorized pooled investment fund that operates
like a mutual fund for the exclusive benefit of the governments within the state. Local
government investment pools may be state sponsored pools or set up through
intergovernmental agreements known as "joint powers" agreements.
A maximum of 20% of available funds may be invested in local government investment
pools with no more than 10% of available funds invested in any individual issuer.
VIII. INVESTMENT MATURITY
To the extent possible, an attempt will be made to match investment maturities with known
cash needs and anticipated cash flow requirements of the City. *h- °`r'' QRkA
IX. RISK AND DIVERSIFICATION
Assets held should be diversified to control the risk of loss resulting from over investing in
specific instruments or individual financial institutions. Diversification strategies within the
established guidelines shall be reviewed and revised periodically, as necessary, by the
appropriate management staff. TL.. f o il -- F i Ra ta r„ „r,...,.._,.,. `6,gc
AGENDA ITEM # 6A
OCTOBER 24, 2011
X. AUTHORIZED INVESTMENT INSTITUTIONS AND DEALERS
The Finance Director shall only purchase securities from financial institutions which are
qualified as public depositories of the State of Florida as identified by the Treasurer of the
State of Florida or dealers designated as "Primary Securities Dealers" by the Federal Reserve
Bank of New York, for purchases and sales of securities. The firm must have a minimum of
$500 million in annual underwriting of U.S. Government Agency Securities or
Instrumentalities for the previous calendar year. The firm must have capital of no less than
$10,000,000.
Bond funds subject to arbitrage rebate shall be invested in accordance with specific bond
covenants.
XI. THIRD PARTY CUSTODIAL AGREEMENTS
The Finance Director may execute a third party Custodial Safekeeping Agreement with a
financial institution which is
chartered by the United States Government or the State of Florida. All securities purchased
and /or collateral obtained by the City shall be properly designated as an asset of the City
and held in safekeeping by the financial institution or its
agent, and no withdrawal of such securities, in whole or in part, shall be made from
safekeeping, except by an authorized City staff member.
The third party Custodial Safekeeping Agreement shall include letters of authority from the
City with details as to responsibilities of parties, notification of security purchases, sales,
delivery, repurchase agreements, wire transfers, safekeeping and transaction costs,
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AGENDA ITEM # 6A
OCTOBER 24, 2011
procedures in case of wire failure or other unforeseen mishaps, including liability of each
party.
XII. BID REQUIREMENTS
When feasible and appropriate, investment purchases will be competitively bid. A minimum
of three (3) banks and /or dealers must be contacted and asked to provide bids on securities
in question. Bids will be held in confidence until the best bid is determined and awarded. As
an alternative investments may be purchased utilizing the comparison to current mar
price method from sources that provide current market prices, i.e. Bloomberg, or ot her
similar industry providers.
XII1. INTERNAL CONTROLS
The Finance Director shall establish and monitor a set of internal controls designed to
prevent loss of funds by fraud, employee error, misrepresentation by third parties, or
imprudent actions by employees of the City and ensure proper accounting and reporting of
the securities transactions. Such internal controls, shall include, but not be limited to, the
following:
A. All securities purchased or sold will be transferred only under the "deliver versus
payment" (D.V.P.) method to ensure that funds or securities are not released until all
criteria relating to the specific transaction are met;
B. The Finance Director is authorized to accept, on behalf of and in the name of the City of
Atlantic Beach, bank trust receipts or confirmations as evidence of actual delivery of the
obligations or securities in return for investment of funds;
C. Trust receipts or confirmations shall fully describe the various obligations or securities
held, and the receipt or confirmation shall state that the investment is held in the name
of the City of Atlantic Beach;
D. The actual obligations, or securities, whether in book entry or physical form, on which
trust receipts or confirmations are issued, may be held by a third party custodial bank
and /or institution or a designated correspondent bank which has a correspondent
relationship to the City's third party custodian; and,
E. Other internal controls such as:
1. Written documentation of telephone or e-mail communications;
2. Adequate segregation of duties;
3. Custodial safekeeping;
4. Supervisory control of employee actions and operations review;
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AGENDA ITEM # 6A
OCTOBER 24, 2011
5. Performance evaluations and interim reporting;
6. Requirement of dual signatures on all investment transactions from two of the
following authorized personnel:
Finance Director
City Manager
City Clerk
7. Staff in the Finance Department reconciles the City's general depository account on
a monthly basis.
8. Independent auditors as a normal part of the annual financial audit to the City shall
conduct a review of the system of internal controls to ensure compliance with
policies and procedures.
XIV. CONTINUING EDUCATION
The Finance Director and appropriate staff shall annually complete eight (8) hours of
continuing education in subjects or courses of study related to investment practices and
products.
XV. ETHICS AND CONFLICTS OF INTEREST
The City's staff 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. Also, employees involved in the
investment process shall disclose to the City any material financial interests in financial
institutions that conduct business with the City, and they shall further disclose any material
personal financial /investment positions that could be related to the performance of the
City's investment program.
XVI. DERIVATIVES AND REVERSE REAURCHASE AGREEMENTS
Investment in any derivative products or the use of reverse repurchase agreements is not
permitted. A "derivative" is defined as a financial instrument, the value of which depends
on, or is derived from, the value of one or more underlying assets or indices or asset values.
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