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HomeMy WebLinkAbout4041_CCv0001.pdf RESOLUTION NO. 4041 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDLANDS ACKNOWLEDGING THE RECEIPT AND FILING OF THE ANNUAL STATEMENT OF INVESTMENT POLICY FOR THE YEAR 1985 WHEREAS, the California State Legislature passed legislation during the 1984 session requiring the filing of an annual Statement of Investment Policy by local public agencies; and WHEREAS, the Governor of the State of California signed such legislation into law effective January 1 , 1985 (Chapter 1226) ; and WHEREAS, the City Treasurer of the City of Redlands declares the annual Statement of Investment Policy to be as follows: PURPOSE: This statement is intended to provide a guideline for the prudent investment of idle cash, trust funds , and restricted monies and to outline a policy for maximizing the efficiency of the cash manage- ment system. Ultimate investment goals include the enhancement of the economic condition of the City while assuring the safety of funds invested and assuring that existing funds are always available when needed. OBJECTIVE: Redlands ' cash management system is designed to accurately monitor and forecast expenditures and revenues, thus enabling the investment of funds to the fullest extent possible. Redlands attempts to obtain the highest yield available when selecting investments, providing that criteria for safety and liquidity are met. POLICY: Redlands operates its idle cash investments under the prudent man rule (Civil Code Section 2261 , et seq. See attached copy) . This affords the City a broad spectrum of investment opportunities so long as the investment is deemed prudent and is allowable under current legislation of the State of California. Redlands strives to maintain the level of investment of all idle funds as near 100% as possible, through daily and projected cash flow determinations. Idle cash management and investment transactions are the responsibility of the City Treasurer. Investments are made in the following: Securities of the U. S . Government, or its agencies Certificates of Deposit, placed with commercial banks and savings and loans Bankers acceptances Negotiable Certificates of Deposit Commercial paper Local Agency Investment Fund demand deposits Repurchase agreements and reverse repurchase agreements Government National Mortgage Association guaranteed securities Passbook savings account demand deposits Government and agency securities are the highest quality investments available in terms of safety and liquidity. Certificates of Deposit, savings accounts, repurchase agreements, and bankers acceptances are insured or collateralized. Only commercial paper with both A-1 Moody ' s and P-1 Standard and Poor ' s ratings is purchased. Criteria for selecting investments, and the order of_priority are: A) SAFETY Safety and the minimizing of risk associated with investing refers to attempts to reduce the potential for loss of principal, interest or a combination of the two. The first level of risk control is found in state law which restricts the particular type of investments permissable for municipalities. The second level of risk control is reduction of default risk by investing in instruments that appear upon examination to be the most credit worthy. The third level of risk control is reduction of market risk by investing in instruments that have maturities coinciding with dates of disbursement, thereby eliminating risk of loss from a forced sale . Redlands only invests in those instruments that are considered very safe . B) LIQUIDITY Liquidity refers to the ability to easily sell at any time with a minimal risk of losing some portion of principal or interest. Liquidity is an important quality for an investment to have, for at any time the City may have unexpected or unusual circumstances that result in larger disbursements than expected, and some investments may need to be sold to meet contingency. Most investments are highly liquid, with the exception of G.N.M.A. guaranteed securities and Certificates of Deposit held by banks and savings and loans. Maturities are selected to anticipate cash needs, thereby eliminating the need for forced liquidation. C) YIELD Yield is the potential dollar earnings an investment can provide , and also is sometimes described as the rate of return. Redlands attempts to obtain the highest yield possible when selecting an investment, provided that the criteria stated in the Investment Policy for safety and liquidity are met and the investment guidelines and strategy are followed. Resolution No. 4041 Page two - POLICY CONSTRAINTS: Redlands operates its investment portfolio with many State and self- imposed constraints. It does not buy stocks or deal in futures or options. Longer-term investments are generally limited to maturities of two years or less. The economy and various markets are monitored carefully in order to assess the probable course of interest rates. The City lengthens its maturities when rates are falling and shortens maturities when rates are rising. The City attempts to take advantage of imperfections in the market where a security ' s price is out of line with other investments. All net profits earned from "swaps" and "trades" are allocated solely to the General Fund. The basic premise underlying Redlands ' investment philosophy is that existing funds are always readily available when needed. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Redlands as follows: That an annual Statement of Investment Policy for the City of Redlands has been filed by the City Treasurer for calendar year 1985 in compliance with Section 53546 (A) of the Government Code of the State of California ADOPTED, SIGNED AND APPROVED this Mayor of the City of Redlands ATTEST: City Clerk Resolution No. 4041 Page three - CIVIL CODE § 2261. [Investment of funds) (1) In investing, reinvesting, purchasing, acquiring, exchanging, selling and managing property for the benefit of another, a trustee shall exercise the judgment and care, under the circumstances then prevail- ing, which men of prudence, discretion and intelligence exercise in the :management of their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of their capital. Within the limitations of the foregoing standard, and subject to any express provisions or limitations contained in any particular trust instrument, a trustee is authorized to acquire every kind of property, real, personal or mixed, and every kind of investment, specifically including, but not by way of limitation, corporate obligations of every kind, and stocks, preferred or common, which men of prudence, discretion and intelligence acquire for their own account. i Resolution No. 4041 Attachment