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2016 05 11 IABN Investment Advisory Board agendas and staff reports are now available on the City's web page: www.la-quinta.q�g INVESTMENT ADVISORY BOARD AGENDA CITY HALL STUDY SESSION ROOM 78-495 Calle Tampico, La Quinta REGULAR MEETING ON WEDNESDAY MAY 11 2016 AT 4:00 P.M. CALL TO ORDER 1. Pledge of Allegiance 2. Roll Call PUBLIC COMMENT At this time members of the public may address the Board on any matter not listed on the agenda. Please complete a "Request to Speak" form and limit your comments to three minutes. CONFIRMATION OF AGENDA APPROVAL OF MINUTES 1. Approval of the Minutes of February 10, 2016 CONSENT CALENDAR 1. Receive and File the Third Quarter Fiscal Year 2015-2016 Treasury and Pooled Money Reports for January, February and March 2016 BUSINESS SESSION 1. Consideration of Fiscal Year 2016/2017 Investment Policy and Work Plan Items 2, Consideration of Fiscal Year 2016/2017 Meeting Schedule INVESTMENT ADVISORY BOARD AGENDA 1 May 11, 2016 CORRESPONDENCE AND WRITTEN MATERIALS - None BOARD MEMBER ITEMS — None DIRECTORS ITEMS ADJOURNMENT The next regular meeting of the Investment Advisory Board will be held on August 10, 2016 commencing at 4:00 p.m. at the La Quinta Caucus Room, 78-495 Calle Tampico, La Quinta, CA 92253. DECLARATION OF POSTING I, Vianka Orrantia, Management Assistant, of the City of La Quinta, do hereby declare that the foregoing Agenda for the La Quinta Investment Advisory Board meeting was posted on the City's website, near the entrance to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and the La Quinta Cove Post Office at 51-321 Avenida Bermudas, on May 5, 2016. DATED: May 5, 2016 VIANKA ORRANTIA, Management Assistant City of La Quinta, California Public Notices The La Quinta Study Session Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the City Clerk's office at 777-7123, twenty-four (24) hours in advance of the meeting and accommodations will be made. If special electronic equipment is needed to make presentations to the City Council, arrangements should be made in advance by contacting the City Clerk's office at 777-7123. A one (1) week notice is required. If background material is to be presented to the Investment Advisory Board during an Investment Advisory Board meeting, please be advised that five (5) copies of all documents, exhibits, etc., must be supplied to the Management Assistant for distribution. It is requested that this take place prior to the beginning of the meeting. Any writings or documents provided to a majority of the Investment Advisory Board regarding any item(s) on this agenda will be made available for public inspection at the City Clerk's counter at City Hall located at 78-495 Calle Tampico, Lo Quinta, California, 92253, during normal business hours. INVESTMENT ADVISORY BOARD AGENDA 2 May 11, 2016 INVESTMENT ADVISORY BOARD MINUTES Wednesday,February 11 2016 CALL TO ORDER A regular meeting of the La Quinta Investment Advisory Board was called to order at 4:00 p.m. by Chairman Mortenson. PRESENT: Board Members Park, Mortenson, Donais and Batavick ABSENT: None STAFF PRESENT: Finance Director Rita Conrad, and Management Assistant, Vianka Orrantia PUBLIC COMMENT - None CONFIRMATION OF AGENDA - Confirmed APPROVAL OF MINUTES Approval of the Minutes of December 9, 2015 Motion - A motion was made by Board Members Batavick/Park to approve the Minutes of December 9, 2015 as submitted with a correction to the spelling of Board Member Batavick's name. Motion passed unanimously. CONSENT CALENDAR ITEMS 1. Receive and File the Second Quarter Fiscal Year 2015-2016 Treasury and Pooled Money Reports for October and November 2015 Motion - A motion was made by Board Members Park/Batavick to receive and File the Second Quarter Fiscal Year 2015-2016 Treasury and Pooled Money Reports for October and November 2015. INVESTMENT ADVISORY MINUTES 1 February 11, 2016 BUSINESS SESSION 1. Consideration of Fiscal Year 2016-2017 Investment Policy and Work Plan Items Mrs. Conrad advised the Board of the Auditors recommended change Appendix A (Table) within the Investment Policy, with inconsistencies to the LAIF deposits, State Maximum Allocations vs City Maximum Allocations. Currently the State has no limit maximum; therefore the recommendation is to remove the 30% maximum allocation. Board Member Mortenson recommended the following changes/deletions as follows: PAGE 8: Column of Permissible De osits and Investments Delete "Negotiable Certificate of Deposit" Decrease "Certificate of Deposit" from 60% to 30% PAGE 10: Delete, under Money Market Mutual Funds; "and maintain a par value of $1 per share PAGE 11: Delete Negotiable Certificates of Deposit definition PAGE 12: Delete, listed under Money Market Mutual Funds; "that are money market funds maintaining a par value of $1 per share." Motion - It was moved by Board Members Batavick/Park to continue the review of the 2016/2017 Investment Policy and Work Plan Items. Motion carried unanimously CORRESPONDENCE AND WRITTEN MATERIAL - None BOARD MEMBER ITEMS- None DIRECTOR'S ITEMS 1. Discussion of the Next Scheduled Meeting Mrs. Conrad advised the Board that the next scheduled meeting is May 11, 2016. Mrs. Conrad suggested that if Board required an additional review of the Investment Policy and Work Plan a meeting should be scheduled either in March or April. The Board at this time was advised of the upcoming joint meeting with all Boards and Commissions and the City Council. INVESTMENT ADVISORY MINUTES 2 February 11, 2016 ADJOURNMENT There being no further business, it was moved by Board Members Park/Donais +to adjourn this meeting at 4:48 p.m. Motion passed unanimously. Respectfully submitted, Vianka Orrantia, Management Assistant City of La Quinta, California INVESTMENT ADVISORY MINUTES 3 February 11, 2016 CONSENT CALENDAR ITEM NO. 1 City of La Quinta INVESTMENT ADVISORY BOARD MEETING: May 11, 2016 STAFF REPORT AGENDA TITLE: TRANSMITTAL OF 3rd QUARTER FISCAL YEAR 2015-2016 TREASURY AND POOLED MONEY REPORTS (JANUARY, FEBRUARY AND MARCH 2O16). RECOMMENDATION Receive and File the 3rd Quarter FY 2015-2016 Treasury and Pooled Money Reports (January, February, and March 2016). BACKGROUNDIANALYS15 Attached are the 3rd Quarter FY 2016-2017 (January, February and March 2016) Treasury Reports and Pooled Money Investment Reports. Treasurer's Commentary on 3" dQuarter FY 2015-2016 For the 3rd quarter period of FY 2015-2016 (January 1, 2016 through March 31, 2016) the City's total portfolio increased by $9.5 million from $109.8 million to $119.3 million. Typically, during months of January and June each year, receipts are higher than disbursements due to Redevelopment Property Tax Trust Fund (RPTTF) disbursements for obligations of the Successor Agency to the former La Quinta Redevelopment Agency. The [arcer recei is in the 3rdQuarter of FY 2015-2016 by month were: January 6 $7.7 million RPTTF disbursement • $1.2 RPTTF residual property tax payment $3.6 million property tax payment February d $2.03 million property tax in lieu of vehicle license fee $604,200 sales tax 0 $640,669 SilverRock revenue March ■ $835,625 Library Fund property tax ■ $793,433 sales tax • $637,944 SilverRock revenue payment The larger disbursements not including monthly payroll costs in the 3rd Quarter of FY 2015-2016 by month were: January ■ $383,719 to LandMark for contract golf management at SilverRock ■ $396,148 to Granite Construction for slurry seal -pavement management ■ $92,537 to Coachella Valley Association of Governments (Jefferson/I10)) February ■ $1.56 million to Burrtec for refuse payments collected on property tax rolls $314,568 to LandMark for contract golf management at SilverRock ■ $5 million to US Bank for Successor Agency debt service March ■ $271,465 to LandMark Golf for contract management services at SilverRock ■ $1.9 million to the Riverside County Sheriffs Department for contract law enforcement services from 10/15/15 to 12/9/15 ■ $140,226 to Bang Inc. for playground equipment (CDBG funds) Inyestmer:t Activity January ■ $14 million in excess cash from the Successor Agency was transferred to LAIF ■ Bank fees in January were $998 and the sweep account earned $39 in interest income • Average investment maturity in January was 351 days as compared to 419 days in December February ■ $4 million was transferred from LAIF to the City's checking to cover pending debt service payments 2 • 3 new CD's of $240,000 each were purchased to replace 3 matured CD's • Bank fees for the month of February were $852 and the sweep account earned $35 in interest income • Average investment maturity in February was 358 days as compared to 351 days in January March • $5.5 million was paid by US bank to bondholders for debt service • A $5 million FHLMC investment was called (was reinvested in April) 10 Bank fees were $907 in December and the sweep account earned $7 in interest income $1 million was transferred from LAIF to the City to cover operating expenses Portfolio Performance January - Overall portfolio performance in January of .81% was slightly lower than .92% performance in December. At January 31th last year the portfolio yielded .49%. February- Overall portfolio performance in February was similar to January at .90%. In February of last year the portfolio yielded .51%. March - Overall portfolio performance in March of .88% was slightly lower than February's yield of .90%. In March of last year the portfolio yielded .52%. Other Notes The "Permissible Deposits and Investments" report show the City to be over the allowable percentage of funds to be invested in mutual funds. However, these funds are bond proceeds with the fiscal agent and are subject to the bond indentures, not the City's investment policy. Additionally, Successor Agency (SA) funds cannot be invested in long-term investments. Therefore, SA funds are only invested in LAIF. Looking Ahead The Treasurer follows a "buy and hold" investment policy. In the short term the Treasurer will invest in negotiable certificates of deposits, GSE securities, U.S. Treasuries and LAIF as needed. ALTERNATIVES None. Prepared by and approved for submission by: Rita Conrad, Finance Director 3 ECONOMY AT A GLANCE Riverside -San Bernardino -Ontario, CA Riverside -San Bernardino -Ontario, CA Data Series Labor Force Data Civilian Labor Force L11 Employment (1) Unemployment (1) Unemployment Rate (2) Nonfarm Wage and Salary Employment Total Nonfarm (3) 12-month % change Mining and Logging L1 12-month % change Construction 121 12-numth 0/6 change Manufacturing (3) 12-month c/a change Trade, Transportation, and Utilities (3) 12-mmith o/o change Information 12-month ale change Financial Activities JK 12-month % change Professional and Business Services in 12-month % change Education and Health Services L3l 12-month % change Leisure and Hospitality L1 12-month % change Other Services f3) 12-month % change Government f31 12-month % change Coner Price Index; Los Angeles -Riverside -Orange County, CA CPI-U, All items CPI-U, All items, 12-month % change L41 CPI-W, All items M CPI-W, All items, 12-month °/o change Sri Back Oct Nov Dec ]an Fels Mar Data 2015 2015 2015 2016 2016 2016 1,97=.1 --,975.5 1,S68.4 1.S58,: - 1,S51.7 1n5 = 2-_ - 117.0 114.5 :=113:S• 9 11389.9 1,3 ;3- 7 1,369.6 ...-_ 1,177.7 3.4 3.s 3'' P y.4 1.3 = 1.2 1.2 1.- -' 1.2 -7.7 •7.7 -7.7, ? -14.3 1.2 :;3.= 87.2 S7.2 57.3 '-87.9 13,4 a-8 10.7 10.8 8.7 ` 8.0 963 _ _ 96.4 36.5 97.'r - 97.7 3.9 = s.0 2.9 3.5 10 r 33SA 351_- 354.9 139-3 3S61 338.1 512 4.8 4,7 4.4 �.2 r' 4.6 �; 11.2 11.2 11.3 11.3 11.4 -L 11.4 F7f (I.9 11.0 0.0 0J) 0.9 �' 0.9 43.8- 43.8 43.2 -33 43.0. L 43.5 s.1 2.6 10.9 114 Q.2 i 145.9 146.0 145.S 143.8 1=3.6 u 144.5 0.8 -3.9 -1.4 0.2 LEI.1.4 ZD9.0 209.0 207.1 2U6.3 21.l.tl j 5.8 4.9 4.1 3.3 101 --ri 3.7 150.9 153.9 156.2 154.4 155.3 I155.1 F7 4.1 4.1 5.;1 3.5 3.8 = 1.9. 43.5 44.2 44.6 w.5 44.5 'c14,8 -1 1.9 2.8 4.2 4.2 2.8 ?I2.5 237.3 2 3 o r 24.1 24 CI.1 240.6' - 243.5 2.2 2.3 3.0 3.3 3.1 ° 3.1 245.812 245.711 245.357 247.155 247,113 247.873 1.3 1.6 2.0 3.1 2.4 1.7 237.472 237,190 236.787 235.609 235.262 139.146 0.7 1.4 1.9 S. _.3 1.3 P-xAntt s (1 NUS Mel- :,f paf5,)n , in thOusP-njs, not sea�orlali� ust-�. L In pi?r-'enz -at. ac n-!l adiUs[ a. LL NLII'Ibcr of 'Ibs, in th-) lx'nds, TA S'� 'Ai cut ih�? jatc_ ± a,kl j lrLa r t� _. r:re>=, try: 198 -s-=1U,::, nx 5e._3n_Il &:kk ed. LLs Urbcn ' 'a^_,9 Earner and 4 rlcsl bzse: cu3LIStT�r. 4ierlyd ,� Fr?�fil'lrlcly 4 TO: La Quinta City Council FROM: Rita Conrad, Finance Director/Treasurer SUBJECT: Treasurer's Report for January 31, 2016 DATE: March 24, 2016 Attached is the Treasurer's Report for the month ending January 31, 2016. The report is submitted to the City Council each month after a reconciliation of accourits is accomplished by the Finance Department. The following table summarizes the changes in investment types for the month: Investment Balance 12/31/15 Purchased Notes Sold/Matured Ending Change LAIF 17,376,525 $ 14,014,323 $ 31,390,848 14,014,323 Interest bearing active bank deposit Certificates of Deposit 10,933,151 10,933,151 0 US Treasuries 19,916,150 19,916,150 0 US Gov't Sponsored Enterprises 28,022,920 28,022,920 0 Commercial Paper Corporate Notes - - - Mutual Funds 1 31,275,338 159 31,275,497 1 159 Subtotal $ 107.524.084 $ 14.014.482 $ $ 121.538.566 1 $ 14.014,482 Cash $ 2,292,938 1 8 2 $ (257e690)1 $ 2.035,248 f $ 257.690 Total $ 109,817,022 $ 14,014,482 1 1 $ 257,690) $ 123,573,814 1 $ 13,756,792 I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment Policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. Rita Conrad Date Finance Director/Treasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits and withdrawals from the previous month. (2) The cash account may reflect a negative balance. 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��g46 _ •• a' �R42 111qAVpMd14 Rag'. �YPSaao� WTI gg;: V E g 10 City of La Quinta Comparative Rates of Interest January 31, 2016 FY 11/12 FY 12/13 FY 13114 FY 14/15 FY 15/16 Citv of La Quinta Month Annualized Eammos Average Maturity (da 119 Treasury Bills/Note Commercial Paper Three Month Non-Financi2l LAIF Ra 0.53% Pooled Cash Fiscal Agent Overall Three Month 0.16% Six Month One Year Two Year July 2010 0.50% 0.15% 0.47% 0.20% 0.30% 0.63% 0.28% Aug 2010 0.49% 0.15% 0.46% 108 0.15% 0.19% 0.26% 0.38% 0.25% 0.51% Sept 2010 0.55% 0.15% 0.51% 107 0.16% 0,19% 0-27% 0.38% 0.24% 0.50% Oct 2010 0.55% 0.15% 0.51% 88 0.13% 0.17% 0.23% 0.38% 0.23% 0,48% Nov 2010 0.53% 0.15% 0.49% 84 0.18% 0.21% 0.28% 0.50% 0,23% 0.45% Dec 2010 0.57% 0.14% 0.52% 265 0.15% 0.19% 0.30% 0.63% 0,23% 0.46% Jan 2011 0.51% 0.14% 0.43% 206 OA6% 0.18% 0.28% 0.63% 0,24% 0.54 Feb 2011 0.55% 0.17% 0.46% 210 0,15% 0.17% 0.31% 0.63% 0.23% 0.51% Mar 2011 0,54% 0.17% 0.45% 218 0.05% 0.13% 0.26% 0.75% 0.23% 0.50% Apr 2011 0.59 % 0.17% 0.48% 192 0.05% 0.10% 0.28% 0.63% 0.20% 0.59% May2011 0A8% 0.17% 0.41% 156 0.06% 0,12% 0.20% 0.50% 0.16% 0.41% June 2011 0.53% 0.00% 0.35% 126 0.03% 0.10% 0.20% 0.38% 0115% 0.45% July 2011 0.53% 0.00% 0.35% 112 0.07% 0.12% 0.15% 0.20% OA4% 0,38% Aug 2011 : 0.60 % 0.00% 0.38% 102 0.02% 0.05% 0.10% 0.13% 0.16% 0.41% Sept 2011 0.58% 0.03% 0.39% 124 0.02% 0.06% 0.09% 0.13% 0.14% 0.38% Oct 2011 0.53% 0,03% 0.35% 117 0.01% 0.06% 0.12% 0.25% 0.15% 0.39% Nov 2011 0.52% 0.03% 0.37% 94 0.03% 0.07% 0.10% 0.25% 0.14% 0.40% Dec 2011 0.48% 0.03% 0.35% 86 0.02% 0.06% 0.11% 0.13% 0.14% 0.39% Jan 2012 0.45% 0,03% 0.34% 74 0.05% 0.08% 0.11% 0-25% 0.14% 0.39% Feb 2012 0.49% 0.05% 0.36% 72 0.12% 0.15% OA7% 0-25% 0.17% 0.39% Mar 2012 0.44% 0.05% 0.34% 74 0.08% 0,14% 0.19% 0.25% 0.18% 0,38% Apr 2012 0.44% 0.09% 0.35% 61 0.10% OA5% 0.19% 0.25% 0.20% 0.37% May 2012 0.43% 0.09% 0.34% 62 0.09% 0.14% 0.19% 0.25% 0.19% 0.36% June 2012 0.38% 0.08% 0.29% 47 0A0% 0.15% 0.21% 0.25% 0,21% 0.36% July 2012 0.41% 0.08% 0.31% 112 0.11% 0.15% 0.18% 0.22% 0.22% 0.36% Aug 2012 0.41% 0.08% 0.29% 31 0.11% 0.14% 0.20% 0.25% 0.20% 0.38% Sept 2012 0.43% 0.09% 0.33% 34 0.11% 0.14% 0.18 % 025% 0.20% 0.35% Oct 2012 OA7% 0.10% 0.36% 22 0.13% 016% 0.18% 0.25% 0.19% 0.34% Nov 2012 0.48% 0.10% 0.36% 161 0.10% 0.15% 0.18% 025% 0,20 % 0,32 % Dec 2012 0.47% 0.10% 0.36% 137 0.08% 0 12% 0.16% 0.13% 0.20% 0.33% Jan 2013 0.44% 0.10% 0.34% 111 0.08% 0.11% 0.14% 0.25% 0.16% 0.30 % Feb 2013 0.37% 0.10% 0.29% 105 0.13% 0.14% 0.15% 0.25% 0.17% 0.29% Mar 2013 0.39% 0.09% 0-30% 123 0.08% 0.11% 0.15% 0.25% 0.15% 0.29% Apr 2013 0.31% 0.08% 0.25% 186 0.05% 0.08% 0.14% 0.13% 0.12% 0,26% May 2013 0.30% 0,06% 0.23% 175 0,05% 0.08% 0.14% 0.25% 0.10% 0,25% June 2013 0.30% U7% 0.23% 212 0.05% 0.09% 0.16% 0.38% 0.10% 0.24% July 2013 0.28% 0.07% 0.21% 336 0.03% 0.07% 0.12% 0.25% 0.11% 0.27% Aug 2013 0.28% 0,06% 0.21% 303 0-03% 0.06% 0.07% 0.14% 0.09% 0.27% Sept 2013 0.30% 0.07% 0.23% 321 0.01% 0.04% 0.01% 0.25% 0.08% 0.26% Oct 2013 0.48% 0.06% 0.31% 427 0.05% 0.08% 0.16% 0.25% 0.11% 0.27% Nov 2013 0,49% 0.06% 0.31 % 444 0.05% 0.08% 0.16% 0.25% 0.09% 0.26% Dec 2013 0.49% 0.05% 0.31 % 396 0.07% OA9% 0.14% 0.25% 0.09% 0.26% Jan 2014 0.44% 0.05% 0.32% 381 0,04% 0.06% OA3% 0..38% 0.09% 0.24% Feb 2014 0.44% 0.03% 0.30% 357 0.05% 0.08% 0.12% 0.25% 0.10% 0.24% Mar 2014 0.44% 0.02% 0.30% 352 0.05% 0.07% 0.12% 0.38% 0.10% 0.24% Apr 2014 0.47% 0.02% 0.33% 368 0,02% 0.05% 0.11% 0.45% 0.10% 0.23% May 2014 0.49% 0.02% 0.35% 373 0.04% 0.06% 0.10% 0,39 % 0.10% 0.23% June 2014 O.A4% 0.02% 0.33% 310 0.04% 0.07% 0.11% 0.50% 0.10% 0.23% July 2014 0.45% 0.02% 0.34% 305 0.03% 0..06% 0.11% 0.50% 0.10% 0.24% Aug 2014 0.49% 0,02% 0.36% 313 0.03% 0 05% 0.11% 0.50% 0.11% 0.26% Sept 2014 0.51% 0..02% 0.36% 325 0.02% 0.04% 0.12% 0.50% 0.10% 0.25% Oct 2014 0.50% 0.02% 0.36% 323 0.02% 0.06% 0.10% 0.38% 0.10% 0.26% Nov 2014 0.52% 0.02% 0.37% 317 0.03% 0.08% 0.14% 0.50% 0.10% 0.26% Dec 2014 0.52% 0.02% 037% 304 0.02% 0.07% 0.18% 0.50% 0.13% 0.27% Jan 2015 0.49% 0.02% 0-36 % 268 0.02% 0.07% 0.21% 0-50% 0.12% 0.26% Feb 2015 0.51% 0.02% 0-36% 269 0.02% 0.08% 0.21% 0.50% 0.,12% 0.27% Mar 2015 0.52% 0.02% 0.37% 261 0.04% 0.14% 0.27% 0.50% 0.11% 0.28% Apr 2015 0.52% 0.02% 0.37% 248 0.02% 0.07% 0.25% 0.50% 0.10% 0.28% May 2015 0.50% 0.02% 0.35% 388 0,01 % 0.07% 0.26% 0.63% 0.12% 0.29% June 2015 0.70% 0.02% 0.53% 378 0.02% 0.09% 0.30% 0.63% 0,14% 0.30% July 2015 0.79% 0.02% 0.57% 417 0.08% 0.17% 0.34% 0.63% 0.13% 0.32% Aug 2015 0.91% 0.02% 0.60 % 467 0.10% 0.28% 0.42% 0.63% 0.18% 0.33% Sept 2015 0.94% 0.02% 0.62% 470 0.02% 0.11% 0.45% 063% 0.22% 0.34% Oct 2015 0.94% 0,02% 0.62% 458 0.11% 0.29% 0.21% 0-63% 0.18% 0.36% Nov 2015 0.95% 0.02% 0.62% 448 0.22% 0,42% 0.51% 0.88% 0.20% 0.37% Dec 2015 0.92 % 0.02% 0.61 % 419 0.22% 0.51% 0.69% 0.88% 0.36% 0.40 % 11 1 I I 1 y I - I I I I I I I I 1 I I I I I I I I I I i I 1 .1 00 0 0 -.-0 0 0 0 0 -.-0 0 Gi O O cq O� O LF) ,I: Cl? N O7 O aO O O O O O O O O O LO O Z LO U 0 Ln Y- OL (v U) r: u 9 12 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System Selected Interest Rates (Weekly) - H.15 Current Release Release Dates D ily Upcl to Historical Data About Announcements Technical Q&As Current Release (48 KB PDF') Release )rite: Jain» iry 27, 20,16 The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday through Friday on this site. If Monday is a holiday, the weekly release will be posted on Tuesday after the holiday and the daily update will not be posted on that Tuesday. January 27, 2016 H.15 Selected Interest Rates Yields in percent per annum Federal funds (effective) T 23 0.36 0.36 1 0.37 0.37 0.38 1 0.36 0.36 0.24 Commercial Paper - a ' r l Nonfinancial 1-month 0.33 0.33 0.34 0.34 0.34 0.35 0.28 2-month 0.41 0.40 0.40 0.42 0.41 0.40 0.33 3-month 0.47 0.47 0.48 0.49 0.48 0.46 0.36 Financial 1-month [ 0.38 0.38 0.37 0.41 0.39 0.34 0.30 2-month l 0.46 0.46 0.47 0.48 ` 0.47 , 0.47 0.40 3-month 0.55 0.55 0.57 0.56 0.56 0.58 0.54 Eurodollar deposits (London) 37 1-month 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.38 3-month 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.62 6-month 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.82 F Bank prime loan 2 3 8 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.37 Discount window primary credit x 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.87 U.S. government securities Treasury bills (secondary market) -' 4-week 0.20 0.26 0.27 0.25 0.25 0.21 0.17 13 n ^�c n �n n �n n 'in n -i -i n 1/4 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System 3-montn U.LO U.LO 0.37 € 0.34 0.46 0.41 U./-O U..3U U.LU U. 0.40 0.37 0.43 0.45 0.44 0.56 U.LJ f 0.49 0.63 6-month 1-year 0.37 0.42 Treasury constant maturities Nominal 1-month 0.21 0.26 0.27 0.26 0.25 0.21 0.17 3-month 6-month 1-year 2-year 0.26 0.26 0.28 0.31 0.28 0.23 0.23 0.37 0.35 0.38 0.41 0.38 0.44 0.50 0.48 0.43 0.44 0.47 0.46 0.58 0.65 0.88 0.85 0.84 0.88 0.86 0.91 0.98 3-year 1.11 1.06 1.06 1.11 1.09 1.15 1.28 5-year 1.49 1.44 1.44 1.49 1.47 1.52 1.70 7-year 1.82 1.76 1.77 1.81 1.79 1.87 2.04 10-year 2.06 2.01 2.02 2.07 2.04 2.10 2.24 20-year .2.45 2.41 2.42 2.46 2.44 2.50 2.61 30-year 2.82 2.77 2.79 2.83 2.80 2.88 2.97 Inflation indexed x 5-year 7-year 10-year 0.33 0.34 0.36 0.34 0.34 0.35 0.46 0.50 0.51 0.54 0.52 0.52 0.51 0.59 0.68 0.69 0.74 0.72 0.71 0.68 0.73 20-year 1.07 1.07 1.11 1.10 1.09 1.07 1.06 30-year �4 1.28 1.29 1.31 1.29 1.29 1.29 1.26 Inflation -indexed long-term average •' 1.09 1.10 1.12 1.11 1.11 1.07 1.07 Interest rate swaps 1-year 2-year 3-year 0.77 0.72 0.73 0.75 0.74 0.79 0.78 0.93 0.87 0.89 0.93 0.90 0.98 1.08 1.10 1.03 1.06 1.11 1.07 1.16 1.32 4-year 5-year 7-year 10-year 1.26 w 1.18 1.21 1.27 1.23 1.32 1.51 1.40 1.31 1.35 1.42 1.37 ! 1.46 1.66 1.64 1.56 1.60 1.67 1.62 1.70 1.90 1.90 1.81 1.86 1.92 1.87 1.96 2.16 30-year 2.35 2.26 2.30 2.37 2.32 2.41 2.60 Corporate bonds Moody's seasoned Aaa 14 i 4.00 4.05 4.06 5.41 5.41 5.47 4.02 4.03 3.95 3.97 Baa 5.49 5.45 5.42 I 5.46 State & local bonds <` Cnnventinnal mortnaaes 3.37 3.37 3.45 3.57 3.81 ` 3.81 3.92 3.96 2/4 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System * Markets closed. Footnotes 1. The daily effective federal funds rate is a weighted average of rates on brokered trades. 2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day in the month. 3. Annualized using a 360-day year or bank interest. 4. On a discount basis. 5. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are equivalent to the 30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page (,ti'ww.federalrvsery:.Loxlrelmst,ti'c i . 6. Financial paper that is insured by the FDIC's Temporary Liquidity Guarantee Program is not excluded from relevant indexes, nor is any financial or nonfinancial commercial paper that may be directly or indirectly affected by one or more of the Federal Reserve's liquidity facilities. Thus the rates published after September 19, 2008, likely reflect the direct or indirect effects of the new temporary programs and, accordingly, likely are not comparable for some purposes to rates published prior to that period. 7. Source: Bloomberg and CTRB ICAP Fixed Income & Money Market Products. 8. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several base rates used by banks to price short-term business loans. 9. The rate charged for discounts made and advances extended under the Federal Reserve's primary credit discount window program, which became effective January 9, 2003. This rate replaces that for adjustment credit, which was discontinued after January 8, 2003. For further information, see r)i•cs,;/bcrc P-002!i'0()210312.def iailt.htm. The rate reported is that for the Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as well as the rate on primary credit are available at WWW ....._- Irv_. l 1, rv'data,htm. 10. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The 30-year Treasury constant maturity series was discontinued on February 18, 2002, and reintroduced on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S. Treasury published a factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year nominal rate. The historical adjustment factor can be found at Source: U.S. Treasury. 11. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities. Source: U.S. Treasury. Additional information on both nominal and inflation -indexed yields may be found at r+ww tree7srtroL `ae;ourc�-ceaiter data -chat t center;interest-a°at 12. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of more than 10 years. 13. International Swaps and Derivatives Association (ISDA®) mid -market par swap rates. Rates are for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on rates collected at 11:00 a.m. Eastern time by Thomson Reuters and published on Thomson Reuters Page ISDAFIX®l. ISDAFIX is a registered service mark of ISDA®. Source: Thomson Reuters. 14. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa industrial bond rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds only. Data obtained from Bloomberg Finance L.P. 15. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. Data obtained from Bloomberg Finance L.P. 16. Contract interest rates on commitments for 30-year fixed-rate first mortgages. Source: Primary Mortgage Market Survey® data 15 3/4 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System provided by Freddie Mac. Note: Weekly and monthly figures on this release, as well as annual figures available on the Board's historical H.15 web site (see below), are averages of business days unless otherwise noted. Current and historical H.15 data are available on the Federal Reserve Board's web site (r4��v.federalreserve. cg �r ).For information about individual copies or subscriptions, contact Publications Services at the Federal Reserve Board (phone 202- 452-3244, fax 202-728-5886). Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve for non -inflation -indexed Treasury securities. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed maturities, currently 1, 3, and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity. Similarly, yields on inflation -indexed securities at "constant maturity" are interpolated from the daily yield curve for Treasury inflation protected securities in the over-the-counter market. The inflation -indexed constant maturity yields are read from this yield curve at fixed maturities, currently 5, 7, 10, 20, and 30 years. 16 4/4 TA Wf 4 OFT � TO: La Quinta City Council FROM: Rita Conrad, Finance Director/Treasurer SUBJECT: Treasurer's Report for February 29, 2016 DATE: March 25, 2016 Attached is the Treasurer's Report for the month ending February 29, 2016. The report is submitted to the City Council each month after a reconciliation of accounts Is accomplished by the Finance Department. The following table summarizes the changes in investment types for the month: Investment Balance 01/31/16 Purchased Notes Sold/Matured Ending Change LAIF 31,390,848 $ (4,000,000) $ 27,390,848 (4,000,000) Interest bearing active bank deposit Certificates of Deposit 10,933,151 720,000 (721,395) 10,931,756 (1,395) US Treasuries 19,916,150 19,916,150 0 US Gov't Sponsored Enterprises 28,022,920 28,022,920 0 Commercial Paper - Corporate Notes Mutual Funds 31,275.497 1 5,493.422 1 36,768.919 1 5,493,422 Subtotal $ 121,538,566j $ 6.213.422 1 $ 4,721,395 $ 123.030.593 1 $ 1.492.027 Cash $ 2,035.248 (1) & 2 $ 29.700 1 $ 2,064,948 1 $ .29.700 Total $ 123,573,814 1 $ 6,213,422 1 $ 4,691,695 $ 125.095,541 $ 1,521,727 I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment Policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. Rita ConradL4-69i Finance Director[Treasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits and withdrawals from the previous month. Date (2) The cash account may reflect a negative balance. 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I f E mangall ]SC &5»C¢ u City of La Ouinta Comparative Rates of Interest February 29, 2016 FY 11/12 FY 12/13 FY 13/14 FY 14/15 FY 15116 City of La Ouinta Month Annualized Earnin I Average Maturity (days) 119 Three Month Treasury 841111 lNote Three Month NonwFinancial 0.28% LAIF Re 0.53% Pooled Cash Fiscal Agent Overall Six Month One Year Two Year July2110 0.50% 0.15% 0.47% 0-16% 0.20% 0.30% 0.63% Aug2010 0.49% 0,15% 0.46% 108 0.15% 0.19% 0.26% 0.38% 0.25% 0.51% Sept 2010 0 55% 0.15% 0.51 % 107 0.16% 0.19% 0.27% 0.38% 0.24% 0.50% Oct2010 0.55% 0.15% 0.51% 88 0.13% 0.17% 0.23% 0.38% 0.23% 0.48% Nov2010 0.53% 0.15% 0.49% 84 0.18% 0.21% 0.28% 0.50% 0.23% 0.45% Dec 2010 0.57% 0.14% 0.52% 265 0.15% 0.19% 0.30% 0.63% 0.23% 0.46% Jan 2011 0.51% 0.14% 0,43% 206 0.16% 0.18% 0.28 % 0.63% 0.24% 0.54% Feb 2011 0.55% 0.17% 0.46% 210 0.15% 0.17% 0.31% 0.63% 0.23% 0.51% Mar 2011 0.54% 0.17% 0.45% 218 0.05% 0.13% 0.26% 0.75% 0.23% 0.50% Apr 2011 0.59% 0.17% 0.48% 192 0.05% 0,10% 0.28% 0.63% 0.20% 0.59% May 2011 0.48% 0.17% 0.41% 156 0.06% 0.12% 0.20% 0.50% 0.16% 0.41% June 2011 0.53% 0.00% 0.35% 126 0.03% 0.10% 0.20% 0.38% 0.15% 0.45% July 2011 0.53% 0.00% 0.35% 112 0.07% 0.12% 0.15% 0.20% 0.14% 0.38% Aug 2011 0.60% 0.00% 0.38% 102 0.02% 0.05% 0.10% 0.13% 0.16% 0.41% Sept 2011 0.58% 0.03% 0.39% 124 0,02% 0.06% 0.09% 0,13% 0.14% 0.38% Oct 2011 0.53% 0.03% 0.35% 117 0.01% 0.06% 0.12% 0.25% 0.15% 0.39% Nov 2011 0.52% 0.03% 0.37% 94 0.03% 0.07% 0.10% 0.25% 0.14% 0.40% Dec 2011 0.48% 0.03% 0.35% 86 0.02% 0.06% 0.11% 0.13% 0,14% 0.39% Jan 2012 0.45% 0.03% 0.34% 74 0.05% 0.08% 0.11% 0.25% 0.14% 0.39% Feb 2012 0.49% 0.05% 0.36% 72 0,12% 0.15% 0.17% 025% 0.17% 0.39% Mar 2012 0.44% 0.05% 0.34% 74 0.08% 0.14% 0.1.9% 0,25% 0.18% 0.38% Apr 2012 0.44% 0.09% 0.35% 61 0.10% 0.15% 0.19% 0.25% 0.20% 0,37% May 2012 0,43% 0.09% 0.34% 62 0.09% 0.14% 0.19% 0.25% 0.19% 0.36% June 2012 0.38% 0.08% 0.29% 47 0.10% 0.15% 0.21% 0.25% 0.21% 0.36% July 2012 0.41% 0.08% 0.31% 112 0.11% 0.15% 0.18% 0.22% 0,22% 0.36% Aug 2012 0.41% 0.08% 0.29% 31 0.11% 0.14% 0.20% 0.25% 020% 0.38% Sept 2012 0.43% 0.09% 0,33% 34 0.11% 0.14% 0.18% 0.25% 0.20% 0.35% Oct 2012 0.47% 0.10% 0.36% 22 0.13% 0.16% 0.18% 0.25% 0.19% 0.34% Nov 2012 0.48% 0A0% 0.36% 161 0.10% 0.15% 0.18% 0.25% 0.20% 0.32% Dec 2012 0,47 % 0.10 % 0.36% 137 0.08% 0.12% 0.16% 0,13 % 0.20% 0.33% Jan2013 0.44% 0.10% 0.34% 111 0.08% 0.11% 0.14% 0.25% 0.16% 0.30% Feb 2013 0.37% 0.10% 0.29% 105 0.13% 0.14% 0.15% 0.25% 0.17% 0.29% Mar2013 0.39% 0.09% 0.30% 123 0,08% 0.11% 0.15% 0.25% 0.15% 0.29% Apr2013 0.31% 0.08% 0,25% 186 0.05% 0.08% 0.14% 0.13% 0.12% 0.26% May2013 0.30% 0,06% 0.23% 175 0.05% 0.08% 0.14% 0.25% 0.10% 0.25% June2013 0.30% 0.07% 0.23% 212 0.05% 0.09% 0.16% 0.38% 0.10% 0.24% July2013 0.28% 0.07% 0.21% 336 0..03% 0.07% 0.12% 0.25% 0.11% 0.27% Aug2013 0.28% 0.06% 0.21% 303 0.03% 0,06% U7% 0.14% 0.09% 0,27% Sept2013 0.30% 0.07% 0.23% 321 0.01% 0.04% 0.01% 0.25% 0.08% 0.26% Oct2013 0.48% 0.06% 0.31% 427 0.05% 0.08% 0.16% 0.25% 0.11% 0.27% Nov2013 0.49% 0.06% 0.31% 444 0.05% 0.08% 0.16% 0.25% 0.09% 0.26% Dec2013 0.49% 0.05% 0.31% 396 0.07% 0.09% 0.14% 0.25% 0.09% 0.26% Jan 2014 0.44% 0.05% 0.32% 381 0.04% 0.06% 0.13% 0.38% 0.09% 0.24% Feb 2014 0.44% 0.03% 0.30% 357 0.05% 0.08% 0.12% 0.25% 0.10% 0.24% Mar 2014 044% 0.02% 0.30% 352 0.05% 0.07% 0,12% 0.38% 0.10% 0.24% Apr 2014 0 47% 0.02% 0.33% 368 0.02% 0.05% 0.11% 0.45% 0.10% 0.23% May 2014 0,49% 0.02% 0.35% 373 0.04% 0.06% 0.10% 0.39% 0.10% 0.23% June 2014 0.44% 0.02% 0.33% 310 0.04% 0.07 % 0.11% 0.50% 0.10% 0.23% July 2014 0.45% 0.02% 0.34% 305 0.03% 0.06% 0.11% 0.50% 0.10% 0.24% Aug 2014 0.49% 0.02% 0.36% 313 0.03% 0.05% 0.11% 0.50% 0.11% 0.26% Sept2014 0.51% 0.02% 0.36% 325 0.02% 0.04% 0.12% 0.50% 0.10% 0.25% Oct 2014 050% 0,02% 0.36% 323 0.02% 0.06% 0A0% 0.38% 0.10% 0.26% Nov 2014 0.52% 0,02% 0.37% 317 0.03% 0.08% 0,14% 0.50% 0.10% 0.26% Dec 2014 0.52% 0.02% 0.37% 304 0.02% 0.07% 0.18% 0.50% 0.13% 0.27% Jan 2015 0.49% 0.02% 0.36% 268 0,02% 0.07% 0.21% 0.50% 0.12% 0.26% Feb 2015 0.51% 0.02% 0.36% 269 0.02% 0.08% 0.21% 0.50% 0.12% 0.27% Mar 2015 0.52% 0.02% 0.37% 261 0.04% 0-14% 0.27% 0.50% 0.11% 0.28% Apr 2015 0.52% 0.02% 0.37% 248 0.02% 0,07% 0.25% 0.50% 0.10% 0.28% May 2015 0.50% 0.02% 0.35% 388 0.01% 0.07% 0.26% 0.63% 0.12% 0.29% June 2015 0,70% 0.02% 0.53% 378 0.02% 0.09% 0.30% 0.63% 0,14% 0.30% July 2015 0.79% 0,02% 0.57% 417 0.08% 0,17% 0.34% 0.63% 0.13% 0.32% Aug 2015 0.91% 0.02% 0.60% 467 0.10% 0.28% 0.42% 0.63% 0.18% 0.33% Sept2015 0.94% 0.02% 0.62% 470 0.02% 0.11% 0.45% 0.63% 0.22% 0.34% Oct 2015 0.94% 0.02% 0.62% 458 0.11% 0.29% 0.21% 0.63% 0.18% 0.36% Nov 2015 0.95% 0.02% 0.62% 448 0.22% 0.42% 0.51% 0.88% 0.20% 0.37% Dec 2015 0.92% 0.02% 0.61% 419 0.22% 0.51% 0.69% 0.88% 0.36% 0.40% Jan 2016 0.81 % 0.02% 0.57% 351 0.36% 0.47% 0.69% 0.75% 0,47% 0.45% 23 MI 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System Selected Interest Rates (Weekly) - H.15 Current Release Release Duos Qiiily t date Historicgl Data Abaul Announcernents :%cFSr�ical Q&Rs Current Release (48 KB PDF� Release Date: February 29, 2016 Notice to Users of the H.15 Release Implementation of Planned Changes to the Effective Federal Funds Rate On January 6, 2016, the Federal Reserve Bank of New York announced the implementation date for two changes to the calculation of the effective federal funds rate (EFFR). Effective March 1, the data source for the EFFR will move from aggregated data provided by federal funds brokers to transaction -level data reported by depository institutions. In addition, the calculation method will change from a volume - weighted average to a volume -weighted median. The H.15 will include the new EFFR rate on March 2, with data for March 1, 2016. More information, including additional detail on the calculation methodology, will also be published March 2. For additional information, please see: fit tp :: www.ne� orkfed_orU/markets/o olic L/ol2erating Policy-160106 https•/% -wwf newyo[kfed orb!markets/'onol cvloperatin{g r�olicy 150202.html littps://w-w-%v.newyorkfed.org/maLk.ets,/ol2olicy/operating, 12oliCv-150708.html The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday through Friday on this site. If Monday is a holiday, the weekly release will be posted on Tuesday after the holiday and the daily update will not be posted on that Tuesday. February 29, 2016 H.15 Selected Interest Rates Yields in percent per annum Federal funds (effective) 12 0.38 0.38 0.38 0.37 0.37 0.38 0.38 0.34 Commercial Paper - - - - Nonfinancial 1-month 0.36 0.39 0.36 0.36 0.34 0.36 0.35 0.34 2-month 1 0.43 1 0.402t 0.42 1 0.45 1 0.39 1 0.42 1 0.41 1 0.40 I 1/4 5/4/2016 3-month Financial 1-month 2-month 3-month Eurodollar deposits (London) 2 1-month 3-month Printer Version - Board of Governors of the Federal Reserve System 0.49 0.45 0.47 a 0.50 0.45 0.47 0.48 0.47 6-month Bank prime loan Discount window primary credit = '` U.S. government securities Treasury bills (secondary market) 4-week 3-month 6-month 1-year Treasury constant maturities Nominal M 1-month 3-month 6-month 1-year 2-year 3-year 5-year 7-year 10-year 20-year 30-year Inflation indexed a„t 5-year 7-year 10-year 20-year 30-year 0.41 0.44 0.42 0.43 0.42 0.42 1 0.41 0.38 0.46 0.52 0.47 0.50 0.48 0.49 0.47 0.47 0.52 1 0.60 0.54 1 0.57 0.54 I 0.55 0.53 0.57 0.48 1 0.65 0.48 0.65 0.48 0.65 0.48 0.65 0.48 0.65 0.48 1 0.65 0.48 0.65 0.48 0.70 I 0.90 0.90 3.50 0.90 3.50 0.90 3.50 0.90 3.50 0.90 3.50 0.90 3.50 0.90 3.50 3.50 1.00 1.00 _ 1.00 1.00 1.00 j 1.00 1.00 1.00 0.27 ' 0.28 0.28 1 0.26 1 0.25 1 0.27 0.26 0.22 0.33 0.32 0.33 0.32 0.32 0.32 0.30 0.26 0.45 0.46 0.45 0.45 0.46 0.45 0.43 0.43 0.53 �� 0.53 0.53 0.54 0.57 0.54 0.51 0.52 0.28 1 0.28 0.28 0.27 0.26 0.27 0.26 0.23 0.33 0.32 0.33 0.32 0.33 0.33 0.30 0.26 0.46 j 0.47 0.46 0.46 0.47 0.46 0.44 0.43 0.55 0.55 0.55 0.56 0.60 0.56 EO.7 0.54 0.78 0.76 0.75 0.72 0.80 0.76 0.90 0.92 0.90 0.90 0.85 0.93 0.90 0.91 1.14 1.25 1.23 1.21 1.16 1.23 1.22 1.24 1.52 1.54 1.51 1.52 1.47 1.55 1.52 1.54 1.85 1.77 1.74 1.75 1.71 1.76 1.75 1.78 2.09 2.18 2.16 2.16 2.14 2.20 2.17 2.19 2.49 2.62 2.60 2.61 2.58 2.63 2.61 2.64 2.86 0.14 0.10 I 0.06 -0.02 0.03 0.06 0.20 0.33 0.30 0.25 0.22 0.15 0.18 0.22 0.35 0.49 0.46 1 0.42 I 0.39 0.32 0.35 0.39 0.52 I 0.67 0.83 0.80 0.78 0.72 0.75 1 0.78 0.90 l 1.05 1.08 1.05 1 1.04 1.00 1.04 1.04 1.15 1.26 1 Inflation -indexed Iona -term average ---- l 0.93 1 0.892L 0.87 I 0.82 i 0.85 1 0.87 f 0.96 1 1.06 2/4 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System Interest rate swaps 1-year 2-year 3-year 4-year 5-year 7-year 10-year 30-year Corporate bonds I Moody's seasoned Aaa 14 Baa State & local bonds xs Conventional mortgage Footnotes 0.72 0.72 0.71 0.71 0.75 0.72 0.70 0.78 0.81 0.80 0.77 0.77 0.84 0.80 0.80 0.98 0.92 0.90 0.86 0.86 0.94 0.90 0.91 1.17 1.03 1.02 0.96 0.97 1.05 1.01 1.04 1.32 1.15 1.14 1.07 1.08 1.16 1.12 1.16 1.46 1.36 1.35 1.28 V 1.29 1.36 1.33 1.38 1.70 1.61 1.60 1.52 1.54 1.60 1.57 1.64 1.96 2.11 2.11 ' 2.03 2.04 N 2.10 2.08 2.14 I 2.41 3.97 3.93 I 3.91 3.85 3.88 3.91 4.01 4.00 5.34 5.32 5.31 5.27 5.32 5.31 5.37 5.45 3.34 3.34 3.27 3.41 s5 3.62 3.62 1 3.65 3.87 The daily effective federal funds rate is a weighted average of rates on brokered trades. 2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day in the month. 3. Annualized using a 360-day year or bank interest. 4. On a discount basis. 5. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are equivalent to the 30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page (yt ww.ideralreserve.ov.talawc `c �` 6. Financial paper that is insured by the FDIC's Temporary Liquidity Guarantee Program is not excluded from relevant indexes, nor is any financial or nonfinancial commercial paper that may be directly or indirectly affected by one or more of the Federal Reserve's liquidity facilities. Thus the rates published after September 19, 2008, likely reflect the direct or indirect effects of the new temporary programs and, accordingly, likely are not comparable for some purposes to rates published prior to that period. 7. Source: Bloomberg and CTRB ICAP Fixed Income & Money Market Products. 8. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several base rates used by banks to price short-term business loans. 9. The rate charged for discounts made and advances extended under the Federal Reserve's primary credit discount window program, which became effective January 9, 2003. This rate replaces that for adjustment credit, which was discontinued after January 8, 2003. For further information, see v, tiv.icds r'.�lrescf v .{ oy:boarcldocs% resslbcr �i?O�12 200? 1(1312 �lefat�lt.litm. The rate reported is that for the Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as well as the rate on primary credit are available at Ylwy.i d r&�lr sc �c ter!rrlr<tSc ,Wl11,.5;datl.izta. 27 3/4 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System 10. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The 30-year Treasury constant maturity series was discontinued on February 18, 2002, and reintroduced on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S. Treasury published a factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year nominal rate. The historical adjustment factor can be found at www.trw,urv.Qovlresource-ccntor.iiata-chart-cL-ntcr intcrs:st-r„i:•s . Source: U.S. Treasury. 11. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities. Source: U.S. Treasury. Additional information on both nominal and inflation -indexed yields may be found at www.trcasurv.!zov;-resourcc-ccntcridata- ;hart-center/int:erest-rates/. 12. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of more than 10 years. 13. ICE Swap Rate mid -market par swap rates (previously known as ISDAFIX). Rates are for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on tradable quotes sourced at 11:00 a.m. from regulated electronic trading venues. Source: ICE Benchmark Administration. 14. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa industrial bond rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds only. Data obtained from Bloomberg Finance L.P. 15. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. Data obtained from Bloomberg Finance L.P. 16. Contract interest rates on commitments for 30-year fixed-rate first mortgages. Source: Primary Mortgage Market Survey® data provided by Freddie Mac. Note: Weekly and monthly figures on this release, as well as annual figures available on the Board's historical H.15 web site (see below), are averages of business days unless otherwise noted. Current and historical H.15 data are available on the Federal Reserve Board's web site (www.federalreserve.«�,ov/). For information about individual copies or subscriptions, contact Publications Services at the Federal Reserve Board (phone 202- 452-3244, fax 202-728-5886). Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve for non -inflation -indexed Treasury securities. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed maturities, currently 1, 3, and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity. Similarly, yields on inflation -indexed securities at "constant maturity" are interpolated from the daily yield curve for Treasury inflation protected securities in the over-the-counter market. The inflation -indexed constant maturity yields are read from this yield curve at fixed maturities, currently 5, 7, 10, 20, and 30 years. 28 4/4 •'R� OF TO: La Quinta City Council FROM: Rita Conrad, Finance Director/Treasurer SUBJECT: Treasurer's Report for March 31, 2016 DATE: April 21, 2016 Attached is the Treasurer's Report for the month ending March 31, 2016. The report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department. The following table summarizes the changes in investment types for the month: Investment Balance 02/29/16 Purchased Notes Sold/Matured Ending Chan e LAIF 27,390,848 $ (1,000,000) $ 26,390,848 (1,000,000) Interest bearing active bank deposit Certificates of Deposit 10,931,756 10,931,756 0 US Treasuries 19,916,150 19,916,150 0 US Gov't Sponsored Enterprises 28,022,920 (4,998,000) 23,024,920 (4,998,000) Commercial Paper - - Corporate Notes Mutual Funds 36,768,919 51.524 5.493,432 31,327,011 5.441.908 Subtotal $ 123,030,593 $ 51.524 $ 11.491,432 $ 111,590,685 $ 11,439,908 Cash $ 2,064.948 1 & 2 $ 5,642,509 1 $ 7,707.457 1 $ 5.642.509 Total $ 125,095,541 $ 51.524 1 $ (5.848,923)1 $ 119,298,142 1 $ 5.797.399 I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment Policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. Rita Conrad Date Finance Director/Treasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits and withdrawals from the previous month. (2) The cash account may reflect a negative balance. This negative balance will be offset with transfers from other investments before warrants are presented for payment by the payee at the bank. 78-495 Calle Tampico I La Quinta I California 92253 1 760.777.7000 1 www.La-Quinta.or� 29 C O d d' d C 2. 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Year Month Annualized Pooled Cash Eamingg Fiscal Agent Overall I Average MaWW New) " 119 Treasury Bill ate Three Month Non-Finarx9at 0.28% LAIF ft 0.53% Three Month Six Month One Year jTwoYear FY 10/11 July 2010 0.50% 0.15% 0.47% 0.16% 0.20% 0,30% 0.63% Aug 2010 0.49% 0.15% 0.46% 108 0.15% 0.19% 0.26% 0.38% 0.25% 0.51 % Sept 2010 0.55% 0.15% 0.51% 107 0.16% 0.19% 0.27% 0.38% 0.24% 0.50% Oct2010 0.55% 0.15% 0.51% 88 0.13% 0.17% 0.23% 0.38% 0.23% 0.48% Nov 2010 0.53% 0.15% 0.49% 84 0.18% 0.21% 0.28% 0,50% 0.23% 0.45% Dec 2010 0.57% 0.14% 0.52% 265 0.15% 0.19% 0.30% 0-63% 0,23% 0.46% Jan 2011 0,51 % 0.14% 0.43% 206 0.16% 0.18% 0.28% 0.63% 0.24% 0.54% Feb 2011 0.55% 0.17% 0.46% 210 0,15% 0.17% 0.31% 0.63% 0.23% 0.51% Mar 2011 0.54% 0.17% 0.45% 218 0.05% 0.13% 0.26% 0.75% 0.23% 0.50% Apr 2011 0.59% 0.17% 0.48% 192 0.05% 0.10% 0.28% 0.63% 0.20% 0.59% May 2011 0.48% 0.17% 0.41% 156 0.06% 0.12% 0.20% 0.50% 0.16% 0.41% June 2011 0.53% 0.00% 0.35% 126 0.03% 0.10% 0.20% 0.38% 0.15% 0.45% FY 11/12 July 2011 0.53% 0.00% 0.35% 112 0.07% 0.12% 0.15% 0.20% 0.14% 0.38% Aug 2011 0.60% 0.00% 0.38% 102 0.02% 0.05% 0.10% 0.13% 0.16% 0.41% Sept 2011 0.58% 0.03% 0.39% 124 0.02% 0.06% 0.09% 0.13% 0.14% 0,38 % Oct 2011 0.53% 0.03% 0.35% 117 0.01% 0.06% 0.12% 0.25% 0.15% 0.39% Nov 2011 0.52% 0,03% 0.37% 94 0.03% 0.07% 010% 0.25% 0.14% 0.40% Dec 2011 0.48% 0.03% 0.35% 86 0.02% 0.06% 0.11% 0.13% 0.14% 0.39% Jan 2012 0.45% 0.03% 0.34% 74 0.05% 0.08% 0.11% 0.25% 0.14% 0.39% Feb 2012 0.49% 0.05% 0.36% 72 0.12% 0.15% 0.17% 0.25% 0.17% 0.39% Mar 2012 0.44% 0.05% 0.34% 74 0.08% 0,14% 0.19% 0.25% 0.18% 0.38% Apr 2012 044% 0.09% 0.35% 61 0.10% 0-15% 019% 0.25% 0.20% 0.37% May 2012 0.43% 0.09% 0.34% 62 0.09% 0.14% 0.19% 0.25% 0.19% 0,36% June 2012 0.38% 0.08% 0.29% 47 0.10% 0.15% 0.21% 0,25% 0.21% 0.36% FY12/13 July 2012 0.41% 0.08% 0.31% 112 0.11% 0.15% 0.18% 0.22% 0.22% 0.36% Aug 2012 0.41% 0.08% 0.29% 31 0,11 % 0.14% 0.20% 0.25% 0.20% 0.38% Sept 2012 0 43% 0.09% 0.33% 34 0.11% 0.14% 0.18% 0.25% 0.20% 0.35% Oct 2012 0.47% 0.10% 0.36% 22 0.13% 0.16% 0.18% 0.25% 0.19% 0.34% Nov 2012 0.48% 0.10% 0.36% 161 0.10% 0,15% 0,18% 0.25% 0.20% 0.32% Dec 2012 0.47% 0.10% 0.36% 137 0.08% 0.12% 0.16% 0.13% 0.20% 0,33% Jan 2013 0.44% 0.10% 0.34% 111 0.08% 0.11% 0.14% 0.25% 0.16% 0.30% Feb 2013 0.37% 0,10% 0.29% 105 0.13% 0.14% 0.15% 0,25% 0,17% 0.29% Mar 2013 0.39% 0.09% 0.30% 123 0.08% 0.11% 0.15% 0.25% 015% 0.29% Apr 2013 0.31% 0.08% 0..25% 186 0.05% 0.08% 0.14% 0.13% 0.12% 0.26% May 2013 0.30% 0.06% 0.23% 175 0.05% 0.08% 0.14% 0.25% 0.10% 025% June 2013 0.30% 0.07% 0.23% 212 0.05% 0.09% 0.16% 0.38% 0.10% 0.24% FY13114 July 2013 0.28% 0.07% 0.21% 336 0.03% 0.07% 0.12% 0.25% 0.11% 0.27% Aug 2013 0.28% 0.06% 0.21% 303 0.03% 0.06% 0.07% 0.14% 0.09% 0,27% Sept 2013 0.30% 0.07% 0.23% 321 0.01 % 0.04% 0.01 % 0.25% 0.08% 0.26% Oct 2013 0.48% 0.06% 0.31% 427 0.05% 0.08% 0.16% 0,25% 0.11% 0.27% Nov 2013 0.49% 0.06% 0.31% 444 0-05% 0.08% 0.16% 0.25% 0.09% 0.26% Dec 2013 0.49% 0.05% 0.31% 396 0.07% 0.09% 0.14% 0.25% 0,09 % 0.26% Jan 2014 0.44% 0.05% 0.32% 381 0.04% 0.06% 0.13% 0.38% 0.09% 0.24% Feb 2014 0.44% 0,03% 0.30% 357 0.05% 0.08% 0.12% 0.25% 0.10% 0.24% Mar 2014 0.44% 0.02% 0.30% 352 0.05% 0.07% 0.12% 0.38% 0.10% 0.24% Apr 2014 0.47% 0,02% 0.33% 368 0.02% 0.05% 0.11% 0.45% 0.10% 0.23% May 2014 0.49% 0.02% 0.35% 373 0.04% 0.06% 0.10% 0.39% 0.10% 0.23% June 2014 0.44% 0.02% 0.33% 310 0.04% 0.07% 0.11% 0.50% 0A0% 0.23% FY14/15 July 2014 0.45% 0.02% 0.34% 305 0.03% 0.06% 0.11% 0.50% 0.10% 0.24% Aug 2014 049% 0.02% 0.36% 313 0.03% 005% 0.11% 0.50% 0.11% 0.26% Sept2014 0.51% 0.02% 0.36% 325 0.02% 0.04% 0.12% 0.50% 0.10% 0.25% Oct 2014 0.50% 0.02% 0.36% 323 0.02% 0.06% 0,10% 0.38% 0.10% 0.26% Nov 2014 0.52% 0.02% 0.37% 317 0.03% 0.08% 0.14% 0.50% 0.10% 026% Dec 2014 0.52% 0.02% 0.37% 304 0.02% 0.07% 0.18% 0.50% 0.13% 0.27% Jan 2015 0.49% 0.02% 0.36% 268 0.02% 0.07% 0.21% 0.50% 0.12% 0.26% Feb 2015 0.51% 0.02% 0.36% 269 0.02% 0.08% 0.21% 0,50% 0.12% 0.27% Mar 2015 0.52% 0.02% 0.37% 261 0.04% 0.14% 0.27% 0.50% 0.11% 0.28% Apr 2015 0.52% 0.02% 0.37% 248 0.02% 0.07% 0.25% 0.50% 0.10% 0.28% May 2015 0.50% 0.02% 0.35% 388 0.01 % 0.07 % 0.26% 0.63% 0.12% 0.29% June 2015 0.70% 0.02% 0.53% 378 0.02% 0.09% 0.30% 0.63% 0.14% 0,30% FY 15/16 July 2015 0.79% 0.02% 0.57% 417 0.08% 0,17% 0.34% 0.63% 0.13% 0.32% Aug 2015 0.91 % 0.02% 0.60% 467 0.10% 0.28% 0.42% 0.63% 0.18% 0.33% Sept 2015 0.94% 0,02% 0.62% 470 0.02% 0.11% 0.45% 0.63% 0.22% 0.34% Oct 2015 0.94% 0.02% 0.62% 458 011% 0.29% 0.21% 0.63% 0.18% 0.36% Nov 2015 0.95% 0.02% 0.62% 448 0,22% 0.42% 0.51% 0.88% 0.20% 0.37% Dec 2015 0.92% 0.02% 0.61 % 419 0.22% 0.51% 0.69% 0.88% 0.36% 0.40% Jan 2016 0.81 % 0.02% 0.57% 351 0.36% 0.47% 0.69% 0.75% 0.47% 0.45% Feb 2016 0.90% 0.02% 0.62% 358 0.33% 0.49% 0.67% 0.75% 0.47% 0.47% 35 CD r O N ■ i i I D I , I I 1 1 1 1 1 1 i 1 1 ■ I P 1 f I 1 I I I i I l i � w I 0 0 0 0 0 0 0 0 Q O O O O O O O O O O O y+ O C� Co ti (O UC M N O O O O O CD CDO O O O co CO co LO U N 17 LO O Z a I 36 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System Selected Interest Rates (Weekly) - H. 15 Current Release Release Dates Q2jLy_QjjO.aLte HistoricafData About Announcements TechnicalQ&As Current Release (48 KB PDF) Date: M:�rvh 28,2016 The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday through Friday on this site. If Monday is a holiday, the weekly release will be posted on Tuesday after the holiday and the daily update will not be posted on that Tuesday. March 28, 2016 H. 15 Selected Interest Rates Yields in percent per annum Federal funds (effective) 2 7, 345 Commercial Pape. - - - 6 - 0.37 0.37 0.37 0.37 0.37 0.38 0.37 0.36 Nonfinancial 1-month 2-month 3-month S 0.35 0.42 0.48 0.34 0.40 0.46 0.33 0.38 0.44 0.35 0.40 0.46 0.34 0.40 0.46 0.33 0.39 0.45 0.35 0.42 0.47 Financial 1-month 2-month 3-month Eurodollar deposits (London) a Z r1-month 3-month 6-month 0.43 0.34 0.43 0.41 0.40 0.41 0.41 0.50 0.41 0.50 0.45 0.47 0.47 0.47 0.56 0.49 0.57 0.50 0.54 0.53 0.57 0.54 0.48 0.48 0.48 1 0.48 0.48 0.48 0.48 0.65 0.65 0.65 0.65 0.65 0.65 0.67 0.93 0.93 0.93 0.93 0.93 0.93 0.90 Bank prime loan 2 S C, 1 3.50 1 3.50 3.50 3.50 3.50 3.50 3.50 3.50 Discount window primary credit 2 1.00 1.00 1.00 1.00 1.00 1 00 1. 1.00 U.S. government securities Treasury bills (secondary market) 4-week 0.25 0.28 0.27 i7 0.24 0.26 0.281 0.25 114 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System .s-monEn U.31 U.3U U.3U U.L7 U.3U U.31 U.31 6-month 0.45 0.60 0.45 0.61 0.45 0.61 0.45 0.60 0.45 0.61 0.47 0.65 0.44 0.52 1-year Treasury constant maturities k Nominal 1-month 0.26 0.28 0.27 0.24 0.26 0.28 0.26 3-month 0.31 0.30 0.30 0.30 0.30 0.32 0.31 6-month 0.46 1 0.46 0.46 0.46 0.46 0.48 0.45 1-year 0.63 0.64 0.64 0.63 0.64 0.67 0.53 2-year 0.87 0.91 0.87 0.89 0.89 0.91 0.73 3-year T 1.05 1.08 F1.03 1.05 1.05 1.08 0.90 5-year 1.38 1.42 1.37 1.39 1.39 1:4j3 1.22 7-year 1.70 1.74 1.67 1. 00 1.70 1.73 1.53 10-year 1.92 1.94 1.88 1.91 1.91 l 1.93 1.78 20-year 2.31 2.32 2.25 2.28 2.29 2.30 2.20 30-year 2.72 2.72 2.65 2.67 2.69 2.71 2.62 Inflation indexedx 5-year -0.12 -0.06 -0.07 -0.03 -0.07 0.00 0.14 7-year 0.09 0.14 0.12 0.16 0.13 0.19 0.30 10-year 0.28 0.31 0.30 0.34 0.31 0.38 0.47 20-year 0.68 i 0.70 0.67 , 0.71 0.69 0.78 0.85 30-year 0.95 0.95 0.91 0.95 I 0.94 1.04 1.09 Inflation -indexed long-term average a 0.77 0.78 0.74 0.78 0.77 0.86 0.91 Interest rate swaps 1-year 0.79 0.80 0.82 0.82 0.81 0.82 0.70 2-year - 0.94 0.96 0.98 0.98 0.96 io.9 9: 0.80 3-year 1.07 1.09 1.12 1.11 1.10 1.13 1 0.91 4-year 1.19 1.20 1.24 1.23 1.22 1.26 1.04 5-year 1.30 1.31 1.34 1.33 1.32 1.37 1.16 7-year 1.51 1.52 1.54 1.53 , 1.52 1.56 1.39 10-year 1.74 1.74 1.77 1.75 �' 1.75 1.78 1.65 2.20 2.19 2.20 2.16 I 1 2.19 2.21 2.14 30-year Corporate bonds Moody's seasoned Aaa x4 Baa State & local bonds 1s. Conventional mortgages xq 3.83 3.79 3.74 1 3.77 5.07 5.04 4.95 4.97 3.38 $ 3.71 3.78 3.80 3.96 5.01 5.13 5.34 3.38 3.40 3.30 3.71 3.73 3.66 i 5/4/2016 * Markets closed. Footnotes Printer Version - Board of Governors of the Federal Reserve System 1. As of March 1, 2016, the daily effective federal funds rate (EFFR) is a volume -weighted median of transaction -level data collected from depository institutions in the Report of Selected Money Market Rates (FR 2420). Prior to March 1, 2016, the EFFR was a volume - weighted mean of rates on brokered trades. 2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day in the month. 3. Annualized using a 360-day year or bank interest. 4.On a discount basis. 5. Interest rates interpolated from data on certain commercial paper trades settled by The Depository Trust Company. The trades represent sales of commercial paper by dealers or direct issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are equivalent to the 30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page(www.feder,,dresme.o-ovfretewes!c . 6. Financial paper that is insured by the FDIC's Temporary Liquidity Guarantee Program is not excluded from relevant indexes, nor is any financial or nonfinancial commercial paper that may be directly or indirectly affected by one or more of the Federal Reserve's liquidity facilities. Thus the rates published after September 19, 2008, likely reflect the direct or indirect effects of the new temporary programs and, accordingly, likely are not comparable for some purposes to rates published prior to that period. 7. Source: Bloomberg and CTRB ICAP Fixed Income & Money Market Products. 8. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-chartered commercial banks. Prime is one of several base rates used by banks to price short-term business loans. 9. The rate charged for discounts made and advances extended under the Federal Reserve's primary credit discount window program, which became effective January 9, 2003. This rate replaces that for adjustment credit, which was discontinued after January 8, 2003. For further information, see �vAvivfederalreserve szov_"boarddocs/press=bcrep-�2'0[i21-100210312 default.htri. The rate reported is that for the Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as well as the rate on primary credit are available at �v�vdv.ft°der.Ylreserv�;�uy-riI,Lases;'1� 1 �:cl�:ti�i.tltt�i. 10. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The 30-year Treasury constant maturity series was discontinued on February 18, 2002, and reintroduced on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S. Treasury published a factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year nominal rate. The historical adjustment factor can be found at Source: U.S. Treasury. 11. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities. Source: U.S. Treasury. Additional information on both nominal and inflation -indexed yields may be found at wwe{.trcuiti.wo�. resource -center: dot:-cius� t-ct ntcr:'intt?rc�st-rafts; . 12. Based on the unweighted average bid yields for all TIPS with remaining terns to maturity of more than 10 years. 13. ICE Swap Rate mid -market par swap rates (previously known as ISDAFIX). Rates are for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on tradable quotes sourced at 11:00 a.m. from regulated electronic trading venues. Source: ICE Benchmark Administration. 14. As of December 7, 2001, Moody's Aaa rates are averages of Aaa industrial bond rates. Prior to December 7, 2001, these rates are averages of Aaa utility and Aaa industrial bonds. Data obtained from Bloomberg Finance L.P. 15. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations. Data obtained from Bloomberg Finance L.P. 39 3/4 5/4/2016 Printer Version - Board of Governors of the Federal Reserve System 16. Contract interest rates on commitments for 30-year fixed-rate first mortgages. Source: Primary Mortgage Market Survey® data provided by Freddie Mac. Note: Weekly and monthly figures on this release, as well as annual figures available on the Board's historical H.15 web site (see below), are averages of business days unless otherwise noted. Current and historical H.15 data are available on the Federal Reserve Board's web site (w,v v.federalresenre. c'L ltisf). For information about individual copies or subscriptions, contact Publications Services at the Federal Reserve Board (phone 202- 452-3244, fax 202-728-5886). Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S. Treasury from the daily yield curve for non -inflation -indexed Treasury securities. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed maturities, currently 1, 3, and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity. Similarly, yields on inflation -indexed securities at "constant maturity" are interpolated from the daily yield curve for Treasury inflation protected securities in the over-the-counter market. The inflation -indexed constant maturity yields are read from this yield curve at fixed maturities, currently 5, 7, 10, 20, and 30 years. 40 4/4 5/4/2016 Institutional - Announcements, Data & Results Announcements, Data .�: Results Treasury sells bills, notes, bonds, FRNs, and TIPS at regularly scheduled auctions. Refer to theauction announcements & results press releases for more information. Follow the links below to get the latest information on: Tentative Auction Schedule of U.S. Treasury Securities (PDF) The schedule of Treasury securities auctions is released at the Treasury's Quarterly Refunding press conference, usually held on the first Wednesday of February, May, August, and November. Upcoming Auctions Useful Data for Research Click to find additional statistics from May 5, 2003 through April 1, 2008, which includes information on bidding by primary dealers, direct bidders, and indirect bidders. Note: The following table displays data for the 20 most recently auctioned securities that have not yet matured, for each security type. If you would like to see data for additional securities, please use ourAuction Query. Issue Maturity High Investment CUSI>P Data Date Rate Rate 4-Week 912796HT9 05/05/2016 06/02/2016 0.170% 0.172% 13-Week 9127961D2 05/05/2016 08/04/2016 0.220% 0.223% 26-Week 912796JS9 05/05/2016 11/03/2016 0.395% 0.401% 4-Week 912796GN3 04/28/2016 05/26/2016 0.190% ', 0.193% 52-Week 912796JP5 04/28/2016 04/27/2017 0.605% 0.616% 13-Week 912796JC4 04/28/2016 07/28/2016 0.250% 0.254% 26-Week 912796JR1 04/28/2016 10/27/2016 0.400% 0.406% 4-Week 912796HS1 04/21/2016 05/19/2016 0.175% 0.177% 13-Week 912796GW3 04/21/2016 ; 07/21/2016 26-Week 912796JQ3 04/21/2016 10/20/2016 0.220% " 0.223% 0.350% 0.355% 4-Week 912796HR3 04/14/2016 05/12/2016 0.200% 13-Week 9127963B6 04/14/2016 07/14/2016 0.230% 26-Week 912796HJ1 04/14/2016 10/13/2016 0.350% `�-U!�an Applicatio,912796HN-2 04/07/2016 05/05/2016 0.185% 1.3-Week 912796HZ5 04/07/2016 07/07/2016 0.235% 26-Week 9127963N0 04/07/2016 10/06/2016 0.385% 41 http://www.treasurydirect.govfinsfittannceresuiVannceresult.htm 0.203% 0.233% 0.355% 0.188% 0.238% 0.391% 1/2 5/4/2016 Institutional - Announcements, Data & Results 52-Week 912796JJ9 03/31/2016 03/30/2017 0.660% 0.673% 13-Week 912796HY8 03/31/2016 06/30/2016 0.300% 0.304% 26-Week 912796JM2 03/31/2016 09/29/2016 0.475% 0.483% 13-Week 912796GS2 03/24/2016 06/23/2016 0.300% 0.304% http://www.treasurydirect.govfiinsbt(annceresultiannceresuiLhtm 42 2/2 5/4/2016 Institutional - Announcements, Data & Results Announcements, Data &Results Treasury sells bills, notes, bonds, FRNs, and TIPS at regularly scheduled auctions. Refer to theauction announcements $e results press releases for more information. Follow the links below to get the latest information on: Tentative Auction Schedule of U.S. TreasurV Securities (PDF) The schedule of Treasury securities auctions is released at the Treasury's Quarterly Refunding press conference, usually held on the first Wednesday of February, May, August, and November. Upcoming Auctions Useful Data for Research Click to find additional statistics from May 5, 2003 through April 1, 2008, which includes information on bidding by primary dealers, direct bidders, and indirect bidders. Note: The following table displays data for the 20 most recently auctioned securities that have not yet matured, for each security type. If you would like to see data for additional securities, please use ourAuction Query. Security Terra i 7-Year 912828R28 912828Q78 912828Q94 912828P46 912828Q52 912828029 912828037 912828Q45 912828P46 912828P95 912828P79 912828P87 912828UR9 912828P46 91282SP53 912828P38 912828N89 912828P20 91282SM56 912828N63 5-Year 2-Year 10-Yea r 3-Year 7-Year 5-Year 2-Year 10-Year 3-Year 7-Year 5-Year 2-Year 10-Year 3-Year 7-Year 5-Year 2-Year 10-Year 3-Year Reopening Issue Date No 05/02/2016 No 05/02/2016 No i 05/02/2016 Yes 04/15/2016 No 04/15/2016 No 03/31/2016 No 03/31/2016 No 03/31/2016 Yes 03/15/2016 No 03/15/2016 No 02/29/2016 No 02/29/2016 Yes 02/29/2016 No 02/16/2016 No 02/16/2016 No 02/01/2016 No 02/01/2016 No 02/01/2016 Yes 01/15/2016 No 01/15/2016 Maturity Date 04/30/2023 04/30/2021 04/30/2018 02/15/2026 04/15/2019 03/31/2023 03/31/2021 03/31/2018 02/15/2026 03/15/2019 02/28/2023 ` 02/28/2021 02/28/2018 02/15/2026 02/15/2019 01/31/2023 01/31/2021 01/31/2018 11/15/2025 01/15/2019 High Yield 1.634% 1.410% 0.842% 1.765% 0.890% 1.606% 1.335% 0.877% 1.895% 1.039% 1.568% 1.169% 0.752% 1.730% 0.844% 1.759% 1.496% 0.860% 2.090% 1.174% 1.625% 1.375% 0.750% 1.625% 0.875% 1.500% 1.250% 0.875% 1.625% 1.000% 1.500% 1.125% 0.750% 1.625% 0.750% 1.750% -1 1.375% 0.750% 2.250% 1.125% 43 http://www.treasurydirect.gov/instiVannceresuiVanneeresult.htm 1/2 5/4/2016 Institutional -Announcements, Data & Results 44 http://www.treasurydirect.govfinsbVannceresulUannceresult.htm 212 5/4/2016 Institutional - Announcements, Data & Results Announcements, Data &Results Treasury sells bills, notes, bonds, FRNs, and TIPS at regularly scheduled auctions. Refer to theauction announcements & results press releases for more information. Follow the links below to get the latest information on: _Tentative Auction Schedule of U.S. Treasury Securities (PDF) The schedule of Treasury securities auctions is released at the Treasury's Quarterly Refunding press conference, usually held on the first Wednesday of February, May, August, and November. Upcoming Auctions Useful Data for Research Click to find additional statistics from May 5, 2003 through April 1, 2008, which includes information on bidding by primary dealers, direct bidders, and indirect bidders. Note: The following table displays data for the 20 most recently auctioned securities that have not yet matured, for each security type. If you would like to see data for additional securities, please use ourAuction Query. '' Reopening Issue Hate 30-Year 912810RQ3 Yes ; 04/15/2016 30-Year 912810RQ3 Yes 03/15/2016 30-Year 912810RQ3 No 02/16/2016 30-Year 91281ORP5 Yes 01/15/2016 30-Year 912810RP5 Yes 12/15/2015 30-Year 912810RP5 No 11/16/2015 30-Year 91281ORNO Yes 10/15/2015 30-Year 91281ORNO Yes 09/15/2015 30-Year 91281ORNO No 08/17/2015 30-Year 912810RM2 Yes 07/15/2015 30-Year 912810RM2 Yes 06/15/2015 30-Year 912810RM2 No 05/15/2015 30-Year 912810RK6 Yes 04/15/2015 30-Year 91281ORK6 Yes 03116/2015 30-Year 91281ORK6 No 02/17/2015 30-Year 91281OR19 Yes 01/15/2015 30-Year 912810R19 Yes 12/15/2014 30-Year 91281OR19 No 11/17/2014 30-Year ' 912810RH3 Yes 10/15/2014 30-Year 912810RH3 - Yes 09/15/2014 ;:,,6 High Yield 02/15/2046 02/15/2046 02/15/2046 11/15/2045 11/15/2045 11/15/2045 08/15/2045 08/15/2045 08/15/2045 05/15/2045 05/15/2045 05/15/2045 02/15/2045 02/15/2045 02/15/2045 11/15/2044 11/15/2044 11/15/2044 08/15/2044 08/15/2044 2.596% 2.720% 2.500% 2.905% 2.978% 3.070% 2.914% 2.980% 2.880% 3.084% 3.138% 3.044% 2. 597% 2.681% 2.560% 2.430% 2.848% 3.092% 3.074% 3.240% Interest Rate 2.500% 2.500% 2,500% 3.000% 3.000% 3.000%, 2.875% 2.875% 2.875% 3.000% 3.000% 3.000% i 2.500% 2.500% 2.500% 3.000% 3.000% 3.000% 3.125% 3.125% 45 http://www.treasurydirect.govf nstittannceresultlannceresult.htm 1/2 BUSINESS SESSION ITEM NO: 1. City of La Quinta INVESTMENT ADVISORY BOARD MEETING: May 11, 2016 STAFF REPORT AGENDA TITLE: CONSIDERATION OF THE FISCAL YEAR 2016/2017 INVESTMENT POLICY AND WORK PLAN RECOMMENDATION Approve attached Fiscal Year 2016/2017 Investment Policy and Work Plan and forward to City Council for approval in June 2016. BACKGROUND As part of the work plan, the Investment Advisory Board (IAB) is asked to review the Investment Policy and make any recommendations for the City Council's consideration in June of each year. On February 10, 2016 the IAB approved the draft FY 2016/17 Investment Policy and Work Plan as presented with the following additional changes: • Combine sections related to Negotiable and Non -Negotiable Certificates of Deposits into one section and limit the overall total combined percentage of the portfolio to 30%. • Update language related to Certificates of Deposits (both negotiable and non- negotiable) to be consistent with state law. • Remove language referring to the Mutual Fund restriction of "$1 per share par value" to be consistent with state law requirements. FISCAL IMPACT None. ALTERNATIVES The purpose of this item is to get input from Board Members; the Board may either approve as presented or incorporate further changes. Prepared and Approved by: Rita Conrad, Finance Director W Attachment: 1. Draft Investment Policy (red -line & final) 2. 2016/2017 Investment Advisory Board Work Plan CITY OF LA QUINTA Investment Policy Fiscal Year 162016/2017 Table of Contents Section Topic Page Executive Summary 2 1 General Purpose 4 II Investment Policy 4 III Scope 4 IV Objectives 4 ► Safety of Principal ► Provide Liquidity ► Yield A Risk -Based Market Rate Of Return V Maximum Maturities 6 VI Prudence 6 VII Authority 6 VIII Ethics and Conflicts of Interest 7 IX Authorized Financial Dealers and Institutions 7 ► Broker/Dealers ► Financial Institutions X Permissible Deposits and Investments 8 XI Investment Pools 12 XII Payment and Custody 13 XIII Interest Earning Distribution Policy 13 XIV Internal Controls and Independent Auditors 13 XV Reporting Standards 14 XVI Financial Assets and Investment Activity Not Subject to this Policy 15 XVII Investment of Bond Proceeds 15 XIII Investment Advisory Board - City of La Quinta 15 XIX Investment Policy Adoption 16 Appendices T2pi2 Page A Summary of Permissible Deposits and Investments 17 B City of La Quinta Municipal Code Ordinance 2.70 - Investment Advisory Board 19 C City of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and Funds20 D Segregation of Major Investment Responsibilities 22 E Listing of Approved Financial Institutions 23 F Broker/Dealer Questionnaire and Certification 24 G Request for Proposal for Professional Portfolio Management Firm 28 H Permissible Investment Chart — Professional Portfolio Management Firm 34 1 Investment Management Process and Risk 35 J Glossary 36 CITY OF LA QUINTA Investment Policy Fiscal Year 201 162016/2017 Executive Summary The general purpose of this Investment Policy is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. The City's Investment Policy conforms to all state and local statutes and applies to all deposits and investments of the City of La Quinta (the"City"). It is the City's policy to deposit and invest public funds in a manner that shall provide: ► Safety of principal; ► Liquidity to meet all of the City's obligations and requirements that may be reasonably anticipated; and ► A risk -based market rate of return. It is the City's policy to hold securities and other investments until maturity. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the portfolio require that a security be sold. Authority to manage the City's investment portfolio is derived from the City Municipal Code. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investment Policy. The Treasurer shall establish and implement a system of internal controls to accomplish the following objectives: ► Safeguard assets; ► Orderly and efficiently conduct its business, including adherence to all City management policies; ► Prevent or detect errors and fraud; ► Accurately complete all accounting records; and ► Timely prepare all reliable financial information. The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the independent auditors in connection with the annual audit of the City's financial statements. The City Manager, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. The Treasurer will be permitted to invest only in the permissible deposits and investments described in Section X and Appendix A up to the specified maximum allowable percentages and/or dollar limitations and, where applicable, through the bid process requirements. Permissible deposits and investments include, in general: FDIC -Insured Checking, Savings, and Sweep Accounts; Collateralized Bank Deposits; Certificates of Deposit; Negotiable Certificates of Deposit; U.S. Government Agency Securities and Federal Government Securities; Prime Commercial Paper; Local Agency Investment Fund (LAIF); Money Market Mutual Funds; Corporate Notes; and Professionally Managed Accounts. The City's deposits and investments are generally limited to three years' maximum maturity. However, the projected amount of funds not expected to be disbursed within five years may be invested in notes and bonds maturing between three and five years. Additionally, funds may be invested for up to ten (10) years as further discussed in Section V. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. As a basis for comparison only, the Treasurer's monthly report will display the rates of return on the three-month Bill, six-month Bill, and the one and two-year U.S. Treasury Note, comparable -period rates for commercial paper, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual basis. The Investment Policy will be adopted before the end of June of each year. This Executive Summary is only an overview of the City's Investment Policy. Reading this summary does not constitute a complete review, which can only be accomplished by reviewing all of the pages herein. City of La Quinta Statement of Investment Policy July 1, 244-62016 through June 30, --M b201 Adopted by the City Council on June 27, 2016g GENERAL PURPOSE The general purpose of this document is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. INVESTMENT POLICY It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall provide: ► Safety of principal; ► Liquidity to meet all of the City's obligations and requirements that may be reasonably anticipated; and ► A risk -based market rate of return. The Investment Policy conforms to all State and local statutes governing the investment of public funds and sets forth the permissible deposits and investments of the City's funds and the limitations thereon. III SCOPE Except as further detailed in Section XVII, this Investment Policy applies to all deposits and investments of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency and the City of La Quinta Financing and Housing Authorities (hereafter referred to in this document as the "City"). These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within the following fund types: ► General ► Special Revenue ► Capital Projects ► Debt Service ► Enterprise ► Internal Service ► Trust and Agency ► Any new fund types and fund(s) that may be created. IV OBJECTIVES The objectives of the City's investment activity, in order of priority and importance, are: Safety of Principal Safety of principal is the foremost objective of the City's investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of principal of the overall portfolio in accordance with the permissible deposits and investments. 4 The City shall endeavor to preserve its investment principal by making only permissible deposits and investments, undertaken in a controlled manner to minimize the possibility of loss or misappropriation through malfeasance or otherwise. Investments not backed by the full faith and credit of the United States Government shall be diversified by allocating assets between different types of permissible investments, maturities, and issuers as a means to mitigate credit risk and interest rate risk. a_ Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk may be mitigated by: ► Limiting investments to investment grade securities as permitted in Section X; and ► Diversifying the issuers of the securities in the investment portfolio so that potential losses due to issuer failure or individual securities downgrades may be minimized. Interest Rate Risk is the risk that market values of securities in the portfolio will decline due to changes in general interest rates. Interest rate risk may be mitigated by: ► Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and ► Investing operating funds primarily in shorter -term securities. C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique features or structure or because it is thinly traded. Liquidity risk is not a material issue for the City's portfolio because of the permissible deposits and investments (see Section X) and because the City maintains a buy -and -hold policy and holds securities and other investments to maturity. A discussion of the City's investment process and risk is presented in Appendix I. 2. Provide Liquidity The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs that may be reasonably anticipated. This is accomplished by structuring the portfolio so that sufficient liquid funds are available to meet anticipated demands. Furthermore, since all possible cash needs cannot be anticipated the portfolio should be diversified and consist of securities with active secondary or resale markets. The City's policy is to hold securities and other investments to maturity. Accordingly, securities shall not be sold prior to maturity with the following exceptions: No, A security with declining credit quality can be sold early to minimize loss of principal; and ► Unanticipated liquidity needs of the portfolio require that one or more securities be sold. Yield a Risk -Based Market Rate of Return The City's investment portfolio shall be structured with the objective of yielding a risk - based market rate of return throughout budgetary and economic cycles. Return on investment is less important than the safety and liquidity objectives described above. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. The portfolio's rates of return will be influenced by several factors, including actions by the Federal Reserve Board, the marketplace, and overall economic perceptions and conditions. These factors will not affect yield during the securities' holding period because the City's buy -and -hold policy fixes the securities' yield at the time of purchase. As a basis for comparison only, the Treasurer's monthly reports will display the rates of return on the three-month Bill, six-month Bill, and one and two-year U.S. Treasury Note, comparable -period rates for commercial paper, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Treasurer may use these or any other published rates of return that the Treasurer deems appropriate for comparison to the return on the City's investment portfolio. V MAXIMUM MATURITIES It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the City require that a security be sold. The buy -and -hold policy requires that the City's investment portfolio be structured so that sufficient liquid funds are available from maturing investments and other sources to meet all reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have reliable, diligently prepared cash flow projections. Annually, the Treasurer shall project the amount of funds not expected to be disbursed within ten years. For FY2015/2016, the amount of such funds is projected to be $20 million. Funds up to that amount may be invested in U.S.Treasury notes and bonds, Local Agency Obligations, and California Local Agency Obligations maturing between 3 and 10 years. For all other funds, investments are limited to five years maximum maturity. VI PRUDENCE The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate Code Sections 16045 through 16054. Section 16053 sets forth the terms of a prudent person which are as follows: "Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence, discretion, and intelligence exercise in the professional 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." VII AUTHORITY Authority to manage the City's investment portfolio is derived from section 3.08 of the City's Municipal Code. Management responsibility for the investment program is delegated to the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment Policy. 0 The City Treasurer shall establish written procedures for the operation of the investment program consistent with the 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. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The City Manager or his/her designee shall acknowledge in writing all purchases and sales of investments prior to their execution by the City Treasurer. Vlll ETHICS AND CONFLICTS OF INTEREST The City Manager, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. Any questionable activity or relationship shall be reported immediately and in compliance with the procedures set forth in Section 1.40 — Conflicts of Interest and Acceptance of Gifts and other Gratuities of the City of La Quinta Personnel Manual. Reporting must be made in accordance with the personnel policies of the City and, until resolved, the officer or employee shall refrain from participating in the City's business related to the matter. The City Manager, City Treasurer and City employees may conduct personal business with banks, brokers, and other financial institutions that are authorized to conduct business with the City provided that the terms of the activity to the accountholder with the City are the same as those that are available to the public in general. IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Treasurer maintains a listing of financial institutions which are approved for direct investment purposes. In addition a list will also be maintained of approved broker/dealers selected by credit worthiness. 1. Broker/Dealers who desire to become bidders for direct investment transactions must supply the City with the following: ► Current audited financial statements; ► Proof of Financial Industry Regulatory Authority (FINRA) Certification; ► Trading resolution; ► Resume of Financial broker; and ► Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F) which contains a certification of having read the City's Investment Policy. The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. The City Treasurer will also contact the following agencies during the verification process: Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1- 800-289-9999). 7 ► State of California Department of Corporations (1-916-445-3062). The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for deposit or investment (see Appendix E, "Listing of Approved Financial Institutions"): a. Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC). b. Collateral - The amount of the City's deposits or investments not insured by the FDIC —shall be collateralized by securities with market values of 110%, or by mortgages with market values 1 50%, of the amount of invested funds plus unpaid interest earnings. c. Disclosure - Each financial institution maintaining invested funds in excess of the FDIC insured amount shall furnish the City a copy of the most recent Call Report. The City shall not invest in excess of the FDIC insured amount in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. X PERMISSIBLE DEPOSITS AND INVESTMENTS Permissible deposits and investments are summarized below. A more comprehensive list is included in Appendix A. Permissibleanyestments-and-limitations Maximum Maximum Rpgtre .finnn (See-Appendix•A for Addilional Information) Allesatien Maturity rr"�`� Checking&Sav p Current SWeepAccBu� n Ys AGCtxir 4frFDBG crud$ Sweep AccOunls 85,04 ef-R6M91io 11 a�_.eo„a.,,,^ ^� 9n-Bemand ARdIeF GSRA Interes4t esr Frgardivebank dapcsits—hors FMC insured rsdh3iti a§2od by Current l $40 FRilliea 4.10N olcA9ib1oze@wAi&& 9p-Demagd Perbapk CefOF"e"Of [1epe5ii - F17lClneur9d .- comic .� nnn 60% Of POW01 S Years insludinQ-interest per ­ $250-,009 N090atft Geri+lirePHS of Coposit - FDIC Insured 20-/°eof PA Nelie 5-Years ipsludigQ-iptergst 4420,WD:D00 ki,S--Ftaasury..Ciil;sc-hlowes,:^^ c^^''. ^�'' r_^aommenM4tionai 100% Of PGF9010e 5 Years FnatWgRg 3 10 MGd92y'{6-7 &Sooiahon I{`iNMA) SeuwAier YfS 8 Rerx kwA;la- pmaGtmertts•and-L mitati s M;Ixim--m MaXirnum ReStIFIGNORS (See --A en4d+x-A-for-Additional-infvrfn"oA) ANesatien MatUF* -=$28,004.000 Lotal-A9eFwy.Bonds4 Ca- E (Gnw3 Local AfjeoGy OWigatk.�Rs 209A of PnF#el a 10 YeaFs Lim n" 9 betteF US Govemment Agency Securities -and Fedwal Govemment 5eeurilies $18 mchas (exoept 7taieralya mertga}gaotaliga4 nna {GMFJ S}W-stra6krFed rrties FeF which, oontaln embeddad•rata•opflonay: purchase - Federal Nal ons4 MaFlgage Assoclalio a (FNMA) $20,000,00 5 Yea re -9 k eLReF#el e -Fedsrel Home Loan Bank Notes 8$sxrd •{FHLB) $25.009-.= 5 wears -Federal•Fa m•Gtadi4 Sank-(FFCB} $3O;O01WO 5 Year5 -Federal-Home Loan Mortgage.Gorporaiion (FHLMG) $20,009,(M &ye— Piiw,&Gomm�-Paper PFogram P Elie 90-Bays S5-,=,f ,pOr ..,�.,.na... Lolal-AocnGyJAvestment Fund-(-LAIF} 30 of P. #elie C,-rFent-F 9R-DAFARRd $60-Fal111ea peFaGGGHRt Moneymorket mutual funds r"ulaled 4y theSEG ltlal eon5mw-ooly of US 2004 Current! Maintain $1 PeF TreasurySaruriNe&of-GSFs-a4dmainlaln-agar-valueof-St per-,w"fe of PnFt�91 On -Demand share pare GGFPGFate-Notes °�-A-ef-P6Ftfnld 3-Years ee nnn nnn max Fated 9F hell F 510,000,0GO max Corporale Notes - Temporary Liquidity Guaranlee Program (TLGP) 20% Af PQF#nlie S Years per n n Fated of better Prafoss onally Managed Actouni 1094 of-ReRtelie 3 Years RegeiFes City Ceuneil- App-ved-RFP Cps armissitlle De osits and Investments Maximum Cy Allocation Restrictions Maximum Maturi (Footnote 11 k Wng IS Sn,4nm Acoodnls__YFOtC_lmttrmd) S _S_ween 65% Portfolio $v+raeo Acrn-�rrLSI�S rz + @Sss d4 -- GSFs CumenUOn Demand A in [cal.4ss�nfrY¢Cfef]Lfet�bueiD.lG.lnaus�ti 'Morolried by. it D% of: CllPible_sag;;M 60%Portfolio Current /on Demand C litcace of Deposit f e4le ervdr n•n ! (�?4 �Es01M c 5250.0001nciudrna rntwesl ver 5�� ins0tuson '��-- - -- 3365Y5-Ftrclfelvo- ;'-5266:06U�a�iudrr' 5�eag- _a-wrlereaii Melilulien . Tr Blst�, Mal�,s end ¢�rir�5la, card Govemnsens 100% Portfolio 4550.0O(i0.000 rrrai 'tCS, 3-ears r AD9r141'�fiGfH11[FsS.:Pr�.EtiCNLGI m trabcs i01:Geot ola0li�+tr}¢. m��r gsrg0 30% of Portfolio combined ^�s4 mipion oar pu r�lip3g 4 ai (r'�,-iLGr�i7l�l rr" _r�fl4�wlrith e�r.E3ln ¢ �4"m,,d�&spw2uLesf y.5!+li fJp pn0t Mana ane As�ncrPp0 FMI�Aj 520-Mg. 000 oar �uor _t dW I HamiL om Bg�t bolas 9onda iFHl�l 425.9d0.000 got Issueram &WSMID oer lssuor 5 4B99S r • - - ^i=adaral Fwm Ciedll Sank (FFC H} � + CT0! XIr�I.pPC M7rY4M1RgMorauon L&LM$;.j SMOM.000 Per lssum 5 vears N_AmP Coro-orcial Flamer dpOudLeg TTOMNrary LiauWity 15% Portfolio 55.ixlo,iw0 W,issuey ma:nmum 90 days i� _eMgL. t TLGPt g_ap I -MID $50.000.000 $50•000•000 Per account Current/On Demand Formatted: Left Formatted: Left n m &01 in ulual funds rOQLAnted by 1hoSOC drat 20% Portfolio Mutual fund must have in excess of 4V:�MUMI ifr �y eig unljrr r+rs"t^ FSmGnI a ram a!r tg - Current on Demand - ---- f T r f19 r 3ua&IueUshasa 'ei Comomlu Not 10% Portfolio S5.000.OW max ear issuer + ri Pkiw.• Tomporafy Urluadltycu nm 20% Portfolio Y1Q�Qm x L&adV. sin � 499nila I 10% Portfolio f7SWulslsApXPYA0lP 3 years g4enC4 B[ 11 yry Agfp t Aanller]S 100% ­130.000.0000 10 years Long -Term Scale S&P Al AAA, AA+, AA, AA-, A+, A Moody's P1 Aaa, Aa1, Aa2, Aa3, Al, A2 Fitch AAA, AA+, AA, AA-, A+, A Checking, Savings, and Sweep Accounts - The City will only maintain checking, savings, and sweep accounts with FDIC insured financial institutions. As authorized by the City Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account with a $50,000 target balance may be maintained in conjunction with the checking account. In addition, the Treasurer may invest in an interest bearing active deposit account as approved in Government Code Section 53632. The deposit account must be collateralized with securities that are in accordance with Government Code Sections 53632.5(c). In addition, the market value of the collateralized securities must be maintained in accordance with 53652 (a), and be held by a custodian in accordance with the requirements of Government Code Section 53656. The proposition of the City's share of the deposit account shall be determined in accordance with Government Code Section 53658. Certificates of Deposit (Negotiable and Non-negotiable) - As authorized in Government Code Section 53601, local governments may invest up to 30% of their portfolios in Certificates of Deposits and 30% in Negotiable Certificates of deposits. The City's policy is to limit combined Non -Negotiable and Negotiable Certificates of Deposits to 30% of the overall portfolio. Each CD is limited to the FDIC limit of $250,000. (649,Gekifi,....esof , Ge- �i(3�-de�enel+r+g--e►�-fie- speeitiear+�y-p#edgeif�s--aviletca�al-i�a-ae�'rre-T:',t„ ------- Formatted: Indent: Hanging: 0.5 £3AmlateFal4a446r+-wR1-be Feq---',e,EN-Gem# eetes - epesits�ess of the FDIC ,." amount. imita,d - 0,:.y aut#►e,..11 inVOstaents. Gallatefal will a4ways-lie-held43,"fv-independent Fhifoaf- rein the4na4-utiewtktat-,e#s- he-GeFtsfie tes o-f C3apesit to Eh�Gity--€vide a rf ompliaf�sa wi at to 6etJater fi atier-polk4es--musthe supplied to the City and retained by the City 'T ireas fw as fiallr ws; — f �^Deposits F—insuf aid by 4he cr ,a FDI' i4Cty- TTe ----- Formatted: Justified, Indent: Left: 0", £Ol4tw-akza4towei- t--deposit-4ha"6# -federally i CSkfFed-. Hanging: 0.5', No bullets or numbering, Tab stops: Not at -1" + 0.75" nit i o he a s.l,ot fodee it ♦ vui�t `S�tBSB I ;=c��.r=r= :.".aQ 10 i i 044 ry aline,! 586blfitiOG eF 160% .+,$Fi4, aC,jE}6--FRflFIfBt--'J$±F1fl-vfr-i+�-.c:r-e'3FFlflliii^%E]€ FAIR : T#ie--City's--Iflve�;^^,�° Paiicy-lirni;ca--�,��rc�tagu�f-Ceti#ic�aEes--Fr#-•Fleposi4--tc3-fiat3`�'n--a#�#+e• POWelie. Net{ert+alale-Ger�i#i�sat^� .�`.wait—is�e,d�y�--Ratfe�rafly--ar�a#e-+e#�ar-F2rec#-�iank� a sauiRgs-asseoia�iaR yr e edera{ asses attic (r s r e#i rr y Sec#'^^ r,�, a-�^- 2 ^c t4e-�4Fa RC48i Ce[�le,�-a--5i�te-�#eder�+-stet-Fi#--tilnior�r� •• R i��°sra4ly--er�tate--liicensecl--bfarieh-a#--a €eFeigs--i3ai� (�}(?�77CiF$tsar-1(}tie--.#y-&-(34?%f$I#F3-R•l!-k3@-+R5f9viiR-R$EE}�iiB CDs. U.S. Treasury Bills, Notes and Bonds and Government National Mortgage Associations (GNMA) securities - The City may invest in U.S. Treasury bills, notes, and bonds and GNMA securities directly issued and backed by the full faith and credit of the U.S. Government. The City's Investment Policy provides for investments in U.S. Treasury issues and GNMA's of 100% of the portfolio. ► The City's Investment Policy does not allow investments in state indebtedness. Local Agency Bonds and California Local Agency Obligations - The City may invest in California local agency obligations pursuant to 56301(a) and 53301(e). 53601(a) pertains to investing in bonds issued by a local agency, department, board, agency or authority of the local agency. 53601(e) pertains to investing in bonds and other defined indebtedness of a local agency or department, board, agency or authority of the local agency within the State of California. The City's Investment Policy limits investments in Local Agency Bonds and California Local Agency obligations to 30% of the portfolio with up to a ten year maximum maturity. In addition, the Agency obligations must be invested in the long term rating of A, A2, A or better by S&P, Moody's or Fitch. In the case of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. In the case of secondary issues, the Treasurer will rely on the approved Broker/Dealers. U.S. Government Agency Securities and Federal Government Securities - The City may invest in securities issued by U.S. Government instrumentalities and agencies (commonly referred to as government sponsored enterprises or GSE's). These securities are not backed by the full faith and credit of the U.S. Government. Publicly owned GSE's include Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Student Loan Marketing Association (SLMA). Non -publicly owned GSE's include the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Land Bank (FLB) and Federal Intermediate Credit Bank (FICB). The City's Investment Policy allows investment only in securities of FNMA, FHLMC, FHLB and FFCB. For Fiscal Year 2015/2016, the maximum face amount per issuer is $20 million for FNMA and FHLMC, $25 million for FHLB and $30 million for FFCB. In addition, no more than 30% of the portfolio surplus may be invested in all GSE's combined with a maximum $10 million face amount per purchase. Prime Commercial Paper - As authorized in Government Code Section 53601(g), a portion of the City's portfolio may be invested in commercial paper of the highest rating (All or 11 Formatted: Justified, Indent: Hanging: 0.5" Formatted: Indent: Hanging: 0.5" P1) as rated by Moody's or Standard and Poor's. There are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. The City's Investment Policy permits investments in commercial paper with the following limitations: ► Maximum 15% of the portfolio; ► Maximum maturity of 90 days; and ► Maximum of $5 million per issuer. These limitations are more restrictive than the State code which allows amounts of 25% of the total portfolio with maturities up to 270 days with no per -issuer limitations. Local Agency Investment Fund (LAIF) - As authorized in Government Code Section 16429.1 and by LAIF procedures, local government agencies are each authorized to invest a maximum of $50 million per account in this investment program administered by the California State Treasurer. The City Treasurer may not invest more than $50 million per account in LAIF. The City's investment in LAIF is allowable as long as the average maturity of its investment portfolio does not exceed two years, unless specific approval is authorized by the City Council. The-G4y-4i" srirwest'rnen e-30'::.• ; t,e-pen '01ia: Money Market Mutual Funds - As authorized in Government Code Section 53601(k), local agencies are authorized to invest in shares of beneficial interest issued by diversified management companies (mutual funds) in an amount not to exceed 20% of the agency's portfolio. There are a number of other qualifications and restrictions regarding allowable investments in corporate notes and shares of beneficial interest issued by mutual funds which include (1) attaining the highest ranking or the highest letter and numerical rating provided by not less than two of the three largest nationally recognized rating services, or (2) having an investment advisor registered with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations and with assets under management in excess of five hundred million dollars ($500,000,000). The City's Investment Policy only allows investments in mutual funds il,i<. rarffu+�€#�aainta€nirag-a-par-va}ue n#$$periare that invest in direct issues of the U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not exceeding 90 days and the City limits such investments to 20% of the portfolio. Corporate Notes - As authorized in Government Code Section 53601 (j), local agencies may invest in corporate notes. The notes must be issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any other state and operating in the United States. The City's Investment Policy allows investment in corporate notes authorized by the Government Code with the following limitations: No. Maturities shall not exceed three years from date of purchase; ► Eligible notes shall be regularly quoted and traded in the marketplace; ► Eligible notes shall be rated "AA" or better; and ► The maximum aggregate investment shall not exceed $5 million face amount for each issuer. This is more restrictive than the State code allowed amounts of 30% of the total portfolio with maturities up to five years with no per -issuer limitations. Professionally Managed Account(s) - The City Treasurer may place up to 10% of the 12 portfolio with a professional portfolio management firm ("PPMF"). The PPMF will be approved by the City Council based upon the City Treasurer's recommendation pursuant to completion of a request for proposal (RFP) as outlined in Appendix G. The PPMF shall have: ► An established professional reputation for asset or investment management; No. Knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds; ► Substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City; ► Professional liability (errors and omissions) insurance and fidelity bonding in such amounts as are required by the City; and ► Registration with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Before engagement by the City and except as may be specifically waived or revised, the PPMF shall commit to adhere to the provisions of the City's Investment Policy with the following exceptions: The PPMF may be granted the discretion to purchase and sell investment securities in accordance with Appendix I of this Investment Policy; The PPMF is not required to adhere to the buy -and -hold policy of the City's Investment Policy; and The PPMF does not need City Manager or City Treasurer approval to make permissible investments as detailed in column 8 of Appendix H of this Investment Policy. XI INVESTMENT POOLS There are three (3) types of investment pools: ► State -run pools (e.g., LAIF); ► Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools); and ► Pools that are operated for profit by third parties. The City's Investment Policy permits investment only in pools authorized in Section X. XII PAYMENT AND CUSTODY The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain appropriate evidence of the City's ownership of securities and other eligible investments. Such custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or seller only after receiving evidence that the City has legal, record ownership of the securities. Even though ownership is evidenced in book -entry form rather than by actual certificates, this procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of securities. 13 XIII INTEREST EARNING DISTRIBUTION POLICY Interest earnings are generated from pooled investments and specific investments. The following provisions apply to the calculation and distribution of interest earnings. Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency, La Quinta Financing Authority, and La Quinta Housing Authority, and to allocate interest earnings in the following order, as follows: a. Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund for all operating funds as included in the annual operating budget. Payment to the General Fund of a management fee equal to 5% of the annual pooled cash fund investment earnings. C. Payment to each fund of an amount based on the average computed daily cash balance included in the common portfolio for the earning period. 2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR The City Treasurer shall establish a system of internal controls to accomplish the following objectives: ► Safeguard assets; ► The orderly and efficient conduct of its business, including adherence to management policies; ► Prevention or detection of errors and fraud; ► The accuracy and completeness of accounting records; and ► Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: ► Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. Separation of transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. ► Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for 14 custodial safekeeping. ► Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. ► Gear delegation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. ► Written confirmation or telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions shall be supported by written communications or electronic confirmations and approved by the appropriate person. Written communications may be via fax if on letterhead and the safekeeping institution has a list of authorized signatures. Fax correspondence must be supported by evidence of verbal or written follow-up. ► Development of a wire transfer agreement with the City's bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. The system of internal controls developed by the City, shall be reviewed annually by the independent auditor in connection with the annual audit of the City's Financial Statements. The independent auditor's letter on internal control over financial reporting and compliance as it pertains to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditor's letter. The auditor's letter, as it pertains, to cash and investment activities and the City Treasurer's response shall be provided to the City's Investment Advisory Board for their consideration. Following the completion of each annual audit, the independent auditor shall meet with the Investment Advisory Board and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. See Appendix D, "Segregation of Major Investment Responsibilities." XV REPORTING STANDARDS The City Treasurer shall submit a monthly Treasurers Report to the City Council and the Investment Advisory Board that includes all cash and investments under the authority of the Treasurer. The Treasurer's Report shall summarize cash and investment activity and changes in balances and include the following: A certification by the City Treasurer; A listing of purchases and sales/maturities of investments; Cash and Investments categorized by authorized investments, except for LAIF which will be provided quarterly and show yield and maturity; Comparison of month end actual holdings to Investment Policy limitations; Current year and prior year monthly history of cash and investments for trend analysis; Balance Sheet; Distribution of cash and investment balances by fund; A year to date historical cash flow analysis and projection for the next six months; 15 and ► A two-year list of historical interest rates. XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY The City's Investment Policy does not apply to the following: ► Cash and Investments raised from Conduit Debt Financing; ► Funds held in trust in the City's name in pension or other post -retirement benefit programs; ► Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; and No. Short or long term loans made to other entities by the City or Agency, Short term (Due to/from) or long term (Advances from/to) obligations made either between the City and its funds or between the City and Agency. XVII INVESTMENT OF BOND PROCEEDS The City's Investment Policy shall govern bond proceeds and bond reserve fund investments. California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in accordance with bond indenture provisions which shall be structured in accordance with the City's Investment Policy. Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. These arbitrage calculations may be contracted with an outside source to provide the necessary technical assistance to comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept segregated from other funds and records will be kept in a fashion to facilitate the calculations. The City's investment position relative to the new arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. XVIII INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA The Investment Advisory Board (IAB) is a standing board composed of five members from the public that are appointed by the City Council. Background information will be requested and potential candidates must agree to a background check and verification. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the board. All board members shall report annually to the City Clerk on Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be, or have the appearance of, a conflict of interest. The IAB must meet at least quarterly, but usually meets monthly, to: ► Review at least annually the City's Investment Policy and recommend appropriate 16 changes; ► Review monthly treasury report and note compliance with the Investment Policy and adequacy of cash and investments for anticipated obligations; ► Receive and consider other reports provided by the City Treasurer; ► Meet with the independent auditor after completion of the annual audit of the City's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls and findings for cash and investment activities; and ► Serve as a resource for the City Treasurer on matters such as proposed investments, internal controls, use or change of financial institutions, custodians, brokers and dealers. The IAB will report to the City Council after each meeting either in person or through correspondence at a regular City Council meeting. See Appendix B: "Investment Advisory Board Provisions." XIX INVESTMENT POLICY ADOPTION The City's Investment Policy will be reviewed annually by the City's Investment Advisory Board and the City Treasurer. The Investment Advisory Board will forward the Investment Policy with any revisions to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City Treasurer to review the Investment Policy and any comments prior to submission to the City Council for their consideration. The Investment Policy shall be adopted by resolution of the City Council annually before the end of June of each year. 17 Q K C N M CL Q Q z �Zy V J L.L 0 } U U) z LU LLI z 0 z Q U) Ln 0 CL LLI 0 W J m D) 2 cc LU CL L.L 0 M� L.L CQ C D U) O O M (D O. 21 D) -6 C N 3 3 O _0 O m C me tll E > E c E �O X N � E N E w N O n_ N m n Q 3 O N C � N M L O N N N �a 0) N 7 F E a .-. 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NNC 5b CWC T c0 o A Oub 0 y U c w o U w T >_ m cD w> n c L D oD � c N y S w E" N oQ n w o O N ❑ � 6 b Z w o E D w h C O N 2 o U > E a E E O c o a _ .� mCp E o v a G € S T N W Nk o w E a� alo N C n w _€ E . m to E o a w w« E y j uwi .EoU m> S. w C uyi Q D N �m (nw N v Yy do .w_. s m w U R' y — O m C c v� r c m 12 m o w aoi m =' H w> m w a L Fu a° �m�ama�o m w `m � O yo T O c w y d v m m a� E w$ w Q O Q C N ow w U U �m S 2p .3 m U N a C 4l b T E a$ 6 y y a c c o c y _ ca 401 N 'E No N 'E o y uyi Y3 w w d m E t H E U d d U 2T 'y o a U o U U o 88 N m Eo OC « n y a` c w o j W > a w E g d o m m n� D n m b.2 E yN y V C U U 9 C D d O m w « O_ O E16 N a `o E o 0 EE vawi �c '� o" `" ul 'D c c o 0 c "' a t� m o Vp S C Vp C O U w C O o WW Z « O G O v 0 wa Gl cr «w y Er ? «N U E16 m TNo w d- urn we Em c.s nU �� T E 000 a v Em E o `m c m E E E 'Z o$w nc« y�co nv `2— oLL n`$� �m Ec w Eo i _E oo oE�i F d2 rn v'dc wo a 2 5w ,toa E:! w 8 rn o 2 D ` EL D Q ¢ E E D Q o E 5 y E N w mu E o o�LL E um>' 'aa �m '�M U vW yJ N au'im y.m U U� a�i y�o w5 �d %` com °—�w tdy t> t'o d w n �== ¢« U 2« ¢« F-FEn =oi HS Fa � � a w w m C o o Sc o a LL LL Appendix B Sect ons: 70.010 General rules regarding the investment advisory board. 2 2.70.020 2 270.040 2 Number of members. 70.030 Qualifications of members. Powers and duties. 70.010 General rules regarding the investment advisory board. . Except as set out below, see Chapter 2.06 for General Provisions. (Ord. 516 § 5, 2013) B servi The Investment Advisor Board ("IAB") shall consist of five members_ appointed by, and ig at the will of the city council. for the board should have a background in finance, preferably with knowledge C_Applicants and/or experience in markets, controls and accounting for securities. Background information wil be requested and potential candidates must agree to a background check and verification. D. On an annual basis in conjunction with the Political Reform Act disclosure statutes or at any lime if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the of that member's service on the board. Such matters may include but are not appropriateness limited to, changes in employment, changes in residence, or changes in clients. To promote continuity, the expiration of the terms of the members of the board shall be E stMjered. The term of service is three years, with one or two terms expiring each year. 2 70.020 Number of members. The investment advisory board ("IAB") shall consist of five members appointed by, and servi ia at the will of the city council. Ord. 516 § 5, 2013) 70.030 Qualifications of members. A. In addition to the qualification requirements set forth in Section 2.06.040, 2 applicants for the IAB should have a verifiable background in finance and/or securities, preferably with knowledge and/or experience in markets, financial controls and accounting for securities. B. Background information will be requested and potential candidates must agree to a background check and verification by the city manager or designee. (Ord. 516 § 2 5, 2013) 70.040 Powers and duties. A. The principal functions of the IAB are: 1. Review at least annually the city's investment policy and recommend appropriate changes; 2. Review monthly the treasury report and note compliance with the investment policy and adequacy of cash and investments for anticipated obligations; 3. Receive and consider other reports provided by the city treasurer; 20 4. Meet with the independent auditor after completion of the annual audit of the city's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls, and findings for cash and investment activities; and 5. Serve as a resource for the city treasurer on matters such as proposed investments, internal controls, use of change or change of financial institutions, custodians, brokers and dealers. B. The IAB will report to the city council after each meeting either in person or through correspondence at a regular city council meeting. (Ord. 516 § 5, 2013) 21 Qty-of-ka-0aiata Municipal Code CF,..,,or�apt8F 2.7v INVESTMENT ADVISORY -BOARD PROVISIONS Seat ons.: -� t?.i3-1-t? �.:�:al-Rules-R�-Appe+i►'rt+art: -2 7'0.020 -Rga*d meetinq%. 2 -7a:030 -R ,rd- Functions. 2-740�-040-- 9eneFW Fulas fegar-din"ppointment -€re�ept aaE vela see C.4�aptsr16 fGetecai Rr�+iicrf�s- The Investment naz..°. FF44:mbeFS fFen.,T44ie:tt are-a-ppejnTed-i-"Ft"+)uw-w+lam -AppiaeaMs4of4h o-ar-d-&ho ld-have-a-baGkgr,ound-ire-fiFva a prefeFa ky av+tii-Ic eel ge and --e peraenee-4} F►+afik�* vRtr S and�eeouatifag f�rr ea rFties - ae r r +�a#ernaa#+cr +rvi b8 F quested-awl-pateRtial--{-rafl4jtda£13�1"F-lii�r%-- }Fes- 6-a-ia F£3i-Hlf�-FiFIE FAFi- n--aFlilili3c?I-�FH5i6—FRURF'i£tEflFl-iN-I#•ja--{ia9-PBiltlCrnk-•�42-iF]r•FfY-�Ff:ISCiOtiFB-6iaii�BS;-0rt a FFIe rf at .^.yw ?.. ;,fFe R stBRGea �1arFclF+t BiiEli bec3Ff± Fneii� 3EFwl�i }rfsvid£tit#l@ �aifjF c�F3k3n[3i vfi#+ a disclvs��Fe state er+t k}let i ientiPies an eye a b ring -en the y sitti^-rr^v-^a-.rof that Fn ••bw'S serymee en4he-beard. Sueh lim ides-�in-em+pleyment; el�aRc es ira^r�sfde a eFeiaa�Fges�ar�•a{Fer : e-�raF�aa�#e--eeFtt•�+��+Fly-t•#te�ea�}Arai+crn.a#-t�ae-taF+ems-e•€-i#e--Fr�k�er�-e�*hsrhz •kl--be 5ta +�(i"+E�i9Fiii-�•�iBFYiG@-i6••�E�iF99--y8af5-WFtil--Ori�Of-�iAfO-t•91=i�5r�#�1fFif4Ei`lr-}IBC: -l"24—Beard meetings; T-he-Beard-usually-�M4k-mee#•-menth;y Wt4.his--schedule-may be extended -to- gtrar-terly meel ings upon-- nourrence of -the Seard•and the City -Council, The specific meeting-dates-y% be {d terrnined-b% -the Bawd Members -and - meetings- Ch ay-fie-called-for-of---an-as-neadi d-basi°r. -The-pr4ne-ipa44unctions-ef•-t#3e•Berafd--or-e:414-feview-at4ea64-an u-ally-the-r-it-y-L-�Wc-t e q Poole aFid-recem end-appropriate--efaaRW�,�+4e-view�emth$y-Treasusy--Repart ara"ote Eeaaa kiaaeedra�i3ka�tlae°InW$s•tRt-�+�iiay--and�adw:Facy-o#-sas#-aa�d-i��s�.o��s�ir-antic-rpated obii� �oRs�-#•3}-reoeFve-and-eonsi+der--+�fk�er-rE}sar-ts-pre�ided--i++y-tha�tk��.s�..Fer=44;`FReet-wit#s th depen�ier+t-ea��t�-•a€te*-ooFnpletion-a#-t{�e•-anRe�al�r�di�af�e-�►t+Fs�iRa+rc-ai-stet-eF�en# r RCI-Cf}n51E�eF-t�a-3iiC�itUF'-�C�E]il�til@Rt��3iwaUditiii€]-pFflG-!'dliFa�iRt`;r`FFlci�-Ef}RtrOl�and-�iilEdlf tk7F--a sFi-aFl€1-in�fe`st•FF nt�3e i-v4tties� and;-i }--s;e as a-rea.our-c-e-far the -Go.,. 'easufeF On MrrratteFs r. rTia-i-rrv-e`scmm .nkanr.�rr.-,6 a r,rrew s mac. r i�'�an�--F?� •' �nstiili-t4aPl:�CtlSt$fila! brok Fs and-dealeF-. B d7e 6t�arfi vdi� rc aer to the 5it�+ r��inoil-a#teF eaol+ tf3r-vu9h CDDFf Sj](}R+L•dEF3eP,rat-3-F£C,jtFka��i-#y-COLiR£i{-i:78@tFR� 22 ad 157 Appendix C City of La Quinta Municipal Code Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS Sections: 3.08.010 Investment of city moneys and deposit of securities, 3.08.020 Authorized investments. 3.08.030 Sales of securities. 3.08.040 City bonds. 3.08.050 Reports. 3.08.060 Deposits of securities. 3.08.070 Trust fund administration. 3.08.010 Investment of city moneys and deposit of securities. Pursuant to, and in accordance with, and to the extent allowed by, Sections 53607 and 53608 of the Government Code, the authority to invest and reinvest moneys of the city, to sell or exchange securities, and to deposit them and provide for their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982) 3.08.020 Authorized investments. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to purchase, at their original sale or after they have been issued, securities which are permissible investments under any provision of state law relating to the investing of general city funds, including but not limited to Sections 53601 and 53635 of the Government Code, as said sections now read or may hereafter be amended, from moneys in his custody which are not required for the immediate necessities of the city and as he may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part), 1982) 3.08.030 Sales of Securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord.2 § I (part), 3.08.040 City bonds. Bonds issued by the city and purchased pursuant to this chapter may be cancelled either in satisfaction of sinking fund obligations or otherwise if proper and appropriate; provided, however, that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982) 23 3.08.050 Reports. The city treasurer shall make a monthly report to the city council of all investments made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982) 3.08.060 Deposits of securities. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to deposit for safekeeping, the securities in which city moneys have been invested pursuant to this chapter, in any institution or depository authorized by the terms of any state law, including but not limited to Section 53608 of the Government Code as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. (Ord. 2 § 1 (part), 1982) 3.08.070 Trust fund administration. Any departmental trust fund established by the city council pursuant to Section 36523 of the Government Code shall be administered by the city treasurer in accordance with Section 36523 and 26524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (part), 1982) 24 Appendix D SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Responsible Parties Develop and Recommend Modifications Investment Advisory Board to City's Formal Investment Policy and City Treasurer Review City's Investment Policy City Manager and Recommend City Council Action and City Attorney Adopt Formal Investment Policy City Council Implement Formal Investment Policy City Treasurer Review Financial Institutions & Select Investments City Treasurer Acknowledge Investment Selections City Manager or his/her designee Execute Investment transactions City Treasurer or City Manager Confirm Wires (if applicable) Accounting Manager or Financial Services Assistant Record Investment Transactions in City's Accounting Manager or Accounting Records Financial Services Assistant Investment Verification (match broker confirmation City Treasurer and Financial to City investment records) Services Assistant Reconcile Investment Records to Accounting Records and Bank Statements Financial Services Assistant Reconcile Investment Records to Treasurers Report of Investments Accounting Manager Security of Investments at City Accounting Manager or Senior Secretary Security of Investments outside City Third Party Custodian Review Internal Control Procedures External Auditor 25 Appendix E LISTING OF APPROVED FINANCIAL INSTITUTIONS 1. Banking Services - Wells Fargo Bank, Government Services, Los Angeles, CA (Banking Services) Rabobank N.A., Government Banking Group, Roseville, CA (Collateralized Bank Deposits) 2. Custodian Services Bank of New York/Mellon 3. Deferred Compensation International City/County Management Association Retirement Corporation 4. Broker/Dealer Services Banc of America Securities/Merrill Lynch Morgan Stanley CitiGroup First Empire Securities 5. Government Pool State of California Local Agency Investment Fund 6. Bond Trustees - 1996 Lease Revenue Bonds — US Bank 1998 RDA Project Area 1 &2 — US Bank 2001 RDA Project Area 1 — US Bank 2002 RDA Project Area 1 — US Bank 2003 RDA Project Area 1 — US Bank 2004 Local Agency Rev — US Bank 2011 RDA Project Area 2 — US Bank 2011 Fin Auth Housing 1 &2 — US Bank 2013 Successor Agency — US Bank Assessment Districts — US Bank No Changes to this listing may be made without City Council approval P1:1 Appendix F BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1. Name of Firm: 2. Address: 3. Telephone: 4. Broker's Representative to the City (attach resume): Name: Title: Telephone: (_) 5. Manager/Partner-in-charge (attach resume). - Name: Title Telephone: 6. List all personnel who will be trading with or quoting securities to City employees (attach resume) Name: Title: Telephone: 7. Which of the above personnel have read the City's Investment Policy? 8. Which instruments are offered regularly by your local office? (Must equal 100%) % U.S. Treasuries % Repos % BA's % Reverse Repos • Commercial Paper % CMO's • CD's % Derivatives • Mutual Funds % Stocks/Equities • Agencies (specify): % Other (specify): 9. References -- Please identify your most directly comparable public sector clients in our geographical area. Entity Entity Contact Contact 27 Telephone ( ) Telephone (_ ) Client Since Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 11. Has your firm or your local office ever been subject to a regulatory or state/ federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of securities? Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that you were responsible for an investment loss? Yes No If yes, please provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes No If yes, please provide action taken Do you have any current or pending complaints that are unreported to FINRA? Yes No If yes, please provide action taken Does your firm have any current, or pending complaints that are unreported to FINRA? Yes No If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. Who audits these fiduciary responsibilities? Latest Audit Report date_ 28 14. How many and what percentage of your transactions failed? Last month? % $ Last year? % $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quinta. 16. Is your firm a member in the S.I.P.C. insurance program? Yes No If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? 18. What reports and transaction confirmations or any other research publications will the City receive? 19. Does your firm offer investment training to your clients? Yes No 20. Does your firm have professional liability insurance? Yes No If yes, please provide the insurance carrier, limits and expiration date. 21. Please list your FINRA/NASD Registration Number, 22. Do you have any relatives who work at the City of La Quinta? Yes No If yes, Name and Department_ 23. Do you maintain an office in California? Yes No 24. Do you maintain an office in La Quinta or Riverside County? Yes_ No 25. Please enclose the following: ► Latest audited financial statements; ► Samples of reports, transaction confirmations and any other research/publications the City will receive; ► Samples of research reports and/or publications that your firm regularly provides to clients; and ► Complete schedule of fees and charges for various transactions. 29 'CERTIFICATION' *CERTIFICATION I hereby certify that I have personally read the Statement of Investment Policy of the City of La Quinta, and have implemented reasonable procedures and a system of controls designed to preclude imprudent investment activities arising out of transactions conducted between our firm and the City of La Quinta. All sales personnel will be routinely informed of the City's investment objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable risks associated with financial transactions conducted with our firm. By signing this document the City of La Quinta is authorized to conduct any and all background checks. Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of my knowledge. Broker Representative Date Title Sales Manager and/or Managing Partner* Date Title 10C Appendix G Request for Proposals Professional Portfolio Management Firm City of La Quints, CA The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms for the provision of a discretionary investment management services for City of La Quinta, CA. The portfolio to be managed of the invested assets is will be approximately 10% of the City's investment portfolio and will be invested between 0 — 3 years. The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and the City of La Quinta, CA's investment policy. A copy of the investment policy is attached for your information. Questions regarding this RFP should be directed to: Name: Rita Conrad Title: Finance Director/Treasurer City of: La Quinta, CA Address: 78-495 Calle Tampico City, State, Zip Code: La Quinta, CA 92253 Phone Number: (760)777-7150 I. CRITERIA FOR EVALUATION AND SELECTION ■ Experience of the firm in providing services to public sector entities of similar size and with similar investment objectives; ■ Professional experience and qualifications of the individuals assigned to the account; ■ Portfolio management resources, investment philosophy and approach; ■ Responsiveness to the RFP, communicating an understanding of the overall program and services required; ■ Reporting capabilities; ■ Fees. II. SELECTION TIMETABLE A. [Month, Day and Year] Proposals due by [Time] PST. B. [Month, Day and Year] Proposals evaluated: to be determined C. [Month, Day and Year] [City of La Quinta, CA] [Board/Council] approves selection and awards contract. III. FORMAT FOR PROPOSALS Please format your response to this RFP in the following manner: A. Organization 31 1. Describe your organization, date founded, ownership and other business affiliations. Provide number and location of affiliated offices. Specify the number of years your organization has provided investment management service. 2. Describe your firm's revenue sources (e.g., investment management, institutional research, etc.) and comment on your firm's financial condition. 3. Within the past three years, have there been any significant developments in your organization (e.g., changes in ownership, new business ventures)? Do you expect any changes in the near future? 4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation involving your organization, any officer, or employee at any time in the last ten years. 5. Describe the firm's fiduciary liability and/or errors and omissions insurance coverage. Include dollar amount of coverage. B. Personnel 1. Identify the number of professionals employed by your firm by classification. 2. Provide an organization chart showing function, positions, and titles of all the professionals in your organization. 3. Provide biographical information on investment professionals that will be involved in the decision -making process for our portfolio, including number of years at your firm. Identify the person who will be the primary portfolio manager assigned to the account. 4. Describe your firm's compensation policies for investment professionals and address any incentive compensation programs. C. Assets Under Management 1. Summarize your institutional investment management asset totals by category for your latest reporting period in the following table: Other Restrictive Number Operating Funds Number of Funds of Clients Clients Governmental S S Governmental Pension 5 N/A N/A Non Governmental $ N/A N/A Pension W Corporate $ N/A N/A High Net Worth Client $ N/A N/A Endow mental/Foun- $ N/A N/A dation 2. Provide the number of separate accounts whose portfolios consist of operating funds. 3. List in the following table the percentage by market value of aggregate assets under all governmental accounts under management for your latest reporting period: Type of Asset Percent by Market Value U.S. Treasury securities Federal Agency obligations Corporate securities rated AAA -AA Corporate securities rated A Corporate securities rated BBB or lower Other (specify } 4. Describe the procedures that your firm has in place to address the potential or actual credit downgrade of an issuer and to disclose and advise a client of the situation. 5. Provide data on account/asset growth over the past five years. Indicate the number of government accounts gained and the number of government accounts lost. 6. List your five governmental largest clients. Identify those that are exclusively operating fund relationships and/or those that are other relationships (e.g., bond fund, retirement fund). 7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules). 8. Provide proof of State of California Registration, if your firm is not eligible for SEC registration. 9. Provide a sample contract for services.. 33 D. Philosophy/Approach 1 . Describe your firm's investment philosophy for public clients, including your firm's philosophy regarding average duration, maturity, investment types, credit quality, and yield. 2. Describe in detail your investment process, as you would apply it to City of La Quinta, CA's portfolio. 3. What are the primary strategies for adding value to portfolios? 4. Describe the process you would recommend for establishing the investment objectives and constraints for this account. 5. Describe in detail your process of credit risk management, including how you analyze credit quality, monitor credits on an ongoing basis, and report credit to governmental accounts. 6. Describe your firm's trading methodology. 7. Describe your firm's decision -making process in terms of structure, committees, membership, meeting frequency, responsibilities, integration of research ideas, and portfolio management. 8_ Describe your research capabilities as they would pertain to governmental accounts. What types of analysis do you use? 9. Describe the firm's approach to managing relationships with the broker -dealer community. E. Portfolio Management 1 . Are portfolios managed by teams or by one individual? 2. What is the average number of accounts handled per manager? 3. Which professional staff member will be the primary client contact for City of La Quinta, CA? 4. How frequently are you willing to meet with us? 5. Describe procedures used to ensure that portfolios comply with client investment objectives, policies, and bond resolutions. F. Fees Charged 1. Please include a copy of your firm's fee schedule applicable to this RFP. 2. Identify any expenses that would not be covered through this fee structure and would be required in order to implement the firm's program. 34 3. Is there a minimum annual fee? G. Performance Reporting 1. Please report on all accounts under $100 million. 2. Please provide performance history for governmental accounts for the last five years. 3. Please provide risk measurements for governmental accounts for the last five years. 4. Indicate whether your returns are calculated and compiled in accordance with the Association for Investment Management and Research (AIMR/CFA Institute) standards. 5. Do your reports conform to the State of California reporting standards? Are you willing to customize your reports to meet our specifications? 6. How will you notify us of investment transactions? 7. Are confirmations of investment transactions sent directly by the broker/dealer to the client? 8. Do your reports include rating information on investments which is required by GASB 40? H. References Provide a list of at least five (5) client references in California. References should be public agencies with portfolio size and investment objectives similar to City of La Quinta, CA. Include length of time managing the assets, contact name, and phone number. I. Insurance Requirements Exhibit A defines the insurance requirements that will need to be met prior to the [Board/Council]'s approval of any agreement for services. J. Submittal of proposals 1 . Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing the caption RFP for (City of La Quinta, CA) and addressed to: City of La Quinta, CA 78-495 Calle Tampico La Quinta, CA 92253 Attention: Rita Conrad, Finance Director/Treasurer 35 2. Proposal must be received no later than [Time] PST on [Month, Day, and Year]. 3. Proposals should be verified before submission. The City of La Quinta, CA shall not be responsible for errors or omissions on the part of the respondent in preparation of a proposal. The City of La Quinta, CA reserves the right to reject any and all proposals, to wave any irregularities, or informalities in the proposals, and to negotiate modifications to any proposal. Enclosures: Investment Policy Treasurers Report 36 Appendix I Investment Management Process and Risk Except as provided for in Section 27000.3, Government Code Section 53600.3 declares as a trustee each person, treasurer, or governing body authorized to make investment decisions on behalf of local agencies. As trustees are subject to the prudent investor standard. These persons shall act with care, skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates that the primary objective of any person investing public funds is to safeguard principal; secondly, to meet liquidity needs of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code Section 27000.5 specifies the same objectives for county treasurers and board of supervisors). Risk is inherent throughout the investment process. There is investment risk associated with any investment activity and opportunity risk related to inactivity. Market risk is derived from exposure to overall changes in the general level of interest rates while credit risk is the risk of loss due to the failure of the insurer of a security. The market value of a security varies inversely with the level of interest rates. If an investor is required to sell an investment with a five percent yield in a comparable seven percent rate environment, that security will be sold at a loss. The magnitude of that loss will depend on the amount of time until maturity. Purchasing certain allowable securities with a maturity of greater than five years requires approval of the governing board (see Government Code Section 53601). Part of that approval process involves assessing and disclosing the risk and possible volatility of longer -term investments Another element of market risk is liquidity risk. Instruments with unique call features or special structures, or those issued by little known companies, are examples of "story bonds" and are often thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more difficult and, consequently, the securities' marketability and price are discounted. However, under certain market conditions, gains are also possible with these types of securities. Default risk represents the possibility that the borrower may be unable to repay the obligation as scheduled. Generally, securities issued by the federal government and its agencies are considered the most secure, while securities issued by private corporations or negotiable certificates of deposit issued by commercial banks have a greater degree of risk. Securities with additional credit enhancements, such as bankers acceptances, collateralized repurchase agreements and collateralized bank deposits are somewhere between the two on the risk spectrum. The vast majority of portfolios are managed within a buy and hold policy. Investments are purchased with the intent and capacity to hold that security until maturity. At times, market forces or operations may dictate swapping one security for another or selling a security before maturity. Continuous analysis and fine tuning of the investment portfolio are considered prudent investment management. The Government Code contains specific provisions regarding the types of investments and practices permitted after considering the broad requirement of preserving principal and maintaining liquidity before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust. Chapter II Fund Management Local Agency Investment Guidelines 2010 Issued by California Debt and Investment Advisory Commission 38 Appendix J GLOSSARY (Adopted from the Municipal Treasurers Association) The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a better understanding of financial terms used in municipal investing. AGENCIES: Federal agency securities and/or Government -sponsored enterprises. ASKED: The price at which securities are offered. BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large -denomination CD's are typically negotiable. 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: Short-term unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, Bank America, etc. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City of La Quinta. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance -related legal and contractual provisions, extensive 39 introductory material, and a detailed Statistical Section. CONDUIT FINANCING: A form of Financing in which a government or a government agency lends its name to a bond issue, although it is acting only as a conduit between a specific project and bond holders. The bond holders can look only to the revenues from the project being financed for repayment and not to the government or agency whose name appears on the bond. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non -interest bearing money market instruments that are issued a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. FNMAs (Federal National Mortgage Association) - Like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder -owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. FHLBs (Federal Home Loan Bank Notes and Bondsl - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage -lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. 40 FLBs (Federal Land 130nk Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi-annual coupons. Interest is calculated on a 360-day, 30 day month basis. 4. FFC_Bs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six-month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. 5. FICBs (Federal Intermediate Credit Bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of $3,000 with a nine -month maturity. Interest is payable at maturity and is calculated on a 360- day, 30-day month basis. FHLMCs (Federal Home Loan Mortgage Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBA's), Government National Mortgage Association notes (GNMA's), Tennessee Valley Authority notes (TVA's), and Student Loan Association notes (SALLIE-MAE's). FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per deposit through December 31, 2013. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open - market operations. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "pass-throughs" is often used to describe Ginnie Maes. LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum balance of 41 $50,000,000 for any agency. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-half of one percent of the earnings. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase --reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer -lender to liquidate the underlying securities in the event of default by the seller -borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers' acceptances, etc.) are issued and traded. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) -registered securities broker -dealers, banks and a few unregulated firms. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves. REVERSE REPURCHASE AGREEMENTS (RRP or RevRepo) - A holder of securities sells these securities to an investor with an agreement to 42 repurchase them at a fixed price on a fixed date. The security"buyer" in effect lends the"seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RRP extensively to finance their positions. Exception: When the Fed is said to be doing RRP, it is lending money that is increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, and derivative - based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate necessities to be payment due within one week. TREASURY BILLS: A non -interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year. TREASURY BONDS: Long-term coupon -bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium -term coupon -bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker -dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. UNIFORM PRUDENT INVESTOR ACT: The State of California has adopted this Act. The Act contains the following sections: duty of care, diversification, review of assets, costs, compliance determinations, delegation of investments, terms of prudent investor rule, and application. YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. 43 CITY OF LA QUINTA Investment Policy Fiscal Year 2016/2017 Table of Contents Section Topic Page Executive Summary 2 1 General Purpose 4 II Investment Policy 4 III Scope 4 IV Objectives 4 ► Safety of Principal ► Provide Liquidity ► Yield A Risk -Based Market Rate Of Return V Maximum Maturities 6 VI Prudence 6 VII Authority 6 Vill Ethics and Conflicts of Interest 7 IX Authorized Financial Dealers and Institutions 7 ► Broker/Dealers ► Financial Institutions X Permissible Deposits and Investments 8 XI Investment Pools 12 XII Payment and Custody 12 XIII Interest Earning Distribution Policy 12 XIV Internal Controls and Independent Auditors 13 XV Reporting Standards 14 XVI Financial Assets and Investment Activity Not Subject to this Policy 14 XVII Investment of Bond Proceeds 15 XIII Investment Advisory Board - City of La Quinta 15 XIX Investment Policy Adoption 16 Appendices Topic Page A Summary of Permissible Deposits and Investments 17 B City of La Quinta Municipal Code Ordinance 2.70 - Investment Advisory Board 19 C City of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and Funds 21 D Segregation of Major Investment Responsibilities 23 E Listing of Approved Financial Institutions 24 F Broker/Dealer Questionnaire and Certification 25 G Request for Proposal for Professional Portfolio Management Firm 29 H Permissible Investment Chart - Professional Portfolio Management Firm 35 1 Investment Management Process and Risk 36 J Glossary 37 1 CITY OF LA QUINTA Investment Policy Fiscal Year 2016/2017 Executive Summary The general purpose of this Investment Policy is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. The City's Investment Policy conforms to all state and local statutes and applies to all deposits and investments of the City of La Quinta (the"City"). It is the City's policy to deposit and invest public funds in a manner that shall provide: ► Safety of principal; ► Liquidity to meet all of the City's obligations and requirements that may be reasonably anticipated; and ► A risk -based market rate of return. It is the City's policy to hold securities and other investments until maturity. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the portfolio require that a security be sold. Authority to manage the City's investment portfolio is derived from the City Municipal Code. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish and implement written procedures for the operation of the City's investment program consistent with the Investment Policy. The Treasurer shall establish and implement a system of internal controls to accomplish the following objectives: ► Safeguard assets; ► Orderly and efficiently conduct its business, including adherence to all City management policies; ► Prevent or detect errors and fraud; ► Accurately complete all accounting records; and ► Timely prepare all reliable financial information. The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the independent auditors in connection with the annual audit of the City's financial statements. The City Manager, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. The Treasurer will be permitted to invest only in the permissible deposits and investments described in Section X and Appendix A up to the specified maximum allowable percentages and/or dollar limitations and, where applicable, through the bid process requirements. Permissible deposits and investments include, in general: 2 ► FDIC -Insured Checking, Savings, and Sweep Accounts; ► Collateralized Bank Deposits; ► Certificates of Deposit; ► Negotiable Certificates of Deposit; ► U.S. Government Agency Securities and Federal Government Securities; ► Prime Commercial Paper; ► Local Agency Investment Fund (LAIF); ► Money Market Mutual Funds; ► Corporate Notes; and ► Professionally Managed Accounts. The City's deposits and investments are generally limited to three years' maximum maturity. However, the projected amount of funds not expected to be disbursed within five years may be invested in notes and bonds maturing between three and five years. Additionally, funds may be invested for up to ten (10) years as further discussed in Section V. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. As a basis for comparison only, the Treasurer's monthly report will display the rates of return on the three-month Bill, six-month Bill, and the one and two-year U.S. Treasury Note, comparable -period rates for commercial paper, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual basis. The Investment Policy will be adopted before the end of June of each year. This Executive Summary is only an overview of the City's Investment Policy. Reading this summary does not constitute a complete review, which can only be accomplished by reviewing all of the pages herein. 3 City of La Quinta Statement of Investment Policy July 1, 2016 through June 30, 2017 Adopted by the City Council on June 7, 2016 GENERAL PURPOSE The general purpose of this document is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. II INVESTMENT POLICY It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall provide: ► Safety of principal; ► Liquidity to meet all of the City's obligations and requirements that may be reasonably anticipated; and ► A risk -based market rate of return. The Investment Policy conforms to all State and local statutes governing the investment of public funds and sets forth the permissible deposits and investments of the City's funds and the limitations thereon. III SCOPE Except as further detailed in Section XVII, this Investment Policy applies to all deposits and investments of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency and the City of La Quinta Financing and Housing Authorities (hereafter referred to in this document as the "City"). These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within the following fund types: ► General ► Special Revenue ► Capital Projects ► Debt Service ► Enterprise ► Internal Service ► Trust and Agency ► Any new fund types and fund(s) that may be created.. IV OBJECTIVES The objectives of the City's investment activity, in order of priority and importance, are: 1. Safety of Principal Safety of principal is the foremost objective of the City's investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of principal of the overall portfolio in accordance with the permissible deposits and investments. M The City shall endeavor to preserve its investment principal by making only permissible deposits and investments, undertaken in a controlled manner to minimize the possibility of loss or misappropriation through malfeasance or otherwise. Investments not backed by the full faith and credit of the United States Government shall be diversified by allocating assets between different types of permissible investments, maturities, and issuers as a means to mitigate credit risk and interest rate risk. a. Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk may be mitigated by: ► Limiting investments to investment grade securities as permitted in Section X; and ► Diversifying the issuers of the securities in the investment portfolio so that potential losses due to issuer failure or individual securities downgrades may be minimized. b. Interest Rate Risk is the risk that market values of securities in the portfolio will decline due to changes in general interest rates. Interest rate risk may be mitigated by: ► Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and ► Investing operating funds primarily in shorter -term securities. C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique features or structure or because it is thinly traded. Liquidity risk is not a material issue for the City's portfolio because of the permissible deposits and investments (see Section X) and because the City maintains a buy -and -hold policy and holds securities and other investments to maturity. A discussion of the City's investment process and risk is presented in Appendix I. 2. Provide Liquidity The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs that may be reasonably anticipated. This is accomplished by structuring the portfolio so that sufficient liquid funds are available to meet anticipated demands. Furthermore, since all possible cash needs cannot be anticipated the portfolio should be diversified and consist of securities with active secondary or resale markets. The City's policy is to hold securities and other investments to maturity. Accordingly, securities shall not be sold prior to maturity with the following exceptions: ► A security with declining credit quality can be sold early to minimize loss of principal; and ► Unanticipated liquidity needs of the portfolio require that one or more securities be sold. 3. Yield a Risk -Based Market Rate of Return The City's investment portfolio shall be structured with the objective of yielding a risk - based market rate of return throughout budgetary and economic cycles. Return on investment is less important than the safety and liquidity objectives described above. 5 The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. The portfolio's rates of return will be influenced by several factors, including actions by the Federal Reserve Board, the marketplace, and overall economic perceptions and conditions. These factors will not affect yield during the securities' holding period because the City's buy -and -hold policy fixes the securities' yield at the time of purchase. As a basis for comparison only, the Treasurer's monthly reports will display the rates of return on the three-month Bill, six-month Bill, and one and two-year U.S. Treasury Note, comparable -period rates for commercial paper, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Treasurer may use these or any other published rates of return that the Treasurer deems appropriate for comparison to the return on the City's investment portfolio. V MAXIMUM MATURITIES It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the City require that a security be sold. The buy -and -hold policy requires that the City's investment portfolio be structured so that sufficient liquid funds are available from maturing investments and other sources to meet all reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have reliable, diligently prepared cash flow projections. Annually, the Treasurer shall project the amount of funds not expected to be disbursed within ten years. For FY2015/2016, the amount of such funds is projected to be $20 million. Funds up to that amount may be invested in U.S.Treasury notes and bonds, Local Agency Obligations, and California Local Agency Obligations maturing between 3 and 10 years. For all other funds, investments are limited to five years maximum maturity. VI PRUDENCE The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate Code Sections 16045 through 16054. Section 16053 sets forth the terms of a prudent person which are as follows: "Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence, discretion, and intelligence exercise in the professional 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." VII AUTHORITY Authority to manage the City's investment portfolio is derived from section 3.08 of the City's Municipal Code. Management responsibility for the investment program is delegated to the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment Policy. The City Treasurer shall establish written procedures for the operation of the investment program consistent with the 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. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The City Manager or his/her designee shall acknowledge in writing all purchases and sales of investments prior to their execution by the City Treasurer. VIII ETHICS AND CONFLICTS OF INTEREST The City Manager, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. Any questionable activity or relationship shall be reported immediately and in compliance with the procedures set forth in Section 1.40 — Conflicts of Interest and Acceptance of Gifts and other Gratuities of the City of La Quinta Personnel Manual. Reporting must be made in accordance with the personnel policies of the City and, until resolved, the officer or employee shall refrain from participating in the City's business related to the matter. The City Manager, City Treasurer and City employees may conduct personal business with banks, brokers, and other financial institutions that are authorized to conduct business with the City provided that the terms of the activity to the accountholder with the City are the same as those that are available to the public in general. IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Treasurer maintains a listing of financial institutions which are approved for direct investment purposes. In addition a list will also be maintained of approved broker/dealers selected by credit worthiness. 1. Broker/Dealers who desire to become bidders for direct investment transactions must supply the City with the following: ► Current audited financial statements; ► Proof of Financial Industry Regulatory Authority (FINRA) Certification; ► Trading resolution; ► Resume of Financial broker; and ► Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F) which contains a certification of having read the City's Investment Policy. The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. The City Treasurer will also contact the following agencies during the verification process: ► Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1- 800-289-9999). 7 ► State of California Department of Corporations (1-916-445-3062). The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for deposit or investment (see Appendix E, "Listing of Approved Financial Institutions"): a. Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC). b. Collateral - The amount of the City's deposits or investments not insured by the FDIC —shall be collateralized by securities with market values of 110%, or by mortgages with market values 150%, of the amount of invested funds plus unpaid interest earnings. C. Disclosure - Each financial institution maintaining invested funds in excess of the FDIC insured amount shall furnish the City a copy of the most recent Call Report. The City shall not invest in excess of the FDIC insured amount in banking institutions which do not disclose to the city a current listing of securities pledged for collateral ization in public monies. X PERMISSIBLE DEPOSITS AND INVESTMENTS Permissible deposits and investments are summarized below. A more comprehensive list is included in Appendix A. City City Maximum City Permissible Deposits and Investments Maximum Allocation Restrictions Maturity (Footnote 1) Sweep Account: U.S. Treasuries and/or Current/On Demand Checking & Savings Accounts (FDIC Insured) & Sweep 65% Portfolio Accounts GSE's Interest bearing active bank deposits — non FDIC insured collateralized by 110% of eligible securities 60% Portfolio $40,000,000 per bank Current /on Demand Certificate of Deposit (negotiable and non-negotiable) 30 %Portfolio <_ 000 including interest per $250,institution 5 years U.S. Treasury Bills, Notes and Bonds, and Government 100% Portfolio < $30,0000,000 maturing 3-5 Yrs. 3 years National Mortgage Association (GNMA) securities U.S. Government Agency Securities and Federal Government Securities (except collateralized mortgage 30% of Portfolio combined $10 million per purchase obligations (CMO's) or structured notes which contain embedded rate options): Federal National Mortgage Association (FNMA) $20,000,000 per issuer 5 years Federal Home Loan Bank Notes & Bonds (FHLB) $25,000,000 per issuer 5 years M Federal Farm Credit Bank (FFCB) Federal Home Loan Mortgage Corporation (FHLMC) Prime Commercial Paper including Temporary Liquidity Guarantee Program (TLGP) Local Agency Investment Fund (LAIF) Money market mutual funds regulated by the SEC that consist only of US Treasury Securities or GSE's Corporate Notes Corporate Notes - Temporary Liquidity Guarantee Program (TLGP) Professionally Managed Account Local Agency Bonds/California Agency Obligations $30,000,000 per issuer 5 years $20,000,000 per issuer 5 years 15% Portfolio $5,000,000 per issuer maximum 90 days $50,000,000 $50,000,000 Current/On Demand per account Mutual fund must have in excess of Current / 20% Portfolio $500 million in assets under On Demand management. $5,000,000 max per issuer 3 years 10% Portfolio 20% Portfolio 1 $10,000,000 max per issuer 1 3 years 10% Portfolio Requires Approved RFP 3 years 100% <=A$30,000,0000 10 years Long -Term Scale S&P A 1 AAA, AA + , AA, AA-, A + , A Moody's P1 Aaa, Aa1, Aa2, Aa3, Al, A2 Fitch AAA, AA + , AA, AA-, A + , A Checking, Savings, and Sweep Accounts - The City will only maintain checking, savings, and sweep accounts with FDIC insured financial institutions. As authorized by the City Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account with a $50,000 target balance may be maintained in conjunction with the checking account. In addition, the Treasurer may invest in an interest bearing active deposit account as approved in Government Code Section 53632. The deposit account must be collateralized with securities that are in accordance with Government Code Sections 53632.5(c). In addition, the market value of the collateralized securities must be maintained in accordance with 53652 (a), and be held by a custodian in accordance with the requirements of Government Code Section 53656. The proposition of the City's share of the deposit account shall be determined in accordance with Government Code Section 53658. Certificates of Deposit (Negotiable and Non-negotiable) - As authorized in Government Code Section 53601, local governments may invest up to 30% of their portfolios in Certificates of Deposits and 30% in Negotiable Certificates of deposits. The City's policy is to limit combined Non -Negotiable and Negotiable Certificates of Deposits to 30% of the overall portfolio. Each CD is limited to the FDIC limit of $250,000. ( U.S. Treasury Bills, Notes, and Bonds and Government National Mortgage Associations (GNMA) securities - The City may invest in U.S. Treasury bills, notes, and bonds and GNMA securities directly issued and backed by the full faith and credit of the U.S. Government. The City's Investment Policy provides for investments in U.S. Treasury issues and GNMA's of 100% of the portfolio. ► The City's Investment Policy does not allow investments in state indebtedness. �91 Local Agency Bonds and California Local Agency Obligations - The City may invest in California local agency obligations pursuant to 56301(a) and 53301(e). 53601(a) pertains to investing in bonds issued by a local agency, department, board, agency or authority of the local agency. 53601(e) pertains to investing in bonds and other defined indebtedness of a local agency or department, board, agency or authority of the local agency within the State of California. The City's Investment Policy limits investments in Local Agency Bonds and California Local Agency obligations to 30% of the portfolio with up to a ten year maximum maturity. In addition, the Agency obligations must be invested in the long term rating of A, A2, A or better by S&P, Moody's or Fitch. In the case of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. In the case of secondary issues, the Treasurer will rely on the approved Broker/Dealers. U.S. Government Agency Securities and Federal Government Securities - The City may invest in securities issued by U.S. Government instrumentalities and agencies (commonly referred to as government sponsored enterprises or GSE's). These securities are not backed by the full faith and credit of the U.S. Government. Publicly owned GSE's include Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Student Loan Marketing Association (SLMA). Non -publicly owned GSE's include the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Land Bank (FLB) and Federal Intermediate Credit Bank (FICB). The City's Investment Policy allows investment only in securities of FNMA, FHLMC, FHLB and FFCB. For Fiscal Year 2015/2016, the maximum face amount per issuer is $20 million for FNMA and FHLMC, $25 million for FHLB and $30 million for FFCB. In addition, no more than 30% of the portfolio surplus may be invested in all GSE's combined with a maximum $10 million face amount per purchase. Prime Commercial Paper - As authorized in Government Code Section 53601(g), a portion of the City's portfolio may be invested in commercial paper of the highest rating (Al or P1) as rated by Moody's or Standard and Poor's. There are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. The City's Investment Policy permits investments in commercial paper with the following limitations: ► Maximum 15% of the portfolio; ► Maximum maturity of 90 days; and ► Maximum of $5 million per issuer. These limitations are more restrictive than the State code which allows amounts of 25% of the total portfolio with maturities up to 270 days with no per -issuer limitations. Local Agency Investment Fund (LAIF) - As authorized in Government Code Section 16429.1 and by LAIF procedures, local government agencies are each authorized to invest a maximum of $50 million per account in this investment program administered by the California State Treasurer. The City Treasurer may not invest more than $50 million per account in LAIF. The City's investment in LAIF is allowable as long as the average maturity of its investment portfolio does not exceed two years, unless specific approval is authorized by the City Council. 10 Money Market Mutual Funds - As authorized in Government Code Section 53601(k), local agencies are authorized to invest in shares of beneficial interest issued by diversified management companies (mutual funds) in an amount not to exceed 20% of the agency's portfolio. There are a number of other qualifications and restrictions regarding allowable investments in corporate notes and shares of beneficial interest issued by mutual funds which include (1) attaining the highest ranking or the highest letter and numerical rating provided by not less than two of the three largest nationally recognized rating services, or (2) having an investment advisor registered with the Securities and Exchange Commission with not less than five years' experience investing in the securities and obligations and with assets under management in excess of five hundred million dollars ($500,000,000). The City's Investment Policy only allows investments in mutual funds that invest in direct issues of the U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not exceeding 90 days and the City limits such investments to 20% of the portfolio. Corporate Notes - As authorized in Government Code Section 53601 (j), local agencies may invest in corporate notes. The notes must be issued by corporations organized and operating in the United States or by depository institutions licensed by the United States or any other state and operating in the United States. The City's Investment Policy allows investment in corporate notes authorized by the Government Code with the following limitations: ► Maturities shall not exceed three years from date of purchase; ► Eligible notes shall be regularly quoted and traded in the marketplace; ► Eligible notes shall be rated "AA" or better; and ► The maximum aggregate investment shall not exceed $5 million face amount for each issuer. This is more restrictive than the State code allowed amounts of 30% of the total portfolio with maturities up to five years with no per -issuer limitations. Professionally Managed Account(s) - The City Treasurer may place up to 10% of the portfolio with a professional portfolio management firm ("PPMF"). The PPMF will be approved by the City Council based upon the City Treasurer's recommendation pursuant to completion of a request for proposal (RFP) as outlined in Appendix G. The PPMF shall have: ► An established professional reputation for asset or investment management; ► Knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds; ► Substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City; ► Professional liability (errors and omissions) insurance and fidelity bonding in such amounts as are required by the City; and ► Registration with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Before engagement by the City and except as may be specifically waived or revised, the PPMF shall commit to adhere to the provisions of the City's Investment Policy with the following exceptions: 11 ► The PPMF may be granted the discretion to purchase and sell investment securities in accordance with Appendix I of this Investment Policy; ► The PPMF is not required to adhere to the buy -and -hold policy of the City's Investment Policy; and ► The PPMF does not need City Manager or City Treasurer approval to make permissible investments as detailed in column 8 of Appendix H of this Investment Policy. XI INVESTMENT POOLS There are three (3) types of investment pools: ► State -run pools (e.g., LAIF); ► Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools); and ► Pools that are operated for profit by third parties. The City's Investment Policy permits investment only in pools authorized in Section X. XII PAYMENT AND CUSTODY The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain appropriate evidence of the City's ownership of securities and other eligible investments. Such custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or seller only after receiving evidence that the City has legal, record ownership of the securities. Even though ownership is evidenced in book -entry form rather than by actual certificates, this procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of securities. XIII INTEREST EARNING DISTRIBUTION POLICY Interest earnings are generated from pooled investments and specific investments. The following provisions apply to the calculation and distribution of interest earnings. 1 . Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency, La Quinta Financing Authority, and La Quinta Housing Authority, and to allocate interest earnings in the following order, as follows: a. Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund for all operating funds as included in the annual operating budget. b. Payment to the General Fund of a management fee equal to 5% of the annual pooled cash fund investment earnings. C. Payment to each fund of an amount based on the average computed daily cash balance included in the common portfolio for the earning period. 12 2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR The City Treasurer shall establish a system of internal controls to accomplish the following objectives: ► Safeguard assets; ► The orderly and efficient conduct of its business, including adherence to management policies; ► Prevention or detection of errors and fraud; ► The accuracy and completeness of accounting records; and ► Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: ► Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. ► Separation of transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. ► Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping. ► Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. ► Clear delegation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. ► Written confirmation or telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions shall be supported by written communications or electronic confirmations and approved by the appropriate person. Written communications may be via fax if on letterhead and the safekeeping institution has a list of authorized signatures. Fax correspondence must be supported by evidence of verbal or written follow-up. 13 ► Development of a wire transfer agreement with the City's bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. The system of internal controls developed by the City, shall be reviewed annually by the independent auditor in connection with the annual audit of the City's Financial Statements. The independent auditor's letter on internal control over financial reporting and compliance as it pertains to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditor's letter. The auditor's letter, as it pertains, to cash and investment activities and the City Treasurer's response shall be provided to the City's Investment Advisory Board for their consideration. Following the completion of each annual audit, the independent auditor shall meet with the Investment Advisory Board and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. See Appendix D, "Segregation of Major Investment Responsibilities." XV REPORTING STANDARDS The City Treasurer shall submit a monthly Treasurers Report to the City Council and the Investment Advisory Board that includes all cash and investments under the authority of the Treasurer. The Treasurer's Report shall summarize cash and investment activity and changes in balances and include the following: ► A certification by the City Treasurer; ► A listing of purchases and sales/maturities of investments; ► Cash and Investments categorized by authorized investments, except for LAIF which will be provided quarterly and show yield and maturity; ► Comparison of month end actual holdings to Investment Policy limitations; ► Current year and prior year monthly history of cash and investments for trend analysis; ► Balance Sheet; ► Distribution of cash and investment balances by fund; ► A year to date historical cash flow analysis and projection for the next six months; and ► A two-year list of historical interest rates. XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY The City's Investment Policy does not apply to the following: ► Cash and Investments raised from Conduit Debt Financing; ► Funds held in trust in the City's name in pension or other post -retirement benefit programs; ► Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; and ► Short or long term loans made to other entities by the City or Agency, Short term (Due to/from) or long term (Advances from/to) obligations made either between the City and its funds or between the City and Agency. 14 XVII INVESTMENT OF BOND PROCEEDS The City's Investment Policy shall govern bond proceeds and bond reserve fund investments. California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in accordance with bond indenture provisions which shall be structured in accordance with the City's Investment Policy. Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. These arbitrage calculations may be contracted with an outside source to provide the necessary technical assistance to comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept segregated from other funds and records will be kept in a fashion to facilitate the calculations. The City's investment position relative to the new arbitrage restrictions is to continue pursuing the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It is the City's position to continue maximization of yield and to rebate excess earnings, if necessary. XVIII INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA The Investment Advisory Board (IAB) is a standing board composed of five members from the public that are appointed by the City Council. Background information will be requested and potential candidates must agree to a background check and verification. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the board. All board members shall report annually to the City Clerk on Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be, or have the appearance of, a conflict of interest. The IAB must meet at least quarterly, but usually meets monthly, to: ► Review at least annually the City's Investment Policy and recommend appropriate changes; ► Review monthly treasury report and note compliance with the Investment Policy and adequacy of cash and investments for anticipated obligations; ► Receive and consider other reports provided by the City Treasurer; ► Meet with the independent auditor after completion of the annual audit of the City's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls and findings for cash and investment activities; and ► Serve as a resource for the City Treasurer on matters such as proposed investments, internal controls, use or change of financial institutions, custodians, brokers and dealers. The IAB will report to the City Council after each meeting either in person or through correspondence at a regular City Council meeting. See Appendix B: "Investment Advisory Board Provisions." 15 XIX INVESTMENT POLICY ADOPTION The City's Investment Policy will be reviewed annually by the City's Investment Advisory Board and the City Treasurer. The Investment Advisory Board will forward the Investment Policy with any revisions to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City Treasurer to review the Investment Policy and any comments prior to submission to the City Council for their consideration. The Investment Policy shall be adopted by resolution of the City Council annually before the end of June of each year. 16 y Q ++ X E Q: Q. 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A. Except as set out below, see Chapter 2.06 for General Provisions. (Ord. 516 § 5, 2013) B. The Investment Advisory Board ("IAB") shall consist of five members appointed by, and serving at the will of the city council. C. Applicants for the board should have a background in finance, preferably with knowledge and/or experience in markets, controls and accounting for securities. Background information will be requested and potential candidates must agree to a background check and verification. D. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each board member will provide the City Council with a disclosure statement which identifies any matters that have a bearing on the appropriateness of that member's service on the board. Such matters may include, but are not limited to, changes in employment, changes in residence, or changes in clients. E. To promote continuity, the expiration of the terms of the members of the board shall be staggered. The term of service is three years, with one or two terms expiring each year. 2.70.020 Number of members. The investment advisory board ("IAB") shall consist of five members appointed by, and serving at the will of the city council. (Ord. 516 § 5, 2013) 2.70.030 Qualifications of members. A. In addition to the qualification requirements set forth in Section 2.06.040, applicants for the IAB should have a verifiable background in finance and/or securities, preferably with knowledge and/or experience in markets, financial controls and accounting for securities. B. Background information will be requested and potential candidates must agree to a background check and verification by the city manager or designee. (Ord. 516 § 5, 2013) 2.70.040 Powers and duties. A. The principal functions of the IAB are: 1. Review at least annually the city's investment policy and recommend appropriate changes; 2. Review monthly the treasury report and note compliance with the investment policy and adequacy of cash and investments for anticipated obligations; 3. Receive and consider other reports provided by the city treasurer; 19 4. Meet with the independent auditor after completion of the annual audit of the city's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls, and findings for cash and investment activities; and 5. Serve as a resource for the city treasurer on matters such as proposed investments, internal controls, use of change or change of financial institutions, custodians, brokers and dealers. B. The IAB will report to the city council after each meeting either in person or through correspondence at a regular city council meeting. (Ord. 516 § 5, 2013) 20 Appendix C City of La Quinta Municipal Code Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS Sections: 3.08.010 Investment of city moneys and deposit of securities, 3.08.020 Authorized investments. 3.08.030 Sales of securities. 3.08.040 City bonds. 3.08.050 Reports. 3.08.060 Deposits of securities. 3.08.070 Trust fund administration. 3.08.010 Investment of city moneys and deposit of securities. Pursuant to, and in accordance with, and to the extent allowed by, Sections 53607 and 53608 of the Government Code, the authority to invest and reinvest moneys of the city, to sell or exchange securities, and to deposit them and provide for their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982) 3.08.020 Authorized investments. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to purchase, at their original sale or after they have been issued, securities which are permissible investments under any provision of state law relating to the investing of general city funds, including but not limited to Sections 53601 and 53635 of the Government Code, as said sections now read or may hereafter be amended, from moneys in his custody which are not required for the immediate necessities of the city and as he may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part), 1982) 3.08.030 Sales of securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord.2 § I (part), 3.08.040 City bonds. Bonds issued by the city and purchased pursuant to this chapter may be cancelled either in satisfaction of sinking fund obligations or otherwise if proper and appropriate; provided, however, that the bonds may be held uncancelled and while so held may be resold. (Ord. 2 § 1 (part), 1982) 21 3.08.050 Reports. The city treasurer shall make a monthly report to the city council of all investments made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982) 3.08.060 Deposits of securities. Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is authorized to deposit for safekeeping, the securities in which city moneys have been invested pursuant to this chapter, in any institution or depository authorized by the terms of any state law, including but not limited to Section 53608 of the Government Code as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. (Ord. 2 § 1 (part), 1982) 3.08.070 Trust fund administration. Any departmental trust fund established by the city council pursuant to Section 36523 of the Government Code shall be administered by the city treasurer in accordance with Section 36523 and 26524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (part), 1982) 22 Appendix D SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Responsible Parties Develop and Recommend Modifications Investment Advisory Board to City's Formal Investment Policy and City Treasurer Review City's Investment Policy City Manager and Recommend City Council Action and City Attorney Adopt Formal Investment Policy City Council Implement Formal Investment Policy City Treasurer Review Financial Institutions & Select Investments City Treasurer Acknowledge Investment Selections City Manager or his/her designee Execute Investment transactions City Treasurer or City Manager Confirm Wires (if applicable) Accounting Manager or Financial Services Assistant Record Investment Transactions in City's Accounting Manager or Accounting Records Financial Services Assistant Investment Verification (match broker confirmation City Treasurer and Financial to City investment records) Services Assistant Reconcile Investment Records to Accounting Records and Bank Statements Financial Services Assistant Reconcile Investment Records to Treasurers Report of Investments Accounting Manager Security of Investments at City Accounting Manager or Senior Secretary Security of Investments outside City Third Party Custodian Review Internal Control Procedures External Auditor 23 Appendix E LISTING OF APPROVED FINANCIAL INSTITUTIONS 1. Banking Services - Wells Fargo Bank, Government Services, Los Angeles, CA (Banking Services) Rabobank N.A., Government Banking Group, Roseville, CA (Collateralized Bank Deposits) 2. Custodian Services Bank of New York/Mellon 3. Deferred Compensation - International City/County Management Association Retirement Corporation 4. Broker/Dealer Services Banc of America Securities/Merrill Lynch Morgan Stanley CitiGroup First Empire Securities 5. Government Pool - State of California Local Agency Investment Fund 6. Bond Trustees - 1996 Lease Revenue Bonds - US Bank 1998 RDA Project Area 1 &2 - US Bank 2001 RDA Project Area 1 - US Bank 2002 RDA Project Area 1 - US Bank 2003 RDA Project Area 1 - US Bank 2004 Local Agency Rev - US Bank 2011 RDA Project Area 2 - US Bank 2011 Fin Auth Housing 1 &2 - US Bank 2013 Successor Agency - US Bank Assessment Districts - US Bank No Changes to this listing may be made without City Council approval 24 BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1 . Name of Firm: 2. Address: 3. Telephone: (_) ( ) 4. Broker's Representative to the City (attach resume): Name: 5. Title: Telephone: (_) Manager/Partner-in-charge (attach resume): Name: Title: Appendix F Telephone: 6. List all personnel who will be trading with or quoting securities to City employees (attach resume) Name: Title: Telephone: 7. Which of the above personnel have read the City's Investment Policy? 8. Which instruments are offered regularly by your local office? (Must equal 100%) % U.S. Treasuries % BA's % Commercial Paper % CD's % Mutual Funds % Agencies (specify): % Repos % Reverse Repos % CMO's % Derivatives % Stocks/Equities % Other (specify): 9. References -- Please identify your most directly comparable public sector clients in our geographical area. Entity Entity Contact Contact 25 Telephone j Telephone I ; Client Since Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 1 1 . Has your firm or your local office ever been subject to a regulatory or state/ federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of securities? Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that you were responsible for an investment loss? Yes No If yes, please provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes No If yes, please provide action taken Do you have any current or pending complaints that are unreported to FINRA? Yes No If yes, please provide action taken Does your firm have any current, or pending complaints that are unreported to FINRA? Yes No If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. Who audits these fiduciary responsibilities? Latest Audit Report Date 04: 14. How many and what percentage of your transactions failed? Last month? % $ Last year? % $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quinta. 16. Is your firm a member in the S.I.P.C. insurance program? Yes No If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? 18. What reports and transaction confirmations or any other research publications will the City receive? 19. Does your firm offer investment training to your clients? Yes No 20. Does your firm have professional liability insurance? Yes No If yes, please provide the insurance carrier, limits and expiration date. 21 22 23 Please list your FINRA/NASD Registration Number Do you have any relatives who work at the City of La Quinta? Yes No If yes, Name and Department Do you maintain an office in California? Yes No 24. Do you maintain an office in La Quinta or Riverside County? Yes No 25. Please enclose the following: ► Latest audited financial statements; ► Samples of reports, transaction confirmations and any other research/publications the City will receive; ► Samples of research reports and/or publications that your firm regularly provides to clients; and ► Complete schedule of fees and charges for various transactions. 27 'CERTIFICATION' I hereby certify that I have personally read the Statement of Investment Policy of the City of La Quinta, and have implemented reasonable procedures and a system of controls designed to preclude imprudent investment activities arising out of transactions conducted between our firm and the City of La Quinta. All sales personnel will be routinely informed of the City's investment objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable risks associated with financial transactions conducted with our firm. By signing this document the City of La Quinta is authorized to conduct any and all background checks. Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of my knowledge. Broker Representative Date Title Sales Manager and/or Managing Partner* Date Title 28 Appendix G Request for Proposals Professional Portfolio Management Firm City of La Quinta, CA The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms for the provision of a discretionary investment management services for City of La Quinta, CA. The portfolio to be managed of the invested assets is will be approximately 10% of the City's investment portfolio and will be invested between 0 — 3 years. The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and the City of La Quinta, CA's investment policy. A copy of the investment policy is attached for your information. Questions regarding this RFP should be directed to: Name: Title: City of: Address: City, State, Zip Code: Phone Number: Rita Conrad Finance Director/Treasurer La Quinta, CA 78-495 Calle Tampico La Quinta, CA 92253 (760)777-7150 I. CRITERIA FOR EVALUATION AND SELECTION • Experience of the firm in providing services to public sector entities of similar size and with similar investment objectives; ■ Professional experience and qualifications of the individuals assigned to the account; ■ Portfolio management resources, investment philosophy and approach; ■ Responsiveness to the RFP, communicating an understanding of the overall program and services required; �+ Reporting capabilities; ■ Fees. II. SELECTION TIMETABLE A. [Month, Day and Year] Proposals due by [Time] PST. B. [Month, Day and Year] Proposals evaluated: to be determined C. [Month, Day and Year] [City of La Quinta, CA] [Board/Council] approves selection and awards contract. III. FORMAT FOR PROPOSALS Please format your response to this RFP in the following manner: A. Organization 29 1. Describe your organization, date founded, ownership and other business affiliations. Provide number and location of affiliated offices. Specify the number of years your organization has provided investment management service. 2. Describe your firm's revenue sources (e.g., investment management, institutional research, etc.) and comment on your firm's financial condition. 3. Within the past three years, have there been any significant developments in your organization (e.g., changes in ownership, new business ventures)? Do you expect any changes in the near future? 4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation involving your organization, any officer, or employee at any time in the last ten years. 5. Describe the firm's fiduciary liability and/or errors and omissions insurance coverage. Include dollar amount of coverage. B. Personnel 1. Identify the number of professionals employed by your firm by classification. 2. Provide an organization chart showing function, positions, and titles of all the professionals in your organization. 3. Provide biographical information on investment professionals that will be involved in the decision -making process for our portfolio, including number of years at your firm. Identify the person who will be the primary portfolio manager assigned to the account. 4. Describe your firm's compensation policies for investment professionals and address any incentive compensation programs. C. Assets Under Management 1. Summarize your institutional investment management asset totals by category for your latest reporting period in the following table: Other Restrictive Number Operating Funds Number of Funds of Clients Clients Governmental $ $ Governmental Pension Non Governmental Pension S N/A N/A N/A N/A 30 Corporate $ N/A N/A High Net Worth Client $ N/A N/A Endowmental/Foun- $ N/A N/A dation 2. Provide the number of separate accounts whose portfolios consist of operating funds. 3. List in the following table the percentage by market value of aggregate assets under all governmental accounts under management for your latest reporting period: Type of Asset Percent by Market Value U.S. Treasury securities Federal Agency obligations Corporate securities rated AAA -AA Corporate securities rated A Corporate securities rated BBB or lower Other (specify ) 4. Describe the procedures that your firm has in place to address the potential or actual credit downgrade of an issuer and to disclose and advise a client of the situation. 5. Provide data on account/asset growth over the past five years. Indicate the number of government accounts gained and the number of government accounts lost. 6. List your five governmental largest clients. Identify those that are exclusively operating fund relationships and/or those that are other relationships (e.g., bond fund, retirement fund). 7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules). 8. Provide proof of State of California Registration, if your firm is not eligible for SEC registration. 9. Provide a sample contract for services. 31 D. Philosophy/Approach 1. Describe your firm's investment philosophy for public clients, including your firm's philosophy regarding average duration, maturity, investment types, credit quality, and yield. 2. Describe in detail your investment process, as you would apply it to City of La Quinta, CA's portfolio. 3. What are the primary strategies for adding value to portfolios? 4. Describe the process you would recommend for establishing the investment objectives and constraints for this account. 5. Describe in detail your process of credit risk management, including how you analyze credit quality, monitor credits on an ongoing basis, and report credit to governmental accounts. 6. Describe your firm's trading methodology. 7. Describe your firm's decision -making process in terms of structure, committees, membership, meeting frequency, responsibilities, integration of research ideas, and portfolio management. 8. Describe your research capabilities as they would pertain to governmental accounts. What types of analysis do you use? 9. Describe the firm's approach to managing relationships with the broker -dealer community. E. Portfolio Management 1 . Are portfolios managed by teams or by one individual? 2. What is the average number of accounts handled per manager? 3. Which professional staff member will be the primary client contact for City of La Quinta, CA? 4. How frequently are you willing to meet with us? 5. Describe procedures used to ensure that portfolios comply with client investment objectives, policies, and bond resolutions. F. Fees Charged 1 . Please include a copy of your firm's fee schedule applicable to this RFP. 2. Identify any expenses that would not be covered through this fee structure and would be required in order to implement the firm's program. 32 3. Is there a minimum annual fee? G. Performance Reporting 1. Please report on all accounts under $100 million. 2. Please provide performance history for governmental accounts for the last five years. 3. Please provide risk measurements for governmental accounts for the last five years. 4. Indicate whether your returns are calculated and compiled in accordance with the Association for Investment Management and Research (AIMR/CFA Institute) standards. 5. Do your reports conform to the State of California reporting standards? Are you willing to customize your reports to meet our specifications? 6. How will you notify us of investment transactions? 7. Are confirmations of investment transactions sent directly by the broker/dealer to the client? 8. Do your reports include rating information on investments which is required by GASB 40? H. References Provide a list of at least five (5) client references in California. References should be public agencies with portfolio size and investment objectives similar to City of La Quinta, CA. Include length of time managing the assets, contact name, and phone number. Insurance Requirements Exhibit A defines the insurance requirements that will need to be met prior to the [Board/Council]'s approval of any agreement for services. J. Submittal of proposals 1. Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing the caption RFP for (City of La Quinta, CA) and addressed to: City of La Quinta, CA 78-495 Calle Tampico La Quinta, CA 92253 Attention: Rita Conrad, Finance Director/Treasurer 33 F El LL N E O) Co C� G O O i O d C O N Qi O CL a R .N.. 0 0 E JE ` d oLL o. (L c 0) O E N N N N N o N N. N' N N N (COD. 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'j� m }}} N O O N Z Z O} O z O } z O Z} } O} O z} } m LO Ln LO m 0) CO Ln M l0 LO N LO LO LO C .N N cn C• O •O 0) O N E0 2 N N N C ._ C N0 lL N m .0 O N >. o U7 N N Z j .N N Ip V >CS O 0) Q > n U C N a O -Y 0 LL _0 LL C a (0 0) m o 0 VC N m Q f0 a NN= J N N) Q C E a0N m E 7 iu E !I U ) 1 CZ EN~G) O f�0 Oc = J O '> N N N C m-i Q m O O CO U N Q c 0 10 U 0)U V y � c � 0 V U c CD M C O C E 0 _ lv _ O ::. ::. V N .'�_. .L.. v —c: LO .Y.i _ E O C d — O O O O M O) _ _ O {C > m M Co Co M M M in o Cn M m m m (IO O Co M : f f0 Co fD V O 0 Lo �O LO 0 in m U) 0 U) � � LO O � U m U) v C f0 > .n U Q) w O N N L a Co 0 v a� Cr N 0 C N LL 2 CO iT C C E N > N U O) O C C 'O (0 N E 'm O -rf� N m a°In � c c 0 o E a'R > O c as N Co H w �? a CL Z 'o LO M Appendix I Investment Management Process and Risk Except as provided for in Section 27000.3, Government Code Section 53600.3 declares as a trustee each person, treasurer, or governing body authorized to make investment decisions on behalf of local agencies. As trustees are subject to the prudent investor standard. These persons shall act with care, skill, prudence, and diligence under the circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging, selling, and managing funds. Section 53600.5 further stipulates that the primary objective of any person investing public funds is to safeguard principal; secondly, to meet liquidity needs of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code Section 27000.5 specifies the same objectives for county treasurers and board of supervisors). Risk is inherent throughout the investment process. There is investment risk associated with any investment activity and opportunity risk related to inactivity. Market risk is derived from exposure to overall changes in the general level of interest rates while credit risk is the risk of loss due to the failure of the insurer of a security. The market value of a security varies inversely with the level of interest rates. If an investor is required to sell an investment with a five percent yield in a comparable seven percent rate environment, that security will be sold at a loss. The magnitude of that loss will depend on the amount of time until maturity. Purchasing certain allowable securities with a maturity of greater than five years requires approval of the governing board (see Government Code Section 53601). Part of that approval process involves assessing and disclosing the risk and possible volatility of longer -term investments Another element of market risk is liquidity risk. Instruments with unique call features or special structures, or those issued by little known companies, are examples of "story bonds" and are often thinly traded. Their uniqueness often makes finding prospective buyers in a secondary market more difficult and, consequently, the securities' marketability and price are discounted. However, under certain market conditions, gains are also possible with these types of securities. Default risk represents the possibility that the borrower may be unable to repay the obligation as scheduled. Generally, securities issued by the federal government and its agencies are considered the most secure, while securities issued by private corporations or negotiable certificates of deposit issued by commercial banks have a greater degree of risk. Securities with additional credit enhancements, such as bankers acceptances, collateralized repurchase agreements and collateralized bank deposits are somewhere between the two on the risk spectrum. The vast majority of portfolios are managed within a buy and hold policy. Investments are purchased with the intent and capacity to hold that security until maturity. At times, market forces or operations may dictate swapping one security for another or selling a security before maturity. Continuous analysis and fine tuning of the investment portfolio are considered prudent investment management. The Government Code contains specific provisions regarding the types of investments and practices permitted after considering the broad requirement of preserving principal and maintaining liquidity before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust. Chapter II. Fund Management Local Agency Investment Guidelines 2010 Issued by California Debt and Investment Advisory Commission 36 Appendix J GLOSSARY (Adopted from the Municipal Treasurers Association) The purpose of this glossary is to provide the reader of the City of La Quinta investment policies with a better understanding of financial terms used in municipal investing. AGENCIES: Federal agency securities and/or Government -sponsored enterprises. ASKED: The price at which securities are offered. BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large -denomination CD's are typically negotiable. 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: Short-term unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Commercial paper is issued by corporations such as General Motors Acceptance Corporation, IBM, Bank America, etc. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City of La Quinta. It includes,five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance -related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. CONDUIT FINANCING: A form of Financing in which a government or a government agency lends its name to a bond issue, although it is acting only as a conduit between a specific project and bond holders. The bond holders can look only to the revenues from the project being financed for repayment and not to the government or agency whose name appears on the bond. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at 37 lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non -interest bearing money market instruments that are issued a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. 1. FNMAs (Federal National Mortgage Association) - Like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder -owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. 2. FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage -lending institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. 3. FLBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi-annual coupons. Interest is calculated on a 360-day, 30 day month basis. 4. FFCBs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six-month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. 5. FICBs (Federal Intermediate Credit Bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of $3,000 with a nine -month maturity. Interest is payable at maturity and is calculated on a 360- day, 30-day month basis. 6. FHLMCs (Federal Home Loan Mort a e Corporation) - a government sponsored entity established in 1970 to provide a secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of $10,000. Principal and interest is paid monthly. Other federal agency issues are Small Business Administration notes (SBA's), Government National Mortgage Association notes (GNMA's), Tennessee Valley Authority notes (TVA's), and Student Loan Association notes (SALLIE-MAE's). FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $250,000 per deposit through December 31, 2013. W FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open - market operations. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "pass-throughs" is often used to describe Ginnie Maes. LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum balance of $50,000,000 for any agency. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-half of one percent of the earnings. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase --reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer -lender to liquidate the underlying securities in the event of default by the seller -borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers' acceptances, etc.) are issued and traded. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve 39 Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) -registered securities broker -dealers, banks and a few unregulated firms. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves. REVERSE REPURCHASE AGREEMENTS (RRP or RevRepo) - A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security"buyer" in effect lends the"seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RRP extensively to finance their positions. Exception: When the Fed is said to be doing RRP, it is lending money that is increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule, STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, and derivative - based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate necessities to be payment due within one week. TREASURY BILLS: A non -interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year. TREASURY BONDS: Long-term coupon -bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. W TREASURY NOTES: Medium -term coupon -bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker -dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. UNIFORM PRUDENT INVESTOR ACT: The State of California has adopted this Act. The Act contains the following sections: duty of care, diversification, review of assets, costs, compliance determinations, delegation of investments, terms of prudent investor rule, and application. YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. I'm ATTACHMENT 2 CONSENT CALENDAR ITEM NO. City of La Quinta INVESTMENT ADVISORY BOARD MEETING: May 11, 2016 STAFF REPORT AGENDA TITLE: APPROVE INVESTMENT ADVISORY BOARD WORK PLAN FOR FISCAL YEAR 2016/2017 RECOMMENDATION Approve the Investment Advisory Board Work Plan for Fiscal Year 2015/2016. EXECUTIVE SUMMARY • Each year, the City's Boards and Commissions review their current work plans in order to provide an opportunity for potential modifications to the existing plans. ® The current work plan for the Investment Advisory Board (IAB) reflects the five principal functions of the Board as set forth in the City's Municipal Code. FISCAL IMPACT None. BACKGROUNDIANALYSIS The five principal functions of the IAB are as follows: • Review at least annually the City's investment policy and recommend appropriate changes. • Review monthly treasury report and note compliance with the investment policy and adequacy of cash and investments for anticipated obligations. • Receive and consider other reports provided by the City Treasurer. • Meet with the independent auditor after completion of the annual audit of the City's financial statements, and receive and consider the auditor's comments on auditing procedures, internal controls, and findings for cash and investment activities. • Serve as a resource for the City Treasurer on matters such as proposed investments, internal controls, use of change of financial institutions, custodians, brokers and dealers. ALTERNATIVES None. Prepared by: Rita Conrad, Finance Director Approved by: Frank J. Spevacek, City Manager BUSINESS SESSION ITEM NO. 2 City of La Quinta INVESTMENT ADVISORY BOARD MEETING: May 11, 2016 STAFF REPORT AGENDA TITLE: MEETING SCHEDULE FOR FISCAL YEAR 2016/2017 RECOMMlE1 DATION Approve the meeting schedule of the Investment Advisory Board for Fiscal Year 2015/2016. BACKGROUND1ANALYSIS Attached please find a list of meeting dates for Fiscal Year 2015/2016. ALTERNATIVES None. Prepared by and approved for submission by: Rita Conrad, Finance Director Attachment: 1. Fiscal Year 2016/2017 Meeting Schedule c&t,/ 4 P Qum& MEMORANDUM TO: Investment Advisory Board Members FROM: Rita Conrad, Finance Director HK./ DATE: May 3, 2016 RE: Schedule of Investment Advisory Board Meeting Schedule The City Ordinance specifies that the Investment Advisory Board usually will meet monthly unless the Board with Council concurrence believes less frequent meetings are considered necessary. For the last several years the Board has met monthly however, the Board recently elected to meet on a quarterly basis. Listed below are meeting dates for the Boards review. QUARTERLY August 10, 2016 November 9, 2016 February 8, 2017 May 10, 2017 Please consider the schedules for Fiscal Year 2016/2017 and give Staff direction.