2006 07 12 IABM
P.O. Box 1504
LA QUINTA, CALIFORNIA 92247-1504
78-495 CALLE TAMPICO (760) 7 7 7 - 7 0 0 0
LA QUINTA, CALIFORNIA 92253 FAX (760) 777-7101
AGENDA
INVESTMENT ADVISORY BOARD
Study Session Room
78-495 Calle Tampico- La Quinta, CA 92253
July 12, 2006 - 5:30 P.M.
CALL TO ORDER
a. Pledge of Allegiance
b. Roll Call
II APPOINTMENT OF OFFICERS
A. Appointment of Investment Advisory Board Chairperson
B. Appointment of Investment Advisory Board Vice -Chairperson
III PUBLIC COMMENT - (This is the time set aside for public comment on any matter
not scheduled on the agenda.)
IV CONFIRMATION OF AGENDA
V CONSENT CALENDAR
A. Approval of Minutes of Meeting on June 14, 2006 for the Investment Advisory
Board.
VI BUSINESS SESSION
A. Transmittal of Treasury Report for May 2006
B. FY 2006/2007 Meeting Schedule
C. LAIF Conference
D. Consideration of Approval of Investment Advisory Board 2006/2007 Work Plan
VII CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report - June 2006
B. Pooled Money Investment Board Reports - April 2006
C. Distribution of Investment Policies for Fiscal Year 2006/2007.
Vill BOARD MEMBER ITEMS
IX ADJOURNMENT
INVESTMENT ADVISORY BOARD Business Session: A
Meeting Date: July 12, 2006
ITEM TITLE:
Transmittal of Treasury Report
For April and May 31, 2006
BACKGROUND:
Attached please find the Treasury Report for May 31, 2006.
RECOMMENDATION:
Review, Receive and File the Treasury Report for May 31, 2006.
6VJoh�n�MFalconelr, Finance Director
T41&f 4 4 QU&MI
MEMORANDUM
TO: La Quinta City Council
FROM: John M. Falconer, Finance Director/Treasurer
SUBJECT: Treasurer's Report for May 31, 2006
DATE: • June 30, 2006
Attached is the Treasurer's Report for the month ending May 31, 2006. 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
Beginning
Purchased
Notes
Sold/Matured
Other
Ending
Chan e
Cash (3)
$ (1,102,655)
$ 2,372,119
(1)
$1,269,464
$2,372,119
LAIF
29,578,644
2,900,000
(6,200,000)
26,278,644
(3,300,000)
US Treasuries (2)
131,116,318
45,000,000
(30,000,000)
(477,735)
145,638,583
14,522,265
US Gov't Sponsored Enterprises (2)
34,786,998
42,498
34,829,496
42,498
Commercial Paper (2)
-
9,000,000
(26,462)
8,973,538
8,973,538
Corporate Notes
0
0
Mutual Funds
5,864,137
20,063 1
M1
5,884,200
20,063
Total
$ 201,480,274
$ 59,292,182
$ 36,200,000
$ 461,699
$ 222,873,925
$ 22,630,483
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 except as follows:
The Federal Home Loan Bank maximum was exceeded on January 18, 2006, as reported on page 2, and
is expected to come into conformity on December 15, 2006. As of May 31, 2006, the market value of the investment
was $7,601,120 and the amortized cost plus accrued interest was $7,632,472 for an unrealized loss of $31,352.
Management intends to hold the investment to maturity.
As Treasurer of the City of La Quinta, 1 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.
Z Z0 4
*1inance
Date
Treasurer
Footnote
(1) The amount reported represents the net increase (decrease) of deposits and withdrawals from
the previous month.
(2) The amount reported in the other column represents the amortization of premium/discount for the
month on US Treasury, Commercial Paper and Agency investments.
(3) 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.
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City of La Quinta
Reconciliation of Actual and Surplus Funds
City, Redevelopment Agency and Financing Authority
May 31, 2006
Balance of Actual Funds 222.873,92/
Less Petry cash Funds (1,000)
Less Non -Surplus Funds (957,246)
Balance of Surplus Funds $ 221,915,678
City Cash 6 Investments
Bank Accounts
Name - Availabi'
Su pus
Type
Book
Wells Fargo - Demand
No
Checking
J (45,348)
Petry Cash - Demand
No
WA
1,000
Wells Fa oust -Demand
Yes
Checking
18520
Total - Bank,
$ 25,828
U. S. Treasury
Amortized
Custodian - Availabil
SWPIuS
IsmuenType
Value
Bank of New York - Demand
Yes
U.S. Treasury Big
8,824.106
Bank of New York - Demand
Yes
U.S. Treasury Bin
9,927,993
Bank of New York - Demand
Yes
U.S. Treasury Big
6,882,641
Bank of New York - Demand
Yes
U.S. Treasury Big
9,764,509
Bank of New York - Demand
Yes
U.S. Treasury Note
3,966,577
Bank of New York - Demand
Yes
U.S. Treasury Note
4.961,266
Bank of New York - Demand
Yes
U.S. Treasury Big
4,923,092
Bank of New York - Demand
Yes
U.S. Treasury Bill
4.882,174
Bank of New York - Demand
Yes
U.S. Treasu Note
4 997 055
Total - U.S. Treasury
57,149,413
U. S. Govemment Sponsored Enterprises
Custodian - Availabil
Su lus
IssuerR
Amortized
Value
Bank of New York - Demand
Yes
FHLB
4,979,471
Bank of New York- Demand
Yes
FHLB-Discoum
2.929,896
Bank of New York - Demand
Yes
FHLB
1,990,836
Bank of New York - Demand
Yes
FHLB
7,498,540
Bank of New York - Demand
Yes
FNMA
4,966,181
Bank of New York- Demand
Yes
FHL Mortgage
2.504,427
Bank of New York - Demand
Yes
FARM CREDIT
4,990,486
Bank of New York - Demand
Yes
FNMA
4,969,659
Total - U.S. Govemm rd Securities
34,829,496
Prime Commercial Paper
Book
Custodian - Availabil'
Surplus
lasuerflype
Value
Bank of New York - Demand
Yes
Citicorp Funding Inc
2,991,185
Bank of New York, Demand
Yes
Merrill Lynch CPDS
2,991,132
Bank of New York - Demand
Yes
GE Corp Disc CP
2.991 221
Total- Prime Commercial Paper
8,973,538
Local Agency Investment Fund
Name-Availabil"
surplus
T
Book
LAW - City -Demand
Yes
State P001+22
54 ,0,629
LAIF - RDA - Demand
Yes
State Pool
3,738,015
Total- State Pool
28,278,644
Total City Investments
Total City Cash d Investments
Fiscal Agent Investments
Surplus
Surplus
Yes
Ad'
Yes
S
S -
18,520
18.520
$ 18.520
$ -
$ 18,520
Surplus
Surplus
Yes
Ad'
Yes
8,824,106
8,824,106
9,927,993
9,927,993
0,882,641
4,882,641
9.794.509
9,784,509
3,966,577
3.966,577
4,961,266
4,981,266
4,923,092
4,923,092
4,882,174
4,882,174
4 997 055
4,997, 055
57,149,413
57.149,413
Surplus
Yes
AO'
Surplus
Yes
4.979,471
4,979,471
2,929,896
2,929.696
1,9W,836
1,990,836
7,498,540
7,498.540
4.966,181
4,966,181
2,504,427
2,504,427
4,9WA86
4,990,486
4,969,659
4,969,659
Surplus
Surplus
Yes
Ad'
Yes
2,991.185
2,991,185
2,991,132
2,991,132
2,991,221
2,991,221
81973,538
8,973,538
Surplus
Surplus
Yes
Adi
Yes
22,540,629
(1,002,594)
21,538.035
3,738,015
3,738015
26,278.644
1,002,594
25,276,050
Surplus
Surplus
No
Ad'
No
$ (45,348)
$ 1.002.594
$ 957,246
1,000
1,000
j 44,348
$ 1.002,594
S 958,246
Surplus Surplus
No Ad No
Surplus Surplus
No Ad' No
AN Funds Surplus
Actual % Yes
-0.0125% 0.00110%
All Funds Surplus
Actual % Yes
27.6235% T7.7521%
AN Funds Surplus
Actual % Yes
16.8351% 16.9131%
All Funds Surplus
Actual % Yes
4.3374% C3576%
Surplus Surplus All Funds Surplus
No Ad' No Actual % Yes
12.7020°/ 12.2742%
127,2J1.091 127,231,091 1 111,002,594128,228,497 61.4960% 61.297JX
127,205,2831 127,249,611 1,002,594 126,247,017 1 2,594 r 958,248 61.1855% 81.J06]X
Portfolio - CNy investmerus
Amortized
Custodian-Availabil'
Su us
IssuerR
Value
2002 RDA U.S. Bank-CIP
Yes
U.S.Treasury Bill
10,200,588
2004 Finance Authority,-CIP
Yes
U.S.Treasury Bill
29,9W 993
20D4 Finance Autlariry -CIP
Yes
U.S.Treasury Bill
9.079:511
2004 Finance Autho' -CIP
Yes
U.S.Treasury Nob
24,616063
Total -U.S. Treasury
73,797,155
Portfolio -Mutual Funds
Trustee-Availabil'
surplus
Money Market
MUN2i Fund
Book
Value
Civic Center U.S.Bank - Project
YES
1st American
Civic Center U.S.Bank - Debt Svc
YES
1st American
291
1994 RDA U.S. Bank -Debt Svc
YES
1st American
57
1995 RDA U.S.Bank -CIP
YES
15tAmedcan
1995 RDA U.S.Sank - Special Fund
YES
1st American
2004 Fin Aum - 1995 US Bank - Escrow
YES
1st American
199E RDA U.S.Bank -CIP
YES
1st American
-
1998RDA U.S.Bank-Dbt Svc
YES
1st American
45
1998 RDA U.S.Bank - Special Fund
YES
1st American
17
1998 RDA U.S.Bank -CIP
YES
1st American
2001 RDA U.S. Bank - Do? Svc
YES
1st American
134
2001 RDA U.S. Bank- CIP
YES
1st American
2002 RDA U.S. Bank - Dot Svc
YES
1st American
103
2002 RDA U.S. Bank -CIP
YES
1st American
1.214,558
2003 Taxable RDA U.S. Bank- DS
YES
1st American
86
2003 Taxable RDA U. S. Bank -COI
YES
1 at American
2003 Taxable RDA U. S. Bank-CIP
YES
1st American
2004 Fin Aum US Bank - GIP
YES
1 st American
4.668,665
2004 Fin Aum US Bank - COI
YES
1 at American
244
Subtotal - Mutual Fund
5,884,200
Surplus
Surplus
Yes
Adi
Yes
10,200,588
10.200.568
29.900,993
29,900,993
9,079,51.1
9,079,511
24,616,063
24,616,063
73,797,155
73,7971155
Surplus
Yes
Ad"
Surplus
Yes
291
291
57
57
45
45
17
17
134
134
103
103
1,214,558
1.214,558
86
86
4,668,665
4,668,665
244
244
5,884,200
5,884,200
Surplus
No
Adj
Surplus
No
AN Funds Surplus
Actual % Yes
35.6703% 35.8363%
All Funds Surplus
Actual % Yes
2..42% 2.85741
Total Fiscal Agent Investments 79,881,]551 79.681,355 79,681,J55 1 F-38-5-145—%7-38-6-937%1
Grand Total 206,886,616 206,930,868 1,002,594 205,928,J72 44,346 1,002,594 g59,246 100.0000% 100.0000%
o 5 Q M
V C
c0
0
INVESTMENT ADVISORY BOARD MEETING BUSINESS SESSION: B
Meeting Date: July 12, 2006
ITEM TITLE
Meeting Schedule for Fiscal Year
2006/2007
BACKGROUND:
Attached find a list of meeting dates for Fiscal Year 2006/2007.
RECOMMENDATION:
Approve the meeting schedule of the Investment Advisory Board for Fiscal Year
2006/2007.
/ l
John M. Falco
r, Finance Director
INVESTMENT ADVISORY BOARD Business Session: C
Meeting Date: July 12, 2006
TITLE:
LAIF Conference — Sacramento, CA
November 30 — December 1, 2006
BACKGROUND:
The LAIF Conference Agenda has not been printed yet but will be held in Sacramento,
California on November 30 through December 1, 2006.
Staff will provide the agenda to the Board as soon as it is available. We wanted to bring
this item to the Board to check their calendars.
RECOMMENDATION:
Select up to two Board members to attend the LAIF Conference.
/t-t I,- L��
2Fjohn M. Falconer, Finance Director
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10
MEMORANDUM
TO: Investment Advisory Board Members
FROM: John M. Falconer, Finance Director
DATE: July 12, 2006
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. In the past, the Board has met monthly except for the Month of
August. Listed below are meeting dates for the Boards review.
Monthly
July 12, 2006
August 9, 2006
September 13, 2006
October 11, 2006
November 8,2006
December 13, 2006
January 10, 2007
February 14, 2007
March 14, 2007
April 11, 2007
May 9, 2007
June 13, 2007
Quarterly
September 13, 2006
December 13, 2006
March 14, 2007
June 13, 2007
Please consider the schedules for Fiscal Year 2006/2007 and give Staff direction.
Conference
=k
Save the date
Local Agency Investment Fund (LAIF)
Annual Conference
Date: November 30 - December 1, 2006
Where: Sacramento Convention Center
Sacramento, CA
The annual Local Agency Investment Fund Conference will be
held on Thursday, November 30 at the Sacramento Convention
Center in Sacramento. A post -conference tour of
Investments/LAIF is scheduled the following day, Friday,
December 1 at the State Treasurer's Office (Jesse Unruh
Building).
It is anticipated the conference registration form will be posted
on the LAIF website (www.treasurer.ca.gov/pmia-laif) and
mailed to participating LAIF agencies two months prior to the
event.
95781
INVESTMENT ADVISORY BOARD
Meeting Date: July 12, 2006
ITEM TITLE:
Fiscal Year 2006/07 Work Plan
BACKGROUND:
Business Session: D
Each year the Investment Advisory Board adopts a work plan, which is subsequently
forwarded to the City Council for approval.
In addition to the responsibilities listed in the ordinance, the Board may want to
consider additional items to address during FY 06/07.
Last year the work plan included a review of GSE's, LAIF, Commercial Paper and
development of a request for proposal regarding portfolio managers.
In Fiscal Year 2006/207, Staff has identified the following possible work plan items:
1) Request for Proposal (RFP) for banking services.
2) RFP for Audit Services.
3) Monitoring of GSE's.
4) Recommending to City Council the use of a portfolio manager and amending
the municipal code.
RECOMMENDATION:
Review and approval of work plan items as deemed appropriate, for consideration by
the City Council at their July 18, 2006 meeting.
"'4 M jt--e��
John M. Falconer, Finance Director
INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item A
Meeting Date: July 12, 2006
TITLE:
Month End Cash Report - June 2006
BACKGROUND:
This cash report is not a complete Treasury Report (exclude petty cash, deferred
compensation and fiscal agent balances), but would report in a timely fashion selected
cash balances.
RECOMMENDATION:
Information item only.
n M. Falconer, Finance Director
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Phil Angelides, State Treasurer
Inside the State Treasurer's Office
Local Agency investment Fund (LAIF)
PMIA Performance Report
•4.
6/7/2006
. W
4.65
'fit fl a a 'n ttlh2 'N'WO
4.47
151
6/8/2006
4.65
4.47
151
6/9/2006
4.65
4.47
151
6/10/2006
4.65
4.47
151
6/11/2006
4.65
4.48
151
6/12/2006
4.65
4.48
148
6/13/2006
4.66
4.48
148
6/14/2006
4.67
4.48
146
6/15/2006
4.71
4.49
144
6/16/2006
4.71
4.49
145
6/17/2006
4.71
4.49
145
6/18/2006
4.71
4.50
145
6/19/2006
4.721
4.501
142
6/20/2006
4.721
4.501
141
Corpor<
1.
Commercial Paper
19.22%
Time C
12.:
LAIF Performance Report
Quarter ending 3/31/2006
Apportionment Rate: 4.03%
Earnings Ratio: .00011053168579962
Fair Value Factor: .997592460
PMIA Average Monthly Effective Yields
May 2006 4.563%
April 2006 4.305%
March 2006 4.142%
Pooled Money Investment Account
Portfolio Composition
$63.1 Billion
05/31 /06
Reverses Treasuries
Loans -0.31 % 5.80% Mortgages
1 n 3d o
GUS/13NS
24.14%
Agencies
26.05%
3
Bureau of the Public Debt: Recent Treasury Bill Auction Results Page 1 of 2
Recent Treasury Bill Auction Results
Issue Maturity
Term
Discount Investment
Price
Per
CUSIP
Date Date
Rate %
Rate %
$100
28-DAY 06-29-2006 07-27-2006
4.775
4.859
99.628611
912795XN6
91-DAY 06-29-2006 09-28-2006
4.905
5.036
98.760125
912795XX4
182-DAY 06-29-2006 12-28-2006
5.110
5.318
97.416611
912795YL9
28-DAY 06-22-2006 07-20-2006
4.600
4.681
99.642222
912795XM8
91-DAY 06-22-2006 09-21-2006
4.830
4.958
98,779083
912795XW6
182-DAY 06-22-2006 12-21-2006
5.055
5.260
97.444417
912795YK1
28-DAY 06-15-2006 07-13-2006
4.645
4.727
99.638722
912795XLO
91-DAY 06-15-2006 09-14-2006
4.800
4.926
98.786667
912795XV8
182-DAY 06-15-2006 12-14-2006
4.925
5.121
97.510139
912795YJ4
28-DAY 06-08-2006 07-06-2006
4.700
4.783
99.634444
912795XK2
91-DAY 06-08-2006 09-07-2006
4.710
4.833
98.809417
912795XUO
182-DAY 06-08-2006 12-07-2006
4.815
5.004
97.565750
912795YH8
9-DAY 06-06-2006 06-15-2006
4.875
4.949
99.878125
912795XG1
13-DAY 06-02-2006 06-15-2006
4.870
4.946
99.824139
912795XG1
28-DAY 06-01-2006 06-29-2006
4.645
4.727
99.638722
912795XJ5
91-DAY 06-01-2006 08-31-2006
4.720
4.843
98.806889
912795XT3
182-DAY 06-01-2006 11-30-2006
4.840
5.030
97.553111
912795YGO
28-DAY 05-25-2006 06-22-2006
4.655
4.737
99.637944
912795XH9
91-DAY 05-25-2006 08-24-2006
4.705
4.828
98.810681
912795XS5
183-DAY 05-25-2006 11-24-2006
4.810
4.999
97.554917
912795YF2
28-DAY 05-18-2006 06-15-2006
4.660
4.742
99.637556
912795XG1
91-DAY 05-18-2006 08-17-2006
4.740
4.864
98.801833
912795XR7
182-DAY 05-18-2006 11-16-2006
4.820
5.009
97.563222
912795YE5
28-DAY 05-11-2006 06-08-2006
4.620
4.701
99.640667
912795XF3
91-DAY 05-11-2006 08-10-2006
4.740
4.864
98.801833
912795XQ9
182-DAY 05-11-2006 11-09-2006
4.830
5.020
97.558167
912795YD7
28-DAY 05-04-2006 06-01-2006
4.575
4.655
99.644167
912795XE6
91-DAY 05-04-2006 08-03-2006
4.685
4.807
98.815736
912795XP1
182-DAY 05-04-2006 11-02-2006
4.780
4.966
97.583444
912795YC9
28-DAY 04-27-2006 05-25-2006
4.540
4.619
99.646889
912795XD8
91-DAY 04-27-2006 07-27-2006
4.635
4.755
98.828375
912795XN6
182-DAY 04-27-2006 10-26-2006
4.735
4.919
97.606194
912795YB1
28-DAY 04-20-2006 05-18-2006
4.460
4.538
99.653111
912795XCO
91-DAY 04-20-2006 07-20-2006
4.600
4.719
98.837222
912795XM8
182-DAY 04-20-2006 10-19-2006
4.750
4.934
97.598611
912795YA3
4-DAY 04-13-2006 04-17-2006
4.720
4.788
99.947556
912795TU5
28-DAY 04-13-2006 05-11-2006
4.540
4.619
99.646889
912795XB2
91-DAY 04-13-2006 07-13-2006
4.570
4.688
98.844806
912795XLO
182-DAY 04-13-2006 10-12-2006
4.700
4.881
97.623889
912795XZ9
10-DAY 04-07-2006 04-17-2006
4.685
4.756
99.869861
912795TU5
http://wwws.publicdebt.treas.gov/AI/OFBills
6/28/2006
4
Bureau of the Public Debt: Recent Treasury Bill Auction Results Page 2 of 2
Effective with the 11/2/98 auction, all bills are auctioned using the single -priced method.
Return to Auction Information Page
Privacy &Security Notices I Terms & Conditions I Accessibiliy I pata ualit
Last Updated June 28, 2006 6:36:53 PM EDT
5
http://wwws.publicdebt.treas.gov/AI/OFBills 6/28/2006
FRB: Commercial Paper Rates and Outstandings
Page 1 of 3
Federal Reserve Release
Commercial Paper
11,11"',11,11
Release I About I Outstandings I Volume statistics I Year-end I Data Download
Data as of June 27, 2006 T' lama
Cter,lerad
Commercial Paper Rates and Outstanding 'l°
Derived from data supplied by The Depository Trust Company
Posted June 28, 2006
Discount rates
2/F2
AA
AA
EA2/PAA
financial
nonfinancial
financial
asset -backed
1-day 5.01 5.13 5.03 5.05
7-day 5.13 5.33 5.20 5.25
15-day 5.20 5.37 5.24 5.30
30-day 5.22 5.40 5.28 5.31
60-day 5.24 5.46 5.32 5.35
90-day n.a. 5.50 ]=I 5.40
Trade data insufficient to support calculation of the 90-day AA nonfinancial rate for June 27, 2006.
Yield curve
lvfoacy market basis
5.1
Percent
�.......=
A21P�"? nonfrourtral
:4A fnane:e6
.t 'llt
l
1 7 15 30
tray.'+ to M<ttLiCti}•
EM
5,5
S.3
6
http://www.federalreserve.gov/Releases/CP/ 6/28/2006
FRB: Commercial Paper Rates and Outstandings
Page 2 of 3
Discount rate spread
Thirty -days A2/P21F2 less; AA nonfinancial commercial paper (daily) Basis points
120
I
ft'-jd. 5-day moving avg
80
60
} 40
20
0
2001 2002 2(]03 2(X9 2(,K)5 2006
Discount rate history
2001 2002 2003 2004 2006
Outstandings
Weekly (Wednesday), seasonally adjusted
Percent
6
5
4
3
2
t
0
2006
7
http://www.federalreserve.gov/Releases/CP/ 6/28/2006
FRB: Commercial Paper Rates and Outstandings
Page 3 of 3
940
890
840
790
740
690
640
590
540
490
Billions of dollars
k
— — -- Nonfinancial f right Ncal4
Financial iteli w alcp
it
n
Billions of dollars
2001 2002 2003 2004 2005 2006
250
210
170
130
90
The daily commercial paper release will usually be available before 11:00am EST. However, the Federal
Reserve Board makes no guarantee regarding the timing of the daily commercial paper release. When
the Federal Reserve Board is closed on a business day, rates for the previous business day will be
available through the Federal Reserver Board's Data Download application. This policy is subject to
change at any time without notice.
Release I About I Outstandings I Volume statistics I Year-end I Data Download
Home I Statistical releases
Accessibility I Contact Us
Last update: June 28, 2006
8
http://www.federalreserve.gov/Releases/CP/ 6/28/2006
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --June 28, 2006
Page I of 4
Federal Reserve Statistical release
H.ts
Selected Interest Rates (daily)
Sky to content
Release Date: June 28, 2006
Weekly release dates and announcements I historical data I Data Download I About
Daily update Other formats: Screen reader I ASCII
Try Data
Downbad
The weekly release is posted on Monday. Daily updates of the weekly releow ar p
through Friday on this site. If Monday is a holiday, the weekly release will`b6 p
after the holiday and the daily update will not be posted on that Tuesday.
FEDERAL RESERVE STATISTICAL RELEASE
H.15 DAILY UPDATE: WEB RELEASE ONLY
SELECTED INTEREST RATES
For use at 4:15 p.m. Eastern Time
Yields in percent per annum June 28, 2006
2006 2006
Instruments
Jun
Jun
26
27
Federal funds (effective) 1 2 3
5.03
5.02
Commercial Paper 3 4 5
Nonfinancial
1-month
5.30
5.22
2-month
5.24
5.24
3-month
5.29
n.a.
Financial
1-month
5.27
5.28
2-month
5.31
5.32
3-month
5.35
5.33
CDs (secondary market) 3 6
1-month
5.31
5.33
3-month
5.45
5.48
6-month
5.58
5.59
Eurodollar deposits (London) 3 7
1-month
5.33
5.34
3-month
5.47
5.50
6-month
5.62
5.62
Bank prime loan 2 3 8
8.00
8.00
Discount window primary credit 2 9
6.00
6.00
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
4.62
4.78
3-month
4.91
4.92
6-month
5.11
5.10
Treasury constant maturities
Nominal 10
1-month
4.73
4.86
3-month
5.03
5.05
6-month
5.32
5.31
1-year
5.30
5.28
2-year
5.27
5.24
9
http://www.federalreserve.gov/Releases/H 15/update/ 6/28/2006
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --June 28, 2006
Page 2 of 4
3-year
5.25
5.22
5-year
5.22
5.19
7-year
5.23
5.20
10-year
5.25
5.21
20-year
5.42
5.38
30-year
5.28
5.24
Inflation indexed 11
5-year
2.61
2.58
7-year
2.63
2.59
10-year
2.67
2.63
20-year
2.66
2.63
Inflation -indexed long-term average 12
2.62
2.59
Interest rate swaps 13
1-year
5.76
5.74
2-year
5.73
5.70
3-year
5.72
5.69
4-year
5.74
5.70
5-year
5.75
5.72
7-year
5.78
5.75
10-year
5.82
5.79
30-year
5.89
5.86
Corporate bonds
Moody's seasoned
Aaa 14
6.01
5.97
Baa
6.94
6.91
State & local bonds 15
Conventional mortgages 16
n.a. Not available.
Footnotes
1. The daily effective federal funds rate is a weighted average of rates on broke
2. Weekly figures are averages of 7 calendar days ending on Wednesday of the curr
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 settl
Depository Trust Company. The trades represent sales of commercial paper by deale
issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are
30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page
(www.federalreserve.gov/releases/cp/).
6. An average of dealer bid rates on nationally traded certificates of deposit.
7. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time.
8. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.
commercial banks. Prime is one of several base rates used by banks to price short
loans.
9. The rate charged for discounts made and advances extended under the Federal Re
credit discount window program, which became effective January 9, 2003. This rate
adjustment credit, which was discontinued after January 8, 2003. For further info
www.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/default.htm. The rate
for the Federal Reserve Bank of New York. Historical series for the rate on adjus
10
http://www.federalreserve.gov/Releases/H 15/update/ 6/28/2006
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --June 28, 2006 Page 3 of 4
well as the rate on primary credit are available at www.federalreserve.gov/releas
10. Yields on actively traded non -inflation -indexed issues adjusted to constant m
30-year Treasury constant maturity series was discontinued on February 18, 2002,
on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S. Treasu
factor for adjusting the daily nominal 20-year constant maturity in order to esti
nominal rate. The historical adjustment factor can be found at
www.treas.gov/offices/domestic-finance/debt-management/interest-rate/itcompositei
Source: U.S. Treasury.
11. Yields on Treasury inflation protected securities (TIPS) adjusted to constant
Source: U.S. Treasury. Additional information on both nominal and inflation -index
found at www.treas.gov/offices/domestic-finance/debt-management/interest-rate/ind
12. Based on the unweighted average bid yields for all TIPS with remaining terms
more than 10 years.
13. International Swaps and Derivatives Association (ISDA(R)) mid -market par swap
for a Fixed Rate Payer in return for receiving three month LIBOR, and are based o
at 11:00 a.m. Eastern time by Garban Intercapital plc and published on Reuters Pa
ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited.
14. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and A
rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds o
15. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Th
16. Contract interest rates on commitments for fixed-rate first mortgages. Source
Note: Weekly and monthly figures on this release, as well as annual figures avail
Board's historical H.15 web site (see below), are averages of business days unles
Current and historical H.15 data are available on the Federal Reserve Board's web
(www.federalreserve.gov/). For information about individual copies or subscriptio
Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-7
electronic access to current and historical data, call STAT-USA at 1-800-782-8872
Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series
Yields on Treasury nominal securities at "constant maturity" are interpolated by
from the daily yield curve for non -inflation -indexed Treasury securities. This cu
the yield on a security to its time to maturity, is based on the closing market b
actively traded Treasury securities in the over-the-counter market. These market
calculated from composites of quotations obtained by the Federal Reserve Bank of
constant maturity yield values are read from the yield curve at fixed maturities,
and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yiel
maturity, for example, even if no outstanding security has exactly 10 years remai
Similarly, yields on inflation -indexed securities at "constant maturity" are inte
daily yield curve for Treasury inflation protected securities in the over-the-cou
inflation -indexed constant maturity yields are read from this yield curve at fixe
currently 5, 7, 10, and 20 years.
Weekly release dates and announcements I Historical data I About
11
http://www.federalreserve.gov/Releases/H 15/update/ 6/28/2006
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --June 28, 2006 Page 4 of 4
Daily update Other formats: Screen reader I ASCII
Statistical releases
Hoine I Economic research and data
Accessibility I Contact Us
Last update: June 28, 2006
12
http://www.federalreserve.gov/Releases/H15/update/ 6/28/2006
INVESTMENT ADVISORY BOARD
Meeting Date:
TITLE:
July 12, 2006
Pooled Money Investment Board Report
for April 2006
BACKGROUND:
Correspondence & Written
Material Item B
The first few pages of the Pooled Money Investment Board Report for April 2006 is
included in the agenda packet. This full report is available on-line at
www.treasurer.ca.gov.
RECOMMENDATION:
Receive & File
--- 3 m
John M. Falconer, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF APRIL 2006 WITH APRIL 2005
(DOLLARS IN THOUSANDS)
APRIL 2006 APRIL 2005 CHANGE
Average Daily Portfolio
$
54,555,166
$
64,857,398
$
-302,232
Accrued Earnings
$
193,032
$
122,837
$
+70,195
Effective Yield
4.305
2.724
+1.58
Average Life -Month End (in Days)
162
183
-21
Total Security Transactions
Amount
$
27,064,052
$
20,443,506
$
+6,620,547
Number
558
426
+132
Total Time Deposit Transactions
Amount
$
4,770,000
$
4,296,190
$
+473,810
Number
160
162
-2
Average Workday Investment Activity
$
1,591,703
$
1,178,081
$
+413,622
Prescribed Demand Account Balances
For Services
$
267,952
$
407,679
$
-139,727
For Uncollected Funds
$
332,658
$
293,748
$
+38,910
1
PHIL ANGELIDES
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
April 30, 2006
DIFFERENCE IN
PERCENTOF
PERCENT OF
PORTFOLIO FROM
TYPE OF SECURITY
AMOUNT
PORTFOLIO
PRIOR MONTH
Government
Bills
$
2,998,320
4.81
+0.52
Bonds
0
0.00
0.00
Notes
2,520,615
4.04
-2.59
Strips
0
0.00
0.00
Total Government
$
5,518,935
8.85
-2.07
Federal Agency Coupons
$
10,255,317
16.45
-1.96
Certificates of Deposit
11,557,398
18.54
+1.90
Bank Notes
1,809,999
2.90
+0.14
Bankers' Acceptances
0
0.00
0.00
Repurchases
0
0.00
0.00
Federal Agency Discount Notes
5,021,550
8.06
+0.58
Time Deposits
7,770,995
12.47
-2.73
GNMAs
248
0.00
0.00
Commercial Paper
11,820,657
18.96
+7.08
FHLMC/Remics
703,232
1.13
-0.27
Corporate Bonds
916,881
1.47
-0.12
AB 55 Loans
6,963,284
11.17
-2.55
GF Loans
0
0.00
0.00
Reversed Repurchases
0
0.00
0.00
Total (All Types)
$
62,338,496
100.00
INVESTMENT ACTIVITY
Pooled Money
Other
Time Deposits
Totals
PMIA Monthly Average Effective Yield
Year to Date Yield Last Day of Month
APRIL 2006
NUMBER
AMOUNT
558
$ 27,064,052
40
269,608
160
4,770,000
768
$ 32,093,660
4.305
3.696
MARCH 2O06
NUMBER
AMOUNT
634
$ 30,339,489
28
310,721
183
3,073,500
845
$ 33,723,710
4.142
3.629
Pooled Money Investment Account
Portfolio Composition
$63.2 Billion
4/30/06
Corporate
1.45
Commercial Paper
18.69%
Time De
12.2'
Loans Treasuries
i i ni o/. 10.15%
3
CDs/BNs
21.14%
;s
Agencies
24.16%
INVESTMENT ADVISORY BOARD MEETING
Meeting Date: July 12, 2006
ITEM TITLE
Distribution of Investment Policies
for Fiscal Year 2006/2007
BACKGROUND:
Correspondence and
Written Material: C
On June 20, 2006 the City Council approved the Investment Policies for Fiscal Year
2006/2007 which are attached.
RECOMMENDATION:
Receive and File.
M. Falconer, Finance Director
City of La Quinta
- Investment Policy
Fiscal Year 2006-2007
CITY OF LA QUINTA
Investment Policy
Table of Contents
Section
Topic
Paqe
Executive Summary
2
I
General Purpose
4
II
Investment Policy
4
III
Scope
4
IV
Objectives
4
► Safety
► Liquidity
► Yield
► Diversified Portfolio
V
Maximum Maturities
6
VI
Prudence
6
VII
Delegation of Authority
6
VIII
Conflict of Interest
7
IX
Authorized Financial Dealers and Institutions
7
► Broker/Dealers
► Financial Institutions
X
Authorized Investments and Limitations
8
XI
Investment Pools
12
XII
Payment and Custody
12
XIII
Interest Earning Distribution Policy
12
XIV
Internal Controls and Independent Auditors
13
XV
Benchmark
14
XVI
Reporting Standards
14
XVII
Financial Assets and Investment Activity Not Subject to this Policy
15
Will
Investment of Bond Proceeds
15
XIX
Professional Portfolio Manager
16
XX
Investment Advisory Board - City of La Quinta
16
XXI
Investment Policy Adoption
16
Appendices: A. Summary of Authorized Investments and Limitations
18
B. Municipal Code Ordinance 2.70 - Investment Advisory Board
19
C. Municipal Code Ordinance 3.08 - Investment of Moneys and Funds
20
D. Segregation of Major Investment Responsibilities
22
E. Listing of Approved Financial Institutions
23
F. Broker/Dealer Questionnaire and Certification
24
G. Investment Pool Questionnaire
28
H. Request for Proposal for Portfolio Manager
32
L Permissible Investment Chart
38
J. Glossary
39
City of La Quinta
-- Investment Policy
Executive Summary
The general purpose of this Investment Policy is to provide the rules and standards users
must follow in investing funds of the City of La Quinta.
It is the policy of the City of La Quinta to invest all public funds in a manner which will
provide a diversified portfolio with maximum security while meeting daily cash flow
demands and the highest investment return in conformity to all state and local statutes.
This Policy applies to all cash and investments of the City of La Quinta, La Quinta
Redevelopment Agency and the La Quinta Financing Authority, hereafter referred in this
- document as the "City".
The primary objectives, in order of priority, of the City of La Quinta's investment activity
shall be:
Safety of principal is the foremost objective of the investment program.
- Investments of the City of La Quinta shall be undertaken in a manner that seeks
to ensure the preservation of capital in the overall portfolio
The investment portfolio shall remain sufficiently liquid to meet all operating
requirements that may be reasonably anticipated.
The investment portfolio shall be designed with the objective of attaining a
market rate of return or yield throughout budgetary and economic cycles,
taking into account the investment risk constraints and liquidity needs.
Within the constraints of safety, liquidity and yield, the City will endeavor to
maintain a diversified portfolio by allocating assets between different types of
investments within policy limitations.
Investments shall be made with judgment and care - under circumstances then prevailing
- which persons of prudence, discretion, and intelligence exercise in the management of
their own affairs, not for speculation, but for investment, considering the probable safety
-- of their capital as well as the probable income to be derived.
Authority to manage the City of La Quinta's investment portfolio is derived from the City
Ordinance. 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 maintain the safety of the
portfolio. In addition, the internal control system will also insure the timely preparation
and accurate reporting of the portfolio financial information. As part of the annual audit of
the City of La Quinta's financial statements the independent auditor reviews the adequacy
of those controls and comments if weaknesses are found.
2
The City Treasurer may use a professional investment manager engaged by the City to
assist the City Treasurer in managing the investment program.
Investment responsibilities carry added duties of insuring that investments are made
without improper influence or the appearance to a reasonable person of questionable or
improper influence.
The City of La Quinta Investment Policy maintains a listing of financial institutions which
are approved for investment purposes. All Broker/Dealers and financial institutions
selected by the Treasurer to provide investment services will be approved by the City
Manager subject to City Council approval.
The Treasurer will be permitted to invest only in City approved investments up to the
maximum allowable percentages or dollar limitations and, where applicable, through the
bid process requirements. Authorized investment vehicles and related maximum portfolio
Dositions are listed in Appendix A - Summary of Authorized Investments and Limitations.
At least two bids will be required of investments in the authorized investment vehicles.
Collateralization will be required for Certificates of Deposits in excess of $100,000.
Collateral will always be held by an independent third party from the institution that sells the
- Certificates of Deposit to the City. Evidence of compliance with State Collateral izatio n
policies must be supplied to the City and retained by the City Treasurer.
The City of La Quinta Investment Policy shall require that each individual investment have
a maximum maturity of two years unless specific approval is authorized by the City Council,
except the projected annual dollar amount as detailed in Section V, may be invested in
U.S. Treasury bills, notes and bonds maturing between 2 and 5 years. In addition, the
City's investment in the State Local Agency Investment Fund (LAIF) is allowable as long as
the average maturity does not exceed two years, unless specific approval is authorized by
the City Council. The City's investment in Money Market Mutual funds is allowable as long
as the average maturity does not exceed 60 days.
The City of La Quinta Investment Policy will use the six-month U.S. Treasury Bill as a
benchmark when measuring the performance of the investment portfolio.
The Investment Policies shall be adopted by resolution of the La Quinta City Council on an
annual basis. The Investment Policies will be adopted before the end of June of each year.
This Executive Summary is an overall review of the City of La Quinta Investment Policies.
Reading this summary does not constitute a complete review, which can only be
accomplished by reviewing all the pages.
3
ke— a
X4P
1117'^ P.O. Box 1504
LA QuINTA, CALIFORNIA 92247-1504
Ir«a- t�s 78-495 CALLE TAMPICO (760) 777-7000
LA QuINTA, CALIFORNIA 92253 FAX (760) 777-7101
City of La Quinta
Statement of Investment Policy
July 1, 2006 through June 30, 2007
Adopted by the City Council on June 20, 2006
GENERAL PURPOSE
The general purpose of this document is to provide the rules and standards users must
follow in administering the City of La Quinta cash investments.
II INVESTMENT POLICY
It is the policy of the City of La Quinta to invest public funds in a manner which will provide
a diversified portfolio with safety of principal as the primary objective while meeting daily
cash flow demands with the highest investment return. In addition, the Investment Policy
will conform to all State and local statutes governing the investment of public funds.
III SCOPE
This Investment Policy applies to all cash and investments, except as further detailed in
— Section XVII of the City of La Quinta, City of La Quinta Redevelopment Agency and the
City of La Quinta Financing Authority, hereafter referred in this document as the "City".
These funds are reported in the City of La Quinta Comprehensive Annual financial Report
— (CAFR) and include:
All funds within the following fund types:
► General
ON. Special Revenue
► Capital Projects
► Debt Service
ON. Enterprise
► Internal Service
► Trust and Agency
► Any new fund types and fund(s) that may be created.
IV OBJECTIVES
The primary objective, in order of priority, of the City of La Quinta's investment activity shall
be:
1. Safety
Safety of principal is the foremost objective of the investment program. Investments
of the City of La Quinta shall be undertaken in a manner that seeks to ensure the
4
preservation of capital in the overall portfolio in accordance with the permitted
investments. The objective will be to mitigate credit risk and interest rate risk.
A. Credit Risk
Credit Risk - is the risk of loss due to the failure of the security issuer or
-- backer. Credit risk may be mitigated by:
► Limiting investments to the safest types of securities;
► Pre -qualifying the financial institutions, and broker/dealers, which the
City of La Quinta will do business with; and
► Diversifying the investment portfolio so that potential losses on
individual securities will be minimized.
B. Interest Rate Risk
Interest Rate risk is the risk that the market value of securities in the portfolio
will fall 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
► By investing operating funds primarily in shorter -term securities.
2. Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating
requirements 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 demands cannot be
anticipated the portfolio should be diversified and consist of securities with active
secondary or resale markets. Securities shall not be sold prior to maturity with the
following exceptions:
► A declining credit quality security could be sold early to minimize loss of
principal;
► Liquidity needs of the portfolio require that the security be sold.
3. Yield
The investment portfolio shall be designed with the objective of attaining a market
rate of return throughout budgetary and economic cycles, taking into account the
investment risk constraints and liquidity needs. Return on investment is of least
importance compared to the safety and liquidity objectives described above. The
core of investments are limited to relatively low risk securities in anticipation of
earning a fair return relative to the risk being assumed.
- 4. Diversified Portfolio
Within the constraints of safety, liquidity and yield, the City will endeavor to maintain
a diversified portfolio by allocating assets between different types of investments
within policy limitations.
V MAXIMUM MATURITIES
It is the policy of the City of La Quinta to hold securities and other investments of cash
- in financial instruments until maturity, thus avoiding the risk that the market value on
investments fluctuates with overall market interest rates. The hold until maturity policy
shall not prevent the sale of a security to minimize loss of principal when the issuer or
backer suffers declining credit worthiness. The hold until maturity policy requires that
the City of La Quinta's investment portfolio is structured so that sufficient funds are
available from maturing investments and other sources to meet anticipated cash needs.
To meet anticipated cash needs, it is essential that the Treasurer have reasonably
accurate, diligently prepared cash flow projections.
Annually, the Treasurer shall project the amount of funds not expected to be disbursed
within five years. For FY 2006/07, the amount of such funds was $8 million. Funds up
to that amount may be invested in U.S. Treasury bills, notes and bonds maturing
between 2 and 5 years. For all other funds, investments are limited to two 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
rnanagement 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 DELEGATION OF AUTHORITY
Authority to manage the City of La Quinta's investment portfolio is derived from the City
Ordinance. Management responsibility for the investment program is delegated to the City
Treasurer, who 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 Assistant City Manager shall
0
approve in writing all purchases and sales of investments prior to their execution by the
_ City Treasurer.
VIII CONFLICT OF INTEREST
Investment responsibilities carry added duties of insuring that investments are made
without improper influence or the appearance of improper influence.
Therefore, the City Manager, Assistant City Manager, and the City Treasurer shall adhere
to the State of California Code of Economic Interest and to the following:
► The City Manager, Assistant City Manager, and the City Treasurer shall not
personally or through a close relative maintain any accounts, interest, or private
dealings with any firm with which the City places investments, with the exception of
regular savings, checking and money market accounts, or other similar transactions
that are offered on a non-negotiable basis to the general public. Such accounts
shall be disclosed annually to the City Clerk in conjunction with annual disclosure
statements of economic interest.
► All persons authorized to place or approve investments shall report to the City Clerk
kinship relations with principal employees of firms with which the City places
investments.
IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City of La Quinta Investment Policy 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, who maintain an office in the State
of California.
1. Broker/Dealers who desire to become bidders for direct investment transactions
must supply the City of La Quinta with the following:
_ ► Current audited financial statements;
► Proof of National Association of Security Dealers Certification;
► Trading resolution;
► Proof of California registration;
► Resume of Financial broker; and
► Completion of the City of La Quinta Broker/Dealer questionnaire which
contains a certification of having read the City of La Quinta 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:
7
► National Association of Security Dealer's Public Disclosure Report File - 1-
800-289-9999
► State of California Department of Corporations 1-916-445-3062
— All Broker/Dealers selected by the City Treasurer to provide investment services will
be approved by the City Manager subject to City Council approval. The City
Attorney will perform a legal review of the trading resolution/investment contract
-- submitted by each Broker/Dealer.
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:
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 City of La Quinta deposits or investments
not insured by the FDIC -shall be 110% collateralized by securities' or
150% mortgages' market values of that 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 Annual 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 AUTHORIZED INVESTMENTS AND LIMITATIONS
The City Treasurer will be permitted to invest in the investments summarized in the
Appendix A.
K. STATE OF CALIFORNIA AND CITY OF LA QUINTA LIMITATIONS
As provided in Sections 16429.1, 53601, 53601.1, and 53649 of the Government
Code, the State of California limits the investment vehicles available to local
- agencies as summarized in the following paragraphs. Section 53601, as now
amended, provides that unless Section 53601 specifies a limitation on an
investment's maturity, no investments with maturities exceeding five years shall be
- made. The City of La Quinta Investment Policy has specified that no investment
may exceed two years, except the projected annual dollar amount, as detailed in
Section V, may be invested in U.S. Treasury bills, notes and bonds maturing
- between 2 and 5 years.
F
- State Treasurer's 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 $40 million per account in this
investment program administered by the California State Treasurer. The City
investment in the State Local Agency Investment Fund (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 City of La Quinta has
two accounts with LAIF. The City of La Quinta Investment Policy has a limitation of
25% of the portfolio.
U.S. Government and Related Issues -As authorized in Government Code Sections
53601 (a) through (n) as they pertain to surplus funds, this category includes a wide
variety of government securities which include the following:
Local government bonds or other indebtedness and State bonds or other
indebtedness. The City of La Quinta Investment Policy does not allow
investments in local and state indebtedness
• U.S. Treasury bills, notes and bonds and Government National Mortgage
Association (GNMA) securities directly issued and backed by the full faith
and credit of the U.S. Government. The City of La Quinta Investment Policy
limits investments in U.S. Treasury issues and GNMA to 100% of the
portfolio.
• U.S. Government instrumentalities and agencies commonly referred to as
government sponsored enterprises (GSEs), issuing securities not backed as
to principal and interests by the full faith and credit of the U.S. Government.
Publicly owned GSEs include Federal National Mortgage Association
(FNMA), Federal Home Loan Mortgage Corporation (FHLMC) and Student
Loan Marketing Association (SLMA). Non -publicly owned GSEs include the
Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB),
Federal Land Bank (FLB) and Federal Intermediate Credit Bank (FICB). The
City of La Quinta Investment Policy allows investment only in securities of
FNMA, FHLMC, FHLB and FFCB and has a limitation of $10 million face
amount for each issuer.
Bankers' Acceptances - As authorized in Government Code Section 53601 (f), 40%
of the portfolio may be invested in Bankers' Acceptances, although no more than
-- 30% of the portfolio may be invested in Bankers' Acceptances with any one
commercial bank. Additionally, the maturity period cannot exceed 180 days. The
City of La Quinta Investment Policy does not allow investment in Bankers'
Acceptances.
Commercial Paper - As authorized in Government Code Section 53601(g), 15% of
the portfolio may be invested in commercial paper of the highest rating (A-1 or P-1)
as rated by Moody's or Standard and Poor's, with maturities not to exceed 270
days. This percentage may be increased to 30% if the dollar weighted average
- maturity does not exceed 31 days. There are a number of other qualifications
9
regarding investments in commercial paper based on the financial strength of the
corporation and the size of the investment. The City of La Quinta's Investment
Policy follows The Government Code with the following additional limitations: (1)
maximum maturity per issue of 90 days and (2) a maximum of $3 million per issuer.
Negotiable Certificates of Deposit - As authorized in Government Code Section
53601(h), 30% of the portfolio may be invested in negotiable certificates of deposit
-- issued by commercial banks and savings and loan associations. The City of La
Quinta Investment Policy does not allow investment in Negotiable Certificates of
Deposit.
Repurchase and Reverse Repurchase Agreements - As authorized in Government
Code Section 53601(i), these investment vehicles are agreements between the
local agency and seller for the purchase of government securities to be resold at a
specific date and for a specific amount. Repurchase agreements are generally
used for short term investments varying from one day to two weeks. There is no
legal limitation on the amount of the repurchase agreement. However, the maturity
period cannot exceed one year. The market value of securities underlying a
repurchase agreement shall be at least 102% of the
- funds invested and shall be valued at least quarterly.
The City of La Quinta Investment Policy does not allow investment in Repurchase
Agreements.
The term "reverse repurchase agreement" means the sale of securities by the local
agency pursuant to an agreement by which the local agency will repurchase such
securities on or before a specific date and for a specific amount. As provided in
Government Code Section 53635, reverse repurchase agreements require the prior
approval of the City Council. The City of La Quinta
Investment Policy does not allow investment in Reverse Repurchase Agreements.
Corporate Notes - As authorized in Government Code Section 53601 0), local
agencies may invest in corporate notes for a maximum period of five years in an
amount not to exceed 30% of the agency's portfolio. 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 of La Quinta Investment Policy allows investment in
corporate notes authorized by the Government Code with the following limitations:
► Maturities shall conform with Section V.
► Eligible notes shall be regularly quoted and traded in the marketplace.
► Eligible notes shall be rated "AX or "AAA" on the date of acquisition.
► Total investment shall not exceed 15% of the portfolio, and
► The maximum aggregate investment shall not exceed $3 million face amount
for each issurer.
Diversified Management Companies - 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
10
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 of La Quinta Investment Policy only allows investments in mutual funds that are
money market funds maintaining a par value of $1 per share that invests 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.
- Mortgage -Backed Securities - As authorized in Government code Section 53601(n),
local agencies may invest in mortgage -backed securities such as mortgage pass -
through securities and collateralized mortgage obligations for a maximum period of
five years in an amount not to exceed 20% of the agency's portfolio. Securities
eligible for investment shall have an "A" or higher rating. The City of La Quinta
Investment Policy does not allow investment in Mortgage -Backed Securities.
Financial Futures and Financial Option Contracts - As authorized in Government
Code Section 53601.1, local agencies may invest in financial futures or option
contracts in any of the above investment categories subject to the same overall
portfolio limitations.
The City of La Quinta Investment Policy does not allow investments in financial
futures and financial option contracts.
Certificates of Deposit - As authorized in Government Code Section 53649,
Certificates of Deposit are fixed term investments which are required to be
collateralized from 110% to 150% depending on the specific security pledged as
collateral in accordance with Government Code Section 53652. There are no
portfolio limits on the amount or maturity for this investment vehicle.
Collateralization will be required for Certificates of Deposits in excess of the FDIC
insured amount. The type of collateral is limited to City authorized investments.
Collateral will always be held by an independent third party from the institution that
sells the Certificates of Deposit to the City. Evidence of compliance with State
- Collateralization policies must be supplied to the City and retained by the City
Treasurer as follows:
-- 1. Certificates of Deposits Insured by the FDIC.
The City Treasurer may waive collateral ization of a deposit that is federally
insured.
2. Certificates of Deposit in excess of FDIC Limits.
The amount not federally insured shall be 110% collateralized securities or
- 150% mortgages market value of that amount of invested funds plus unpaid
interest earnings.
11
The City of La Quinta Investment Policy limits the percentage of Certificates of
Deposit to 60% of the portfolio.
Sweep Accounts - As authorized by the City Council, a U.S. Treasury an U.S.
- Agency Securities Money Market Sweep Account with a $50,000 target balance
may be maintained in conjunction with the checking account.
Derivatives - The City of La Quinta Investment Policy does not allow investment in
derivatives.
XI INVESTMENT POOLS
There are three (3) types of investment pools:1) state -run pools, 2) pools that are operated
by a political subdivision where allowed by law and the political subdivision is the trustee
i.e. County Pool; and 3) pools that are operated for profit by third parties.
The City of La Quinta Investment Policy has authorized investment with the State of
California's Treasurers Office Local Agency Investment Fund commonly referred to as
LAIF. LAIF was organized in 1977 through State Legislation Section 16429.1, 2 and
3. Each LAW account is restricted to a maximum investable limit of $40 million. In addition,
LAIF will provide quarterly market value information to the City of La Quinta.
On an annual basis the City Treasurer will submit the Investment Pool Questionnaire to
LAIF.
Also, prior to opening any new Investment Pool account, which would require City Council
approval, the City Treasurer will require the completion of the Investment Pool
Questionnaire.
— 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.
1. Pooled Investments - It is the general policy of the City to pool all available
operating cash of the City of La Quinta, La Quinta Redevelopment Agency and La
Quinta Financing Authority and 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.
12
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 computerized
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:
a. Control of collusion. Collusion is a situation where two or more employees are
working in conjunction to defraud their employer.
b. 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.
C. 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.
d. 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.
-- e. 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
13
- control structure that is contingent on the various staff positions and their respective
responsibilities as outlined in the Segregation of Major Investment Responsibilities
appendices.
f. 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 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.
g. 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 of La Quinta's
Financial Statements.
The independent auditor's management letter comments pertaining 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 management letter
comments pertaining 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.
XV BENCHMARK
The investment portfolio shall be designed with the objective of obtaining a rate of return
_ throughout budgetary and economic cycles commensurate with the investment risk
constraints and the cash flow needs of the City. Return on investment is of least
importance compared to safety and liquidity objectives.
The City of La Quinta Investment Policy will use the six-month U.S. Treasury Bill as a
benchmark when measuring the performance of the investment portfolio.
XVI REPORTING STANDARDS
SB564 section 3 requires a quarterly report to the Legislative Body of Investment activities.
The City of La Quinta Investment Advisory Board has elected to report the investment
activities to the City Council on a monthly basis through the Treasurers Report. AB 943
requires that the December 31 st and June 30th Treasurers Reports be
sent to the California Debt and Advisory Commission within sixty days of the end of the
quarter.
14
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 Treasurers Report shall summarize cash and investment activity and changes in
balances and include the following:
► A certification by City Treasurer.
No. 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 historyof cash and investments for trend
analysis.
► Balance Sheet.
► Distribution of cash and investment balances by fund.
► A comparison of actual and surplus funds.
► A year to date historical cash flow analysis and projection for the next six
months.
► A two-year list of historical interest rates.
XVII 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;
• Short or long term loans made to other entities by the City or Agency; and 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.
XVI11 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. This arbitrage calculations may be
15
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.
XIX PROFESSIONAL PORTFOLIO MANAGER
- With the Approval of the City Council, the City may engage a professional investment
portfolio manager(s to assist the City Treasurer administer the delegated authority to
manage and invest the City's Funds. The investment portfolio managers will be approved
by City Council based upon a request for proposal process as outlined in Appendix H.
Before engagement by the City, except as may be specifically waived or revised, the
professional manager or advisor shall commit to adhere to the provisions of the City of La
Quinta Investment Policy. Such managers may be granted the discretion to purchase and
sell investment securities in accordance with this Investment Policy as outlined in Appendix
I. Such managers shall have: (1) an established professional reputation for asset or
investment management; (2) knowledge and working familiarity with State and Federal
laws governing and restricting the investment of public funds; (3) substantial experience
providing investment management services to local public agencies whose investment
policies and portfolio size are similar to those of the City; and (4) professional liability
(errors and omissions) insurance and fidelity bonding in such amounts as are required by
the City. Such managers shall be registered under the Investment Advisers Act of 1940.
XX INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA
The Investment Advisory Board (IAB) consists of five members of the community that have
been appointed by and report to the City Council. The IAB usually meets on a monthly
basis, but at least quarterly to (1) review at least annually the City's Investment Policy and
recommend appropriate changes; (2) review monthly 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; (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 or change of financial institutions,
custodians, brokers and dealers.
The appendices include City of La Quinta Ordinance 2.70 entitled Investment Advisory
Board Provisions.
XXI INVESTMENT POLICY ADOPTION
On an annual basis, the Investment policies will be initially reviewed by the Investment
Advisory Board and the City Treasurer. The Investment Advisory Board will forward the
- Investment policies, 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
16
Manager, City Attorney, and City Treasurer to review the Investment policies and
comments, prior to submission to the City Council for their consideration.
The Investment Policies shall be adopted by resolution of the City of La Quinta City Council
— on an annual basis. The Investment Policies will be adopted before the end of June of
each year.
- AB 943 requires that the Investment Policies be sent to the California Debt and Investment
Advisory Commission within sixty days of a change to the Investment Policy.
17
Appendix A
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Appendix B
- Chapter 2.70
INVESTMENT ADVISORY BOARD PROVISIONS
Sections:
2.70.010 General Rules Regarding. Appointment.
2.70.020 Board meetings.
2.70.030 Board functions.
- 2.70.010 General rules regarding appointment
A. Except as set out below, see Chapter 2.06 for General Provisions.
B. The Investment Advisory Board (the"board") is a standing board composed of five (5) members
from the public that are appointed by city council. La Quinta residency is required except for Board
Members currently serving on the Board as of June 30, 2003.
C. Background in the investment field and/or related experience is preferred. Background
information will be required 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.
2.70.020 Board meetings.
The Board usually will meet monthly, but this schedule may be extended to quarterly meetings
upon the concurrence of the Board and the City Council. The specific meeting dates will be
determined by the Board Members and meetings may be called for on an as needed basis.
2.70.030 Board functions.
1. The principal functions of the Board are: (1) review at least annually the City's Investment Policy
and recommend appropriate changes; (2) review monthly 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; (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 or change of financial institutions, custodians,
brokers and dealers.
2. The Board will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting.
19
Appendix C
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 canceled
LL 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)
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)
20
-- 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)
21
Appendix D
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Function
Responsibilities
Develop formal Investment Policy
City Treasurer
Recommend modifications to Investment Policy
Investment Advisory Board
Review formal Investment Policy and recommend
City Manager and
City Council action
City Attorney
Adopt formal Investment Policy
City Council
Review Financial Institutions & Select Investments
City Treasurer
Approve investments
City Manager or
Assistant City Manager
Execute investment transactions
City Manager or Treasurer
Confirm wires, if applicable
Accounting Manager or
Record investment transactions in City's
accounting records
Investment verification - match broker confirmation
to City investment records
Reconcile investment records
- to accounting records and bank statements
Reconcile investment records
- to Treasurers Report
of investments
Security of investments at City
Security of investments Outside City
Review internal control procedures
22
Financial Services Assistant
Accounting Manager or
Financial Services Assistant
City Treasurer and Financial
Services Assistant
Financial Services Assistant
Accounting Manager
Vault
Third Party Custodian
External Auditor
Appendix E
LISTING OF APPROVED FINANCIAL INSTITUTIONS
1. Banking Services
- Wells Fargo Bank, Government Services,
Los Angeles, California
2. Custodian Services
- Bank of New York, Los Angeles,
California
3. Deferred Compensation
- International City/County Management
Association Retirement Corporation
4. Broker/Dealer Services
- Merrill Lynch, Los Angeles, CA
Morgan Stanley, Los Angeles, CA
CitiGroup, San Francisco, CA
5. Government Pool
- State of California Local Agency
_
Investment Fund
City of La Quinta Account
La Quinta Redevelopment Agency
6. Bond Trustees
- 1991 City Hall Revenue Bonds - US Bank
1991 RDA Project Area 1 - US Bank
1992 RDA Project Area 2 - US Bank
1994 RDA Project Area 1 - 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
Assessment Districts — US Bank
No Changes to this listing may be made without City Council approval
23
Appendix F
BROKERIDEALER 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: (� U
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):
References -- Please identify your most directly comparable public sector clients in
our geographical area.
24
- Entity Entity
Contact Contact
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 the
NASD?
Yes No If yes, please provide action taken
- Does your firm have any current, or pending complaints that are unreported
to the NASD? Yes No If yes, please provide action
taken
25
13. Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
Latest Audit Report Date
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
Cityreceive?
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 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 I No
24. Do you maintain an office in La Quinta or Riverside County? Yes No
26
25. Please enclose the following:
❑ Latest audited financial 9t6teme'ritt.
❑ 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.
❑ Complete schedule of fees and charges for various transactions.
***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
27
Appendix G
INVESTMENT POOL QUESTIONNAIRE
Note: This Investment Pool Questionnaire was developed by the Government Finance
Officers Association (GFOA).
Prior to entering a pool, the following questions and issues should be considered.
SECURITIES
Government pools may invest in a broader range of securities than your entity invests in. It is
important that you are aware of, and are comfortable with, the securities the, pool buys.
1. Does the pool provide a written statement of Investment Policy and objectives?
2. Does the statement contain:
a. A description of eligible investment instruments?
b. The credit standards for investments?
c. The allowable maturity range of investments?
d. The maximum allowable dollar weighted average portfolio maturity?
e. The limits of portfolio concentration permitted for each type of security?
f. The policy on reverse repurchase agreements, options, short sales and futures?
3. Are changes in the policies communicated to the pool participants?
4. Does the pool contain only the types of securities that are permitted by your Investment
Policy?
INTEREST
Interest is not reported in a standard format, so it is important that you know how interest is
quoted, calculated and distributed so that you can make comparisons with other investment
alternatives.
Interest Calculations
1. Does the pool disclose the following about yield calculations:
a. The methodology used to calculate interest? (Simple maturity, yield to maturity, etc.)
b. The frequency of interest payments?
c. How interest is paid? (Credited to principal at the end of the month, each quarter;
mailed?)
d. How are gains/losses reported? Factored monthly or only when realized?
REPORTING
1. Is the yield reported to participants of the pool monthly? (If not, how often?)
W.
2. Are expenses of the pool deducted before quoting the yield?
3. Is the yield generally in line with the market yields for securities in which you usually
invest?
4. How often does the pool report, and does that report include the market value of,
securities?
SECURITY
The following questions are designed to help you safeguard your funds from loss of principal
and loss of market value.
1. Does the pool disclose safekeeping practices?
2. Is the pool subject to audit by an independent auditor?
3. Is a copy of the audit report available to participants?
4. Who makes the portfolio decisions?
5. How does the manager monitor the credit risk of the securities in the pool?
6. Is the pool monitored by someone on the board of a separate neutral party external to the
investment function to ensure compliance with written policies?
7. Does the pool have specific policies with regards to the various investment vehicles?
a. What are the different investment alternatives?
b. What are the policies for each type of investment?
8. Does the pool mark the portfolio to its market value?
9. Does the pool disclose the following about how portfolio securities are valued:
a. The frequency with which the portfolio securities are valued?
b. The method used to value the portfolio (cost, current value, or some other method)?
OPERATIONS
The answers to these questions will help you determine whether this pool meets your
operational requirements:
1. Does the pool limit eligible participants?
c7
2. What entities are permitted to invest in the pool?
3. Does the pool allow multiple accounts and sub -accounts?
4. Is there a minimum or maximum account size?
5. Does the pool limit the number of transactions each month? What is the number of
transactions permitted each month?
6. Is there a limit on transaction amounts for withdrawals and deposits?
— a. What is the minimum and maximum withdrawal amount permitted?
b. What is the minimum and maximum deposit amount permitted?
— 7. How much notice is required for withdrawals/deposits?
8. What is the cutoff time for deposits and withdrawals?
9. Can withdrawals be denied?
10. Are the funds 100% withdrawable at anytime?
11. What are the procedures for making deposits and withdrawals?
a. What is the paperwork required, if any?
b. What is the wiring process?
12. Can an account remain open with a zero balance?
13. Are confirmations sent following each transaction?
STATEMENTS
It is important for you and the agency's trustee (when applicable), to receive statements
monthly so the pool's records of your activity and holding are reconciled by you and your
trustee.
-- 1. Are statements for each account sent to participants?
a. What are the fees?
— b. How often are they passed?
c. How are they paid?
d. Are there additional fees for wiring funds (what is the fee)?
2. Are expenses deducted before quoting the yield?
30
-- QUESTIONS TO CONSIDER FOR BOND PROCEEDS
It is important to know (1) whether the pool accepts bond proceeds and (2) whether the pool
-- qualifies with the U.S. Department of the Treasury as an acceptable commingled fund for
arbitrage purposes.
- 1. Does the pool accept bond proceeds subject to arbitrage rebate?
2. Does the pool provide accounting and investment records suitable for proceeds of bond
- issuance subject to arbitrage rebate?
3. Will the yield calculation reported by the pool be acceptable to the IRS or will it have to be
recalculated?
4. Will the pool accept transaction instructions from a trustee?
5. Are you allowed to have separate accounts for each bond issue so that you do not
commingle the interest earnings of funds subject to rebate with funds not subject to
regulations?
31
Appendix H
Request for Proposals
Investment Advisory Services
. 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 estimated to be $10 million and will be
invested between 0 — 5 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:
John M. Falconer
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, Year] Proposals due by [Time] PST.
B. [Month Day, Year] Proposals evaluated: to be determined
C. [Month Day, Year] [City of La Quinta, CA] [Board/Council] approves
selection and awards contract.
32
III. FORMAT FOR PROPOSALS
Please format your response to this RFP in the following manner:
A. Organization
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.
33
C. Assets Under Management
1. Summarize your institutional investment management asset totals by category for
your latest reporting period in the following table:
Number of
Operating Funds
Number Other Restrictive
Clients
of Clients Funds
Governmental
$
$
Governmental Pension
$
$
Non Governmental
$
$
Pension
$
$
Corporate
$
High Net Worth Client
$
$
Endowmental/Foundation
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.
34
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.
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.
35
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.
- 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 confirmation 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?
36
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: John M. Falconer, Finance Director/Treasurer
2. Proposal must be received no later than [Time] PST on [Month, Day, 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
37
G
iE
.p
U
38
Appendix 1
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 of
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, BankAmerica, 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.
39
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.
1. FNMAs (Federal National Mortgage
Association) - Used to assist the home
mortgage market by purchasing mortgages
insured by the Federal Housing
Administration and the Farmers Home
Administration, as well as those guaranteed by the
Veterans Administration. They are issued in
various maturities and in minimum denominations of
$10,000. Principal and Interest is paid monthly.
E
K,
4.
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.
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.
FFCBs (Federal Farm Credit Bank) - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
40
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 Mortgage
Corporation) - a government sponsored entity
established in 1970 to provide a secondary
market for conventional home mortgages.
Morgages 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 (SBAs),
Government National Mortgage Association
notes (GNMAs), Tennessee Valley Authority
notes (TVAs), and Student Loan Association
notes (SALLIE-MAEs).
FEDERAL DEPOSITOR INSURANCE
CORPORATION (FDIC): A federal agency that
insures bank deposits, currently up to $100,000 per
deposit.
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 "passthrough" 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 $30,000,000 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 -quarter of one
percent of the earnings.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without a
41
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 vent 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, bander'
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 depositions 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
repurchase agreement is a short-term investment
transaction. Banks buy temporarily idle funds from
a customer by selling U.S. Government or other
securities with a contractual agreement to
repurchase the same securities on a future date.
Repurchase agreements are typically for one to ten
days in maturity. The customer receives interest
from the bank. The interest rate reflects both the
prevailing demand for Federal funds and the
maturity of the repo. Some banks will execute
repurchase agreements for a minimum of $100,000
to $500,000, but most banks have a minimum of
$1,000,000.
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.
42
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, FNMAS,
SLMA, etc.) And Corporations which have imbedded
options (e.g., call features, step-up coupons, floating
rate coupons, 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 of 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.
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BOARD MEMBER ITEMS