2007 06 13 IABAGENDA
INVESTMENT ADVISORY BOARD
Finance Conference Room
78-495 Calle Tampico- La Quinta, CA 92253
June 13, 2007 - 4:30 P.M.
I CALL TO ORDER
a. Pledge of Allegiance
b. Roll Call
II PUBLIC COMMENT - (This is the time set aside for public comment on any matter not
scheduled on the agenda.)
III CONFIRMATION OF AGENDA
Milt I Olander's tenure on the Investment Board began on August 3, 1999 and will end
June 301". The Board and Staff want to thank Milt for his contribution to the City of La
Quinta.
IV CONSENT CALENDAR
A. Approval of Minutes of Meeting on May 9, 2007 for the Investment Advisory
Board.
V BUSINESS SESSION
A. 1 Transmittal of Treasury Report for April, 2007
B. I Continued Consideration of Fiscal Year 2007108 Investment Policy
C. Consideration of Approval of Investment Advisory Board 2007/2008 Work Plan
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report - May, 2007
B. Pooled Money Investment Board Reports - March, 2007
VII BOARD MEMBER ITEMS
VIIII ADJOURNMENT
P.O. Box 1504 • Lv QcrNIA, CALI@ORNIA 92247-1504
78-495 CALLS TAMPICO • LA QuiNrA, CV.rFORNIA 92253 7�
(760) 777-7000 -FAX (760) 777-7101 C�
INVESTMENT ADVISORY BOARD
Meeting Date
ITEM TITLE:
June 13, 2007
Transmittal of Treasury Report
for April 30, 2007
BACKGROUND:
Business Session: A
Attached please find the Treasury Report for April 30, 2007.
RECOMMENDATION:
Review, Receive and File the Treasury Report for April 30, 2007.
John M.
Falconer, Finance Director
i
i f
MEMORANDUM
TO: La Quinta City Council
FROM: John M. Falconer, Finance Director/Treasurer
SUBJECT: Treasurer's Report for April 30, 2007
DATE: May $1, 2007
Attached is the Treasurer's Report for the month ending April 30, 2007. 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 Be innin Purchased Notes Sold/Matured
Other Entlin Chan e
Cash (3)
LAW30,836,025
$ 394,962
2,140,271
(1)
$ (768,348)
$ (373,386) $
(768,348;
US Treasuries (2)
112,652,174
(1,550,000)
0
31,426,296
590,271
US Gov't Sponsored Enterprises (2)
�ommeraal Paper (2)
29,536,553 12,500.000
(12,500,000)
464,080
(107,811)
113,116,254
29,428,742
464,080
-orporate Notes
14,963,492 12,500,000
2,932,344
(15,000,000)
(51,770)
13,911.722
(107,811)
(1,051,770)
Mutual Funds
4.647.152
3,598
2,935,942
3,598
I certify that this report accurately reflects all pooled investments and is in compliance with the California
Government Code, and is in conformity with the City Investment Policy.
As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated
revenues are available to meet the pools expenditure requirements for the next six months. The City of
La Quints 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.
�'-V� � Z1 2D0%
John M. Falconer / '
Finance DirectorfTrea$urer Date
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.
2
Treasurer's Commentary
For the Month of April
Cash Balances - The portfolio size decreased by $2.466 million. The major reason for the
decrease; was housing payments for Vista Dunes and Watercolors Projects totaling $1 .6
million.
Investment Activity - There was no significant change in the investment types from last
month. The sweep account earned $ 4,094 which is greater than normal because of
outstanding pass through checks not being promptly cashed. The bank fees for the month
were $ 11,991 Which resulted in a net increase of $ 2,103 in real savings.
Portfolio Performance - The overall portfolio performance had no change from the prior month
and ended at 5.15% for the month. The portfolio yield was thirty one (31) basis points over
the benchmark which had decreased by four (4) basis points from March. With the short
average maturity of 67 days, the portfolio yield should remain at these levels. The Treasurer
will continue to invest in short term investments based upon the yield curve. At this time last
year, the portfolio was yielding 4.37% and the benchmark was at 4.74% for a 37 point
difference so we have made progress in meeting our benchmark. The Treasurer has been
investing more in LAIF and has not been investing in longer than six months Treasury
securities or in will be investing in longer than six months GSE's based upon the yield curve
to take advantage of yield spreads.
Future Thoughts
The Treasurer will continue to invest in short term maturities to take advantage of the
inverted yield curve - Commercial Paper with 30 to 60 day maturities and Bond proceeds will
be laddered in three and six month Treasury bills as they mature. GSE's, which have been
rolled over for six months may be rolled over for a longer one year term to increase the
average maturity since rates appear to be gradually trending downward.
3
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Reconciles. W AWmI and Sgplm Fuss
City. RehvebpreW Apellry and FmanMy Adlerily
Apni 30,2007
Bell of AWW Foods 1N.496]02
L .Poet' call Funds ry,9W1
Lena NoRSuWm FU (1,]0],58
Balame W Surpem Fuss f181 ]08.021
"A"Ass'
N. - Mr.1
I Surpse
I T e
Book
SUMS
Yes
AO
Sudm
Ym
1Ne9a FarN-Renard
NO
Clesong
3 (1,O23,SY1
3 -
3 -
WNbFgpa - Sweep
NO
Sleep
63B,1U2
-
-
elyCask-Do
No
AMA
I.WO
W.I. Fa 0910UMn -Danakl
Yes
CbeW
S 190se
f 19m
5 19Om
robe -Bank Acoomis
3 3nd86
f 19098
f -
f IB,WO
U S I.,
Amwbred
Surplus
Suplm
I: dlan-Avalab0l
$
IassrR
Views,
Yes
M
Yes
BarF el Nex YOh-Cesare
Y.
U$ TRanry Bill
5,920,631
5.928.01
5,928,631
Bsarol New Yne-DemanO
Yes
US Treasury Blll
8.987,668
8,Y7,Y8
898T.868
Bar&.r New Y.k-Bammb
Yea
US Treasury Bell
9,95T,201
8,96Tj81
9,957,281
Bahr M NM Yod (em -end
Yes
US T2aary 801
14.821.W3
14,821,W3
14,Wl WS
BarOWNm Yolk-Demad
Yes
USTloam Bill
sal
91381o2B
9881029
TOM, - US Tlomu
49,5M,W
495M612
-
49585,812
U $GowmmaM S'sol E.,d.
Mmnbed
Saplm
f:u¢lotlun-Avalab,R
Sloe.
Issuer
Value
Yes
Ad
BVJrW Neaa Yoh-Oemvq
Vm
Freddb Mac
2.993.1to
2,995,d10
10
BarakotNm York -Renard
Ym
FMLB
1,999,148
1.9W.14B
9
BakotNm YOh-Dames
Yes
FFCB
1,1M.0]1
4,]OB4Oit
>1
OazOdNew Yoh-OBmaM
Yes
Flossie Mal
d,3W,15B
4,3W,15B
9kWNmYoh-DenHtl
L
Yes
FHLB
],993,513],Y3513
13kofNewYoh-Camas
YesFFCB
4:05:260
4,955268
kWNmYoh-Camas
Ym
FHL Ab ae-ObwuW Nose
2474172
2 ]41M
72U$WRolmtm
SeWrMs
29,428,]42
29,428,]R
42
Neo,un Tam Note
Book
Suo,m
SupMa,
Qnm],an- AvabNMv
3uryWs
ImuerType
Value
Yen
Ad
Yes
BaikWNev Ywk-UemaM
'es
General E.. Capital
28]5942
2935912
1.n'.
Total- lesson Tenn Paper
2,W5,912
3.935,9d2
2.935,942
Pure Connnamal P.m
Cuakd,an-AYallaN
S.I.
Issuer?
Book
Value
Surylus
Yes
Ad
Surplus
Y.
Balk OlNex York-Cemvtl
Yes
John Deem Cassel Corp
2.9]4.6Y
2.974.60
2.974,6AS
BakWNaw Ymk-Demand
Yes
AOWn Labs
1,W1,551
1,991,551
I.W1,551
BaikdNBw Yak -Demand
Yes
Nestle Cap COr
2,9692Y
2,96B,2Y
2,M,2Y
Balk aQNew Yak-Cemand
Yes
CXgmup FvdOq
3,9W,n8
2,Y9,n8
2,Y9]38
BaikMNm Yqk-Canard
Yes
Germinal Elam C
29Y49J
2.9en493
2986.4.
Tool-Pnme CommegW'P
13,911722
13.911.]22
13911 ]22
a,a Funs
Scapa
Sues
Nanne- AvesMem
Name-Avmla
Burolus
Type
Bco4
Yes
Atl
Ylus
es
i
(3,101,165)
IAIFftDARmand
Yes
Sb1e Pw1
19665,YSI
11605 Y3
116658/3
TOW -Slam Pwl
T
31.426256
3f,426,2W
2,f01,185
29,J25,iJ1
scale's
NO
PA
Surplus
No
SLW3,SY)
3 2.n1,28]
s 1,]W.Yi
00,102
(830,102)
migw%o
1,000
CW
3 392.484
52,101,165
3 1,]o9Y1
Suplm
No
A
S,apw
NO
A9 F1nd5
Adual%
S,upkrs
Yes
256261%
25B.Le%
Sups.
$uplus
:112..
21S..%
Samlm
Na
Ad
Slvplm
No
AN Furtls
Atlual %
Su qus
Yes
151]3%
15300%
$Unseen
No
M
Smplm
No
A9 Funds
A 1%
Sur(Aus
Yes
71896%
]253]%
Surylus
No
Ad
Sur(Aus
No
MFunds
ACWaI%
Surylus
Yes
182113%
152&M%
Total CRY MwsmtMa 12i,266,1161 E],2Y,Ji4 2,101,16 131.161,10
Total ChM Class & anise as 120.914.92¢I 127.907A13 2,101,16 II5,3YSb 392,4Y 2.101,1651 1,794,Y1 65.YY% 89589]%
�NIAWM4rvasMwb
POMOko-CkylmekbreMa
Anon.
Sugm
f5
annerrt a
Value
Tas
M
802 RDA U.S. Beek-CIP
Yes
USTreasuy Bk
],N],91]
],943917
iW4 FlonseAutlmlly-GIP
Yes
U.S TsaaVry Bel
21,825,249
21,825249
k"2
2(02 RDA U.S. BankCIP
Ye¢
USTreaaury Bk
8,936,n6
8,YBT35
ZW4 Fbaxe Awled LIP
Yee
USTreaz BN
34 B21p11
21824>41
TOW-U.S Tlo
63530,N2
835WY2
POMWb-MOWNFudc
Tlmlee-Avadabtll
Su us
Morey market
Mutual Fixed
Book
Value
Serpus
Yea
set
SUgWa
Yes
CWe Censer U S Bank - Posed
YES
Ia Amaban
304
3Y
304
CHb haler U S.BaM-Cast Svc
YES
id American
1934 RDA US Bark -Deb. Se
YES
IAAnerka,
190 RDA U S Bank -CIP
YES
lea Aeen n
1995 RDA U S Bank -Seidel Fund
YES
1d Arteaan
2Wa Fa AUM-19W US Bark-E.
YES
in Akaea
Jose RDA U S.Bank -CIP
YES
let..
19MI RDA U$.Bark - DIM Svc
YES
IMAmenC3n
-
IMRDAUSBank- SFedal Flail
YES
19M RDA U S Bank -CW
YES
19Amencan
id Amman
-
=IMAU5Bank -CIA Svc
YES
1MAinve.
'
2031 RDA US Bank - CUP
YES
1d Amason
'
2W2 MAUS Bark -Oil Svc
YES
1s.Anal
-
-
-
W)2RDAU$Bank -CIP
YES
1dAmakan
4W,855
aso,&55
4W,855
m l Nabse RCAUS Bark -CS
YES
1slAmercun
'
20TaaWb RDAU S BarkG01
W
YES
1s.Ameaan
'
moleasbb RDAU S BanACIP
YES
tdAnlasan
-
-
-
,,, Fb AdNUSBal
YES
1AAnemn
2.619.973
2,619.973
2.619,973
201 ZAAUSBak-001
YES
1M Amennn
-
0ubmtg-MsAM FUM
3051132
3W1132
3011M
511ryWs
No
Surpkrs
No
AM Fade
Af %
S.pplm
Yes
32 332M
331254%
NO
M
Surplus
NO
AN Fads
Actual
"a"A'a
Yes
rSurplm
1570%
1 1.5009%
TPW Fiscal A9tM lmasM.arob Y.Yt.]TlI N.Ml.774 Y.Yt TTb ]4AY0% MT1Y%
Grand TNd 19J,IN.TY1 192,M9,1N 10116 191,TN.021 192,4N 2,101115 1,]00.M1 1000W IOO.WW%
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2
12
INVESTMENT ADVISORY BOARD Business Session No. B
Meeting Date: June 13, 2007
TITTLE:
Continued Consideration of Fiscal Year 2007/08
Investment Policies
BACKGROUND:
Pursuant to State Legislation the City investment policies must be approved on an
annual basis by the City Council. This approval is done in June of each year.
During the last several months, the Board has met to update the City Investment
Policy.
An Executive summary and strikeout version of the proposed Fiscal Year 2007/08
Investment Policy is attached.
Pursuant to the Investment Policy, the Board meets with the City Manager and City
Attorney to discuss the Investment Policy before they are forwarded to the City
Council for their consideration.
The State Code for Commercial Paper was amended to increase the percentage
allowed for cities to increase the percentage allowed for cities 25% from 15% and to
remove the 31 day weighted average maturity allowance. Staff is requesting the
Boards consideration as to this change for incorporation into the Investment Policy.
RECOMMENDATION:
Forward the Investment Policy to the June 19, 2007 City Council meeting for their
consideration with an appropriate recommendation.
vim\
Johan M. Falcone , Finance Director
PAGE EXECUTIVE SUMMARY
6 Maximum Maturity: Increase maximum maturity from 2 years to
3 years with no more 25% of surplus funds invested in maturities
exceeding two years and less than three years.
9 — l0 GSE's: For Fiscal Year 2007/08 the maximum face amount for
FNMA, Freddie Mac, FHLB and Farm Credit Government
sponsored enterprises (GSE) increased from $10 million per issuer
to $20 million.
10 Commerical Paper: Per issuer limit increased from $3 million to
$5 million and may increase from 15% to 25%.
11 Corporate Notes: Total investment shall not exceed 10% of the
portfolio (versus 15% in Fiscal Year 2006-07) maximum $5
million face amount per issuer. (Versus $3 million for Fiscal Year
2006-07)
12-13 Certificates of Deposits — Private Placement: The Investment
Policy does not allow for this investment commonly know as
CDAR's.
WARS llocument xetnevaf
deems wise or expedient in those investments set forth below. A
local agency purchasing or obtaining any securities prescribed in
this section, in a negotiable, bearer, registered, or nonregistered
format, shall require delivery of the securities to the local agency,
including those purchased for the agency by financial advisers,
consultants, or managers using the agency's funds, by book entry,
physical delivery, or by third -party custodial agreement. The
transfer of securities to the counterparty bank's customer book entry
account may be used for book entry delivery.
For purposes of this section, "counterparty" means the other party
to the transaction. A counterparty bank's trust department or
separate safekeeping department may be used for the physical delivery
of the security if the security is held in the name of the local
agency. Where this section specifies a percentage limitation for a
particular category of investment, that percentage is applicable only
at the date of purchase. Where this section does not specify a
limitation on the term or remaining maturity at the time of the
investment, no investment shall be made in any security, other than a
security underlying a repurchase or reverse repurchase agreement or
securities lending agreement authorized by this section, that at the
time of the investment has a term remaining to maturity in excess of
five years, unless the legislative body has granted express authority
to make that investment either specifically or as a part of an
investment program approved by the legislative body no less than
three months prior to the investment:
(a) Bonds issued by the local agency, including bonds payable
solely out of the revenues from a revenue -producing property owned,
controlled, or operated by the local agency or by a department,
board, agency, or authority of the local agency.
(b) United States Treasury notes, bonds, bills, or certificates of
indebtedness, or those for which the faith and credit of the United
States are pledged for the payment of principal and interest.
(c) Registered state warrants or treasury notes or bonds of this
state, including bonds payable solely out of the revenues from a
revenue -producing property owned, controlled, or operated by the
state or by a department, board, agency, or authority of the state.
(d) Bonds, notes, warrants, or other evidences of indebtedness of
any local agency within this state, including bonds payable solely
out of the revenues from a revenue -producing property owned,
controlled, or operated by the local agency, or by a department, ,
board, agency, or authority of the local agency.
(e) Federal agency or United States government -sponsored
enterprise obligations, participations, or other instruments,
including those issued by or fully guaranteed as to principal and
interest by federal agencies or United States government -sponsored
enterprises.
(f) Bankers acceptances otherwise known as bills of exchange or
time drafts that are drawn on and accepted by a commercial bank.
Purchases of bankers acceptances may not exceed 180 days' maturity or
40 percent of the agency's money that may be invested pursuant to
this section. However, no more than 30 percent of the agency's money
may be invested in the bankers acceptances of any one commercial
bank pursuant to this section.
Th'_s subdivision does not preclude a municipal utility district
from investing any money in its treasury in any manner authorized by
the Municipal Utility District Act (Division 6 (commencing with
Section 11501) of the Public Utilities Code).
(g) Commercial paper of "prime" quality of the highest ranking or
of the highest letter and number rating as provided for by a
nationally recognized statistical -rating organization (NRSRO). The
entity that issues the commercial paper shall meet all of the
following conditions in either paragraph (1) or paragraph (2):
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WA1J 1Jocument xeirievai
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general
corporation.
(B) Has total assets in excess of five hundred million dollars
($500,000,000).
(C) Has debt other than commercial paper, if any, that is rated "A"
or higher by a nationally recognized statistical -rating organization
(NRSRO).
(2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose
corporation, trust, or limited liability company.
(B) Has programwide credit enhancements including, but not limited
to, overcollateralization, letters of credit, or surety bond.
(C) Has commercial paper that is rated "A-l" or higher, or the
equivalent, by a nationally recognized statistical -rating
organization (NRSRO).
Eligible commercial paper shall have a maximum maturity of 270
days or less. Local agencies, other than counties or a city and
county, may invest no more than 25 percent of their money in eligible
commercial paper. Local agencies, other than counties or a city and
county, may purchase no more than 10 percent of the outstanding
commercial paper of any single issuer. Counties or a city and county
may invest in commercial paper pursuant to the concentration limits
in subdivision (a) of Section 53635.
(h) Negotiable certificates of deposit issued by a nationally or
state -chartered bank, a savings association or a federal association
(as defined by Section 5102 of the Financial Code), a state or
federal credit union, or by a state -licensed branch of a foreign
bank. Purchases of negotiable certificates of deposit may not exceed
30 percent of the agency's money which may be invested pursuant to
this section. For purposes of this section, negotiable certificates
of deposit do not come within Article 2 (commencing with Section
53630), except that the amount so invested shall be subject to the
limitations of Section 53638. The legislative body of a local agency
and the treasurer or other official of the local agency having legal
custody of the money are prohibited from investing local agency
funds, or funds in the custody of the local agency, in negotiable
certificates of deposit issued by a state or federal credit union if
a member of the legislative body of the local agency, or any person
with investment decisionmaking authority in the administrative office
manager's office, budget office, auditor -controller's office, or
treasurer's office of the local agency also serves on the board of
directors, or any committee appointed by the board of directors, or
the credit committee or the supervisory committee of the state or
federal credit union issuing the negotiable certificates of deposit.
(ii (1) Investments in repurchase agreements or reverse repurchase
agreements or securities lending agreements of any securities
authorized by this section, as long as the agreements are subject to
this subdivision, including the delivery requirements specified in
this section.
(2) Investments in repurchase agreements may be made, on any
investment authorized in this section, when the term of the agreement
does not exceed one year. The market value of securities; that
underlay a repurchase agreement shall be valued at 102 percent or
greater of the funds borrowed against those securities and the value
shall be adjusted no less than quarterly. Since the market value of
the underlying securities is subject to daily market fluctuations,
the investments in repurchase agreements shall be in compliance if
the value of the underlying securities is brought back up to 102
percent no later than the next business day.
(3) Reverse repurchase agreements or securities lending agreements
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CITY OF LA QUINTA
Investment Policy
Table of Contents
Section TOPIC
Page
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
13
XII
Payment and Custody
14
XIII
Interest Earning Distribution Policy
14
XIV
Internal Controls and Independent Auditors
14
XV
Benchmark
16
XVI
Reporting Standards
16
XVII
Financial Assets and Investment Activity Not Subject to this Policy
17
XVIII
Investment of Bond Proceed P
17
XIX
Pfe4essienal C€mtraotl Professional Portfolio Manageftneffl
17
XX
Investment Advisory Board - City of La Quinta
18
XXI
Investment Policy Adoption
18
Appendices: A. Summary of Authorized Investments and Limitations
19
B. Municipal Code Ordinance 2.70 - Investment Advisory Board
20
C. Municipal Code Ordinance 3.08 - Investment of Moneys and Funds
21
D. Segregation of Major Investment Responsibilities
23
E. Listing of Approved Financial Institutions
24
F. Broker/Dealer Questionnaire and Certification
25
G. Investment Pool Questionnaire
30
H. Request for Proposal for Portfolio Manager
44
I. Permissible Investment Chart
40
J. Glossary
41
1
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, with the approvel of the City Courto , may use a professional
portfolio management firm iRvestinnent FnanageF engaged bythe 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 positions 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.
Collateral ization 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 ization 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 three 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 3 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
si� I
P.O. Box 1504
LA QuINFA, CALIFORNIA 92247-1504
78-495 CALLI, TAMPICO (760) 7 7 7 - 7 0 0 0
LA QuINTA, CAI IFORNIA 92253 FAX (760) 777-7101
City of La Quinta
Statement of Investment Policy
July 1, 200457 through June 21, 20078
Adopted by the City Council on June 19, 200657
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
► Special Revenue
► Capital Projects
► Debt Service
► Enterprise
► Internal Service
P. 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 Quihta's investment activity shall
be:
1. Safety
Safety of principal is th"6:,fordmost objective of the investment program.
Investments of the City of La'fluinta shall be undertaken in a manner that seeks
4
Esamag,
to ensure the 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
5
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 2007/08, 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 3 and 5 years. For all other,funds, investments are
limited to awe three years maximum maturity, with than at surous
(funds trwestod between wo at a" #me. in matwiltlias exweding
ilwn years and less than three years.
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 persona which are as follows:
Investments shall be made with judgment and care - under circumstances then
prevailing - which persons of prudence, discretion, and intelligence exercise in the
professional management of their own affairs, not for speculation, but for investment,
considering the probable safety of their capital as well as the probable income to be
derived.
VII 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
R
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 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
7
broker/dealer and independently verify existing re Ports on file for any firm and
individual conducting investment related business.
The City Treasurer will also contact the following agencies during the
verification process:
No, 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 1 10% collateralized
by securities' or 150% mortgages' market values of that amount
of invested funds plus unpaid interest earnings.
C. Disclosure - Each financial institution imaintaining 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 LIMITATI
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
N
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 gave three 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 yaws, with no mom then 25% of surpius funds
invested in maturities exceed,M two years and less than three years. no rothan 26% of wFous funds kwested between two, and ftes years at any _e.
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's 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.
In 'tion, no more than
?file% of surphis funds may be irmsted per QSE Issuer unti rw more than
31D% of the portfolio surplus may be invested in a# OSE's with a
9
maximum 10 million few amount per pwdrose. ftw Fy 0716B, the
maximum face amount has been determined 420 million per 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),
% of the portfolio may be invested in commercial paper of the highest rating
U-1 or P-1) as rated by Moody's or Standard and Poor's, with maturities not to
exceed 270 days.
There are a number of
other qualifications regarding investments in commercial paper based on the
financial strength of the corporation and the size of the investment. The City 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 $6 3 million per issuer, The pa�
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.
iff
Corporate Notes - As authorized in Government Code Section 53601 (j), 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.
No. Eligible notes shall be rated "AA" or "AAA" on the date of acquisition.
No. Total investment shall not exceed 4-5 10% of the portfolio, and
► The maximum aggregate investment shall not exceed $5e 3 million face
amount for each issareFfs r.
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 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 a "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.
11
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 1 10% 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 Collateral ization 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 1 10% collateralized securities
or 150% mortgages market value of that amount of invested funds plus
unpaid interest earnings.
The City of La Quinta Investment Policy limits the percentage of Certificates of
Deposit to 60% of the portfolio.
Cartificaus of Deposits, — Pratt€ placment
Section 53601.8 aftm a local aglency, to irmest it portion of its surplus funds
in c cater of deposit at a commercial bank, savingsbar*, s F s nrd loan
association, or credit anion that uses a privatir sectair entity tW assists in the
placernent of certificates of deposit, provided that the ptirchasesof certificates
of deposit pursuant to this sectim Se , and subtvision(hl of
$n 53W1 do not, in totsk exaved 30 percent of the agency's funds that
rpay be invested for this purpose. Thii gandkilim shall apptyl
The City of La Quints investment Poky does not allow investments in
Certificate of Deposits -Plate placements.
aornwamW , -.
12
January
or afW
,
!"Our+ty-
Sweep Accounts - As authorized by the City Council, a U.S. Treasury and/or
U.S. Agency Securities Money Market Sweep Account with a $50,000 target
balance may be maintained in conjunction with the checking account.
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 LAIF 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
13
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 Quintai 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.
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;
14
► 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 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.
15
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 3151 and June 30`h Treasurers Reports be
sent to the California Debt and Advisory Commission within sixty days of the end of
the quarter.
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.
► A listing of Purchases and sales/maturities of investments.
► Cash and Investments categorized by authorized investments, except for
LAIF which will be provided quarterly and show yield and maturity.
► Comparison of month end actual holdings to Investment Policy
limitations.
► Current year and prior year monthly history of cash and investments for
Iry
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:
o Cash and Investments raised from Conduit Debt Financing;
o Funds held in trust in the City's name in pension or other post -retirement
benefit programs;
o Cash and Investments held in lieu of retention by banks or other financial
institutions for construction projects;
o 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.
XVIII INVESTMENT OF BOND PROCEEDS
The City's Investment Policy shall govern bond proceeds and bond reserve fund
investments. California Code Section 5922 (d) govems 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 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
With the Approval of the City Council, the City may engage a professional �t
portfolio nanageF(s management f~i s) to assist the City Treasurer administer the
delegated authority to manage and invest the City's Funds. The ^ Tt
professional portfolio managers management firim will be approved by City Council
17
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 portfolio managefmont firm of advisef 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 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.
�:
Appendix A
WILL BE UPDATED ACCORDINGLY
19
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.
Rio:
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
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)
21
3.08.060 Deposits of securities.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to deposit for safekeeping, the securities in which city moneys have been
invested pursuant to this chapter, in any institution or depository authorized by.the
terms of any state law, including but not limited to Section 53608 of the Government
Code as it now reads or may hereafter be amended. In accordance with said section,
the city treasurer shall take from the institution or depository a receipt for the
securities so deposited and shall not be responsible for the securities delivered to and
receipted for by the institution or depository until they are withdrawn therefrom by the
city treasurer. (Ord. 2 § 1 (part), 1982
3.08.070 Trust fund administration.
Any departmental trust fund established by the city council pursuant to Section
36523 of the Government Code shall be administered by the city treasurer in
accordance with Section 36523 and 26524 of the Government code and any other
applicable provisions of law. (Ord. 2 § 1 (part), 1982)
22
Appendix D
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Function 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
Financial Services Assistant
Record investment transactions in City's Accounting Manager or
accounting records Financial Services Assistant
Investment verification - match broker confirmation City Treasurer and Financial
to City investment records Services Assistant
Reconcile investment records
- to accounting records and bank statements Financial Services Assistant
Reconcile investment records
- to Treasurers Report
of investments Accounting Manager
Security of investments at City Vault
Security of investments Outside City Third Party Custodian
Review internal control procedures External Auditor
23
Appendix E
LISTING OF APPROVED FINANCIAL INSTITUTIONS
1. Banking Services Wells Fargo Bank, Government Services,
Los Angeles, California
2. Custodian Services
Bank of Now York, Los Angeles,
California
3. Deferred Compensation
International City/County Management
Association Retirement Corporation
4. Broker/Dealer Services
Merrill Lynch, Los Angeles San
Franciscio, CA
Morgan Stanley, Les Angeles San Rafael,
CA
CitiGroup, San Francisco Newport
Beach, 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
`ZI
Appendix F
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1. Name of Firm:
2. Address:
3. Telephone: ( ► ( )
4. Broker's Representative to the City (attach resume):
Name:
Title:
Telephone: ( ►
5. Manager/Partner-in-charge (attach resume):
Name:
Title:
Telephone:
6. List all personnel who will be trading with or quoting securities to City employees
(attach resume)
Name:
Title:
Telephone:
7. Which of the above personnel have read the City's Investment Policy?
8. Which instruments are offered regularly by your local office? (Must equal
100%)
% U.S. Treasuries
% BA's
% Commercial Paper
% CD's
% Mutual Funds
% Agencies (specify):
`k1
% Repos
• Reverse Repos
• CMO's
_% Derivatives
• Stocks/Equities
• Other (specify):
9. References -- Please identify your most directly comparable public sector
clients in our geographical area.
Entity
Entity --
Contact _
Contact
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
26
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
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? % g
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?
P&i
18. What reports and transaction confirmations or any other research publications will
the City receive?
19. Does your firm offer investment training to your clients? Yes No
20. Does your firm have professional liability insurance. Yes No
If yes, please provide the insurance carrier, limits and expiration date.
21. Please list your NASD Registration Number
22. Do you have any relatives who work at the City of La Quinta?
Yes No If yes, Name and Department
23. Do you maintain an office in California. Yes No
24. Do you maintain an office in La Quinta or Riverside County? Yes No
25. Please enclose the following:
❑ Latest audited financial statements.
❑ Samples of reports, transaction confirmations and any other
research/publications the City will receive.
❑ Samples of research reports and/or publications that your firm regularly
provides to clients.
❑ 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.
M.
Under penalties of perjury, the responses to this questionnaire are true and accurate to
the; best of my knowledge.
Broker
Date
Sales
Date
Representative
Title
Manager and/or Managing Partner*
Title
29
Appendix G
INVESTMENT POOL QUESTIONNAIRE
Nolte: 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?
30
REPORTING
1. Is the yield reported to participants of the pool monthly? (If not, how often?)
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. IHow does the manager monitor the credit risk of the securities in the pool?
6. Its 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. IDoes the pool have specific policies with regards to the various investment vehicles?
a. What are the different investment alternatives?
ID. 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?
ID. The method used to value the portfolio (cost, current value, or some other
method)?
31
OPERATIONS
The; answers to these questions will help you determine whether this pool meets your
operational requirements:
1. Does the pool limit eligible participants?
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.
32
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?
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
egulations?
33
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
fl-+men +wild be approximately 10% of the City's investmentportfolio, lio net of bond proceeds
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
u Professional experience and qualifications of the individuals assigned to the
account
■ Portfolio management resources, investment philosophy and approach
u Responsiveness to the RFP, communicating an understanding of the overall
program and services required
m Reporting capabilities
u Fees
II. SIELECTION 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
34
selection and awards contract.
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
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.
35
Cal
Assets Under Management
1 . Summarize your institutional investment management asset totals by category
for your latest reporting period in the following table:
Number Operating Funds
of Clients
Governmental
Governmental
Pension
Non Governmental
Pension
Corporate
High Net Worth Client
Endowmental/Foun-
dation
Number of Other Restrictive
Clients Funds
S
Not
Applesable Not Applicable
Not Not ' e.
Applicable
NW Not Applicable
Applicable,
Not Not Applicable
Applicable
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
36
Other
(specify
4. Describe the procedures that your firm has in place to address the
potential or actual credit downgrade of an issuer and to disclose and
advise a client of the situation.
5. Provide data on account/asset growth over the past five years. Indicate the
number of government accounts gained and the number of government
accounts lost.
6. List your five governmental largest clients. Identify those that are
exclusively operating fund relationships and/or those that are other
relationships (e.g., bond fund, retirement fund).
7. Provide a copy of the firm's Form ADV, Parts I and II (including all
schedules).
8. Provide proof of State of California Registration, if your firm is not eligible
for SEC registration.
9. Provide a sample contract for services.
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,
37
committees, membership, meeting frequency, responsibilities, integration of
research ideas, and portfolio management.
8. Describe your research capabilities as they would pertain to governmental
accounts. What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker -
dealer community.
E. Portfolio Management
1. Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City
of La Quinta, CA?
4. How frequently are you willing to meet with us?
5. Describe procedures used to ensure that portfolios comply with client
investment objectives, policies, and bond resolutions.
F. Fees Charged
1. Please include a copy of your firm's fee schedule applicable to this RFP.
2. Identify any expenses that would not be covered through this fee
structure and would be required in order to implement the firm's
program.
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
M3
(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?
H. References
Provide a list of at least five (5) client references in California. References should
be public agencies with portfolio size and investment objectives similar to City of
La Quinta, CA. Include length of time managing the assets, contact name, and
phone number.
Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Councill'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.
1CRJ
Enclosures: Investment Policy
Treasurers Report
Appendix I
WILL BE UPDATED ACCORDINGLY
,E
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, Bank America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report for the City of
La Quinta. It includes five combined statements
for each individual fund and account group
41
prepared in conformity with GAAP. It also
includes supporting schedules necessary to
demonstrate compliance with finance -related legal
and contractual provisions, extensive introductory
material, and a detailed Statistical Section.
CONDUIT FINANCING: A form of Financing in
which a government or a government agency
lends its name to a bond issue, although it is
acting only as a conduit between a specific project
and bond holders. The bond holders can look only
to the revenues from the project being financed
for repayment and not to the government or
agency whose name appears on the bond.
COUPON: (a) The annual rate of interest that a
bond's issuer promises to pay the bondholder on
the bond's face value. (b) A certificate attached
to a bond evidencing interest due on a payment
date.
DEALER: A dealer, as opposed to a broker, acts as
a principal in all transactions, buying and selling
for his own account.
DEBENTURE: A bond secured only by the general
credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two
methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery
versus payment is delivery of securities with an
exchange of money for the securities. Delivery
versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose
return profile is linked to, or derived from, the
movement of one or more underlying index or
security, and may include a leveraging factor, or
(2) financial contracts based upon notional
amounts whose value is derived from an
underlying index or security (interest rates, foreign
exchange; rates, equities or commodities)•
DISCOUNT: The difference between the cost
price of a security and its maturity when quoted
at 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.
3. FLBs (Federal Land Bank Bonds) - Long-term
mortgage credit provided to farmers by Federal
Land Banks. These bonds are issued at
irregular times for various maturities ranging
from a few months to ten years. The
minimum denomination is $1,000. They carry
semi-annual coupons. Interest is calculated on
a 360-day, 30 day month basis.
fv
FEDERAL CREDIT AGENCIES: Agencies of the
Federal government set up to supply credit to
various classes of institutions and individuals, 5.
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.
2. FHLBs (Federal Home Loan Bank Notes and
Bonds) - Issued by the Federal Home Loan
Bank System to help finance the housing
industry. The notes and bonds provide
liquidity and home mortgage credit to savings
and loan associations, mutual savings banks,
cooperative banks, insurance companies, and
mortgage -lending institutions. They are
issued irregularly for various maturities. The
minimum denomination is $5,000. The notes
are issued with maturities of less than one
year and interest is paid at maturity.
42
FFCBs (Federal Farm Credit Bank) - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
national agricultural industry. They are issued
monthly with three- and six-month maturities.
The FFCB issues larger issues (one to ten
year) on a periodic basis. These issues are
highly liquid.
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 proviide 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 oif 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.
43
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
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.
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
E&7
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.
NVESTMENT ADVISORY BOARD Business Session: C
Meeting Date: June 13, 2007
ITEM TITLE:
Fiscal Year 2007/08 Work Plan
BACKGROUND:
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 07/08.
Last year the work plan included a review of audit proposals, GSE's, LAIF,
Commercial Paper and development of a request for proposal regarding portfolio
managers.
In Fiscal Year 2007/2008, Staff has identified the following possible work plan
items:
11 Request for Proposal (RFP) for banking services. (Contract expires on
01 /01 /08)
2) Monitoring of GSE's, LAIF and Commercial Paper.
3) Recommending to City Council the use of a Professional 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 3, 2007 meeting.
3V o�
ohn M. Falconer, Finance Director
INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item A
Meeting Date: June 13, 2007
TITLE:
Month End Cash Report - May 2007
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. This report also includes other statistical investment data
for the Board to review.
RECOMMENDATION:
Information item only.
John M. Falconer, Finance Director
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FRB: H.15--Selected interest Kates, wen-umy uauy upuaie-- vray J 1, �w
. us. ,,. ,
Federal Reserve Statistical Release
H.15
Selected Interest Rates (Daily)
seep to COVIClli
Release Date: May 31, 2007
Weekly release dates I l listorical data I Data Download Program (DDP) I About I Announcements
Daily update Other formats: Screen reader I ASCII
r Data Download
-- - - - :lr,i?t`: Program
The weekly release is posted on Monday. Daily updates of the weekly release are p
through Friday on this site. If Monday is a holiday, the weekly release will be 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
May 31,
2007
2007
2007
2007
Instruments
May
May
May
28*
29
30
Federal funds (effective) 1 2 3
5.29
5.29
5.25
Conmercial Paper 3 4 5
Nonfinancial
1-month
5.23
5.24
2-month
5.22
3.25
3-month
5.16
5.21
Financial
1-month
5.24
5.24
2-month
5.24
5.23
3-month
5.24
5.23
CDs (secondary market) 3 6
1-month
5.30
5.30
3-month
5.32.
5.32
6-month
5.34
5.34
Eurodollar deposits (London) 3 7
1-month
5.32
5.32
3-month
5.35
5.35
6-month
5.37
5.37
Bank prime loan 2 3 8
8.25
8.25
8.25
Discount window primary credit 2 9
6.25
6.25
6.25
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
4.87
4.85
3-month
4.76
4.71
6-month
4.80
4.79
Treasury constant maturities
Nominal 10
1-month
4.95
4.94
3-month
4.90
4.85
6-month
5.00
4.99
1-year
4.96
4.96
2-year
4.88
4.89
http://www.federalreserve.gov/Releases/H 15/update/ 6/1 /2007
FRB: H.15--Selected Interest Rates, Web-uniy uauy upaaie-- way _)i, /uu t
1 ar,M L V l ,
3-year
4.83
4.85
5-year
4.82
4.83
7-year
4.83
4.84
10-year
4.88
4.88
20-year
5.09
5.09
30-year
5.01
5.01
Inflation indexed 11,
5-year
2.50
2.50
7-year
2.49
2.48
10-year
2.54
2.52
20-year
2.56
2.54
Inflation -indexed long-term average 12
2.54
2.52
Interest rate swaps 13
1-year
5.40
5.40
2-year
5.30
5.29
3-year
5.27
5.26
4-year
5.29
5.27
5-year
5.31
5.30
7-year
5.36
5.35
10-year
5.43
5.42
30-year
5.59
5.59
Corporate bonds
Moody's seasoned
Aaa 14
5.57
5.56
Baa
6.50
6.49
State & local bonds 15
Conventional mortgages 16
d Markets closed.
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.
S. Interest rates interpolated from data on certain commercial paper trades settl
Depository Trust Company. The trades represent sales of commercial paper by deals
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.
B. 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
http://www.federalreserve.gov/Releases/H15/update/ 6/1/2007
FRB: H.15--Selected interest Kates, wen-t-my "any UPuaLc -iviay J 1,
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 Asa rates through December 6, 2001, are averages of Asa 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
--`------------------------------------------------------------------------------
Notre: 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 Maturi
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 I Historical data I Data Dolinload Program (DDP) I About I Announcements
http://www.federalreserve.gov/Releases/H15/update/ 6/1/2007
FRB: H.15--Selected Interest Kates, wen-vniy uany Upuatc viay J r, »b
Daily update Other formats: Screen reader I ASCII
Statistical releases
Homc I Economic research and data
Accessibilit} I Contact Us
Last update: May 31, 2007
http://www.federalreserve.gov/Releases/H15/update/ 6/1/2007
Bill Lockyer, State Treasurer
Inside the State Treasurer's Office
MIA Performance Report
Date
Daily
Yield
Quarter to
Date Yield
Average
Maturity
days)
5/16/2007
5.251
5.23
168
5/17/2007
5.251
5.23
167
5/18/2007
5.25
5.23
171
5/19/2007
5.25
5.23
171
5/20/2007
5.25
5.23
171
5/21/2007
5.25
5.23
169
5/22/2007
5.25
5.23
169
5/23/2007
5.25
5.23
168
5/24/2007
5.26
523
166
5/25/2007
5.261
523
166
5/26/2007
5.26
5.23
166
5/27/2007
5.26
5.23
166
5/28/2007
5.26
5.23
166
5/29/2007
5.25
5.23
170
LAIF Performance Report
Quarter ending 3/31/07
Apportionment Rate: 5.17%
Earnings Ratio: .00014178008655639
Fair Value Factor: .999717479
PMIA Average Monthly Effective Yields
April 2007 5.222%
March 2007 5.214%
February 2007 5.181%
Pooled Money Investment Account
Portfolio Composition
$64.5 Billion
04/30/07
Reverses Treasunes
-0.92% 6.84%
Loans Mortgages
Corporate 11.44% 1.38%
Bonds
0.72% Agencies
19.43%
Commercial
Paper
20.25%
Time De
13.25%
Is
27 61
1 ar0 1 Vl Y
Federal Reserve Release
Commercial Paper
Release I About Announcements Outstandings I Volume. statistics I Year-end I Data Download
Program (DDP)
Announcement: Commercial paper data now available via RSS feed
Data as of May 31, 2007
Commercial Paper Rates and Outstanding
Derived from data supplied by The Depository Trust Company
Posted hrne 1. 2007
Discount rates
[Term]nonfinancial
AA
A2/P2/F2
nonfinancial
AA
financial
asset -backed
1-day]
5.30
5.38
5.29
5.33
7-da]
5.24
5.34
5.26
5.29
15-da]
5.24
5.32
5.23
5.30
30-da]
5.24
5.35
5.23
5.28
60-da,]
5.19
5.32
5.23
5.26
90-da;]
5.20
5.35
5.23
5.26
Yield curve
http://www.federalreserve.gov/releases/cp/ 6/l /2007
1 iW. 1iV11llLLV1M10.1 1 0.t.113 i\atVa alAU VULJL0.11Ulllb'J
Money market basis Percent
1 ag06 VLY
— — — Art naAG nancial
---------- A21P2t1-'2 nonfinancial
---.— AA hnancktl
1 7 15 30 60 9C
[Jays to Maturity
5.5
5.3
Discount rate spread
Thirt;t-day A2/P2/F2 less AA nonfinancial commercial paper (daily) Basis points
120
�e� .pre.ai 100
spread. ;5-day moving avg
80
1 �Jy 60
40
i� 20
2001 2002 2003 2004 2005 2006 2007
Discount rate history
http://m,ww.federalreserve.gov/releases/cp/ 6/1 /2007
FRB: Commercial Faper Kates ana umstancungs
-5
n.,_. --I
6
5
4
3
I
0
2001 2002 _1t)Vi ZRAR SUVJ �NAIV
Outstandings
Weekly (Wednesday), seasonally adjusted
Billions of dollars
1140
1090
1040
"0
941)
890
840
790
740
690
640
590
540
490
S ---- tamlin;etiial (fight •Ctica
^S -... rur.;ci cej rleti" A. ,I
Y
� t
�s
Yt
1 S. {tt !r'}ilr xt 4
b
2001 2€02 2003 2004 2M5
Billions. of dollars
I�S� ESf'
! it y�lf`ri�
2006 2007
250
210
170
130
(JO
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 Reserve Board's Data Download Program (DDP). This policy is subject to
change at any time without notice.
Release I About I Announcements I Outstandings I Volume statistics I Year-end I Data Download
PLognffnDDS
Home I Statistical releases
Accessibility I Contact Us
http://www.federalreserve.gov/releases/cp/ 6/1 /2007
i, Kb: toll merclal YapeI ICaLCJ auu UUMZUIuuiga - -I- • --
Last update: June 1, 2007
http://ivww.federalreserve.gov/releases/cp/ 6/1/2007
ICecen2 I5111 HLlctlllll JMZNU12S - - �- - -
} l
Recent Bill Auction Results
Security
Issue
Maturity
Discount
Investment
Price
GVSIP
Term
Date
Date
Rate to
Rate %
Per $100
14-DAY
06-01-2007
06-15-2007
5.090
6 185
99,802056
9127951JA7
28-DAY
05-31-2007
06-28-2007
4.860
4 960
99.622000
912795ZN4
91-DAY
05-31-2007
08-30-2007
4 780
4.919
98,791722
912795ZX2
182-DAY
05-31-2007
11-29-2007
4.805
5.007
97.570806
912795B42
28-DAY
05-24-2007
06-21-2007
4 900
5.001
99,618889
912795ZM6
91-DAY
05-24 2007
08 23 2007
4 775
4 914
98,792986
912795ZW4
183 DAY
05-24-2007
11-23-2007
4 810
5.013
97.554917
912795B34
28-DAY
05-17-2007
06-14-2007
4.665
4.760
99.63716/
912795ZL8
91-DAY
05-17-2007
08-16-2007
4.730
4 867
98.804361
912795ZV6
182 DAY
05-17-2007
11-15-2007
4.735
4932
97,606194
912795826
28-DAY
05 10-2007
06-07-2007
4.640
4.734
99,639111
912795ZK0
91-DAY
05-10-2007
08-09-2007
4 760
4.898
98.796778
912795ZU8
182 DAY
05-10-2007
11-08-200/
4 815
5.01/
97,565750
912/95A92
28-DAY
05-03-2007
05-31-2007
4 590
4.683
99.643000
912795733
91-DAY
05-03-2007
08-02-2007
4.785
4 924
98.790458
912795ZT1
182-DAY
OS-03-2007
11-01-2007
4.820
5.023
97 563222
912795A84
28-DAY
04-26-2007
05-24-2007
4.825
4.924
99.624722
912795ZH7
91-DAY
04-26-2007
07-26-2007
4835
4.976
98.777819
912795Z53
182-DAY
04-26-2007
10-25-2007
4.835
5.039
97,555639
912795A76
28-DAY
04-19-2007
05-17-2007
4.840
4 939
99.623556
912795ZG9
91-DAY
04 19 2007
07 19 2007
4 865
5.008
98.770236
912795ZR5
182-DAY
04-19-2007
10-18 2007
4.865
5.071
97,540472
912795A68
5-DAY
04-13-2001
04-18-2007
5.210
5.301
99.927639
912795TZ4
5-DAY
04-12-2007
04-17-2007
5.230
5.321
99.927361
912795i 7
28-DAY
04-12-2007
05-10-2007
4.895
4.996
99.619278
912795ZFI
91 DAY
04-12-2007
07-12-2007
4.880
5.023
98 766444
912/95ZQ7
182-DAY
04-12-2007
10-11-2007
4 890
5.098
97 527833
912795A50
12-DAY
04-05-2007
04-17-2007
5 200
5.296
99.826667
912795TY7
28 DAY
04 05-2007
05 03-2007
5 060
5.165
99,606444
912795ZC4
91 DAY
04-05-2007
07-05-2007
4910
5.055
98.758861
912795ZP9
182-DAY
04-05-2007
10-04-2007
4.870
5.076
97.537944
912795A43
13 DAY
04-03-2007
04-16-2007
5.195
5.292
99.812403
912795TX9
17 DAY
03-30-2007
04-16-2007
5.070
5.167
99.760583
912795TX9
28 DAY
03 29 2007
04-76 2007
5 130
5,236
99.601000
9127957D6
91 DAY
03-29-2007
06-28-2007
4.925
5 070
95, 755069
912795ZN4
182-DAY
03-29-2007
09-27-2007
4.875
5.081
9/.53541/
912795A35
28 DAY
03-22-2007
04-19-2007
5 140
5 247
99 600222
912795ZC8
91 DAY
03-22-2007
06-21-2007
4,930
5, 075
98.753806
912795ZM6
182 DAY
03-22-2007
09-2.0-2007
4.910
5.119
97,517722
912795A27
28 DAY
03-15-2007
04-12-2007
5.160
5.267
99,598667
912795ZBO
Effective with the 11/2/98 auction, all bills are auctioned using the single -priced method.
http://www.treasurydirect.gov/RI/OFBills 6/1/2007
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INVESTMENT ADVISORY BOARD
Meeting Date
TITLE:
June 13, 2007
Pooled Money Investment Board Report
for (March 2007
BACKGROUND:
Correspondence & Written
Material Item B
The Pooled Money Investment Board Report for March, 2007, summary pages have
been attached for the Board's review. A complete copy is available for review upon
request.
RECOMMENDATION:
Receive & File
?John M. Falconer, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF MARCH 2O07 WITH MARCH 2O06
(DOLLARS IN THOUSANDS)
Average Daily Portfolio
Accrued Earnings
Effective Yield
Average Life -Month End (In Days)
MARCH 2O07 MARCH 2O06 CHANGE
$ 57,580,012 $
$ 264,978 $
5.214
170
63,828,826 $ +3,751,186
189,384 $ +66,694
4.142 +1.072
181
Total Security Transactions
$
28,341,426
$
30,339,489
$
-1,998,063
Amount
Number
599
634
35
Total Time Deposit Transactions
$
3,890,000
$
3,073,500
$
+816 ,600
Amount
208
183
+25
Number
Average Workday Investment Activity
$
1,465,065
$
1,518,772
$
-53,707
Prescribed Demand Account Balances
$
324,967
$
-52,442
For Services
$
$
272,526
179,017
$
124,238
$
+54,779
For Uncollected Funds
BILL LOCKYER
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
MARCH 31, 2007
DIFFERENCE IN
PERCENT OF
PERCENT OF
PORTFOLIO FROM
TYPE OF SECURITY
AMOUNT
PORTFOLIO
PRIOR MONTH
Government
$
3,824,319
6.42
-1.28
Bills
0
0.00
0
Bonds
0
Notes
0
0.00
0
Strips0
Total Government
$
3,824,319
6.42
-1.28
Federal Agency Coupons
$
7,236,314
12.15
0
Certificates of Deposit
10,469,536
17.58
+1.06
Bank Notes
1,010,018
1.70
-0.43
Bankers' Acceptances
0
0.00
0
0
Repurchases
0
4,588,019
0.00
7.70
+0.05
Federal Agency Discount Notes
+0.12
Time Deposits
8,507,495
14.28
0
GNIMAs
217
9,627,305
0.00
16.16
-2.41
Commercial Paper
911,661
1.53
-0.02
FHI_MC/Remics
427,285
0.72
-0.14
Corporate Bonds
7,708,719
12.94
-1.37
AB 55 Loans
5,550,800
9.32
+4.92
GF Loans
-297,652
-0.50
+0.50
Reversed Repurchases
Total (All Types)
$
59,664,026
100.00
INVESTMENT ACTIVITY
MARCH
2O07
FEBRUARY 2007
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
599 $
28,341,426
637
$ 30,393,586
13
2,243
6
83,550
Other
208
3,890,000
186
4,076,000
Time Deposits
820 $
32,233,669
829
$ 34,653,136
Totals
PMIA Monthly Average Effective Yield
5.214
5.181
Year to Date Yield Last Day of Month
5.078
5.060
4
Pooled Money Investment Account
Portfolio Composition
$59.6 Billion
03/31 /07
Corporate Bonds
0.72%
Commercial Pap,
16.16%
Reverses Treasuries
-0.50% 6.42%
Time Deposits
14.28%
3
gencies
9.85%
BOARD MEMBER ITEMS
R�FC
1007 J1/N EIVFJ)
C/r
C/rl QRL S Or,,IC "
E
.June 12, 2007
'Veronica Montecino
City Clerk
City of La Quinta
PO Box 1504
La Quinta, CA 92247
Re: Gary Egbert-Resignation from Investment Advisory Board
Dear Ms. Montecino,
Please let this letter serve as notice of my intent to resign from the
Investment Advisory Board effective today.
Circumstances beyond my control prevent me from regular meeting
attendance which is neither fair to the City of La Quinta or the other Board
members. I very much enjoyed my association with the existing Board
members and John Falconer and his entire staff. The City's cash portfolio is
truly in well managed.
I hope someday that I'll be able to return to the La Quinta area `full time'
and either rejoin the Board or serve the community in another way.