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2008 04 09 IABCeay,,, 4 4 Q9I444) P.O. Box 1504 LA QuiNFA, CALIFORNIA 92247-1504 78-495 CAFLF TAMPICO (760) 777-7000 LA QuINTA, CALIFORNIA 92253 FAX (760) 777-7101 AGENDA INVESTMENT ADVISORY BOARD Study Session Conference Room 78-495 Calle Tampico- La Quinta, CA 92253 April 9, 2008 - 4:30 P.M. 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 IV CONSENT CALENDAR A. Approval of Minutes of Meeting on March 12, 2008, for the Investment Advisory Board. V BUSINESS SESSION A. Transmittal of Treasury Report for February 2008 B. Continued Consideration of Fiscal Year 2008/09 Investment Policies & Work Plan Items VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report and other selected Financial Data - March 2008 B. Pooled Money Investment Board Reports - January 2008 VII BOARD MEMBER ITEMS VIII ADJOURNMENT INVESTMENT ADVISORY BOARD Business Session: A Meeting Date: April 9, 2008 ITEM TITLE: Transmittal of Treasury Report for February 29, 2008 BACKGROUND: Attached please find the Treasury Report February 29, 2008 RECOMMENDATION: Review, Receive and File the Treasury Report for February 29, 2008 A!40- 01&� J hn M. Falconer, Finance Director T,ihr 4 40a«rw MEMORANDUM TO: La Quinta City Council FROM: John M. Falconer, Finance Director/Treasurer SUBJECT: Treasurer's Report for February 29. 2008 DATE: March 31, 2008 Attached is the Treasurers Report for the month ending February 29, 2008. 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: Be inninq Notes Sold/Matured Other Endin Chan e Investment Cash (3) $ 1,879, (1) 0 $ 5,586,462 39,249,396 $ 3,707,439 (10,600,000) LAIF133,506 4y,84_ (19,900,000) 49,536,761 133,506 US Treasuries (2) US Gott Sponsored Enterprises (2) 49.403,000 54.795, 7377,,843 (18,000,000) (114) 54,795,282(114) 24,950,792 (4,947,559) Commercial Paper (2) 29,898, (10,000,000) 52,441 4,562 4,562 Corporate Notes 7,947, 1 9,015,779 9,015,779 21,206 206Mutual Funds8,994, $ 202,767, 36,028,645 $ 47,900,000 $ 190,395 $ 191,086,632 S 11,680,96 Total 1 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 Quints, I hereby certify that sufficient investment liquidity and anticipated ture irements for the next six months. The City Of revenues Quinta used the Bureau of the Public Debt, U!S Bank Monthly La M nthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end. 31311 Loo 'r Date John M Falconer Finance Director/Treasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits and withdrawals from the previous month. (2) The amount reported in the other column represents the amortization of premium/discount for the month on US Treasury, Commercial Paper and Agency investments. (3) The cash account may reflect a negative balance. This negative balance will be offset with transfers from other investments before warrants are presented for payment by the payee at the bank. 2 Treasurer's Commentary For the Month of February Cash Balances — The portfolio size decreased by $11.6 million to $191.1 million. The major reason for the decrease was $7.2 million in tax increment pass through payments. Investment Activity — The average maturity of the portfolio decreased by 10 days to 86 days at the end of February. The six month US Treasury benchmark decreased by 24 basis points and ended the month at 2.07%. The Treasurer follows a buy and hold investment policy and has not sold investments before maturity to take advantage of market conditions. The Treasurer decreased by $5 million holdings in Commercial Paper to meet the 15% policy limitation and a decrease of $10 million in LAIF to meet payment obligations. The sweep account earned $3,739 in interest income for the month of February and the bank fees for the month were $ 2,004 which resulted in a net increase of $ 1,735 in real savings. Portfolio Performance — The overall portfolio performance decreased by thirty seven basis points from the prior month and ended at 3.85% for the month, with the pooled cash investments yielding 4.12%. The overall portfolio yield (including bond proceeds) was one hundred seventy eight 0 78) basis points over the benchmark, which has decreased by thirteen (13) basis point from the one hundred ninety one (191) basis point difference in January. With the average maturity of 86 days, the portfolio yield should remain at these levels for the next three months with a small downward trend based upon reinvestments at lower rates. The Treasurer has more of a barbell maturity schedule with the longer term investments helping to keep yields higher as interest rates will gradually be falling. At this time last year, the portfolio was yielding 5.17% and the benchmark was at 4.95% so we have made significant progress in meeting our benchmark. In the short term, the Treasurer has been investing more in LAIF because its rate declines slower in a declining rate environment and in Commercial Paper. The Treasurer has not been investing in Treasury securities because of their low yield, except for bond proceeds to ensure that the funds are available for capital projects, e.g. SilverRock and Vista Dunes Courtyard Homes and the CVHC project at 48" and Adams. Future Thoughts The Treasurer will continue to invest in short term maturities to take advantage of the yield curve — Commercial Paper with 30 to 90 day maturities and Bond proceeds will be laddered in three- and six-month Treasury bills as they mature. Maturing GSE's will be rolled over to the highest yield on curve taking into consideration cash flow needs or in medium term notes. R3 m m m c m m c c c c m Z Z Z Z 2 Z Z Z Z w cC m y O=m E n g C �§ ryo� O c c E C ogU a U LL LL C N m y= u c � of C y C � C y 1.2 1.2 m i. a w a C � 22 d - �> w § m C oEEE 0 m > m S E�gTN '4' w OOggOOOO fiAwwww m o 009 C .h K EE O� a m Sc m> a y�U m v v w E w oo 0o .0 18. � w N �m O 000 eE p O N O O 000 S88 ke b O m ag 88 com �RRRRm ry R "s d O J O Oqg O � 00 '-'N O R d UN� 3 j � W r 0 o,g gg ooS�e� pp o"o ti$ g= x $ 88o O88800 mg8 8 m8SS$ M o 8 > m LL N W O O ,; 0o w� RRy� mmNNNmH ammNO p d O Q O a N O N N N E 0000 o0080 0 00 8000�0 00 $o o �e000 go a`�goo og no a`�88o XO a� `RRRRm 'N1n NYI V1N 'th INNO C C w UQ o w A a¢3rc ogo'6m E E E W W W 4 f co y O C C J Q` ¢ n `] >s`OOzzzzzzzzz tN $qq $qq$$UTNN)E $NN qO a+m�rvivrvr��ry� >�YIm YIN CI YJ (V YIh ��id er°�aa"4m �n 7i p1 0 O� m mmmmmm m N O O O a 8O S p p Q Q O O O O O O O O E p O O 1V N O< 0 G N 6� �iT= N O O M O O f0 arv..��rvTi to In 3p 8yo�p OAYmO�ygO�pONNOo/ y v j OqI rypN 'ry WN A g O N c;O N POCI O N m Y F O N IO N rvMCyry10__�rPO N yy N Om«V17FObN C N NN jr� pp p y� Oi m O V 1yM� 1� �j pNm� TNN m M l� N primp rmr ryv m 0 7�1�1 $N$ !Q mm0�N�pp m1N4 IYI Oi<T OW Q�Nm�OO)OI�OiN� Qt N L OOx��i pN $x$ j$e yeryx Q O<YI I�NaNY1N L t��mUU2�tl12 � 9 2 LL LL 9 2 2 LL LL LL� LL LL —$� " 82'�8gg Fgg� yg€&b€L �ZZZ222 »»»zzz N F 7 F r, �m �o n3 nm a^ x II# _a W x 0 N°Orv$$ pp-_ coS H All '6 $i�n.��m_�mDCO rE coSd 0l a c �iSatlg� 4F& 4 AMA MAMA- O•-NNN - plm POI N O 8i------------------ 511 1 1 ^ j b Ni O N ryd =59 JU ��3333333333333333333 . ,.9 N � t`! tl N O OI y xxxxxx * xxxxxx N N N N N N N N N ry N N N N N N N N ry ------------------- Hp ��aaaaFaaa�sa��axxa ��ffi0�8tlOg��C0000tlQ b LL F � vd oa 1 y N O. LL 1 N LLg 6 N d N d y Y U V 0�cR j Htl1J��1/1,4d�vljNj �ii fCy, �CQjQR�.�Q?.�5�$�aQG?gyqj 4FVQYIO O SUUS Qi{Ii�QN O�pQ��pQ��l�$�$LL� •1 �8�1I j DOOI OpIS -l�l• 00 ry O• NNN ry / .� fLL .[ \k E ;>ao : 03 {E{k oQo! coo . 8E0 00aa0E00 7i$§ Oo 8 N a� % � _ < /\\- -- ---- omWNvoo 112©e° ! m \�\$ d�� ! dd§dd\()d(dd � (§§\k C \K - __ NN k /(\\}§s ) \\\\�\\�\\\\ \ ) \$m)))Oa.[L ) fj\ww)) !).Vmom p@mm2) -fE§d))k))k) )§ 2 200 §o 00o { tm ) ! ! ! k WIN 'a § k -{«{B /) ! f 6■ \ D 7! 2 f! k EIk)fj s �4 j6|J) ! )({��a k|k0 N ' - I,£!!!Do # -£ ! t.{J3�lBbb00000$)f\\f »»«#»»» !| « !! ,� ` §.!!!!LLE Ia ;.,r!)!®ELLLLa&�± !_ @ , /)/!k§ - =■oa�!!3 £!o«,�!§!!!!5!! 7 p��mA d"y Aga e'a PgL LL a pS9x;aErc�az SSarc H `w' ife�as c�E e� yC I {- e o �aajs `E&�{� C6ON as U U'U'OQ-UGN-UWt19N12. C UU�» 4- — mnm — gm`�9�$�� Mpg sosslsR_w� oSk3�3ut �N�i gAaY'm, . �gffi�a �RU 19 A U -99 95. m m8 WRA 2 &"smma pig M I $�8� 8m nnmm^-��m 'scar g -Vag a99 R affi�� oV nS� m8 "rym8«8 o'"A» ^g og�F4 p .e�yyggSS 8 $ER�tryo� ��{{N ^F'�'��»n25 gg ¢gy aF4�M �� mN�m.a O1S 88�6S;R6 �mBSw mG Nvyy y�� a A. Nayryn, ma8« q» p@pgg ;j pp mM1� ni �$g� Pi a u'3 .mnm r»8 `a5 rwi p g� yyN mJRM�B.,� 8ffi8^$Gm BAR « 3�$ -<8Rr"Ng 8 gz ��ry4 €g m�EL� E z�c ffig Gg m��IIy j� ^NNE 3R 3yy IDHN � "3yypp- p3 ii d I � NNECjID f UNJJLLUiFb CE FUNJJ6UEF =-i I-UNJJ6VZF FUNJ7�Uf Csyolu Ouln s RemMLnon ofAMW and Surplus FWs Cky, ReOewbpmea Agency and FnaMnp AMorty Feduay 29, 2W8 BNiCe MA WFunds 191,088,833 Less Pefty sin Funds (1,W0) Less Non Su lu Funds p.,61e) BalarrceaSu uFunds $ 190,3W,ai ch, Cask 61mi1m1aa Bats Apmurb Ndme-AVallad b s T Book Sup. Yes MYesY SumNs Wetr Fa9o-Lemad No lasnaO- WeldFeW -Saeap No Sweep- petyCash -DemaN No NIA 1,OW Weld Fe -Demad heck., S Q1fib a]166 S 0165 TOW -Bad, Acsamla 3 5,586652 S 47,155 S - S aI,155 U S Treasury CYsdddn-Ava1a Sur IW lss.r? Amaeaed V.I. Sa08rM Vea Ad S.". Yes TOW -U.S. Tre U S GovemmeMB7nd EaerydnE AmOhua S-PW Sup. Cuebtlian-Avad. $u . wuer V.I. Yea Yes Bard, allow Ya -Demsd Yi Futldb M. 2,952,901 2.982.901 2,902.901 BankaNw Yak-Demstl Yi FMdb Mi 9,96d,B5] 9,956,d5) 9.95605) BaNa Ww York-OemaM Yea MILE 1,9W,669 1.9Wp59 1,999589 Bard,dNew Yak -Demand Y. FFCB 1.968,BDo 1,96MW a.m5.5W Bares Nee Yoh -Da.. Yes FFCB 9,0107 9,01,07 9,161,.] Bad,aNew Yoh -emend Yea Fre4da Map I,IBI,B8] 6,6i,B3] I,U).88) BaNdNew Yoh -Demand Yee FNLB I:967M4 I.96],521 ],95),526 BaNaNew Yak -Demand Yea FXLB 9.B9J.931 0.9W.BU B,BB],856 BaNaNew Yak -amend Yef Fredtlb M. 2AM W3 3158003 ZI6a W3 Total-U S. Covemr.d SewlBee EI i.= 54.795,212 5l ]95282 MedWm TennNW Buck Sprp. I Su" Cuaddan-Avdd uA dE.rrt Val. Yea AM Yes Yak Yes Gererd EkWlctsp5d A1 S2 20O1W1Na,,W1122 a 3W,W2 ]O112Ba..Yh-ndYs Bad,dNew Yoh -Dement Yi Ge.rd EdNkC 191a.95B 19]19W 106956 Tdd-W IM TinP 1552180 ]932,1W .,1W PrMe Camarpal Peer Ludnddn-AvallaM Su a ds.rrt Bak Value Suplus Yi SupM Yes Bikd New Yak-oemaM yes ,Wnn Din a,98],382 1,98).382 6,987.382 Bad,aNw Voh-Wnuaq Yea Nedb Cap aWdi L t,903A53 I,Bn,U2 t,B61,t82 BaNaNew York-DemaM Yi Web Fa90 a.983,61] I,W2,BIi t,W2,S11 BarkdNew Yak-O Yes Wddd Parcel Seal. 1,193,BU I.W3.BU 1.903p15 BaNdNex Yoh-OemW Yea Ift'nsorao foal IM)3 U8 4991U6 4993 36 Tad-PM1. CON.Rial Pa r 2195a.]9L &'B.]02 .'sou", Loral ApeMy lmwdmea Fund mapua Nara-Avaead S BOW Yes Add Y. Yi lA6-Cb-DemaU Yes a Sk.Pod 36,BU,t12 30.3U,1t2 t,6'1],650 13.T6.]92 UM-RW-DaraU Yee Sbb Pod ]O6 6 3W WS 6 Toe-Siri Pad W219.396 30,219,]96 t,e33800 44,001.046 Smp. Ns M Sup. No AN Furls AnWd% Sumu Yes S 2U.6IN f a59.970 f ].,We 5,283,62o S (5,28]:.a) - 1,W0 1.000 S 5,339,298 f I,e3A65o S 705,515 3.92]PA 0.9]N% SVrpnB Np M 5ua9. Nu All FYIdb ZIHS Supu Yes SB000% 000ao% Sdapw W Adi Sapad Ida AIFUMs AM31% Surpus Yea 296156% 267819% $up. NO M Sup. No All . A, Sugl. V!E - - 11615% 1.1]]0% SumWs wAdi SupW W All FurW AMd% Sup. Yea 1305]3% 0106]% $ap. No Ads Supl. W A9 Funds AMN% Sup. Y.E 205101% 231552% TaalCbbrvlatma6a ti{,91I,6iI In"As0 I "Am I - 66A]Nx W31N% TaalCb Cant 8lmibnrN 11I,SU WSI IN,9N,71411131650 131,Ua.6U1 5"i , I 1,11001ii,6M 691A1% 693Ms% parlble - CRY Yrve6Wenb AnmdlrM SupN SupWa Cumckan. Yashaaft SVads hsuarR VaW Yea ml Yi 2W2RMU.S BarA-0IP Yee U.5 Tiiuy Bill 10.852,192 13,962192 13,W2.192 ZWa FNarl.AMlnreJ LW Yea U.S Tmiuy Bll 5,i2.50] 5,B52,00) 5,952,301 2Wa F9rau AMna9y LIP Yea US.T..M Bd 9,55T.851 9,81],it 9,85),851 2001FXani LIP Yea USTrei BIN 108. 19001.M1 198p1 Tad -UST 195Mi61 10,636]61 49,538.761 Pas MUWd Fu hrnW-p S,adhua W.Y Marts MMual Fund Book Value Sure. Yi Add Saw" Y. croft wUS9aN-Pmlad YES 1d Aaaa.n l61 454 I6/ LkSCCmMUS.BaN-Oed SvO YES 1d Anwdcen - 1991RDAUSBadk edmsc YES 1aAmannn 1995RUAUSSaak-CIp YES 1d Anrersan - 1995ROAUSBaN-S.dd Fund AS td AmeMsn 2W1Fn AMn-15B5USBNk-E. YES 1d Alrerbn 1998RDAU.SBank-CIP YES id Ade.an 199ORWUSBank-CMS. YES td Ameman 1B98 RDA U.S Bad, -Specd Fund YES td Amerinn 1998NDAUSALOak-CP YES idAmernan - 2WIRDAUSSoN-Dd SVc YES 1stAmm9an - 20DIRMUSBank-LIP YES 1d Anencan 2W2 RDA U.S. Barak -Dd Svc YES 1a Amakan - - 20WRMU5Sik-CIP YES td Ammkaa 2,670.00 2,670,I50 2,678,150 m Taade RDAUS Bad,-DS YES Id Am9r0an 2W3 TiaMa MAU S Ba Csl YES Idpner[an 2W3 Tax" ROA U S. BSNLIP YES 1dAmehan 2WI Fn Aula US Bad, -CIP YES 1stAmednn 6,336,865 •0.330,865 6,3361BS5 2001FBAWUSBad,-COI YES 1dAmersan SuEWdI -MMud Fund i 9015,]I9 9015,]]9 9W5.]R Sup. ND Ads S.O. W AN Funds AMa% Surpnu Yea 25913]% WL0198% Sap. Np pd Sup. Ib MFunds AMal% SYmWs Yea l net% l,TlSM Tdd Fdsal A,asdliaskranb ® ou.sca533 iM19% i,)355% Cvand Total 191.011.1]21 105,317.3Y 1 4.111.160 11 4539J96 I (4,WASSONIMS,N6 109 1d0.O50d% 4l ^ o o } LL MNtltl01 OpN 10 yNtl� pdJ� tl p R ^ tl n C4 R N N tl V N O F N R tl mlNrih M R O� � wpm �i� r b N O � O N N tapp CA1 N S A Y^I y e'1 O<M�fO lO pl p y LLQO dNtV O5m ^'NNdM m d O m d N N p R Q A 0 lV O r N N d A p aC m N oo m n 0 V n LL d M N d N M A N N �p N O M �yRy W qyyy q0 NNtlOfd otl �N t0 VVVVO IQ LQ tlidpN tMp ' e w A�O A S N M d M O N N N tl O M tl �1�0001C N roO qN p 6 pN O qq Y q I�gq,;N N th O N 'O Nm�q O r A N V N W tl O O N g TU LLc Y yiO^Cly ��fqqV Moe]Jm M O! N N tl tl A V DNA M MO tl1OO.vt! O tl O ��qn C) O -o mw CJ O+ NM �i n Q n N pV Kopf N N M� r^n 1p m td0 10 0 !� tl M O O y W ^ b p ftlp qq 10 m N 6 t0 N^ V �py� N m LL� C- W tl^tlN0 ^ NNnI N OJ 5aV p N m N n m ONi �A S qL Y wq Oi. 1 ON tl N MN�fpV M� r R 0 rotl tp b V y 0 R � M d Lq dcli N e�2 L. O N �c L A tl Q FE CO m u n E q � T aoyoJJ .fin � q qqq N F n N C C °Xqq E ;merge. 8 c �'mrL� gyy uiaain �_ q �, U p� do 0A p�qt nag q e O q 2 2 q �' 0 X q N q N b O L C b 0 Mrw wviKOUOF 2 U W 2 IM �"deo de ae de de de v dee ae deX moo` a` yde 3"a`ve a Ee �� ae odye D` �3E dpp�e edp�{ep dtA em ydj 10 (?tm+1 M iee e�� JNm �Ny VO�mMN NAm $m. fON R� Q.ON�fO O O��' Y. bnlv�AO �N On0 J h N Cr 2N� 4 ZbNmbCNM N W d y�Y N ry O � NO 00 W A M NmA� N�MO YymAMN � i0010 � Nmm M eNOW10N NNNW�M `IO�mON NNOMm�� 3�mdm� NNNMO�Q mOAA��W i��y� d• dee �e de � d�(�(pp d°e emm� � �'dee d��u� dGE d�� T M�WYMr Y� LLa00Nn0 (u(VVE LL�NNmoM tO mI7O�< I1PNnR�� ta�O LLNN6 NmN O NNY yj QQYQ Q' NNNN IL o de deo g odes d'd' ode a' 4ede �o �a"a° �°0Nqe 10 O N N H�l b l0OOOPm� QmmON N �N NMO MOInQWO Nm '.n a��amE mO.tMmMp Z ;ea sWgeeada. �m� Z�mWOW a ZOjo >>OdNOe aOaWYeeWW NN dE a��j^1 de d°VGeg. A dea eEe W Y N Q �$ �A�Ao a �m�m`dyyE iqI g ele a d!�gdNN=�. ee O O R h O N 0 0 W (0 0 Q m N m y Q Y N. N N N d yj M 10 M M M O � � N � N � N d aeea' W O N a"de de a' v O O R n n sae em�A� A O N T b^ aye�o ae de o 0 Y N O m$ (e(ppo a°X o, eOO Y R m 0 (e0e ma' N N R W tW0 d O yMj 4 M N y N d N N M M MM M �W e`C n m m a� o� dE W Q m Y�l p e n N N �50� ��pp p m is 'J Old de de de °� ode d°dee ^ae odes omm m.-m no '`ono mQ N$ �vNiem� _ v oon'.n —na umi, oa NmA '�OaO �N�N�' N-JjdMdM F S Fi E w F F F q1 P E y c m yC ryry QW�k pW d U U Qq wq NN m C N N C 0 p U TG O p O—TO R O — O_—FI a O' O _— O.LLa 6LLa� dli afL LLILL aK� 1LLad'_ 0 0— O LLLLa LL'_ O O O O RIi O O O m T N_ O O O .� — O m OI W gl r 9 o c W C F i' 9 OI C C? O C C C C C C IVO C P? O C? 9 o E E E '�^ � W E E E °�' N N N O E E E W N N q E E E d R N N E E E m. Ztp R N EEE N R N ttpp E EE N N W WWW�� WWWF� WWOWF� W. W. Wy�� WWW a yV�� WO W9 WF� 'WpWF� O NN C1 L m N N 0 N c A N W t0 O N >> g N uxLL ad`ama5 LL a`a�'w aS in) a`�ama5 aaaNaS d`a ain<g aaa`ina g,�,� N m co O A LD c r 7 S 0 a N � x lL N EE c0 O y � � a � o m E w a � U I N y� c 0 Vi Y C C leg v CO G Q � ll N O > 0 rn C Z E A W C 0 Q a N O w 10 O d L j l0 !0 d L _ LL v O N a�� s � O w U R N t V d E o 0 0 0 0 o a d o o O 0 o 0 0 0 o CD c o 0 o o y C. CO 10 M N V O Gi y co a • I I I � I I ' i i i 1 I I 1 1 ' ■ / � / I I I� li I� I li I� I I i■ ;i i I I I' i • 12 INVESTMENT ADVISORY BOARD Business Session: B Meeting Date: April 9, 2008 TITLE: Continued Consideration of the Fiscal Year 2008/09 Investment Policy BACKGROUND: The Investment Advisory Board has been reviewing the Investment Policy for final recommendation to the City Council in June 2008. The Investment Policy is attached for the Board's review. In addition, Staff is requesting the Board consider increasing the LAIF rate from 25% to 35% of surplus funds. This request is being made based upon the impacts that subprime mortgages are having in the quality of commercial paper. The following attachment was information requested by the Board at the March meeting. RECOMMENDATION: Continued review of the Investment policies for approval by City Council in June 2008. M ' l aohn M. Falconer, finance Director rULIII.T nEVIJIVIVO 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's deposits and investments_ II INVESTMENT POLICY It is the policy of the City of La Quinta to deposit and invest public funds in a manner which will provide:. ?-Safety of pdftipo as the primary objectivsq,_ •;"„ i .Liquidity to C' ,all of the City's obligations and, requirements that may be reasona64y anticipated; A risk -based market rate of MUM The Investment Policy will conform to all State and local statutes governing the investment of _ public fund%jmd sets forth the permissibiedeposits and investments of One CitvTS funds and the limitations thereon. I III SCOPE !Except as further detailed in Section XVII, ,this Investment Policy applies to all cash and investments,of the City of La Quinta, City of La Quinta Redevelopment Agency and the City of La Quinta Financing Authority (hereafter referred to in this document as the "City"I. These funds are ' reported in the City'sComprehensive Annual€inanc_i_al Report (CAFR) and include all funds within_ the following fund types: ► General ► Special Revenue ► Capital Projects ► Debt Service P. Enterprise ► Internal Service ► Trust and Agency ► Any new fund types and funds) that may be created. IV OBJECTIVES ThepbjectiveSpf die City�lnvestment activity in order of priority and importance, pt$ 7. _ Safety of Principal Safety of principal is the foremost objective of the City's investment program. Investments +shall be undertaken in a manner that seeks to ensure the preservation of , capital in the overall portfolio in accordance with the permitted investments. The City shall endeavor to_preserve its capital funds by making only permissible deposits not backed by the tull id by allocating assets s a means, to mitigate ;- 2 credit risk and interest rate risk. Formatted - ed U A. Credit Risk is the risk of loss from the failure of the security issuer or backer. " Deleted: Credit Risk- is the risk of loss due to the failure of the Credit risk may be mitigated by: _ - _ _ security issuer or backer. Credit risk —"'- - _ - may be mhlig etl by: Formatted ► Limiting investments to the safest types of securities; : Pre -qualifying the financial rEtnst=it�ions, ► Morsifying the issuers of the securities in the investment portfolio so that and brokerideaier ,_ bpotential losses due to issue failure or individual securities downgrades '- d: Font: 11 pt may be minimized,. _. -_- -- - .'--_--.--- - -- .' Deleted: Oiversifving the ... ► - .. - - Formatted ... 8 B. Interest Rate Risk is the risk that market values of securities in the portfolio will Interest Rate risk is 1g� -"-°-°°• decline due to changes in general interest rates Interest rate risk, maybe mitigated ,' tDele:b:9d: . By �- bed: Font: 11 ptted: Font: 11 pt Formatted ... 10 �► structuring the investment portfolio so that securities mature to meet cash Deleted: operating requirements for ongoing operations, thereby avoiding the need to sell Formatted securities on the open market prior to maturity; and , .':' Del-mdemands ► Jnvesting operating funds primarily in shorter -term securities. - Deleted: s 2. provide.Liquidity _ Formes ... tZ Formatted ... 13 Tf,w_Ift astrfi$tit Portfolios shs# 101main 3UffiCI'Srttiy_Iiq!>7d. to alall of the Clty'a cash " __ .; Debated: declining credit quality needs that may be reasonably antiolperted,, This is accomplished by structuring the ', Formatted ... 14 portfolio so that sufficient liquid funds are available to meet anticipated demands. "', Deleted: could Furthermore since all possible cash needs cannot be anticipated the portfolio should be --_ - -R fO^" diversified and consist of securities with active secondary or resale markets. 1s: The City's policy is to hold securities and other investments to maturity. Accordingly, ,` `� Formatted ... f16 �; gecurities shall not be sold prior to maturity with the following exceptions ' ''' ` Deleted: the {_ r: Formatted ... 17 ► ,pecurit�+ with declining credit dtualitY can fg6 sofd- party itt th"irniza_ less of ir';',' petered; y --- pr1"Pad% ► f_iquidtity needs of the portfolio_ require that one or more satcur` 'e a sold♦:. ? i Forrrmatbed' 3. Yield A Risk -Based Market Rate Of Return The City'S miyestment port(dto shell be structured with the objective of xiieldin a risk - based market rate itf return iftroughout budgetary and econon'rft oychull jf+eturn on investmar#tis LELss Impbrtar[t than the s__.- and IiyUidtty actives described above. i+ Formatted: Highlight Delebad: designed Deleted: attaining Formatted: Highlight Formatted: Highlight Deleted: , taking into accouDelated:. taking into accou ,�Zgu Formatted: Highlight Deleted: of least Formatted: Highlight Deleted: ce... compared to F Deleted: The cores of F.Mbi Font: 111 Formatted 3 Investment Fund (LAIF) The Treasurer may use these or any other published rates of return that the Treasurer deems appropriate for comparison to the return on the City's investment portfolio, V MAXIMUM MATURITIES Jt is ttte City's ticy j0 Inidd securities andother dnvestimonts tie matutt f filing they,# risky markat value, fluctuation. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit I" worthiness or when the liquidity needs of the portfolio require that a security be sold. V The buy -and -hold policy requires that the City,'s investment portfolio Pe structured so that sufficient liquid funds are available from maturing investments and other sources to meet all reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have 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 3 and 5 years. For all other funds, investments are limited to three years maximum maturity, with no more than 25% of surplus funds invested in maturities exceeding two years and less than three years. VII AUTHORITY Authority to manage the City,'s investment portfolio is derived from sections 35607 and 35608 of ,City Ordinance 3.08.010. Management responsibility for the investment program is delegated to the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment Policy. The City Treasurer. shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. For procedure purposes, &e City Manager or Assistant City Manager shall acknowledge, in writing_ all purchases and sales of investments prior to their execution by the City Treasurer. X PERMISSABLEJNVESTMENTS AND DEPOSITS, The City permissible deposits and jnvestments are .s_ummari_zed pelow and, more fully described 1n Appendix A. Permissable Investments and Limitations (See Appendix Afor Adddional Information) La Qulnta Maximum Restrictions Maximum Matun Formatted: Pont: 11 M Not Italic, No underline, Not Highlight Formatted: Font: 11 pt, Not Italic, No underline Formatted: Font: Il pt Deleted: <p>Diversified Pordollot t 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 Deleted: of cash in financial instruments Formatted: Highlight Deleted: of the City of La Quints Form - ; Highlight Deleted: that the Formatted: Highlight _ Delated: on investments fluctuates with overall market interest rates Debated: The Deleted: until maturity Deleted: the Deleted: until maturity Deleted: of La Quints Deleted: is Deleted: DELEGATION OF Deleted: of La Ouinta Deleted: the Deleted:. who Deleted: The Formatted: No underline___ Formatted: No underline Formatted: No underline Deleted: LIMITATIONS Formatted: Font: 11 pt Deleted: Treasurer will be p ,,, _25 Formatted: Font: 11 pt Formatted: Font: 11 In 1 Formatted: Font: 11 nt Formatted l ._ (26] Formatted: Font: 11 pt Formatted: Font: 11 pt deleted: the El Checking & Savings Accounts with Federal Deposit Insurance Corporation Sweep Account B Sweep Accounts 85%PoNolio 3years U.S. Treasuries and/or GSE's CeNficates of Deposit with interest earnings paid monthly. 60 % Portfolio 3 years <=$99,000 per institution U.S. Treasury Bills, Ships, Notes and Bonds 100% Portfolio 5 years <=$8,0000,000 matudng>3 Yrs U S Government Securities and Federal Government Securities (except collateralized mortgage obligations (CMOs) or structured notes which contain embedded rate options): - Government National Mortgage Association(GNMA) 100%Portfolio 3years - Federal National Mortgage Assouation (FNMA) $20,000,000 3 years - Federal Home Loan Bank Notes a Bonds (FHLB) $20,000,000 3 years - Federal Farm Credit Bank (FFCB) $20,000,000 3 years - Federal Home Loan Mortgage Corporation (FHLMC) $20.000,000 3 years Prime Commercial Paper 15% Portfolio 90 days $5,000,000 per Issuer maximum. $40,000,000 per Local Agency Investment Fund (LAIF) 25% Portfolio 3 years account. Utilize DVP Money market mutual funds regulated by the Sewntles and Exchange 60% Portfolio Maintain $1 per Commission and whose portfolios consist only of US Treasury Sewntles and 20% of 60 days share par value. or GSE's maintaining a par value per share of $1. surplus funds Utilize DVP. Investment Agreements for bond proceeds and/or reserve funds N/A $5,000,000 Corporate Notes 10% 3 years maximum per issuer STATE OF CALIFORNIA AND CITY OF LA QUINTA LIMITATIONS As provided in Sections 16429.1, 53601, 53601.1, and 53649 of the Government Code, the State of California limits the investment vehicles available to local agencies as summarized In the following paragraphs. Section 53601, as now amended, provides that unless Section 53601 specifies a limitation on an investment's maturity, no investments with maturities exceeding five years shall be made. The City`s Investment Policy has Deleted: of La Quints specified that no investment may exceed three years, except the projected annual dollar amount, as detailed in Section V, may be invested in U.S. Treasury bills, notes and bonds; with maturities between 2 and 5 years, with no more than 25% of surplus funds invested in maturities exceeding two years and less than three years. 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 t�ekLed: the State Local Agency administered by the California State Treasurer. The City's investment in J AIF,is allowable Investment Fund I as long as the average maturity of its investment portfolio does not exceed two years, - Deleted:) unless specific approval is authorized by the City Council. The Cityras two accounts with Deleted: of La nolnta � LAIF and limitsmvestment to 2. 5_ %of the portfolio_. _ _ _ _ _ _ - _ - Deleted:. The City of La ouinta Investment Policy has a U.S. Government and Related Issues - As authorized in Government Code Sections 53601 Deleted: anon of -� (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,s Investment Policy does not allow investments in local Deleted: of La come 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', s Investment Policy limits investments in _ (oeleted: of La nointa 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,s Investment Policy allows investment only_in - Deletm: otLaoomta securities of FNMA, FHLMC, FHLB and FFCB. In addition, no more than 10% of surplus funds may be invested per GSE issuer and no more than 30% of the portfolio surplus may be invested in all GSE's with a maximum $10 million face amount per purchase. For FY 07/08, the maximum face amount has been determined $20 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,s Investment Policy (Deeted: of La nointa does not allow investment in Bankers' Acceptances. Commercial Paper - As authorized in Government Code Section 53601(g), 25% of the portfolio may be invested in commercial paper of the highest rating (A-1 or P-1) as rated by Moody's or Standard and Poor's, with maturities not to exceed 270 days. There are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. The City,'s Investment _ Deleted: of La nointa Policy follows The Government Code with the following additional limitations: (1) up to 15% of the portfolio may be invested in commercial paper of the highest rating (2) maximum maturity per issue of 90 days and (3) a maximum of $5 million per issuer. Negotiable Certificates of Deposit - As authorized in Government Code Section 53601(h), 30% of the portfolio may be invested in negotiable certificates of deposit issued by commercial banks and savings and loan associations. The City,s Investment Policy does Deleted: or La nolnta __ _J 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 0 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', s Investment_ Policy does not allow investment in Repurchase Agreements._ _ DIIWd'f La Quinta 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 CityLs Dented: of La Quinta l Investment Policy does not allow investment in Reverse Repurchase Agreements. 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,'s Investment Policy allows investment in corporate notes authorized by the Government Code with the following limitations: Maturities shall conform with Section V. Eligible notes shall be regularly quoted and traded in the marketplace. Eligible notes shall be rated "AA" or "AAA" on the date of acquisition. Total investment shall not exceed10% of the portfolio, and The maximum aggregate investment shall not exceed $5 million face amount for each issuer. 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 CityLs 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. Deleted: of La Quinta [&elated: of La Quinta Mortgage -Backed Securities - As authorized in Government code Section 53601In), 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'_ Investment Policy does not allow investment - { &elated: of La Qunta j 7 in Mortgage -Backed Securities. Financial Futures and Financial Option Contracts - As authorized in Government Code Section 53601.1, local agencies may invest in financial futures or option contracts in any of the above investment categories subject to the same overall portfolio limitations. The City,s Investment Policy does not a_ll_ow_ investments in financial _ futures and financial_ option contracts. Certificates of Deposit - As authorized in Government Code Section 53649, Certificates of Deposit are fixed term investments which are required to be collateralized from 110% to 150% depending on the specific security pledged as collateral in accordance with Government Code Section 53652. There are no portfolio limits on the amount or maturity for this investment vehicle. Collateralization will be required for Certificates of Deposits in excess of the FDIC insured amount. The type of collateral is limited to City authorized investments. Collateral will always be held by an independent third party from the institution that sells the Certificates of Deposit to the City. Evidence of compliance with State Collateralization policies must be supplied to the City and retained by the City Treasurer as follows: Certificates of Deposits Insured by the FDIC. The City Treasurer may waive collateralization of a deposit that is federally insured. 2. Certificates of Deposit in excess of FDIC Limits. The amount not federally insured shall be 110% collateralized securities or 150% mortgages market value of that amount of invested funds plus unpaid interest earnings. The City', s Investment Policy limits the percentage of Certificates of Deposit to 60% of the portfolio. Certificates of Deposits - Private Placement Section 53601.8 allows a local agency, to invest a portion of its surplus funds in certificates of deposit at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of certificates of deposit, provided that the purchases of certificates of deposit pursuant to this section, Section 53635.8, and subdivision(h) of Section 53601 do not, in total, exceed 30 percent of the agency's funds that may be invested for this purpose. The City,s_Investme_nt_ Policy does not allow investments in Certificate of Deposits -_ Private placements. 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 CityLss Investment Policy does not allow investment in derivatives. Contracting a Professional Portfolio Management Firm Deleted: of La Quint. Deleted: of La Quint Dekted: of La Qmnta ) Deleted: of La Quinta With the Approval of the City Council the City Treasurer may engage a professional portfolio management firm(s) to invest and manage a portion of the City's Funds. The professional portfolio management firm wdl be approved.by City Council based upon a request for proposal process as outlined in Appendix H. Before engagement by the City, except as may be specifically waived or revised the professional portfolio management firm shall commit to adhere to the provisions of the City's Investment Policy. Such with 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. 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', s 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, On an annual basis the City Treasurer will submit the Investment Pool Questionnaire to LAIR 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. Deleted: of La Quints Deleted: of La Quints Deleted: 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.f 1 The City of La Quints Investment Policy will use the six-month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio.) Deleted: XIX CONTRACTING PROFESSIONAL PORTFOLIO MANAGEMENT FIRM1 1 With the Approval of the City Council, the City may engage a professional portfolio management firm(s) to assist the City Treasurer administer the delegated authority to manage and invest the City's Funds. The professional portfolio management firm will be approved by City Council based upon a request for proposal process as outlined in Appendix H. Before engagement by the City, except as may be specifically waived or revised, the professional portfolio management firm shall commit to adhere to the provisions of the City of La Quints 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; 13) 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. G A 1 1 Vr9VCT UVIVIIVICIV 1 b— Fit: GVNF'LIG Ir4&e1r"19Fltb Vianka Orrantia From: Jenson, Kathy [kjenson@rutan.com] Sent: Thursday, April 03, 2008 8:29 AM To: Vianka Orrantia Subject: FW: Investment Policy - Conflict of Interest Section M. Katherine Jenson Rutan & Tucker, LLP 611 Anton Boulevard, 14th Floor Costa Mesa, CA 92626 714-641-3413 Direct 714-546-9035 Fax klenson@rutan.com y .rutan.com Any tax advice contained in the body of this e-mail (and any attachments thereto) was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Privileged And Confidential Communication. This electronic transmission, and any documents attached hereto, (a) are protected by the Electronic Communications Privacy Act (18 USC §§ 2510-2521), (b) may contain confidential and/or legally privileged information, and (c) are for the sole use of the intended recipient named above. If you have received this electronic message in error, please notify the sender and delete the electronic message. Any disclosure, copying, distribution, or use of the contents of the information received in error is strictly prohibited. From: Jenson, Kathy Sent: Thursday, March 13, 2008 9:59 AM To: 'John Falconer' Subject: RE: Investment Policy - Conflict of Interest Section I think it is an excellent idea. I see no problem with that change. To your knowledge, will any of your board members have a problem?? M. Katherine Jenson Rutan & Tucker, LLP 611 Anton Boulevard, 14th Floor Costa Mesa, CA 92626 714-641-3413 Direct 714-546-9035 Fax kjenson@rutan.com w rutan.com Any tax advice contained in the body of this e-mail (and any attachments thereto) was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. Privileged And Confidential Communication. This electronic transmission, and any documents attached hereto, (a) are protected by the Electronic Communications Privacy Act (18 USC §§ 2510-2521), (b) may contain confidential and/or legally privileged information, and (c) are for the sole use of the intended recipient named above. If you have received this electronic message in error, please notify the sender and delete the electronic message. Any disclosure, copying, distribution, or use of the contents of the information received in error is strictly prohibited. -----Original Message ----- From: John Falconer [mailto:jfalconer@la-quinta.org] 10 4/3/2008 Page 2 of 2 Sent: Thursday, March 13, 2008 9:56 AM To: Jenson, Kathy Cc: Vianka Orrantia Subject: Investment Policy - Conflict of Interest Section Importance: High Kathy The Board is working on the FY 08/09 Investment Policy . Board Member Rassi wants to add the IAB to this section and their discussion whether it was appropriate or not. After the discussion I suggested that we run this item by you for your thoughts. Thank you John From: Mason Lord Sent: Thursday, March 13, 2008 7:08 AM To: John Falconer Subject: Attached Image Importance: High 4/3/2008 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 IMAnnnA. „r A.t'.6+_ a ri.. execution by the City Treasurer. V' "'"at'""n Ccn s or To tne�r // / VIII CONFLICT. OF INTEREST �✓r`� 45� Investrrient 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 micinterest and to the following: 4 ► The City Manager, Assistant City Manager, r and the City Treasurer shall not personally or through a close relative `)Od �j 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 lace recommend or approve investments shall report Im FREEMOME 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. Brroker/Dealers who desire to Become bidders for direct investment transactions mustsupply 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 re Policy, ad the City of La Quinta Investment The City Treasurer shall evaluate the documentation submitted by the 7 12 STAFF FOLLOW-UP ITEMS FROM MARM91NE fiING John Falconer From: John Falconer Sent: Thursday, March 13, 2008 9:48 AM To: Vianka Orrantia Subject: IAB Follow-up Items Importance: High Attachments: 1475_001. pdf Vianka Please forward this PDF to the Board Members. It contains information requested from last nights meeting regarding Benchmarks GASB 40 Interest Rate Risk Investment Policy Resolution Thankyou John From: Mason Lord Sent: Thursday, March 13, 2008 7:01 AM To: John Falconer Subject: Attached Image Importance: High 3/13/2008 13 14 treasury Bond News and Iinanctal Information I Keuters.com rage ror-z Lh gu LI I�M '2 LATEST NEWS E20 NEW YORK GOV. SPITZER RESIGNS BUT MORE WOES LIKELY Top 10 Research t Reports Tap into over 15 million Aftift ca�� phone �� ._..: analyst research reports Start Your Search T- \1fj5f,- You are here Home > Business & Finance > Bonds HOME Bonds BUSINESS & FINANCE SHORT TERM RATES US TREASURY RATES Markets As of 02/01 02 30 As of 03/11 0f 49 Deals Prime 600 Rate Price Yield Maturity Date Discount 3.50 3 Month 1.35 1 36 11 Jun 2008 Industries Fed Funds 295 6 Month 1.46 1.47 10 Sep 2008 Industry Summits 1 Month Libor 2.82 2 Year 10081 1 57 27 Feb 2010 3 Month Libor 2.80 5 Year 101 35 2.45 27 Feb 2013 Stocks 10 Year 100.17 3.47 14 Feb 2018 Stock Buzz 30 Year 99 39 4.41 14 Feb 2038 Funds BONDS NEWS ETFs UPDATE 1-CFTC chief: Cracks appearing under market strain 12 33pm EDT Currencies BOCA RATON, Fla., March 13 (Reuters) - Futures markets have held up during Commodities recent volatile conditions, but instances of huge trading losses show "some cracks" Options are appearing, the top U.S. futures regulator said on Thursday. Full Article Bonds TREASURIES -Bonds fall as stocks pare loss before auction Analyst Research 12.23pm EDT Portfolio NEW YORK, March 13 (Reuters) - U.S. government bond prices fell on Thursday, erasing earlier gains, after a Standard & Poor's report said the worst of subprime NEWS -- - write -downs among large financial companies is now in sight. Full Article UPDATE 2-US House's Frank seeks wider FHA role in mortgages 1222pn,EDT Do More with Reuters WASHINGTON, March 13 (Reuters) - New legislation that would facilitate the buying RSS L,U up of distressed mortgages with the help of the Federal Housing Administration Mobile (FHA) was unveiled on Thursday by a key U.S. House of Representatives Democrat. Podcasts Full Article Newsletters You Witness News UPDATE 1-NY Fed to discuss new lending facility with dealers 12 18pm ED1 Partner Services NEW YORK, March 13 (Reuters) - The Federal Reserve Bank of New York said on CareerBuilder Thursday it will meet individually with each primary dealer on Thursday and Friday Affiliate Network regarding the terms and conditions of the Term Securities Lending Facility (TSLF) that was announced earlier this week. Full Article Professional Products Support (Customer Zone) UPDATE1-U.S. 30-, 15-year mortgage rates rise in latest week Reuters Media 12 17pm EDT Financial Products WASHINGTON, March 13 (Reuters) - U.S. 30- and 15-year mortgage rates rose in Find a financial adviser the latest week, home funding giant Freddie Mac said on Thursday. Full Article About Reuters UPDATE 1-U.S. Feb. foreclosures up 60 pct on yr-RealtyTrac 12 07om EDT http://www.reuters.com/finance/bonds 'P13/2008 �Y,�-Sj—Mig-0 � 7 �65o Lei v it-] RESOLUTION NO. 2007-053 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA QUINTA APPROVING AND ADOPTING THE AMENDED INVESTMENT POLICY FOR FISCAL YEAR 2007/2008 WHEREAS, the general purpose of the Investment Policy is to provide the rules and standards users must follow in investing funds of the City of La Quinta; and WHEREAS, 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 most 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 ield throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity,needs. WHEREAS, authority to manage th6 City of Ca Quinta's investmerif 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 vestment Policy; and WHEREAS, the Investment Policy will be adopted before the end of June of each year and amended as considered necessary; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of La Quinta to adopt the 2007/2008 Fiscal Year Investment Policy (Exhibit A). PASSED, APPROVED and ADOPTED at a regular meeting of the La Quinta City Council, held on this 19'h day of June, 2007 by the following vote, to wit: 17 Resolution No. 2007-053 Investment Panay FY 2007.2008 Adopted: June 19. 2007 Page 2 AYES: Council Members Henderson, Kirk, Osborne, Sniff, Mayor Adolph NOES: None ABSTAIN: None ASSENT: None ON AD PH, or City of La Quinta, California ATTEST: (SEAL) APPROVED AS TO FORM: i M. KA HER NE JENSON, Cit orney City of La Quinta, California [E �o �A kt.- or) vc (L-ecdl� 19 Summary of Statement No. 40 Page I of2— Governmental Accounting Standards Board Summaries / Status Summary of Statement No. 40 Deposit and Investment Risk Disclosures —an amendment of GASB Statement No. 3 (Issued 3/03) The deposits and investments of state and local governments are exposed to risks that have the potential to result in losses. This Statement addresses common deposit and investment risks related to credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. As an element of interest rate risk, this Statement requires certain disclosures of investments that have fair values that are highly sensitive to changes in interest rates. Deposit and investment policies related to the risks identified in this Statement also should be disclosed. The Board reconsidered the disclosures required by Statement No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements. Portions of that Statement are modified or eliminated. The custodial credit risk disclosures of Statement 3 are modified to limit required disclosures to: • Deposits that are not covered by depository insurance and are (a) uncollateralized, (b) collateralized with securities held by the pledging financial institution, or (c) collateralized with securities held by the pledging financial institution's trust department or agent but not in the depositor -government's name • Investment securities that are uninsured, are not registered in the name of the government, and are held by either (a) the counterparty or (b) the counterparty's trust department or agent but not in the government's name. Statement 3 disclosures generally referred to as category 1 and 2 deposits and investments are eliminated. However, this Statement does not change the required disclosure of authorized investments or the requirements for reporting certain repurchase agreements and reverse repurchase agreements, and it maintains, with modification, the level -of -detail disclosure requirements of Statement 3. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2004. Earlier application is encouraged. How the Changes in This Statement Improve Financial Reporting http://www.gasb.org/st/summary/gstsm40.htmi 3/13/2008 Summary of Statement No. 4U -rage Deposit and investment resources often represent significant assets of governmental, proprietary, and fiduciary funds. These resources are necessary for the delivery of governmental services and programs, or to carry out fiduciary responsibilities. This Statement is designed to inform financial statement users about deposit and investment risks that could affect a government's ability to provide services and meet its obligations as they become due. The Board believes that there are risks inherent in all deposits and investments, and it believes that the disclosures required by this Statement provide users of governmental financial statements with information to assess common risks inherent in deposit and investment transactions. The Board adopted fair value accounting for most investments in Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Fair value portrays the market's estimate of the net future cash flows of investments, discounted to reflect both time value and risk. In order to understand the measurement of investments at fair value, the timing of cash flows (including investment time horizons) and investment risks need to be communicated This Statement results from the Board's formal reviews of its existing standards. These reviews —part of the Board's strategic plan —are designed to evaluate the continuing usefulness of current requirements. The reduction of existing custodial credit risk disclosures follows from federal banking reforms adopted since the release of Statement 3 Unless otherwise specified, pronouncements of the GASB apply to financial reports of all state and local governmental entities, including general purpose governments; public benefit corporations and authorities; public employee retirement systems; and public utilities, hospitals and other healthcare providers, and colleges and universities. Paragraph 2 discusses the applicability of this Statement. 20 http://www.gasb.org/st/summary/gstsm40.htm[ 3/13/2008 GASB Statement No. 40 Deposit and Investment Risk Disclosures for AFRs Who should read? Policy Additional resources In this document I Accounting Contacts, Annual Financial Report (AFR) Contacts, Chief Fiscal Officers, and Component Units and Related Organizations Agencies and institutions of higher education must submit their AFRs in compliance with Governmental Accounting Standards Board (GASB) Statement No. 40 Deposit and Investment Risk Disclosures —an Amendment of GASB Statement No. 3. Go to Fiscal Management's Annual Financial Report Preparation Resources page for more information, including legal cites, forms, key dates and deadlines, and contacts if you need additional assistance. It's online at: <bitty•//fnx.cpa.state.tr.us/&ix/ nrpt/afrh. This document discusses the following topics. Topic pap GASB 40 Implementation Date and Sununary 2 Ltvestment"lypes 3 _ Deposit Risks 4 lnvesurteut Risks 5 For More lnlbrmation 9 21 WOCALPOU= &PROCEDURES T GASB 40 Implementation Date and Summary Implementation GASB 40 will be implemented for fiscal 2005. date Component units should implement the requirements of GASB 40 no later than the same year as their primary government. Component Units with fiscal year -ends that are different from their primary government's may have to implement the requirements of GASB 40 early. Agencies are responsible for assisting their component units in implementing GASB 40. Agencies with component units whose fiscal year end is before August 31 must make those investment disclosures in compliance with GASB 40. Summary GASB 40 establishes and modifies disclosure requirements related to investment risks: • credit risk including custodial credit risk and concentrations of credit risk, • interest rate risk, and • foreign currency risk. GASB 40 also establishes and modifies disclosure requirements for deposit risks: • custodial credit risk and • foreign currency risk. Agencies and institutions of higher education should briefly describe their formally adopted deposit or investment policies that are related to the above risks. Agencies and institutions of higher education that have no deposit or investment policy that addresses a specific type of risk should indicate that fact. Agencies are strongly encouraged to read the GASB Statement, as well as the Guide to Implementation of GASB Statement 40 on Deposit and Investment Risk Disclosures. Submission 'nc Financial Reporting section is currently developing the submission method for GASB 40 requirements. An example of the deposit and investment note in compliance with GASB 40 will be included in the Reporting Requirernents for Annual Financial Reports of State Agencies and Universities for fiscal 2005, to be issued at a later date. Page 2 GASB Statement No. 40 22 F� FISCAL POLICIES & PROCEDLIM . Investment Types List of Investment disclosures in the investment note are organized by investment types. investment Investments with significantly different risk profiles should not be aggregated into a types and single investment type. Agencies should disclose the following investment types in their examples Annual Financial Report (AFR). Investment type Examples of what the type includes (not all inclusive) U.S. Treasury Securities U.S. Treasury Bills, Notes or Bonds U.S. Treasury Strips U.S. Treasury Strips U S Treasurl'TIPS U.S.I'reasury PIPS Asset and mortgage backed securities issued by government sponsored cuterprlses (GSEs) such as Fannie Mar, Freddie Mac, Sallie Mae or Giuuic Mar U.S. Government Agencv Obligations Corporate Obligations Domestic corporate obligations Corporate Asset and Mortgage Backed .Securities Collateralized Mortgage Obligation (CMO), Mortgage Backed Securities (MBS), or Commercial Mortgage Backed Securities (CMBS) Equitv f Domestic equity International Obligations Foreign obligations issued by governments and corporations or ADPs Intetnattonal Equity Foreign equity Repurchase Agreements Repurchase agreements_ Pooled investments of fixed income securities Fixed Income Money Market and Bond Mutual Fund Other Commingled Funds Other commingled fundc Commercial p.tper Commercial Paper Securities Lending Collateral Investment Pool Securities Lending Collateral Investment Pool Real Estate Read estate Miscellaneous Alternative investments, limited partnerships, guaranteed investment contracts, hedge funds or political subdivision obligations (disclose individual investment types as a memo disclosure when any one invectinent type has a significantly different risk profile). 1 A'A y a J GASB Statement No. 40 * ?8x AS * Page 3 ON] l` FISCAL POLICIES & PROCEDURES i Deposit Risks Deposit risk definitions and disclosure requirements Page 4 The table below lists the deposit risks, defines them and lists their related disclosure requirements. Risk Definition Disclosure requirements Custodial credit risk the risk that, in the event of the failure If your agency has deposits at of a dvposuory financial institution. the fiscal year-end that are exposed to agency will not be able to recover deposits custodial credit risk, disclose the or will not be able to recover collateral amount of those bank balances, the securities chat are in the possession of an Fact that the balances are uninsured, Outside parts% Deposits are exposed to and whether the balances are custodial rc(lit risk if they ate not covered exposed on the basis of: by depository uasuran(C and are: UnttalLireralized • Uncollatcralizcd • Cullau•ralized with • Collateralized with securities securities held by the held by the pledging financial pledging financial institution, or institution, or • Cullateialiecd with securities • Collateralized with held by the pledging financial securities held by the Institution's trust dcparuncut pledging financial or agent but out m the agency's institutions trust uantn. department ur agent but nut in the agency's name. Foreign currency risk Tlac risk that changes in exchange rams will If your agency has deposits adversely affe,t the deposit. denominated in foreign currency, disclose the U.S. dollar balances Of such deposits organized by currency denumination. GASB Statement No. 40 24 FIStAI. POLICIU& PROCEDiiRFS\ / �l Investment Risks Investment -lie table below lists the investment risks, defines them and lists their related disclosure risk definitions and disclosure requirements requirements. Risk I Definition Disclosure requirements Custodial credit risk 'Ihe risk that, in the event of the failure of If your agency has investment the counterpart•, the agemy will not be securities at fiscal year-end that able to recover the value of its investments are exposed to custodial credit or collateral securities thar are in the risk, disclose the investment's possession of an outside parry. Investment type, the carrying value, and securmes arc cxpuscd to cu,audial credit whether the securities are exposed risk if the seaunies aw uninsured. arc not on the basis of: registered in the agency's name, and are The counterparty or held by either: The cuunterparty's trust • 'Ihe cuunterparty or department or agent • Tlic cuunterparry's trust but not in the agency's department or agent but nor in name. the .tgency's name. Foreign currency risk The risk that changes in exchange rates will If your agency has investments adversely affect the investment. denominate,d in foreign currency, disclose the U.S. dollar carrying value of such investments organized by currency denomination and either International Obligations or ' International Equity investment type as applicable. GASB Statement No. 40 Continued on next page Page 5 25 t\ FISCAL POLICIES & PROCEDURES Investment Risks, continued Investment risk definitions and disclosure requirements (continued) Risk Definition Disclosure requirements Credit risk 'Ihe risk that an issuer or other Agencies should provide counterparty to an investment will not information about the credit risk fulfill its obligations. associated with their investments by disclosing the credit quality ratings of investments by type of debt securityas described by Moodys, Standard & Poor and Fitch as of fiscal year-end. i Unlcsn there is information to I the contrary. obligations of the U.S. government or obligations explicitly guaranteed by the U.S. government arc not considered to have credit risk and do nor require dieelusure of credit quality. Concentration of 'Ihe risk of loss attributable to the Agencies should disclose, by credit risk magnitude of investment in a single issuer carrying value and issuer, investments in any one issuer that represent five percent or more of total investments. Investments issued or explicitly guaranteed by the U.S. Government and investments in mutual funds, external investinent pools, and other pooled investments are excluded from this requirement. Continued on next page ,j�XI: Co � ()Illy vsPage 6 Pi,X X GASB Statement No. 40 26 i\ FISCAL PQUCIES ar PROaDURES`er/ Investment Risks, continued Investment risk definitions and disclosure requirements (continued) Entities that must disclose interest rate risk Risk Definition Disclosure requirements Interest rare risk 'lhe risk that changes in interest rares I Agencies should disclose will adversely affect the fair value of an information about the investment. interest rate risk of their debt i investments. (See below for more information about interest rate risk disclosure ) For AFR purposes, only the following agencies must submit interest rate risk disclosure to the Financial Reporting section: • Agencies required to prepare their AFR in accordance with Generally Accepted Accounting Principles (i.e., audited AFR) • The Texas Education Agency (agency 7o l) • Texas A&M University System (agency 798), and • The Univei:sity of'Fexas System (agency 799)• '�JJ , •4,.!�%gip "J GASB Statement No. 40 Continued on next page Page 7 27 FISCAL P041CIES & PROCEDURES Investment Risks, continued Organizing Organize interest rate risk information by type of investment and amount using an interest acceptable method. Acceptable methods are: rate risk • segmented time distribution information Specific identification • weighted average maturity • duration, and • simulation model. Page 8 If a method requires an assumption regarding timing of cash }lows, interest rate changes, or other factors that affect interest rate risk information, that assumption should be disclosed. Agencies using the duration interest rate risk disclosure method should also disclose whether they are using Macaulay duration, modified duration or effective duration. The terms of a debt investment may cause its fair value to be highly sensitive to interest rate changes. Some of the acceptable interest rare risk disclosure methods above incorporate sufficient information about these investments with fair values that are highly sensitive to interest rate changes. To the extent investment terms are not considered in the interest rate risk disclosure requirements, the terms and fair value of that investment should be disclosed. Terms include such information as coupon multipliers, benchmark indexes, reset dates and embedded options. Interest rate risk disclosure methods can adequately communicate the effects of call options with the exception of the specific identification method. Therefore, agencies using the specific identification method are required to make disclosure of call options. GASB Statement No. 40 28 A\ FISCAL POLICIES & PROCEDURES .l r� For More Information Questions If you have questions regarding this Fiscal Policies and Procedures or otter matters concerning appropriate accounting practices, please contact your Financial Reporting analysts in the Fund Accounting Division at 512-463-4992. c GASB Statement No. 40 * TLxxS * Page 9 29 INVESTMENT ADVISORY BOARD Correspondence & Written Material Item A Meeting Date: April 9, 2008 TITLE: Month End Cash Report for March 31', 2008 BACKGROUND: This cash report is not a complete Treasury Report (exclude petty cash, deferred compensation and fiscal agent balances), but would report in a timely fashion selected cash balances. RECOMMENDATION: Information item only. ohn M. Falconer, Finance Director ry r Y $ m d m ��yy ttpp N N N N N m n O 0 n S Hbb00 n o Q0000 I� 0 OOi � re m of m w nna °3 a m o m� n m mN -yY ny m^00 Nip N m y y N n �Nlz <tO m p m m o O o O O pp O N N W N mn n T. m m w Rw Z qC w n Y A M m n O O N O mO m O O O m aLL N N N 000 O pj m m d a v a 0 N 0 N o N O O O O m p LL C6 � m O m m m Ug� vi iu CC O O N N O m n n •- �' v n 0Y On m LL w O 66 O O O O m Q.O 3 m O O N O O O O m LL m N N N O m a O b m m o N m 3x m m ei m m m m O n n m m m m C m O N N m m � m n m m n m (im mm Vi b N m O O OR m m m m E W m m mQ N m m m �Cn y N $ a W $ m E E y m m'm0 We vLL W2 m o m >>0 o�i qm cp4s§� a O m 0 0 H d .s W a s a W a N m E 8 2 t,tw: uommerciai Paper xates ana uutstanatngs ragu-t ar3 i Commercial P Release I About I Announcements I Outstandin>?s I Volume statistics I Year-end Maturity Distribution Data Download Prograrn (DDP) Data as of March 31, 2008 Commercial Paper Rates and Outstanding Derived from data supplied by The Depository Trust $ Clearing Corporation Posted April 1, 2008 Discount rates [Term] nonfinancial nonfinancial financial asset -backed 1-day 2.35 3.43 2.43 3.30 7-day F 3.25 2.26 3.20 1S-day 2.14 3.18 2.16 3.05 30-day 2.10 3.15 2.40 3.05 60-day 2.09 3.10 2.56 3.08 90-day 2.08 n.a. 2.51 2.80 Trade data insufficient to support calculation of the 90-0ay A2IP2 nonfinancial rate for March 31, 2008. Yield curve Money market basis - - - AA nonfinancial ••••••••••• AM nonfinancial ---- AA financial Percent ---------------------_-_------- f f t r t 1 7 15 30 Days to Maturity ,, 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0 http://www.federalreserve.gov/Releases/CP/ 4/l/2008 3 PKB: Commercial Yaper Kates and uutstandmgs Yagez-ur3 Discount rate spread 2001 2002 2003 2004 2005 2006 2007 Discount rate history 2001 2002 2003 2004 2005 2006 2007 Outstandings Weekly (Wednesday), seasonally adjusted Basis points 160 140 120 100 80 60 40 20 0 2008 Percent 7 6 5 4 3 1 0 2008 http://www.federaireserve.gov/Releases/CP/ 4/1/2008 4 PKB: Commercial Yaper Kates and Uutstandmgs Billions of dollars rage 3-c r 3 1190 1090 990 890 790 690 590 490 Billions of dollar 1 1 — — — Nonfinancial (right scale) Financial OCIt kale) Il �l�l t 1 tl 1 ffi. lA 1 i t,i-4, i^k ., ,. A, . �.�� IV Jk4/'It rl ;i pv 2001 2002 2003 2004 2005 2006 2007 250 210 170 130 90 2008 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 Maturity_ Distribution Data Download Program (DDP) Home I Statistical releases Accessibility I Contact Us Last update: April 1, 2008 http://www.federalreserve.gov/Releases/CP/ 4/l/2008 5 Kecent 13111 Auction Kesults Page_I-ar-1 lTreas),rLTDirect® Recent Bill Auction Results Security Issue Maturity Discount Investment Price Term Date Date Rate % Rate % Per $100 CUSIP 91-DAY 04-03-2008 07-03-2008 1.440 1.465 99.636000 912795F30 182-DAY 04-03-2008 30-02-2008 1.500 1.532 99.241667 912795G88 15-DAY 04-01-2008 04-16-2008 1.800 1.826 99.925000 912795UG4 25-DAY 03-27-2008 04-21-2008 1.340 1.360 99.906944 912795UF6 28-DAY 03-27-2008 04-24-2008 1,500 1.523 99.883333 912795D99 91-DAY 03-27-2008 06-26-2008 1.200 1.220 99.696667 912795F22 182-DAY 03-27-2008 09-25-2008 1.550 1.584 99.216389 912795G70 28-DAY 03-20-2008 04-17-2008 0.520 0.527 99.959556 912795D81 91-DAY 03-20-2008 06-19-2008 1.100 1.118 99.721944 91279SE98 182-DAY 03-20-2008 09-18-2008 1.310 1.337 99.337722 912795G62 28-DAY 03-13-2008 04-10-2008 1.800 1.828 99.860000 912795D73 91-DAY 03-13-2008 06-12-2008 1.420 1.445 99.641056 912795E80 182-DAY 03-13-2008 09-11-2008 1.450 1.481 99.266944 912795G54 28-DAY 03-06-2008 04-03-2008 1.980 2.011 99.846000 912795D65 91-DAY 03-06-2008 06-05-2008 1.790 1.823 99.547528 912795E72 182-DAY 03-06-2008 09-04-2008 1.810 1,852 99.084944 912795G47 14-DAY 03-03-2008 03-17-2008 2.550 2.588 99.900833 912795UE9 28-DAY 02-28-2008 03-27-2008 2.320 2.363 99.819556 912795D57 91-DAY 02-28-2008 05-2.9-2008 2.160 2.208 99.454000 912795E64 182-DAY 02-28-2008 08-28-2008 2.070 2.127 98.953500 912795G39 19-DAY 02-27-2008 03-17-2008 2.400 2.443 99.873333 912795UE9 28-DAY 02-21-2008 03-20-2008 2.360 2.404 99.816444 912795D40 91-DAY 02-21-2008 05-22-2008 2.200 2.249 99,443889 912795E56 182-DAY 02-21-2008 08-21-2008 2.040 2.096 98,968667 912795G21 60-DAY 02-15-2008 04-15-2008 2.510 2.563 99.581667 912795UDI 28-DAY 02-14-2008 03-13-2008 2.500 2.547 99.805556 912795D32 63-DAY 02-14-2008 04-17-2008 2.440 2.491 99.573000 912795D81 91-DAY 02-14-2008 05-15-2008 2.250 2.301 99.431250 912795E49 182-DAY 02-14-2008 08-14-2008 2.080 2,137 98.948444 912795F97 28-DAY 02-07-2008 03-06-2008 2.210 2.251 99.828111 912795D24 91-DAY 02-07-2008 05-08-2008 2,230 2.280 99.436306 912795E31 182-DAY 02-07-2008 08-07-2008 2.160 2.220 98.908000 912795F89 28-DAY 01-31-2008 02-28-2008 2.050 2.087 99.840556 912795C90 91-DAY 01-31-2008 05-01-2008 2.335 2.388 99.409764 912795E23 182-DAY 01-31-2008 07-31-2008 2.310 2.376 98.832167 912795F71 26-DAY 01-24-2008 02-21-2008 1.750 1.782 99.863889 912795C82 91-DAY 01-24-2008 04-24-2008 2.370 2.424 99.400917 912795D99 182-DAY 01-24-2008 07-24-2008 2.400 2.470 98.786667 912795F63 28-DAY 01-17-2008 02-14-2008 3.080 3.139 99.760444 912795C74 91-DAY 01-17-2008 04-17-2008 3.080 3.156 99.221444 912795D81 Effective with the 11/2/98 auction, all bills are auctioned using the single -priced method. http://www.treasurydirect.gov/RI/0FBills 4/1/2008 6 rrcrs: ri.iD--.�oetectea interest xates, web -Only Uaily Update --March ZY,_Yage 1 of T Federal Reserve Statistical Release H.15 Selected Interest Rates (Daily) Skip to Content Release Date: March 28, 2008 Weekly release dates I Historical data I Data Download Program (DDP) I About I Announcements Daily update Other formats: Screen reader I ASCII Data Download 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 March 28, 2008 2008 2008 2008 2008 Instruments Mar Mar Mar Mar 24 25 26 27 Federal funds (effective) 1 2 3 2.08 2.42 2.30 2.27 Commercial Paper 3 4 5 Nonfinancial 1-month 2.15 2.23 2.15 2.06 2-month 2.15 2.17 2.17 2.00 3-month n.a. 2.11 2.11 2.13 Financial 1-month 2.41 2.60 2.36 2.68 2-month 2.48 2.55 2.54 2.63 3-month 2.57 2.53 2.56 2.65 CDs (secondary market) 3 6 1-month 2.67 2.71 2.77 2.80 3-month 2.65 2.71 2.77 2.77 6-month 2.61 2.67 2.72 2.70 Eurodollar deposits (London) 3 7 1-month 2.65 2.80 2.80 2.90 3-month 2.65 2.80 2.80 2.90 6-month 2.55 2.75 2.80 2.80 Bank prime loan 2 3 8 5.25 5.25 5.25 5.25 Discount window primary credit 2 9 2.50 2.50 2.50 2.50 U.S. government securities Treasury bills (secondary market) 3 4 4-week 0.58 1.45 1.34 1.30 3-month 1.23 1.27 1.27 1.28 6-month 1.57 1.53 1.45 1.46 Treasury constant maturities Nominal 10 1-month 0.67 1.47 1.36 1.32 3-month 1.24 1.29 1.29 1.30 6-month 1.60 1.56 1.48 1.49 1-year 1.68 1.64 1.56 1.57 2-year 1.84 1.79 1.71 1.73 http://www.federalreserve.gov/Releases/I-I15/update/ 4/1/2008 rxu: ri.l_'i--Neiectea interest xates, wen-uniy uaiiy update--marcnzs-zws rage-Z-ui-4 3-year 5-year 7-year 10-year 20-year 30-year Inflation indexed 11 5-year 7-year 10-year 20-year Inflation -indexed long-term average Interest rate swaps 13 1-year 2-year 3-year 4-year 5-year 7-year 10-year 30-year Corporate bonds Moody's seasoned Aaa 14 Baa State & local bonds 15 Conventional mortgages 16 n.a. Not available. Footnotes 1.99 1.93 1.86 1.88 2.64 2.61 2.55 2.61 3.04 3.00 2.96 3.02 3.56 3.51 3.51 3.56 4.31 4.29 4.31 4.37 4.33 4.30 4.33 4.38 0.47 0.48 0.42 0.40 0.88 0.90 0.88 0.86 1.24 1.25 1.24 1.23 1.88 1.91 1.93 1.92 12 1.88 1.91 1.94 1.93 2.46 2.39 2.38 2.37 2.62 2.55 2.53 2.52 2.90 2.87 2.85 2.85 3.18 3.17 3.15 3.16 3.42 3.41 3.38 3.40 3.76 3.76 3.74 3.79 4.10 4.10 4.09 4.15 4.60 4.62 4.62 4.72 5.49 5.49 5.51 5.56 6.90 6.90 6.92 6.97 4.96 5.85 1. The daily effective federal funds rate is a weighted average of rates on broke 2. Weekly figures are averages of 7 calendar days ending on Wednesday of the curr figures include each calendar day in the month. 3. Annualized using a 360-day year or bank interest. 4. On a discount basis. 5. Interest rates interpolated from data on certain commercial paper trades settl Depository Trust Company. The trades represent sales of commercial paper by deale issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are 30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page (www.federalreserve.gov/releases/cp/). 6. An average of dealer bid rates on nationally traded certificates of deposit. 7. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time. 8. Rate posted by a majority of top 25 (by assets in domestic offices) insured U. commercial banks. Prime is one of several base rates used by banks to price short loans. 9. The rate charged for discounts made and advances extended under the Federal Re credit discount window program, which became effective January 9, 2003. This rate adjustment credit, which was discontinued after January 8, 2003. For further info www.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/default.htm. The rate for the Federal Reserve Bank of New York. Historical series for the rate on adjus 8 http://www.federalreserve.gov/Releases/H15/update/ 4/1/2008 rrcD: n.1J--aerecteu interest Ames, weD-unty catty update--marn LS, 2uLTs P4e3 OT-T 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/ltcompositei Source: U.S. Treasury. 11. Yields on Treasury inflation protected securities (TIPS) adjusted to constant Source: U.S. Treasury. Additional information on both nominal and inflation -index found at www.treas.gov/offices/domestic-finance/debt-management/interest-rate/ind 12. Based on the unweighted average bid yields for all TIPS with remaining terms more than 10 years. 13. International Swaps and Derivatives Association (ISDA(R)) mid -market par swap for a Fixed Rate Payer in return for receiving three month LIBOR, and are based o at 11:00 a.m. Eastern time by Garban Intercapital plc and published on Reuters Pa ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited. 14. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and A rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds o 15. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Th 16. Contract interest rates on commitments for fixed-rate first mortgages. Source Note: Weekly and monthly figures on this release, as well as annual figures avail Board's historical H.15 web site (see below), are averages of business days unles Current and historical H.15 data are available on the Federal Reserve Board's web (www.federalreserve.gov/). For information about individual copies or subscriptio Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-7 electronic access to current and historical data, call STAT-USA at 1-800-782-8872 Description of the Treasury Nominal and Inflation -Indexed Constant 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 r} elease dates I Historical data I Data Download procramtDDP)_I About I Announcements 9 http://www.federalreserve.gov/Releases/Hl5/update/ 4/1/2008 rice: min-miecte4 interest Kates, web-uniy vaily Update=-MeC—If Z8,-ZUUS Vage-4-6I-4 Daily update Other formats: Screen reader I ASCU Statistical releases Home I Economic research and data Accessibility I Contact Us Last update: March 28, 2008 http://www.federaireserve.gov/Releases/1415/update/ 4/1/2008 10 Bill Lockyer, State Treasurer Inside the State Treasurer's Office Local Agency Investment Fund (LAIF) PMIA Performance Report Date Daily Yield Quarter to Date Yield Average Maturity in da s 3/12/2008 3.84 4.31 216 3/13/2008 3.80 4.30 212 3/14/2008 3.79 4.30 213 3/15/2008 3.79 4.29 213 3/16/2008 3.79 4.28 213 3/17/2008 3.79 4.28 208 3/18/2008 3.78 4.27 208 3/19/2008 3.77 4.26 207 3/20/2008 3.74 4.26 207 3/21/2008 3.71 4.25 209 3/22/2008 3.71 4.24 209 3/23/2008 3.711 4.23 209 3/24l2008 3.69 4.23 202 3/25/20081 3.68 4.23 202 Corporate Bonds 0.54% Commercial Paper 6.02% Time Deposit 14.46% LAW Performance Report Quarter ending 12/31/2007 Apportionment Rate: 4.96% Earnings Ratio: 0.00013544408962064 Fair Value Factor: 1.000679115 PMIA Average Monthly Effective Yields February2008 4.161% January 2008 4.620% December 2007 4.801 % Pooled Money Investment Account Portfolio Composition $64.3 Billion 02/29/08 Treasuries Loans 4.90% Mortgages ._ _._. A OA01 18.84% Agencies 36.19% 11 t ) E , ; ! \ ] \ \ ) �§ ¢\4 2- #k# !` # ,� y!� ■� § #k § § — w; �� -, / \§ «K# k¥ !®§® #k ® )k§ } \ #■ §!rK k^ ■ 2A(\#\(«k$¥(\/ ! a## 2##§ §| k`K!«!■§I®Ea§&" $ !, §§[ ## fn wa e //: _ ! ! | ) 2! LD , ( ` | /\ k :®& |a |[ &! ( ; ' E )/0 e( G! i| _ z° / :»;/§\\\ §)�§L) L)M�:m!°uz &§(§L§} ) § !N! /| }\0/\ | Z zI /(5(.)iL 12 INVESTMENT ADVISORY BOARD Correspondence & Written Material Item B Meeting Date: April 9, 2008 TITLE: Pooled Money Investment Board Report for January 2008 BACKGROUND: The Pooled Money Investment Board Report for January 2008 is included in the agenda packet. RECOMMENDATION: Receive & File aJ4ohnM. Falconer, Finance Director POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF JANUARY 2008 WITH JANUARY 2007 (DOLLARS IN THOUSANDS) JANUARY 200811 JANUARY 2007 CHANGE Average Daily Portfolio $ 63,086,247 67,966,340 $ +5,129,907 Accrued Earnings $ 246,861 $ 253,783 $ -6,922 Effective Yield 4.620 6.166 -0.536 Average Life -Month End (in Days) 197 183 +14 Total Security Transactions Amount $ 30,886,643 $ 24,806,849 $ +6,079,794 Number 637 634 +103 Total Time Deposit Transactions Amount $ 6,391,300 $ 6,817,500 $ +673,800 Number 261 211 +40 Average Workday Investment Activity $ 1,776,092 $ 1,458,266 $ +316,837 Prescribed Demand Account Balances For Services $ 309,416 $ 248,440 $ +60,975 For Uncollected Funds $ 192,071 $ 220,261 $ -28,190 1 BILL LOCKYER TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) JANUARY 31, 2008 DIFFERENCE IN PERCENT OF PERCENT OF PORTFOLIO FROM TYPE OF SECURITY AMOUNT PORTFOLIO PRIOR MONTH Government Bills $ 589,614 0.90 -0.35 Bonds 0 0.00 0 Notes 2,218,109 3.37 -0.16 Strips 0 0.00 0 Total Government $ 2,807,723 4.27 -0.51 Federal Agency Coupons $ 9,310,058 14.16 +0.47 Certificates of Deposit 13,186,063 20.05 +1.15 Bank Notes 1,925,000 2.93 +0.86 Bankers' Acceptances 0 0.00 0 Repurchases 0 0.00 0 Federal Agency Discount Notes 12,646,820 19.08 +3.04 Time Deposits 9,151,295 13.92 -0.52 GNMAs 178 0.00 0 Commercial Paper 6,390,534 9.72 -2.91 FHLMC/Remics 1,191,734 1.81 -0.11 Corporate Bonds 360,156 0.53 -0.06 AS 55 Loans 8,896,961 13.53 +0.15 GF Loans 0 0.00 -1.56 Reversed Repurchases 0 0.00 -0.65 Total (All Types) $ 66,754,521 100.00 INVESTMENT ACTIVITY JANUARY 2008 DECEMBER 2007 NUMBER AMOUNT NUMBER AMOUNT Pooled Money 637 $ 30,885,643 621 $ 29,629,407 Other 1 120 17 161,432 Time Deposits 251 6,391,300 190 3,796,000 Totals 889 $ 37,277,063 828 $ 33,586,839 PMIA Monthly Average Effective Yield 4.620 4.801 Year to Date Yield Last Day of Month 5.032 5.105 2 Pooled Money Investment Account Portfolio Composition $65.8 Billion 01 /31 /08 Corporate E 0.53% Commercial Pape 9.72% Time Deposit: 13.92% Treasuries Mortgages Loans 4.27% 1.81% Icr20 CDs/l3Ns 22.98% c Agencies 33.24% BOARD MEMBER ITEMS 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's deposits and investments. INVESTMENT POLICY It is the policy of the City of La Quinta to deposit and invest public funds in a manner which will provide: ➢ Safety of principal as the primary obioctiveg ➢ Liquidity to Moet ag of tfte City's obligations and requirements that may be reasonably anticipated; ➢ A risk -based market rate of return. The Investment Policy will conform to all State and local statutes governing the investment of 1 public funds and sets forth the PermisaiWe dlepositsorttf investrrarrtts of the City's funds and the limitations thereon. III SCOPE Except as further detailed in Section XVlfr this Investment Policy applies to all cash and investments of the City of La Quinta, City of La Quinta Redevelopment Agency and the City of La Quinta Financing Authority (hereafter referred to in this document as the "City"). These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within the following fund types: ► General ► Special Revenue ► Capital Projects ► Debt Service ► Enterprise ► Internal Service ► Trust and Agency ► Any new fund types and fund(s) that may be created. IV OBJECTIVES The objectives of the CAy's irevestment activity, in order of priority and importance, are: Safety of Principal Safety of principal is the foremost objective of the City's investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio in accordance with the permitted investments. The City shall endeavor to preserve its capital funds by making only permissible deposits and investments, undertaken in a controlled manner to minimize the possibility of loss or misappropriation through malfeasance or otherwise. Investments not backed by the full faith and credit of the United States Government shall be diversified by allocating assets between different types of permissible investments and issuers as a means to mitigate credit risk and interest rate risk. A. Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk may be mitigated by: ► Limiting investments to the safest types of securities; ► D4versJ1VhVthe issuers of the purities in the irmeatMentpWffolio so that potential losses due to issuer failure or individual securities downgrades may be minimized. B. Interest Rate Risk is the risk that market values of securities in the portfolio will decline due to changes in general interest rates. Interest rate risk may be mitigated by: ► Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and ► Investing operating funds primarily in shorter -term securities. 2. Provide Liquidity The investment portfolio shell remain sufierrtly liquid to meet ell of the City's cash needs that may be reasortabty anticipated. This is accomplished by structuring the portfolio so that sufficient liquid funds are available to meet anticipated demands. Furthermore since all possible cash needs cannot be anticipated the portfolio should be diversified and consist of securities with active secondary or resale markets. The City's policy is to hold securities and other investments to maturity. Accordingly, securities shall not be sold prior to maturity with the following exceptions: ► A security with declining cradit quality can be sold early to minimize loss of principal; ► Liquidity needs of the portfolio require that one or more securities be sold. 3. Yield a Risk -Based Market Rate of Return The City's investmient portfolio shall be structured with the objective of yielding a risk - based market rate of return throughout budgetary and economic cycles. Return on investment is less important than the safety and liquidity objectives described above. The City's Investment Policy does not specify a single benchmark as a goal or target yield for a rate of return on its investment portfolio. The portfolio's rates of return will be influenced by several factors, including actions by the Federal Reserve Board, the marketplace, and overall economic perceptions and conditions. These factors will not affect yield during the securities' holding period because the City's buy -and -hold policy fixes the securities' yield at the time of purchase. As bases for comparison only, the Treasurer's monthly report will display the rates of return on the three-month six-month, and one-year U.S. Treasury Bill, comparable -period rates for commercial paper and CDs, and the yield for the State Treasurer's Local Agency Investment Fund (LAIF). The Treasurer may use these or any other published rates of return that the Treasurer deems appropriate for comparison to the return on the City's investment portfolio. V MAXIMUM MATURITIES tt is the City's pokcy to heW s urities and other investments until maturity, thus avoiding the risk of market valve fluctuation. This buy -and -hold policy shall not prevent the sale of a security to minimize loss of principal when an issuer or backer suffers declining credit worthiness or when the liquidity needs of the portfolio require that a security be sold. The buy -and -hold policy requires that the City's investment portfolio be structured so that sufficient liquid funds are available from maturing investments and other sources to meet all reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have 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 3 and 5 years. For all other funds, investments are limited to three years maximum maturity, with no more than 25% of surplus funds invested in maturities exceeding two years and less than three years. VII AUTHORITY Authority to manage the City's investment portfolio is derived from sections 35607 and 35608 of City Ordinance 3.08.010. Management responsibility for the investment program is delegated to the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the Investment Policy. The City Treasurer shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. For procedure purposes, the City Manager or Assistant City Manager shall acknowledge in writing all purchases and sales of investments prior to their execution by the City Treasurer. X PERMISSABLE INVESTMENTS AND DEPOSITS The City's permissible deposits and investments are summarized below and more fully described in Appendix A. Permissible Investments and Limitations La Quinta Maximum (See Appendix A for Additional Information) Maximum Maturity Restrictions Checking & Savings Accounts with Federal Deposit Insurance Corporation Sweep Account: & Sweep Accounts. 85% Portfolio 3 years U.S. Treasuries and/or GSE's Certificates of Deposit with interest earnings paid monthly. 60% Portfolio 3 years <=$99,000 per institution U.S. Treasury Bills, Strips, Notes and Bonds. 100% Portfolio 5 years <=$8,0000,000 maturing>3 Yrs U.S. Government Securities and Federal Government Securities (except collateralized mortgage obligations (CMOs) or structured notes which contain embedded rate options): - Government National Mortgage Association (GNMA) 100% Portfolio 3 years - Federal National Mortgage Association (FNMA) $20,000,000 3 years - Federal Home Loan Bank Notes & Bonds (FHLB) $20,000,000 3 years - Federal Farm Credit Bank (FFCB) $20,000,000 3 years - Federal Home Loan Mortgage Corporation (FHLMC) $20,000,000 3 years Prime Commercial Paper 15% Portfolio 90 days $5,000,000 per issuer maximum. Loral Agency Investment Fund (LAIF) 25% Portfolio 3 years $40,000,000 per account. Utilize DVP. Money market mutual funds regulated by the Securities and Exchange 60% Portfolio Maintain $1 per Commission and whose portfolios consist only of US Treasury Securities and 20% of 60 days share par value. or GSE's maintaining a par value per share of $1. surplus funds Utilize DVP. Investment Agreements for bond proceeds and/or reserve funds. N/A $5,imum00 Corporate Notes P o 10% 3years maximum per issuer STATE OF CALIFORNIA AND CITY OF LA QUINTA LIMITATIONS As provided in Sections 16429.1, 53601, 53601.1, and 53649 of the Government Code, the State of California limits the investment vehicles available to local agencies as summarized in the following paragraphs. Section 53601, as now amended, provides that unless Section 53601 specifies a limitation on an investment's maturity, no investments with maturities exceeding five years shall be made. The City's Investment Policy has specified that no investment may exceed three years, except the projected annual dollar amount, as detailed in Section V, may be invested in U.S. Treasury bills, notes and bonds, with maturities between 2 and 5 years, with no more than 25% of surplus funds invested in maturities exceeding two years and less than three years. 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 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 has two accounts with LAIF and limits investment to 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's 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's 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 (GSE's), 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's Investment Policy allows investment only in securities of FNMA, FHLMC, FHLB and FFCB. In addition, no more than 10% of surplus funds may be invested per GSE issuer and no more than 30% of the portfolio surplus may be invested in all GSE's with a maximum $10 million face amount per purchase. For FY 07/08, the maximum face amount has been determined $20 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's Investment Policy does not allow investment in Bankers' Acceptances. Commercial Paper - As authorized in Government Code Section 53601(g), 25% of the portfolio may be invested in commercial paper of the highest rating (A-1 or P-1) as rated by Moody's or Standard and Poor's, with maturities not to exceed 270 days. There are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. The City's Investment Policy follows The Government Code with the following additional limitations: (1) up to 15% of the portfolio may be invested in commercial paper of the highest rating (2) maximum maturity per issue of 90 days and (3) a maximum of $5 million per issuer. Negotiable Certificates of Deposit - As authorized in Government Code Section 53601(h), 30% of the portfolio may be invested in negotiable certificates of deposit issued by commercial banks and savings and loan associations. The City's 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's 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's Investment Policy does not allow investment in Reverse Repurchase Agreements. 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's Investment Policy allows investment in corporate notes authorized by the Government Code with the following limitations: ► Maturities shall conform with Section V. ► Eligible notes shall be regularly quoted and traded in the marketplace. ► Eligible notes shall be rated "AA" or "AAA" on the date of acquisition. ► Total investment shall not exceedl0% of the portfolio, and ► The maximum aggregate investment shall not exceed $5 million face amount for each issuer. 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's 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 536011n►, 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's Investment Policy does not allow investment in Mortgage -Backed Securities. Financial Futures and Financial Option Contracts - As authorized in Government Code Section 53601.1, local agencies may invest in financial futures or option contracts in any of the above investment categories subject to the same overall portfolio limitations. The City's 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 Collateralization policies must be supplied to the City and retained by the City Treasurer as follows: Certificates of Deposits Insured by the FDIC. The City Treasurer may waive collateralization of a deposit that is federally insured. Certificates of Deposit in excess of FDIC Limits. The amount not federally insured shall be 110% collateralized securities or 150% mortgages market value of that amount of invested funds plus unpaid interest earnings. The City's Investment Policy limits the percentage of Certificates of Deposit to 60% of the portfolio. Certificates of Deposits — Private Placement Section 53601.8 allows a local agency, to invest a portion of its surplus funds in certificates of deposit at a commercial bank, savings bank, savings and loan association, or credit union that uses a private sector entity that assists in the placement of certificates of deposit, provided that the purchases of certificates of deposit pursuant to this section, Section 53635.8, and subdivision(h) of Section 53601 do not, in total, exceed 30 percent of the agency's funds that may be invested for this purpose. The City's Investment Policy does not allow investments in Certificate of Deposits — Private placements. 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's Investment Policy does not allow investment in derivatives. Contracting a Professional Portfolio Management Firm With the Approval of the City Council, the City Treasurer may engage a professional portfolio management firm(s) to invest and manage a portion of the City's Funds. The professional portfolio management firm will be approved by City Council based upon a request for proposal process as outlined in Appendix H. Before engagement by the City, except as may be specifically waived or revised, the professional portfolio management firm shall commit to adhere to the provisions of the City's 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. XI INVESTMENT POOLS There are three (3) types of investment pools: 11 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's 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. On an annual basis the City Treasurer will submit the Investment Pool Questionnaire to LAIF. Also, prior to opening any new Investment Pool account, which would require City Council approval; the City Treasurer will require the completion of the Investment Pool Questionnaire. 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 followina 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 cores of investments are limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. 4. Diversified Portfolio Within the constraints of safety, liquidity and yield, the City will endeavor to maintain a diversified portfolio bV allocating assets between different!ypes of investments within olic limitations. The City of La Quinta Investment Policy will use the six-month U.S , Ken..►,m, rie %whan mcaciirinn the nerformance of the investmen FROM SECTION XV 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 3 and 5 years. For all other funds, investments are limited to three years maximum maturity, with no more than 25% of surplus funds invested in maturities exceeding two 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 person which are as follows: Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence, discretion, and intelligence exercise in the professional management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. VII DELEGATION OF AUTHORITY Authority to manage the City of La Quinta's investment portfolio is derived from the City Ordinance. Management responsibility for the investment program is delegated to the City Treasurer, who shall establish written procedures for the operation of the investment program consistent with the Investment Policy. Procedures should include reference to safekeeping, wire transfer agreements, banking service contracts, and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this Investment Policy and the procedures established by the City Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The Ci ana erorAssistantCi Mana ershalla rov ACKNOWL.EDG inwritin all urchase nd sales of investments orior to their execution by the City Treasurer Vill CONFLICT OF INTEREST LEAVE AS IS Investment responsibilities carry added duties of insuring that investments are made without improper influence or the appearance of improper influence. 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 Citys bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. The System of Internal Controls developed by the City, shall be reviewed annually by the independent auditor in connection with the annual audit of the City of La Quinta's Financial Statements. The independent auditor's management letter comments pertaining to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditor's letter. The management letter comments pertaining to cash and investment activities and the City Treasurer's response shall be provided to the City's Investment Advisory Board for their consideration. Following the completion of each annual audit, the independent auditor shall meet with the Investment Advisory Board and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. XV BENCHMARK TAME OUT COMPLETELY 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. —THIS IS ALREADY STATED WORD FOR WORD IN section iv part 3 �he City of La Quinta Investment benchmark when measuring the pei IV, PART 4 XVI REPORTING STANDARDS will use the six-month U.S. Treasury Bill as :e of the investment portfolio. ADD TO SECTION SB564 section 3 requires a quarterly report to the Legislative Body of Investment activities. The City of La Quinta Investment Advisory Board has elected to report the investment activities to the City Council on a monthly basis through the Treasurers Report. AB 943 requires that the December 31't and June 3e 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 trend analysis. ❑ Balance Sheet. ❑ Distribution of cash and investment balances by fund. ❑ A comparison of actual and surplus funds. ❑ A year to date historical cash flow analysis and projection for the next six months. ❑ A two-year list of historical interest rates. XVII FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY The City's Investment Policy does not apply to the following: • Cash and Investments raised from Conduit Debt Financing; • Funds held in trust in the City's name in pension or other post -retirement benefit programs; • Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; • Short or long term loans made to other entities by the City or Agency; and Short term (Due to/from) or long term (Advances from/to) obligations made either between the City and its funds or between the City and Agency. XVIII INVESTMENT OF BOND PROCEEDS LEAVE AS IS The City's Investment Policy shall govern bond proceeds and bond reserve fund investments. California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in accordance with bond indenture provisions which shall be structured in accordance with the City's Investment Policy. Arbitrage Requirement The US Tax Reform Act of 1986 requires the City to perform arbitrage calculations as required and return excess earnings to the US Treasury from investments of proceeds of bond issues sold after the effective date of this law. This arbitrage calculations may be 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 CONTRACTING A PROFESSIONAL PORTFOLIO MANAGEMENT FIRM With the Approval of the City Council, the City may engage a professional portfolio management firm(s) to assist the City Treasurer administer the delegated authority to manage and invest the City's Funds. The professional portfolio management firm will be approved by City Council based upon a request for proposal process as outlined in Appendix H. Before engagement by the City, except as may be specifically waived or revised, the professional portfolio management firm 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; GOVERNMENT CODE SECTION 53600-53609 53600. As used in this article, "local agency" means county, city, city and county, including a chartered city or county, school district, community college district, public district, county board of education, county superintendent of schools, or any public or municipal corporation. 53600.3. Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of alike character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. 53600.5. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, the primary objective of a trustee shall be to safeguard the principal of the funds under its control. The secondary objective shall be to meet the liquidity needs of the depositor. The third objective shall be to achieve a return on the funds under its control_ 53600.6. The Legislature hereby finds that the solvency and creditworthiness of each individual local agency can impact the solvency and creditworthiness of the state and other local agencies within the state. Therefore, fo protect the solvency and creditworthiness of the state and all of its political subdivisions, the Legislature hereby declares that the deposit and investment of public funds by local officials and local agencies is an issue of statewide concern. 53601. This section shall apply to a local agency that is a city, a district, or other local agency that does not pool money in deposits or investments with other local agencies, other than local agencies that have the same governing body. However, Section 53635 shall apply to all local agencies that pool money in deposits or investments with other local agencies that have separate governing bodies. The legislative body of a local agency having money in a sinking fund or money in its treasury not required for the immediate needs of the local agency may invest any portion of the money that it 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