2008 06 11 IABVI
VII
VIII
P.O. Box 1504
LA QUINTA, CALIFORNIA 92247-1504
78-495 CALLL TANIPICO (760) 7 7 7 - 7 0 0 0
LA QUINTA, CALIFORNIA 92253 FAX (760) 777-7101
AGENDA
INVESTMENT ADVISORY BOARD
Finance Conference Room
78-495 Calls Tampico- La Quints, CA 92253
June 11, 2008 - 4:30 P.M.
CALL TO ORDER
a. Pledge of Allegiance
b. Roll Call
PUBLIC COMMENT - (This is the time set aside for public comment on any matter not
scheduled on the agenda.)
CONFIRMATION OF AGENDA
CONSENT CALENDAR
A. Approval of Minutes of Meeting on May 14, 2008 for the Investment Advisory
Board.
BUSINESS SESSION
A. Transmittal of Treasury Report for April, 2008
B. Continued Consideration of Fiscal Year 2008/09 Investment Policy
CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report - May, 2008
B. Pooled Money Investment Board Reports - March, 2008
C. Update on California Municipal Treasurers Association Conference (CMTA)
BOARD MEMBER ITEMS
ADJOURNMENT
mw
INVESTMENT ADVISORY BOARD Business Session: A
Meeting Date: June 11, 2008
ITEM TITLE:
Transmittal of Treasury Report
for April 30, 2008
BACKGROUND:
Attached please find the Treasury Report for April 30, 2008.
RECOMMENDATION:
Review, Receive and File the Treasury Report for April 30, 2008,
VVVI
John M. Falconer, Finance Director
TO:
FROM:
SUBJECT:
DATE:
Tw(f 4 a V a"
MEMORANDUM
La Quints City Council
John M. Falconer, Finance Director/Treasurer
Treasurer's Report for April 30, 2008
May 30, 2008
Attached is the Treasurer's Report for the month ending April 30, 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:
Investment
Beginning
Purchased
Notes
Sold/Matured
Other
Endina
Chan
Cash (3)
$ 69,858
$ (169.527)
(1)
$ (99,669)
$ (169,527)
LAW
42,999,395
8.978,997
(5,000,000)
0
46,978,392
3,978,997
US Treasuries (2)
43,676,884
118,673
43.795,557
118,673
US Gov t Sponsored Enterprises (2)
54,689,707
26,000,000
(21,000,000)
35,589
59,725,296
5,035,589
Commercial Paper (2)
19,950.070
10,000,000
(10,000,000)
4,073
19,954,143
4,073
Corporate Notes
7,957,039
4,720
7,961,759
4,720
Mutual Funds
15 030.776
1
12,337,019
2,693 757
12,337,019
Total
$ 184,373,729
$ 44 809.470
$ 48 337 019
$ 163,055
$ 181,009,235
$ 3,364 494
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 Quinta, I hereby certify that sufficient investment liquidity and anticipated
revenues are available to meet the pods expenditure requirements for the next six months. The City of
La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York
Monthly Custodian Report to determine the fair market value of investments at month end.
g3!Loo
John M. Falcone Date
Finance Director/rreasurer
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 premiumldiscount 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.
Fa
Treasurer's Commentary
For the Month of April
Cash Balances — The portfolio size decreased by $3.3 million to $181.0 million. The major
reason for the decrease was construction payments for the Vista Dunes Lousing Project and
the Ave 48' and Adams Housing Projects.
Investment Activity — The average maturity of the portfolio increased by 8 days to 82 days at
the end of April. The six month US Treasury benchmark increased by 20 basis points and
ended the month at 1.70%. The Treasurer follows a buy and hold investment policy and has
not sold investments before maturity to take advantage of market conditions. The Treasurer
increased by $5 million holdings in Farm Credit GSE's. LAIF increased by $3.9 million to take
advantage of their higher rates in a declining rate environment. As previously reported in last
month's report, Staff did a $12.3 million drawdown in April from mutual funds for low
income project costs. The sweep account earned $2,283 in interest income for the month of
April and the bank fees for the month were $ 3,624 which resulted in a net decrease of $
1,341 in real cots. The bank costs included a one time charge for a second check scanner of
$1,500.
Portfolio Performance — The overall portfolio performance decreased by eighteen basis points
from the prior month and ended at 3.41 % for the month, with the pooled cash investments
yielding 3.45%. The overall portfolio yield (including bond proceeds) was one hundred
seventy one (171) basis points over the benchmark, which has decreased by forty six (46)
basis point from the two hundred seventeen (217) basis point difference in March. With the
average maturity of 82 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 failing. At this time last year, the
portfolio was yielding 5.15% and the benchmark was at 4.84% 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.
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12
INVESTMENT ADVISORY BOARD Business Session No. B
Meeting Date: June 11, 2008
TITLE:
Continued Consideration of Fiscal Year 2008/09
Investment Policies
BACKGROUND:
Pursuant to State Legislation the City investment policies must be approved on an annual
basis by the City Council. This approval is done in June of each year.
During the last several months, the Board has met to update the City Investment Policy.
An Executive Summary of the proposed Fiscal Year 2008/09 Investment Policy is
attached along with correspondence from Board Member's Moulin and Rassi on proposed
revisions.
Pursuant to the Investment Policy, the Board meets with the City Manager and City
Attorney to discuss the Investment Policy before they are forwarded to the City Council
for their consideration.
Staff is requesting two outstanding items be discussed at this meeting:
• Finalize Ethics and Conflicts of Interest Language (page 7).
• Eliminating the GSE 30% Cap (page 10);
RECOMMENDATION:
Forward the Investment Policy to the June 19, 2008 Special City Council meeting for
their consideration with an appropriate recommendation.
John M. Falconer, Finance Director
PAGE EXECUTIVE SUMMARY
10 Increase LAIF percentage from 25% to 30%
10 Increase GSE amounts for Farm Credit from $20 million to $30
million and increase the amount for Federal Home Loan from $20
million to $25 million.
11 Add to permissible investments the ability to use a professional
portfolio management firm.
ATTACHMENT 1
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2008-09
Table of Contents
To is
Executive Summary
General Purpose
Investment Policy
Scope
Objectives
► Safety of Principal
#f'*► Provide Liquidity
► Yield A Risk -Based Market Rate Of Return
Maximum Maturities
Prudence
Delegation of Authority
Ethics and Conflict of Interest
Authorized Financial Dealers and Institutions
+► Broker/Dealers
+► Financial Institutions
PermissibleAathefized Deposits and Investments and LifflilatiORS
Investment Pools
Payment and Custody
Interest Earning Distribution Policy
Internal Controls and Independent Auditors
Reporting Standards
Financial Assets and Investment Activity Not Subject to this Policy
Investment of Bond Proceeds
Investment Advisory Board - City of La Quinta
Investment Policy Adoption
Page
nmary of PermissibleAut Wiled Deposits and Investments �^aa d-�
/ of La Quinta Municipal Code Ordinance 2.70 - Investment Advisory Board
of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and Funds
Iregation of Major Investment Responsibilities
ing of Approved Financial Institutions
ker/Dealer Questionnaire and Certification
9 Request for Proposal for Professional Portfolio Managefinent Firm
H Permissible Investment Chart - Professional Portfolio Management Firm
I Investment Management Process and Risk
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2008-09
Executive Summary
The general purpose of this Investment Policy is to provide the rules and standards asefs that
must be followed in administering' the City of La Quinta's deposits and
investments.
The City's Investment Policy in -conforms to all state and local statutes. Two; y and
applies to all de ositseash and investments of the City of La Quinta, City of La Quinta
Redevelopment Agency, and the City of La Quinta Financing Authority,- e aft:.: ;cf�' �'
deeument as (the "City").
It is the City's policy of to C,�=a Q4inta to deposit and invest a4-public funds in a manner
that shallwhieh will provide:
be —
Safety of principal
► Liquidity tow4i1e meeting daily rash flow demands all of the City's obligations and
requirements that may be reasonably anticipated;
QAd4••*�=..as,,,e..-A risk -based market rate of return.
rrtrs. .
'"Well
l -------•:. : .:-:..
investments shall be made with judgment and eaFe undeF GiFeumstanses then PFavailing—
f-their-own
as well as the Y-
It is the City's policy to hold securities and other investments until maturity. This buy -and -hold
policy shall not prevent the sale of a security to minimize loss of principal when an issuer or
backer suffers declining credit worthiness or when the liquidity needs of the portfolio require
2
that a security be sold.
Authority to manage the City e- ,�s investment portfolio is derived from the City
Ordinance. Management responsibility for the investment program is delegated to the City
Treasurer, who shall establish and implement written procedures for the operation of the City's
investment program consistent with the Investment Policy. The Treasurer shall establish and
implement a system of internal controls to accomplish the following objectives:
'—'*v► Safeguard assets;
-= ► The orderly and efficient conduct of its business, including adherence to all City
management policies;
+► Prevention or detection of errors and fraud;
±► The accuracy and completeness of accounting records; and
► Timely preparation of reliable financial information. !a FnaiRtain the safety of the
adequaey of those E;OntFE)ls and rommenis if weaknesses aFe found.
to assist the Gity TFeaSUFeF iR managing the
The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the
independent auditors in connection with the annual audit of the City of a s Financial
Statements.
Investment responsibilities carry added duties of insuring that investments are made without
improper influence or the appearance to a reasonable person of questionable or improper
influence. -Therefore, the City Manager Assistant City Manager, and the City Treasurer shall
adhere to the State of California Code of Economic Interest
The City Treasurer maintains a listing of financial institutions which
are approved for investment purposes. All Broker/Dealers and financial institutions selected by
the Treasurer to provide investment services will be approved by the City Manager subject to City
Council approval.
The Treasurer will be permitted to invest only in the permissibleG4y-apprsved deposits and
investments described in Section X and Appendix A up to the specified maximum allowable
percentages and/or dollar limitations and, where applicable, through the bid process requirements.
Permissible depositsA •r �iaed and investments include, in general:
FR
At least two bids will be FequiFed of investments in the authoitized investment vehieles.
► FDIC -Insured Checking, Savings, and Sweep Accounts;
► Certificates of Deposit;
► U.S. Government Agency Securities and Federal Government Securities;
► Prime Commercial Paper;
► Local Agency Investment Fund (LAIF)•
► Money Market Mutual Funds;
► Corporate Notes;
► Professionally Managed Accounts.
3
will always be held by an thmFd paft�,F fFRFR ihP iRStiti-ROAR that sells the GeFtifleates of
In the Gity and Fetained by the City TFegq'-'FPF.
The Cit V Shall FeqUiFe that deposits and
investments are generally limited to three years' maximum
maturity. However, the projected
aaaual deNa�amount of funds not expected to be disbursed within five years
may be invested in U.S. Treasury bills, notes and bonds maturing between three3 and fiveb
years.
1 funds is allowable
The City's Investment Policy does not specify a single benchmark as a goal or target yield for a
rate of return on its investment portfolio As a basis for comparison only, the Treasurer's
monthly report will display the rates of return on the three-month six-month, and one-year U.S.
Treasury Bill, comparable -period rates for commercial paper, and the yield for the State
Treasurers Local Agency Investment Fund (LAIF)
The Investment Policiesy shall be adopted by resolution of the La Quinta City Council on an
annual basis. The Investment Policiesy will be adopted before the end of June of each year.
This Executive Summary is only an overview an overall f the City's of I a Qn: m
Investment Policyfes. Reading this summary does not constitute a complete review, which can
only be accomplished by reviewing all of the pages herein.
H
City of La Quinta
Statement of Investment Policy
July 1, 2008-7 through June 3024, 20098
Adopted by the City Council on June- 1949, 2008-7
I GENERAL PURPOSE
The general purpose of this document is to provide the rules and standards Usersthat must be
followed in administering the City of La Quinta's deposits and cash investments.
II INVESTMENT POLICY
It is the policy of the City of La Quinta to deposit -and invest public funds in a manner that
shallwhieh will provide:
Safety of principal as he I);iMa y 9hiBetiVe;
➢ Liquidity to while -meeting d�i y ea h flew demands all of the City's obligations and
requirements that may be reasonably anticipated;
➢ with ��� �A risk -based market rate of return.
In addkt en, The Investment Policy vWH-conforms to all State and local statutes governing the
investment of public funds and sets forth the permissible deposits and investments of the City's
funds and the limitations thereon.
III SCOPE
Except as further detailed in Section XVII Tthis Investment Policy applies to all depositsoash and
investments a a 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's of I a Q, inta Comprehensive
Annual #Financial Report (CAFR) and include all funds within the following fund types:
All the follew"ng fund types:
► General
i}► Special Revenue
� Capital Projects
-,�► Debt Service
t'*► Enterprise
► Internal Service
�► Trust and Agency
� Any new fund types and fund(s) that may be created.
IV OBJECTIVES
The priraaFy bjectives, iR eFdBF Of pFmeFitY,- of the City es I=a Quinta's investment activity, in order
of priority and importance are iall-be:
1. Safety of Principal
Safety of principal is the foremost objective of the City's investment program.
Investments of the Gity of La Quinta shall be undertaken in a manner that seeks to ensure
the preservation of investment principaleapital iaof the overall portfolio in accordance with
the permissibletted deposits and investments.
The City shall endeavor to preserve its investment principal by making only permissible
deposits and investments, undertaken in a controlled manner to minimize the possibility of
loss or misappropriation through malfeasance or otherwise Investments not backed by
the full faith and credit of the United States Government shall be diversified by allocating
assets between different types of permissible investments maturities and issuers as a
means The objeetive will o 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:
GFedit Risk is the Fisk of loss due to the faElUFO of the 68GUF4Y issueF OF baekRF CFPElit FiRk May
be mitigated by
3L*Limiting investments to investment gradethe ...,feet typos of securities as
permitted in Section X;
-
�i►Diversifying the issuers of the securities in the investment portfolio so that
potential losses due to issuer failure or individual securities downgrades may be
minimiz-ens, and 19FGkeF/deaIeFS, whiah the
ed.o rs ti a
Gity ef La Quinta wall de business with; and
SAO-Witieg %vill he 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
interest Rate FWE *S the FiSk that the FAaFket value of se6UFitieS in !he PoFtfelie will fall due to
►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
�t►By4lnvesting operating funds primarily in shorter -term securities.
C. Liquidity Risk is the risk that a security cannot be tradedliquidated because of its
unique features or€ structure or because it is thinly traded Liquidity risk is not a
material issue for the City's portfolio because of the permissible deposits and
investments (see Section X) and because the City maintains a buy -and -hold policy
and holds securities and other investments to maturity. A discussion of the City's
investment process and risk is presented in Appendix I.
Provide Liquidity
The investment portfolio shall remain sufficiently liquid to meet all of the City's eperati-q
FeqUiFeFneot_scash needs that may be reasonably anticipated. This is accomplished by
structuring the portfolio so that sufficient liquid funds are available to meet anticipated
demands. Furthermore, since all possible cash demands needs cannot be anticipated the
portfolio should be diversified and consist of securities with active secondary or resale
markets.
0
The City's policy is to hold securities and other investments to maturity. Accordingly
Ssecunties shall not be sold prior to maturity with the following exceptions:
�► A security with declining credit quality can seWWbe sold
early to minimize loss of principal;
�+► Unanticipated 6liquidity needs of the portfolio require that one or more tfae
securitiesy be sold.
3. Yield A Risk -Based Market Rate Of Return
The City's investment portfolio shall be structureddesijoed with the objective of
iey Idingattaining a risk -based market rate of return throughout budgetary and economic
cycles,needs. Return on
investment is lessef least importantee thaneernpared4e the safety and liquidity objectives
described above. The GAFPs of . e limited
._ -_,_..._,.. ,-._ Fisk seGiffitieS in
The City's Investment Policy does not specify a single benchmark as a goal or target yield
for a rate of return on its investment portfolio The portfolio's rates of return will be
influenced by several factors including actions by the Federal Reserve Board the
marketplace and overall economic perceptions and conditions These factors will not
affect yield during the securities' holding period because the City's buy -and -hold policy
fixes the securities' yield at the time of purchase
As a basis for comparison only, the Treasurer's monthly 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 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 Citv's
investment portfolio.
V MAXIMUM MATURITIES
It is the City's policy of the Git, cf La Q inta to hold securities and other investments of oash in
fiAaReial until maturity, thus avoiding the risk that the of market value en invest+rents
fluctuationes with overall market interest rates. Thise buy -and -hold unt4+oatufity-policy shall not
prevent the sale of a security to minimize loss of principal when anthe issuer or backer suffers
declining credit worthiness or when the liquidity needs of the City require that a security be sold.
The buy -and -hold uRtil FnatW+ty-policy requires that the City o'�intQ s investment portfolio
beis 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 Feasonably aGGUFatereliable, diligently prepared cash flow
projections.
Annually, the Treasurer shall project the amount of funds not expected to be disbursed within five
7
years. For FY 2008-7/098, the amount of such funds is proiected to bewas $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 D EGA I^rAUTHORITY
Authority to manage the Cityof La Qainta's investment portfolio is derived from sections 35607
and 35608 of Vw-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 Treasurerwhe shall establish written procedures for the operation of the investment
program consistent with the Investment Policy. Procedures should include reference to
safekeeping, wire transfer agreements, banking service contracts, and collateral/depository
agreements. Such procedures shall include explicit delegation of authority to persons responsible
for investment transactions. No person may engage in an investment transaction except as
provided under the terms of this Investment Policy and the procedures established by the City
Treasurer. The City Treasurer shall be responsible for all transactions undertaken and shall
establish a system of controls to regulate the activities of subordinate officials. The City Manager
or an Assistant City Manager shall acknowiedgeappfwe in writing all purchases and sales of
investments prior to their execution by the City Treasurer.
Vill ETHICS AND CONFLICT OF INTEREST
Officers and employees involved in the City's banking and investment process shall conduct the
City's business in an ethical manner and refrain from any activity or relationship that may be, or
have the appearance of a conflict of interest Any questionable activity or relationship shall be
reported immediately and comply with the procedures set forth in Section 1.40 - Conflicts of
Interest and Acceptance of Gifts and other Gratuities of the City of La Quinta Personnel Manual
Reporting must be made to the 13,.-,.... nel g4 in accordance with the personnel policies of
the City and until resolved the officer or employee shall refrain from participating in the City's
business related to the matter.
Officers and employees may conduct personal business with banks brokers and other financial
institutions that are authorized to conduct business with the City provided that the terms of the
activity to the accountholder with the City are the same as those thato are
E
available to the public in general
IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City Treasurer maintains a listing of financial institutions which
are approved for direct investment purposes. In addition a list will also be maintained of approved
broker/dealers selected by credit worthiness, who maintain an office in the State of California.
Broker/Dealers who desire to become bidders for direct investment transactions must
supply the City O°�a= uipAa with the following:
�+► Current audited financial statements;
�t► Proof of Financial Industry Regulatory Authority (FINRA) National Asseeiation of
SesuF+ty Dealers Certification;
�+► Trading resolution;
�+► Proof of California registration;
�r► Resume of Financial broker; and
► Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F)
which contains a certification of having read the City's-e€-La-QaiF+ta Investment
Policy.
The City Treasurer shall evaluate the documentation submitted by the broker/dealer and
independently verify existing reports on file for any firm and individual conducting
investment related business.
The City Treasurer will also contact the following agencies during the verification process:
► Financial Industry Regulatory Authority (FINRA)
DealeF'S Public Disclosure Report File (1-800-289-9999).
*► State of California Department of Corporations (1-916-445-3062).
All Broker/Dealers selected by the City Treasurer to provide investment services will be
approved by the City Manager subject to City Council approval. The City Attorney will
perform a legal review of the trading resolution/investment contract submitted by each
Broker/Dealer.
�'7
Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury
Department regulations. Each mutual fund shall provide a prospectus and statement of additional
information.
2. Financial Institutions will be required to meet the following criteria in order to receive City
funds for deposit or investment (see Appendix E "Listing of Approved Financial
Institutions"):
A. Insurance - Public Funds shall be deposited only in financial institutions having
accounts insured by the Federal Deposit Insurance Corporation (FDIC).
B. Collateral - The amount of the City's "`tea deposits or investments not
insured by the FDIC -shall be collateralized by securities' with market values
of 110%, or by mortgages' with market values 150%, of theat amount of
invested funds plus unpaid interest earnings.
C. Disclosure - Each financial institution maintaining invested funds in excess of the
FDIC insured amount shall furnish the City a copy of the most recent ARRUal Call
Report.
The City shall not invest in excess of the FDIC insured amount in banking
institutions which do not disclose to the city a current listing of securities pledged
for collateralization in public monies.
X PERMISSIBLEAl IT#IAR'ZFD DEPOSITS AND INVESTMENTS
Permissible deposits and investments are
summarized below. A more comprehensive list is included in the -Appendix A.
Permissible Investments and Limitations Maximum Maximum Restrictions
(See Appendix A for Additional Information) Allocation Maturi
Checking &Savings Accounts FDIC Insured &Sweep Accounts 85% Portfolio Current / Sweep Account
On Demand U.S. Treasuries
OIIW VI VJC.I
Certificates of Deposit
60% Portfolio
3 Years
"$99000 per
institution
U.S. Treasury Bills Notes and Bonds and Government National
o
100 /° Portfolio
2-Years
<=$8.0000 000
Mortgage Association (GNMA) Securities
maturing 3-5 Yrs
U.S. Government Agency Securities and Federal Government Securities
(except collateralized mortgage obligations (CMOs) or structured notes
which contain embedded rate options):
- Federal National Mortgage Association (FNMA)
$20,000,000
3 Years
- Federal Home Loan Bank Notes & Bonds (FHLB)
$25,000,000
3 Years
- Federal Farm Credit Bank (FFCB)
-Federal Home Loan Mortgage _Ax_ tion (FHLMC)
$30,000,000
$20.000.000 1
3 Years
3 Years
FPnme Commercial Pacer
15% PoMolio
90 D
$5,000,000 per
issuer maximum
Local Agency Investment Fund (LAIF)
30% Portfolio I Current / I 40 million
On Demand per account
10
Permissible Investments and Limitations
(See Appendix A for Additional Information)
Maximum
Maximum
MaturltV
Restrictions
Allocation
Money market mutual funds regulated by the SEC that consist only of US
Treasury Securities GSE's
,
20 /° Portfolio
Current /
On Demand
Maintain $1 per
or and maintain a oar value of $1 per share
share oar value
Corporate Notes
10%
3 Years
55,000.000 max
per issuer. AA
rated or better
Professionally Managed Account
10°k
3 Years
Citv Requires Council -
Approved RFP
with FnatWities exeeeding five yeaFS shall be Fnade- The City of La Q.-Anta 'Rl-'P.-;tFnpfvt
g
1. Checking Savings and Sweep Accounts — The City will only maintain checking savings
and sweep accounts with FDIC insured financial institutions As authorized by the City
Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account
with a $50,000 target balance may be maintained in conjunction with the checking
account.
2. 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:
A. Certificates of Deposits Insured by the FDIC: The City Treasurer may waive
collateraljzation of a deposit that is federally insured
B. 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.
11
➢ The City does not allow investments in CDARs or negotiable (secondary market)
certificates of deposit.
3. U.S. Treasury Bills Notes and Bonds and Government National Mortgage Associations
(GNMA) securities - The City may invest in U.S. Treasury bills notes and bonds and
GNMA securities directly issued and backed by the full faith and credit of the U.S.
Government. The City's Investment Policy limits investments in U.S. Treasury issues and
GNMAs to 100% of the portfolio.
y The City's Investment Policy does not allow investments in local and state
indebtedness.
94. U.S. Government Agency Securities and Federal Government Securities - The Citv ma
invest in securities issued by U.S. Government instrumentalities and agencies (commonly
referred to as government sponsored enterprises or GSEs) These securities are not
backed 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. For Fiscal Year 2008/09 the maximum face amount per issuer is $20 million
for FNMA and FHLMC, $25 million for FHLB and $30 million for FFCB In addition fie
FROM than ° qf sq!pphus `""'" may be invested d DeF GSE and no more than 30% of the
portfolio surplus may be invested in all GSE's combined with a maximum $10 million face
amount per purchase. FOF Fissal _YeaF-2008/09
�-issaeF
5. Prime Commercial Paper - As authorized in Government Code Section 53601(g) a portion
of the City's portfolio may be invested in commercial paper of the highest rating (A-1 or P-
11 as rated by Moody's or Standard and Poor's. There are a number of other qualifications
regarding investments in commercial paper based on the financial strength of the
corporation and the size of the investment. The City's Investment Policy permits
investments in commercial paper with the following limitations:
A. Maximum 15% of the portfolio.
B. Maximum maturity of 90 days.
C. Maximum of $5 million per issuer.
These limitations are more restrictive than the State code allowed amounts of 25% of the
total portfolio with maturities up to 270 days with no per -issuer limitations
6. State Treasurer's Local Agency Investment Fund (LAIF) - As authorized in Government
Code Section 16429.1 and by LAIF procedures, local government agencies are each
authorized to invest a maximum of $40 million per account in this investment program
administered by the California State Treasurer.
The City's investment in the Sta;e Leeal AgeAey InvestmeAt Fund (LAIFJ is allowable as
long as the average maturity of its investment portfolio does not exceed two years, unless
12
specific approval is authorized by the City Council. The City of 'r Uinta has two
accounts with LAIF. The City of La Quinta lRyestment Peliey has and limitsatien of
investment to 30%259; of the portfolio.
7. Money Market Mutual Funds - As authorized in Government Code Section 53601(k) local
agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies (mutual funds) in an amount not to exceed 20% of the agency's
portfolio. There are a number of other qualifications and restrictions regarding allowable
investments in corporate notes and shares of beneficial interest issued by mutual funds
which include (1) attaining the highest ranking or the highest letter and numerical rating
provided by not less than two of the three largest nationally recognized rating services or
(2) having an investment advisor registered with the Securities and Exchange Commission
with not less than five years' experience investing in the securities and obligations and
with assets under management in excess of five hundred million dollars ($500 000 000)
The City's Investment Policy only allows investments in mutual funds that are money
market funds maintaining a par value of $1 per share that invest in direct issues of the
U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not
exceeding 90 days and the City limits such investments to 20% of the portfolio
8. Corporate Notes - As authorized in Government Code Section 53601 (j)local agencies
may invest in corporate notes. The notes must be issued by corporations organized and
operating in the United States or by depository institutions licensed by the United States
or any other state and operating in the United States. The City's Investment Policy allows
investment in corporate notes authorized by the Government Code with the following
limitations:
► Maturities shall not exceed three years from date of purchase.
► Eligible notes shall be regularly quoted and traded in the marketplace
► Eligible notes shall be rated "AA" -or better.
► Total investment shall not exceed10% of the portfolio and
► The maximum aggregate investment shall not exceed $5 million face amount for
each issuer.
This is more restrictive than the State code allowed amounts of 30% of the total portfolio
with maturities up to five years with no per -issuer limitations
9. Professionally Managed Account(s) - The City Treasurer may place up to 10% of the
portfolio with a professional portfolio management firm ("PPMF") The PPMF will be
droved by the City Council based upon the City Treasurer's recommendation pursuant to
completion of a request for proposal (RFP) as outlined in Appendix G. The PPMF shall
have:
(a) an established professional reputation for asset or investment management
(b) knowledge and working familiarity with State and Federal laws governing and
restricting the investment of public funds;
(c) substantial experience providing investment management services to local public
agencies whose investment policies and portfolio size are similar to those of the
City;
(d) professional liability (errors and omissions) insurance and fidelity bonding in such
amounts as are required by the City;
13
(e) registration with the Securities and Exchange Commission under the Investment
Advisers Act of 1940.
Before engagement by the City and except as may be specifically waived or revised the
PPMF shall commit to adhere to the provisions of the City's Investment Policy with the
following exceptions:
(f) the PPMF may be granted the discretion to purchase and sell investment securities
in accordance with Appendix I of this Investment Policy;
(9) the PPMF is not required to adhere to the buy -and -hold policy of the City's
Investment Policy, and;
(h) the PPMF does not need City Manager or City Treasurer approval to make
permissible investments as detailed in column 8 of Appendix H of this Investment
Policy.
ndebtedness and State bonds OF E)theF
ndebtedness. The Gity of La Quinta Investment Poky does net allow invesupenis
n renal _Ra a ti a
im
4-as4-ated
. Triic:v—vrea
14
XI INVESTMENT POOLS
There are three (3) types of investment pools:
► a-►-state-run pools (e.g., LAIF),_
► pools that are operated by a political subdivision where allowed by law and the political
subdivision is the trustee (ei.Re., County Pools); and 3)
it —pools that are operated for profit by third parties.
The City_ e' ,za Investment Policy permits investment only in poolshas authorized in
SectionWFIX' FPFS nvestment
In Additin
XII PAYMENT AND CUSTODY
The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain
appropriate evidence of the City's ownership of securities and other eligible investments. Such
custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or
seller only after receiving evidence that the City has legal, record ownership of the securities.
Even though ownership is evidenced in book -entry form rather than by actual certificates, this
procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of
securities.
XIII INTEREST EARNING DISTRIBUTION POLICY
Interest earnings are generated from pooled investments and specific investments.
17
1. Pooled Investments - It is the general policy of the City to pool all available operating cash
of the City of La Quints, La Quints Redevelopment Agency and La Quinta Financing
Authority and allocate interest earnings, in the following order, as follows:
A. Payment to the General Fund of an amount equal to the total annual bank service
charges as incurred by the general fund for all operating funds as included in the
annual operating budget.
B. Payment to the General Fund of a management fee equal to 5% of the annual
pooled cash fund investment earnings.
C. Payment to each fund of an amount based on the average computerized
daily cash balance included in the common portfolio for the earning period.
2. Specific Investments - Specific investments purchased by a fund shall incur all earnings
and expenses to that particular fund.
XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR
The City Treasurer shall establish a system of internal controls to accomplish the following
objectives:
ii P. Safeguard assets;
�► The orderly and efficient conduct of its business, including adherence to
management policies;
}f'r► Prevention or detection of errors and fraud;
U'_► The accuracy and completeness of accounting records; and
�► Timely preparation of reliable financial information.
While no internal control system, however elaborate, can guarantee absolute assurance that the
City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable
assurance that management of the investment function meets the City's objectives.
The internal controls shall address the following:
At . Control of collusion. Collusion is a situation where two or more employees are working in
conjunction to defraud their employer.
2. Separation of transaction authority from accounting and record keeping. By separating the
person who authorizes or performs the transaction from the people who record or
otherwise account for the transaction, a separation of duties is achieved.
3. 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.
4. 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.
6. Written confirmation or telephone transactions for investments and wire transfers. Due to
the potential for error and improprieties arising from telephone transactions, all telephone
transactions shall be supported by written communications or electronic confirmations and
approved by the appropriate person. Written communications may be via fax if on
letterhead and the safekeeping institution has a list of authorized signatures. Fax
correspondence must be supported by evidence of verbal or written follow-up.
V. Development of a wire transfer agreement with the City's bank and third party custodian.
This agreement should outline the various controls, security provisions, and delineate
responsibilities of each party making and receiving wire transfers.
The System of Internal Controls developed by the City, shall be reviewed annually by the
independent auditor in connection with the annual audit of the City f— te'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.
See Appendix D, "Segregation of Major Investment Responsibilities."
XV B€N6141111ARK
The investment penfelie she" be designed with the objeetive of ebtaining a Fate of FetuFn
safety and liquidity ebjeetives.
The Gity of Le QUORta Investment Paliey well use the six FneAth U.S. T-FeaSUFY Bill as a benshmwk
when meaSUF*Rg the peFfeFrnanGe of the investment penfelio.
XVI REPORTING STANDARDS
tothe
Deeember 21' and ddne3A"
Gemmessmen within sixty days of the end of the quaner-.
The City Treasurer shall submit a monthly Treasurers Report to the City Council and the
Investment Advisory Board that includes all cash and investments under the authority of the
Treasurer.
The Treasurer's Report shall summarize cash and investment activity and changes in balances and
include the following:
�!! A certification by the City Treasurer.
► A listing of Rpurchases and sales/maturities of investments.
3r► 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.
�t► Balance Sheet.
N No Distribution of cash and investment balances by fund.
3k► A comparison of actual and surplus funds.
-Nf I. A year to date historical cash flow analysis and projection for the next six months.
At 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
The City's Investment Policy shall govern bond proceeds and bond reserve fund investments.
California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in
accordance with bond indenture provisions which shall be structured in accordance with the
City's Investment Policy.
Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage
calculations as required and return excess earnings to the US Treasury from investments of
proceeds of bond issues sold after the effective date of this law. These arbitrage calculations
may be contracted with an outside source to provide the necessary technical assistance to
comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept
segregated from other funds and records will be kept in a fashion to facilitate the calculations.
The City's investment position relative to the new arbitrage restrictions is to continue pursuing
the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It
is the City's position to continue maximization of yield and to rebate excess earnings, if
necessary.
20
substantial e;
whose
XVIIIX INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA
The Investment Advisory Board (IAB) is a standing board composed eensists of five members
fromof the ubliceefflmuflity that ami;aye been appointed by and fepertie the City Council.
Background information will be requested and potential candidates must agree to a background
check and verification. On an annual basis in conjunction with the Political Reform Act
disclosure statutes, or at any time if a change in circumstances warrants each board member will
provide the City Council with a disclosure statement which identifies any matters that have a
bearing on the appropriateness of that member's service on the board All board members shall
report annually to the City Clerk on Form 700 Statement of Economic Interests any activities
interests, or relationships that may be or have the appearance of a conflict of interest
The IAB must meet at least quarterly, but usually meetss on a monthly -basis, but at ;eant
quarterly -to:
1. Review at least annually the City's Investment Policy and recommend appropriate
changes;
2. Review monthly treasury report and note compliance with the Investment Policy and
adequacy of cash and investments for anticipated obligations;
3. Receive and consider other reports provided by the City Treasurer;
4. Meet with the independent auditor after completion of the annual audit of the City's
financial statements, and receive and consider the auditor's comments on auditing
procedures, internal controls and findings for cash and investment activities and;
5. Serve as a resource for the City Treasurer on matters such as proposed investments
internal controls use or change of financial institutions,-
nstitutions custodians brokers and dealers
The IAB will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting SeeT-he aAppendixoes B: inelude 6+ty of La
QUiRtR ^ d ' '^ entiVed "Investment Advisory Board Provisions".
XIXI INVESTMENT POLICY ADOPTION
21
"" aR annual bas The Cit s Investment Polic ies will be —� f>_ y raiBiaUy-reviewed annually by the
City's Investment Advisory Board and the City Treasurer. The Investment Advisory Board will
forward the Investment p !olicyie� with any revisions, to the City Manager and City Attorney for
their review and comment. A joint meeting will be held with the Investment Advisory Board, City
Manager, City Attorney, and City Treasurer to review the Investment p !olicyies and any
comments, prior to submission to the City Council for their consideration.
The Investment Policyies shall be adopted by resolution of the City of La Qainta City Council eR
af}annual' 1 be adopted before the end of June of each year.
AR 943 FequiFes that the Investment Pelieies be sent to the GalifOFnia Debt and
22
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Appendix B
City of La Quinta Municipal Code
Chapter 2.70
INVESTMENT ADVISORY BOARD PROVISIONS
Sections:
2.70.010
General Rules Regarding Appointment.
2.70.020
Board meetings.
2.70.030
Board functions.
2.70.010 General rules regarding appointment
A. Except as set out below, see Chapter 2.06 for General Provisions.
B. The Investment Advisory Board (the "board") is a standing board composed of five (5)
r-ers from the public that are appointed by city council. La Quanta Fesideney is FequiFed.exeept
C. Background in the investment field and/or related experience is preferred. Background
infor}nation will be requestedregaiFed and potential candidates must agree to a background check
and verification.
D. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at
any time if a change in circumstances warrants, each board member will provide the City Council
with a disclosure statement which identifies any matters that have a bearing on the
appropriateness of that member's service on the board. Such matters may include, but are not
limited to, changes in employment, changes in residence, or changes in clients.
2.70.020 Board meetings.
The Board usually will meet monthly, but this schedule may be extended to quarterly
meetings upon the concurrence of the Board and the City Council. The specific meeting dates will
be determined by the Board Members and meetings may be called for on an as needed basis.
2.70.030 Board functions.
4-�A. The principal functions of the Board are: (1) review at least annually the City's Investment
Policy and recommend appropriate changes; (2) review monthly Treasury Report and note
compliance with the Investment Policy and adequacy of cash and investments for anticipated
obligations; (3) receive and consider other reports provided by the City Treasurer; (4) meet with
the independent auditor after completion of the annual audit of the City's financial statements, and
receive and consider the auditor's comments on auditing procedures, internal controls, and findings
for cash and investment activities, and; (5) serve as a resource for the City Treasurer on matters
such as proposed investments, internal controls, use or change of financial institutions, custodians,
brokers and dealers.
241B. The Board will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting.
25
26
Appendix C
City of La Quinta Municipal Code
Chapter 3.08
INVESTMENT OF MONEYS AND FUNDS
Sections:
3.08.010 Investment of city moneys and deposit of securities.
3.08.020 Authorized investments.
3.08.030 Sales of securities.
3.08.040 City bonds.
3.08.050 Reports.
3.08.060 Deposits of securities.
3.08.070 Trust fund administration.
3.08.010 Investment of city moneys and deposit of securities.
Pursuant to, and in accordance with, and to the extent allowed by, Sections
53607 and 53608 of the Government Code, the authority to invest and reinvest
moneys of the city, to sell or exchange securities, and to deposit them and provide for
their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982)
3.08.020 Authorized investments.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to purchase, at their original sale or after they have been issued, securities
which are permissible investments under any provision of state law relating to the
investing of general city funds, including but not limited to Sections 53601 and 53635 of
the Government Code, as said sections now read or may hereafter be amended, from
moneys in his custody which are not required for the immediate necessities of the city
and as he may deem wise and expedient, and to sell or exchange for other eligible
securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part),
1982)
3.08.030 Sales of Securities.
From time to time the city treasurer shall sell the securities in which city moneys have
been invested pursuant to this chapter, so that the proceeds may, as appropriate, be
applied to the purchase for which the original purchase money may have been designated
or placed in the city treasury. (Ord.2 § I (part),
3.08.040 City bonds.
Bonds issued by the city and purchased pursuant to this chapter may be canceled
either in satisfaction of sinking fund obligations or otherwise if proper and appropriate;
provided, however, that the bonds may be held uncancelled and while so held may be
27
resold. (Ord. 2 § 1 (part), 1982)
3.08.050 Reports.
The city treasurer shall make a monthly report to the city council of all investments
made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982)
3.08.060 Deposits of securities.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to deposit for safekeeping, the securities in which city moneys have been
invested pursuant to this chapter, in any institution or depository authorized by the terms
of any state law, including but not limited to Section 53608 of the Government Code as
it now reads or may hereafter be amended. In accordance with said section, the city
treasurer shall take from the institution or depository a receipt for the securities so
deposited and shall not be responsible for the securities delivered to and receipted for by
the institution or depository until they are withdrawn therefrom by the city treasurer.
(Ord. 2 § 1 (part), 1982
3.08.070 Trust fund administration.
Any departmental trust fund established by the city council pursuant to Section
36523 of the Government Code shall be administered by the city treasurer in accordance
with Section 36523 and 26524 of the Government code and any other applicable
provisions of law. (Ord. 2 § 1 (part), 1982)
Mf
Appendix D
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Function Responsibleil4 Parties
Develop formal and Recommend Modificationslnvestment Palley Investment Advisory
Board G =r freaSUFef
to City's Formal Investment Policy and City Treasurer
Review #ernaalCity's Investment Policyand-resenfraend City Manager and
and Recommend City Council Aaction and --City
Attorney
Adopt Fformal Investment Policy City Council
Implement Formal Investment Policv City Treasurer
Review Financial Institutions & Select Investments City Treasurer
Approve -Acknowledge (investment sSelections City Manager or
Assistant City Manager
Execute linvestment transactions
T-
Confirm Wwires, (if applicable)
Record linvestment Tfransactions in City's
Aaccounting Rrecords
Investment Vuerification —(match broker confirmation
to City investment records)
Reconcile linvestment Rrecords
—to Aaccounting Rrecords and Bbank Sstatements
Reconcile linvestment Rrecords
of linves
Manager
Security of (investments at City
29
City Treasurer or City Manager or
Accounting Manager or
Financial Services Assistant
Accounting Manager or
Financial Services Assistant
City Treasurer and Financial
Services Assistant
Financial Services Assistant
to Treasurers Report
Vault
Accounting
Security of (investments o9utside City Third Party Custodian
Review (internal Ceontrol Pprocedures External Auditor
30
Appendix E
LISTING OF APPROVED FINANCIAL INSTITUTIONS
1. Banking Services Wells Fargo Bank, Government Services,
Los Angeles, CA
2. Custodian Services Bank of New York, Los Angeles, CA
3. Deferred Compensation International City/County Management
Association Retirement Corporation
4. Broker/Dealer Services Merrill Lynch, San Francisco, CA
Morgan Stanley, San Rafael, CA
CitiGroup, San Francisco Newport
Beach, CA
5. Government Pool State of California Local Agency
Investment Fund
City of La Quinta Account
La Quinta Redevelopment Agency
6. Bond Trustees 1991 City Hall Revenue Bonds - US Bank
1991 RDA Project Area 1 - US Bank
1992 RDA Project Area 2 - US Bank
1994 RDA Project Area 1 - US Bank
1998 RDA Project Area 1 &2 - US Bank
2001 RDA Project Area 1 - US Bank
2002 RDA Project Area 1 - US Bank
2003 RDA Project Area 1 - US Bank
Assessment Districts - US Bank
No Changes to this listing may be made without City Council approval
31
32
Appendix F
1.
2.
3.
4.
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
Name of Firm:
Address:
Telephone: (
Broker's Representative to the City (attach resume):
Name:
Title:
Telephone:) )
Manager/Partner-in-charge (attach resume):
Name:
Title:
Telephone:
6. List all personnel who will be trading with or quoting securities to City employees (attach
resume)
Name:
Title:
Telephone:
7. Which of the above personnel have read the City's Investment Policy?
8. Which instruments are offered regularly by your local office? (Must equal
—100%)
% U.S. Treasuries
% BA's
• Commercial Paper
• CD's
% Mutual Funds
% Agencies (specify):
% Repos
% Reverse Repos
% CMO's
% Derivatives
• Stocks/Equities
• Other (specify):
9._ References -- Please identify your most directly comparable public sector
clients in our geographical area.
Entity
Contact
Entity
Contact
33
Telephone ()
Client Since
Telephone (_)
Client Since
10. Have any of your clients ever sustained a loss on a securities transaction arising from a
misunderstanding or misrepresentation of the risk characteristics of the instrument? If so,
explain.
12.
Has your firm or your local office ever been subject to a regulatory or state/
federal agency investigation for alleged improper, fraudulent, disreputable or unfair
activities related to the sale of securities? Have any of your employees been so
investigated? If so, -explain.
Has a client ever claimed in writing that you were responsible for an
investment loss? —Yes No If yes, please provide
action taken
Has a client ever claimed in writing that your firm was responsible for an
investment loss? —Yes No If yes, please provide -
action taken
Do you have any current or pending complaints that are unreported to FINRA
Yes No If yes, please provide action taken
Does your firm have any current, or pending complaints that are unreported
to FINRA?
Yes No If yes, please provide action taker
34
13. Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
Latest Audit Report
14. How many and what percentage of your transactions failed?..
Last month? % $
Last year?— % $
15. Describe the method your firm would use to establish capital trading limits for the City of
La Quinta.
16. Is your firm a member in the S.I.P.C. insurance program?.-_ Yes No
If yes, explain primary and excess coverage and carriers.
17. . What portfolio information, if any, do you require from your clients?
18. What reports and transaction confirmations or any other research publications will the City
receive?
19. Does your firm offer investment training to your clients? Yes No
20. Does your firm have professional liability insurance?- Yes No
If yes, please provide the insurance carrier, limits and expiration date.
1 21. Please list your FINRA/NASD Registration Number
22. Do you have any relatives who work at the City of La Quinta?
Yes No If yes, Name and Department
23. Do you maintain an office in California. Yes No
35
1 24. Do you maintain an office in La Quinta or Riverside County? Yes No
25. Please enclose the following:
r+-► Latest audited financial statements.
`•=► Samples of reports, transaction confirmations and any other research/publications
the City will receive.
► Samples of research reports and/or publications that your firm regularly provides to
clients.
► Complete schedule of fees and charges for various transactions.
'CERTIFICATION'
*CERTIFICATION*
I hereby certify that 1 have personally read the Statement of Investment Policy of the City of La
Quinta, and have implemented reasonable procedures and a system of controls designed to
preclude imprudent investment activities arising out of transactions conducted between our firm
and the City of La Quinta. All sales personnel will be routinely informed of the City's investment
objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the
City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable
risks associated with financial transactions conducted with our firm.
By signing this document the City of La Quinta is authorized to conduct any and all background
checks.
Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of
my knowledge.
Broker Representative
Date
Title
Sales Manager and/or Managing Partner*
Date Title
36
1 . Does the pool diselose the following about yield ealoulations:
a. The methedelegy used saloul teinterest? (Simple matWity, yield 1
e. MAYO interest is paid? (CFe Bite d te.ffin6pal at the. end 4 the menth, each
37
2- is the pool subjeet to by independent
audit an audkeP
3- is a Gepy of the audit
FePOFt available to paFtiGipanW.
investment
7- Does the pool have SPeEAfiG
POlmGieS With FegaFds te the
What aFe {. .J'FFeFent I
VAFiRl-IS
nvestment
4. What n e the FeF h F'
polieffies type
8Does the of FRaF'( h F I'
h- The FnPthedl used to value the (eOSt,
PE)Ftfelie GUFFeRt
OAFA4 P 1V
The answeFS tO these will help determine
value, eF some otheF fflethed)?
questions you whetheF
FeqU Fements:
ihis pool Fneets YOIAF opwatkmal
[Cie]
us]
Appendix GH
Request for Proposals
Professional Portfolio Management Firm
City of La Quinta, CA
The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms
for the provision of a discretionary investment management services for City of La
Quinta, CA. The portfolio to be managed of the invested assets is will be approximately
10% of the City's investment portfolio net of bond PFOeeeds and will be invested
between 0 — b3 years.
The investment of City of La Quinta, CA's funds is guided by the applicable State
statutes and the City of La Quinta, CA's investment policy. A copy of the investment
policy is attached for your information.
Questions regarding this RFP should be directed to:
Name:
Title:
City of:
Address:
City, State Zip Code:
Phone Number:
John M. Falconer
Finance Director/Treasurer
La Quinta, CA
78-495 Calle Tampico
La Quinta, CA 92253
(760)777-7150
I. CRITERIA FOR EVALUATION AND SELECTION
■ Experience of the firm in providing services to public sector entities of
similar size and with similar investment objectives
■ Professional experience and qualifications of the individuals assigned to the
account
■ Portfolio management resources, investment philosophy and approach
■ Responsiveness to the RFP, communicating an understanding of the overall
program and services required
■ Reporting capabilities
■ Fees
II. SELECTION TIMETABLE
A. [Month Day, Year] Proposals due by [Time] PST.
B. [Month Day, Year] Proposals evaluated: to be determined
C. [Month Day, Year] [City of La Quinta, CA] [Board/Council] approves
selection and awards contract.
Hi
III. FORMAT FOR PROPOSALS
Please format your response to this RFP in the following manner:
A. Organization
1. Describe your organization, date founded, ownership and other business
affiliations. Provide number and location of affiliated offices. Specify the
number of years your organization has provided investment management
service.
2. Describe your firm's revenue sources (e.g., investment management,
institutional research, etc.) and comment on your firm's financial condition.
3. Within the past three years, have there been any significant developments
in your organization (e.g., changes in ownership, new business ventures)?
Do you expect any changes in the near future?
4. Describe any U.S. Securities and Exchange Commission (SEC) censures or
litigation involving your organization, any officer, or employee at any time in
the last ten years.
5. Describe the firm's fiduciary liability and/or errors and omissions insurance
coverage. Include dollar amount of coverage.
B. Personnel
1. Identify the number of professionals employed by your firm by
classification.
2. Provide an organization chart showing function, positions, and titles of all
the professionals in your organization.
3. Provide biographical information on investment professionals that will be
involved in the decision -making process for our portfolio, including number
of years at your firm. Identify the person who will be the primary portfolio
manager assigned to the account.
4. Describe your firm's compensation policies for investment professionals and
address any incentive compensation programs.
M
C. Assets Under Management
1. Summarize your institutional investment management asset totals by category
for your latest reporting period in the following table:
Number Operating Funds
Number of
Other Restrictive
of Clients
Clients
Funds
Governmental
$
$
Governmental Pension
S
Non Governmental
$
Pension
Corporate
$
iaab
High Net Worth Client
$
q eable
Endowmental/Foun-
dation
S
4-.2. Provide the number of separate accounts whose portfolios consist of
operating funds.
-2-.3. List in the following table the percentage by market value of aggregate
assets under all governmental accounts under management for your
latest reporting period:
Type of Asset
Percent by Market
Value
U.S. Treasury securities
Federal Agency obligations
Corporate securities rated AAA -AA
Corporate securities rated A
Corporate securities rated BBB or
lower
43
Other
(specify
�34. Describe the procedures that your firm has in place to address the
potential or actual credit downgrade of an issuer and to disclose and
advise a client of the situation.
5. Provide data on account/asset growth over the past five years. Indicate the
number of government accounts gained and the number of government
accounts lost.
6. List your five governmental largest clients. Identify those that are
exclusively operating fund relationships and/or those that are other
relationships (e.g., bond fund, retirement fund).
7. Provide a copy of the firm's Form ADV, Parts I and II (including all
schedules).
8. Provide proof of State of California Registration, if your firm is not eligible
for SEC registration.
9. Provide a sample contract for services.
D. Philosophy/Approach
1. Describe your firm's investment philosophy for public clients, including your
firm's philosophy regarding average duration, maturity, investment types,
credit quality, and yield.
2. Describe in detail your investment process, as you would apply it to City of
La Quinta, CA's portfolio.
3. What are the primary strategies for adding value to portfolios?
4. Describe the process you would recommend for establishing the investment
objectives and constraints for this account.
5. Describe in detail your process of credit risk management, including how
you analyze credit quality, monitor credits on an ongoing basis, and report
credit to governmental accounts.
6. Describe your firm's trading methodology.
7. Describe your firm's decision -making process in terms of structure,
committees, membership, meeting frequency, responsibilities, integration of
research ideas, and portfolio management.
CLI
8. Describe your research capabilities as they would pertain to governmental
accounts. What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker -
dealer community.
E. Portfolio Management
1. Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City
of La Quinta, CA?
4. How frequently are you willing to meet with us?
4.5. Describe procedures used to ensure that portfolios comply with client
investment objectives, policies, and bond resolutions.
9F. Fees Charged
91. Please include a copy of your firm's fee schedule applicable to this RFP.
92. Identify any expenses that would not be covered through this fee
structure and would be required in order to implement the firm's
program.
93. Is there a minimum annual fee?
G. Performance Reporting
91. Please report on all accounts under $100 million.
e2. Please provide performance history for governmental accounts for the
last five years.
e3. Please provide risk measurements for governmental accounts for the last
five years.
4. Indicate whether your returns are calculated and compiled in accordance
with the Association for Investment Management and Research
(AIMR/CFA Institute) standards.
5. Do your reports conform to the State of California reporting standards? Are
45
you willing to customize your reports to meet our specifications?
6. How will you notify us of investment transactions?
7. Are confirmations of investment transactions sent directly by the
broker/dealer to the client?
8. Do your reports include rating information on investments which is
required by GASB 40?
a.H. References
Provide a list of at least five (5) client references in California. References should
be public agencies with portfolio size and investment objectives similar to City of
La Quinta, CA. Include length of time managing the assets, contact name, and
phone number.
mil. Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Council]'s approval of any agreement for services.
e-.J. Submittal of proposals
91. Seven (7) copies of the proposal shall be submitted in a sealed envelope
bearing the caption RFP for (City of La Quinta, CA) and addressed to:
City of La Quinta, CA
78-495 Calle Tampico
La Quinta, CA 92253
Attention: John M. Falconer
Finance Director/Treasurer
92. Proposal must be received no later than [Time] PST on [Month, Day,
Year].
93. Proposals should be verified before submission. The City of La Quinta,
CA shall not be responsible for errors or omissions on the part of the
respondent in preparation of a proposal. The City of La Quinta, CA
reserves the right to reject any and all proposals, to wave any
irregularities, or informalities in the proposals, and to negotiate
modifications to any proposal.
Enclosures: Investment Policy
Treasurers Report
47
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Appendix I
Investment Management Process and Risk
Except as provided for in Section 27000.3 Government Code Section 53600.3 declares each
person, treasurer, or governing body authorized to make investment decisions on behalf of
local agencies to be a trustee and therefore a fiduciary subject to the prudent investor
standard. These persons shall act with care skill prudence and diligence under the
circumstances then prevailing when investing reinvesting purchasing acquiring exchanging
selling, and managing funds. Section 53600.5 further stipulates that the primary objective of
any person investing public funds is to safeguard principal; secondly, to meet liquidity needs
of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code
Section 27000.5 specifies the same objectives for county treasurers and board of
supervisors).
Risk is inherent throughout the investment process. There is risk assigned to any investment
activity as well as opportunity risk related to inactivity. Market risk is derived from exposure
to overall changes in the general level of interest rates while credit risk is the risk of loss due
to the failure of the insurer of a security. The market value of a security varies inversely with
the level of interest rates. If an investor is required to sell an investment with a five percent
yield in a comparable seven percent rate environment that security will be sold at a loss The
magnitude of that loss will depend on the amount of time until maturity.
Purchasing certain allowable securities with a maturity of greater than five years requires
approval of the governing board (see Government Code Section 53601) Part of that approval
process involves assessing and disclosing the risk and possible volatility of longer -term
investments
Another element of market risk is liquidity risk. Instruments with unique call features special
structures or those issued by little known companies are often thinly traded Their uniqueness
often makes finding prospective buyers in a secondary market more difficult and
consequently, the securities' marketability and price are discounted However, under certain
market conditions gains are also possible with these types of securities
Default risk occurs when the borrower is unable to repay the obligation Generally, securities
issued by the federal government and its agencies are considered the most secure while
securities issued by private corporations or negotiable certificates of deposit issued by
commercial banks have a greater degree of risk. Securities with additional credit
enhancements, such as bankers acceptances collateralized repurchase agreements and
collateralized bank deposits are somewhere between the two on the risk spectrum
The vast majority of portfolios are managed within a buy and hold policy. Investments are
purchased with the intent and capacity to hold that security until maturity. At times market
forces or operations may dictate swapping one security for another or selling a security before
maturity. Continuous analysis and fine tuning of the investment portfolio are considered
prudent investment management.
FIR
Appendix J
GLOSSARY
(Adopted from the Municipal Treasurers Association)
The purpose of this glossary is to provide the reader of the City of La Quinta investment
policies with a better understanding of financial terms used in municipal investing.
AGENCIES: Federal agency securities and/or
Government -sponsored enterprises.
ASKED: The price at which securities are offered.
BANKERS' ACCEPTANCE (BA): A draft or bill of
exchange accepted by a bank or trust company.
The accepting institution guarantees payment of
the bill, as well as the issuer.
BID: The price offered by a buyer of securities.
(When you are selling securities, you ask for a
bid.) See Offer.
BROKER: A broker brings buyers and sellers
together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit
with a specific maturity evidenced by a
certificate. Large -denomination CD's are typically
negotiable.
COLLATERAL: Securities, evidence of deposit or
other property which a borrower pledges to
secure repayment of a loan. Also refers to
securities pledged by a bank to secure deposits of
public monies.
COMMERCIAL PAPER: Short-term unsecured
promissory notes issued by a corporation to raise
working capital. These negotiable instruments
are purchased at a discount to par value or at par
value with interest bearing. Commercial paper is
issued by corporations such as General Motors
Acceptance Corporation, IBM, Bank America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report for the City of
La Quinta. It includes five combined statements
for each individual fund and account group
prepared in conformity with GAAP. It also
includes supporting schedules necessary to
demonstrate compliance with finance -related
50
legal and contractual provisions, extensive
introductory material, and a detailed Statistical
Section.
CONDUIT FINANCING: A form of Financing in
which a government or a government agency
lends its name to a bond issue, although it is
acting only as a conduit between a specific project
and bond holders. The bond holders can look only
to the revenues from the project being financed
for repayment and not to the government or
agency whose name appears on the bond.
COUPON: (a) The annual rate of interest that a
bond's issuer promises to pay the bondholder on
the bond's face value. (b) A certificate attached
to a bond evidencing interest due on a payment
date.
DEALER: A dealer, as opposed to a broker, acts as
a principal in all transactions, buying and selling
for his own account.
DEBENTURE: A bond secured only by the general
credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two
methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery
versus payment is delivery of securities with an
exchange of money for the securities. Delivery
versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose
return profile is linked to, or derived from, the
movement of one or more underlying index or
security, and may include a leveraging factor, or
(2) financial contracts based upon notional
amounts whose value is derived from an
underlying index or security (interest rates, foreign
exchange rates, equities or commodities).
DISCOUNT: The difference between the cost 3.
price of a security and its maturity when quoted
at lower than face value. A security selling
below original offering price shortly after sale also
is considered to be at a discount.
DISCOUNT SECURITIES: Non -interest bearing
money market instruments that are issued a
discount and redeemed at maturity for full face
value, e.g., U.S. Treasury Bills. 4,
DIVERSIFICATION: Dividing investment funds
among a variety of securities offering
independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the
Federal government set up to supply credit to
various classes of institutions and individuals,
e.g., S&L's, small business firms, students, 5.
farmers, farm cooperatives, and exporters.
1. FNMA's (Federal National Mortgage
Association) - Used to assist the home
mortgage market by purchasing mortgages
insured by the Federal Housing
Administration and the Farmers Home
Administration, as well as those guaranteed by
the Veterans Administration. They are issued in
various maturities and in minimum denominations
of $10,000. Principal and Interest is paid
monthly.
2. FHLB's (Federal Home Loan Bank Notes and
Bonds) - Issued by the Federal Home Loan
Bank System to help finance the housing
industry. The notes and bonds provide
liquidity and home mortgage credit to savings
and loan associations, mutual savings banks,
cooperative banks, insurance companies, and
mortgage -lending institutions. They are
issued irregularly for various maturities. The
minimum denomination is $5,000. The notes
are issued with maturities of less than one
year and interest is paid at maturity.
51
FLB's (Federal Land Bank Bonds) - Long-term
mortgage credit provided to farmers by Federal
Land Banks. These bonds are issued at
irregular times for various maturities ranging
from a few months to ten years. The
minimum denomination is $1,000. They carry
semi-annual coupons. Interest is calculated on
a 360-day, 30 day month basis.
FFCB's (Federal Farm Credit Bank) - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
national agricultural industry. They are issued
monthly with three- and six-month maturities.
The FFCB issues larger issues (one to ten
year) on a periodic basis. These issues are
highly liquid.
FICB's (Federal Intermediate Credit bank
Debentures) - Loans to lending institutions
used to finance the short-term and
intermediate needs of farmers, such as
seasonal production. They are usually issued
monthly in minimum denominations of $3,000
with a nine -month maturity. Interest is
payable at maturity and is calculated on a 360-
day, 30-day month basis.
6. FHLMC's (Federal Home Loan Mortgage
Corporation) - a government sponsored entity
established in 1970 to provide a secondary
market for conventional home mortgages.
Mortgages are purchased solely from the
Federal home Loan Bank System member
lending institutions whose deposits are insured
by agencies of the United States Government.
They are issued for various maturities and in
minimum denominations of $10,000. Principal
and Interest is paid monthly. Other federal
agency issues are Small Business
Administration notes (SBA's), Government
National Mortgage Association notes
(GNMA's), Tennessee Valley Authority notes
(TVA's), and Student Loan Association notes
(SALLIE-MAE's).
FEDERAL DEPOSITOR INSURANCE
CORPORATION (FDIC): A federal agency that
insures bank deposits, currently up to $100,000
per deposit.
FEDERAL FUNDS RATE: The rate of interest at
which Fed funds are traded. This rate is currently
pegged by the Federal Reserve through open -
market operations.
FEDERAL HOME LOAN BANKS (FHLB):
Government sponsored wholesale banks
(currently 12 regional banks) which lend funds
and provide correspondent banking services to
member commercial banks, thrift institutions,
credit unions and insurance companies. The
mission of the FHLB's is to liquefy the housing
related assets of its members who must purchase
stock in their district Bank.
FEDERAL OPEN MARKET COMMITTEE (FOMC):
Consists of seven members of the Federal
Reserve Board and five of the twelve Federal
Reserve Bank Presidents. The President of the
New York Federal Reserve Bank is a permanent
member, while the other Presidents serve on a
rotating basis. The Committee periodically meets
to set Federal Reserve guidelines regarding
purchases and sales of Government Securities in
the open market as a means of influencing the
volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of
the United States created by Congress and
consisting of a seven member Board of Governors
in Washington, D.C., 12 regional banks and about
5,700 commercial banks that are members of the
system.
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA or Ginnie Mae): Securities
influencing the volume of bank credit guaranteed
by GNMA and issued by mortgage bankers,
commercial banks, savings and loan associations,
and other institutions. Security holder is
protected by full faith and credit of the U.S.
Government. Ginnie Mae securities are backed
52
by the FHA, VA or FMHM mortgages. The term
"pass -through" is often used to describe Ginnie
Maes.
LAIF (Local Agency Investment Fund) - A special
fund in the State Treasury which local agencies
may use to deposit funds for investment. There is
no minimum investment period and the minimum
transaction is $5,000, in multiples of $1,000
above that, with a maximum balance of
$30,000,000 for any agency. The City is
restricted to a maximum of ten transactions per
month. It offers high liquidity because deposits
can be converted to cash in 24 hours and no
interest is lost. All interest is distributed to those
agencies participating on a proportionate share
basis determined by the amounts deposited and
the length of time they are deposited. Interest is
paid quarterly. The State retains an amount for
reasonable costs of making the investments, not
to exceed one -quarter of one percent of the
earnings.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without a
substantial loss of value. In the money market, a
security is said to be liquid if the spread between
bid and asked prices is narrow and reasonable size
can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP):
The aggregate of all funds from political
subdivisions that are placed in the custody of the
State Treasurer for investment and reinvestment
MARKET VALUE: The price at which a security is
trading and could presumably be purchased or
sold.
MASTER REPURCHASE AGREEMENT: A written
contract covering all future transactions between
the parties to repurchase --reverse repurchase
agreements that establishes each party's rights in
the transactions. A master agreement will
often specify, among other things, the right of the
buyer -lender to liquidate the underlying securities
in the vent of default by the seller -borrower.
MATURITY: The date upon which the principal or
stated value of an investment becomes due and
payable
MONEY MARKET: The market in which short-
term debt instruments (bills, commercial paper,
bankder' acceptances, etc.) are issued and
traded.
OFFER: The price asked by a seller of securities.
(When you are buying securities, you ask for an
offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and
sales of government and certain other securities
in the open market by the New York Federal
Reserve Bank as directed by the FOMC in order
to influence the volume of money and credit in
the economy. Purchases inject reserves into the
bank system and stimulate growth of money and
credit; sales have the opposite effect. Open
market operations are the Federal Reserve's most
important and most flexible monetary policy tool.
PORTFOLIO: Collection of all cash and securities
under the direction of the City Treasurer,
including Bond Proceeds.
PRIMARY DEALER: A group of government
securities dealers who submit daily reports of
market activity and depositions and monthly
financial statements to the Federal Reserve Bank
of New York and are subject to its informal
oversight. Primary dealers include Securities and
Exchange Commission (SEC) -registered securities
broker -dealers, banks and a few unregulated
firms.
QUALIFIED PUBLIC DEPOSITORIES: A financial
institution which does not claim exemption from
the payment of any sales or compensating use or
ad valorem taxes under the laws of this state,
which has segregated for the benefit of the
commission eligible collateral having a value of
not less than its maximum liability and which has
been approved by the Public Deposit Protection
53
Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a
security based on its purchase price or its current
market price. This may be the amortized yield to
maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A
repurchase agreement is a short-term investment
transaction. Banks buy temporarily idle funds
from a customer by selling U.S. Government or
other securities with a contractual agreement to
repurchase the same securities on a future date.
Repurchase agreements are typically for one to
ten days in maturity. The customer receives
interest from the bank. The interest rate reflects
both the prevailing demand for Federal funds and
the maturity of the repo. Some banks will execute
repurchase agreements for a minimum of
$100,000 to $500,000, but most banks have a
minimum of $1,000,000.
REVERSE REPURCHASE AGREEMENTS (RRP or
RevRepo) - A holder of securities sells these
securities to an investor with an agreement to
repurchase them at a fixed price on a fixed date.
The security "buyer" in effect lends the "seller"
money for the period of the agreement, and the
terms of the agreement are structured to
compensate him for this. Dealers use RRP
extensively to finance their positions. Exception:
When the Fed is said to be doing RRP, it is lending
money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered
by banks for a fee whereby securities and
valuables of all types and descriptions are held in
the bank's vaults for protection.
SECONDARY MARKET: A market made for the
purchase and sale of outstanding issues following
the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency
created by Congress to protect investors in
securities transactions by administering securities
legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by
Government Sponsored Enterprises (FHLB,
FNMAS, SLMA, etc.) And Corporations which
have imbedded options (e.g., call features, step-
up coupons, floating rate coupons, derivative -
based returns) into their debt structure. Their
market performance is impacted by the
fluctuation of interest rates, the volatility of the
imbedded options and shifts in the Shape of the
yield curve.
SURPLUS FUNDS: Section 53601 of the
California Government Code defines surplus funds
as any money not required for immediate
necessities of the local agency. The City has
defined immediate necessities to be payment due
within one week.
TREASURY BILLS: A non -interest bearing
discount security issued by the U.S. Treasury to
finance the national debt. Most bills are issued to
mature in three months, six months or one year.
TREASURY BONDS: Long-term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities of more than 10 years.
TREASURY NOTES: Medium -term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and
Exchange Commission requirement that member
firms as well as nonmember broker -dealers in
securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also
called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm,
including margin loans and commitments to
purchase securities, one reason new public issues
are —spread among members of underwriting
syndicates. ' Liquid capital includes cash and
54
assets easily converted into cash.
UNIFORM PRUDENT INVESTOR ACT: The State of
California has adopted this Act. The Act contains
the following sections: duty of care,
diversification, review of assets, costs,
compliance determinations, delegation of
investments, terms of prudent investor rule, and
application.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the
security. (b) NET YIELD or YIELD TO MATURITY is
the current income yield minus any premium
above par of plus any discount from par in
purchase price, with the adjustment spread over
the period from the date of purchase to the date
of maturity of the bond.
ATTACHMENT 2
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2008-09
Table of Contents
Section TOPIC
Executive Summary
I General Purpose
II Investment Policy
III Scope
IV Objectives
► Safety of Principal
► Provide Liquidity
► Yield A Risk -Based Market Rate Of Return
V Maximum Maturities
VI Prudence
VII Authority
Vill Ethics and Conflicts of Interest
IX Authorized Financial Dealers and Institutions
► Broker/Dealers
► Financial Institutions
X Permissible Deposits and Investments
XI Investment Pools
XII Payment and Custody
XIII Interest Earning Distribution Policy
XIV Internal Controls and Independent Auditors
XV Reporting Standards
XVI Financial Assets and Investment Activity Not Subject to this Policy
XVII Investment of Bond Proceeds
XIII Investment Advisory Board - City of La Quinta
XIX Investment Policy Adoption
Appendices Topic
Page
2
6
6
7
7
7
8
12
12
12
13
14
14
15
15
15
Page
A Summary of Permissible Deposits and Investments
17
B City of La Quinta Municipal Code Ordinance 2.70 - Investment Advisory Board
19
C City of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and Funds20
D Segregation of Major Investment Responsibilities
22
E Listing of Approved Financial Institutions
23
F Broker/Dealer Questionnaire and Certification
24
G Request for Proposal for Professional Portfolio Management Firm
28
H Permissible Investment Chart - Professional Portfolio Management Firm
34
1 Investment Management Process and Risk
35
J Glossary
36
1
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2008-09
Executive Summary
The general purpose of this Investment Policy is to provide the rules and standards that must be
followed in administering the City of La Quinta's deposits and investments.
The City's Investment Policy conforms to all state and local statutes and applies to all deposits
and investments of the City of La Quinta, City of La Quinta Redevelopment Agency, and the
City of La Quinta Financing Authority (the"City" ).
It is the City's policy to deposit and invest public funds in a manner that shall provide:
► Safety of principal;
► Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated;
► A risk -based market rate of return.
It is the City's policy to hold securities and other investments until maturity. This buy -and -hold
policy shall not prevent the sale of a security to minimize loss of principal when an issuer or
backer suffers declining credit worthiness or when the liquidity needs of the portfolio require
that a security be sold.
Authority to manage the City's investment portfolio is derived from the City Ordinance.
Management responsibility for the investment program is delegated to the City Treasurer, who
shall establish and implement written procedures for the operation of the City's investment
program consistent with the Investment Policy. The Treasurer shall establish and implement a
system of internal controls to accomplish the following objectives:
► Safeguard assets;
► The orderly and efficient conduct of its business, including adherence to all City
management policies;
► Prevention or detection of errors and fraud;
► The accuracy and completeness of accounting records;
► Timely preparation of reliable financial information.
The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the
independent auditors in connection with the annual audit of the City's Financial Statements.
Investment responsibilities carry added duties of insuring that investments are made without
improper influence or the appearance to a reasonable person of questionable or improper
influence. Therefore, the City Manager, Assistant City Manager, and the City Treasurer shall
adhere to the State of California Code of Economic Interest.
The City Treasurer maintains a listing of financial institutions which are approved for investment
purposes. All Broker/Dealers and financial institutions selected by the Treasurer to provide
investment services will be approved by the City Manager subject to City Council approval.
The Treasurer will be permitted to invest only in the permissible deposits and investments
described in Section X and Appendix A up to the specified maximum allowable percentages
2
and/or dollar limitations and, where applicable, through the bid process requirements. Permissible
deposits and investments include, in general:
► FDIC -Insured Checking, Savings, and Sweep Accounts;
► Certificates of Deposit;
► U.S. Government Agency Securities and Federal Government Securities;
► Prime Commercial Paper;
► Local Agency Investment Fund (LAIF);
► Money Market Mutual Funds;
► Corporate Notes;
► Professionally Managed Accounts.
The City's deposits and investments are generally limited to three years' maximum maturity.
However, the projected amount of funds not expected to be disbursed within five years may be
invested in U.S. Treasury bills, notes and bonds maturing between three and five years.
The City's Investment Policy does not specify a single benchmark as a goal or target yield for a
rate of return on its investment portfolio. As a basis for comparison only, the Treasurer's
monthly report will display the rates of return on the three-month, six-month, and one-year U.S.
Treasury Bill, comparable -period rates for commercial paper, and the yield for the State
Treasurer's Local Agency Investment Fund (LAIF).
The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual
basis. The Investment Policy will be adopted before the end of June of each year.
This Executive Summary is only an overview
summary does not constitute a complete review
of the pages herein.
of the City's Investment Policy. Reading this
which can only be accomplished by reviewing all
3
City of La Quinta
Statement of Investment Policy
July 1, 2008 through June 30, 2009
Adopted by the City Council on June 19, 2008
GENERAL PURPOSE
The general purpose of this document is to provide the rules and standards that must be followed
in administering the City of La Quinta's deposits and investments.
II INVESTMENT POLICY
It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall
provide:
➢ Safety of principal;
➢ Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated;
➢ A risk -based market rate of return.
The Investment Policy conforms to all State and local statutes governing the investment of public
funds and sets forth the permissible deposits and investments of the City's funds and the
limitations thereon.
III SCOPE
Except as further detailed in Section XVII, this Investment Policy applies to all deposits and
investments of the City of La Quinta, 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 City's investment activity, in order of priority and importance, are:
1. Safety of Principal
Safety of principal is the foremost objective of the City's investment program.
0
Investments shall be undertaken in a manner that seeks to ensure the preservation of
principal of the overall portfolio in accordance with the permissible deposits and
investments.
The City shall endeavor to preserve its investment principal by making only permissible
deposits and investments, undertaken in a controlled manner to minimize the possibility of
loss or misappropriation through malfeasance or otherwise. Investments not backed by
the full faith and credit of the United States Government shall be diversified by allocating
assets between different types of permissible investments, maturities, and issuers as a
means to mitigate credit risk and interest rate risk.
A. Credit Risk is the risk of loss from the failure of the security issuer or backer.
Credit risk may be mitigated by:
► Limiting investments to investment grade securities as permitted in Section X;
► Diversifying the issuers of the securities in the investment portfolio so that
potential losses due to issuer failure or individual securities downgrades may be
minimized.
B. Interest Rate Risk is the risk that market values of securities in the portfolio will
decline due to changes in general interest rates. Interest rate risk may be mitigated
by:
► Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell securities
on the open market prior to maturity; and
► Investing operating funds primarily in shorter -term securities.
C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique
features or structure or because it is thinly traded. Liquidity risk is not a material
issue for the City's portfolio because of the permissible deposits and investments
(see Section X) and because the City maintains a buy -and -hold policy and holds
securities and other investments to maturity. A discussion of the City's investment
process and risk is presented in Appendix I.
2. Provide Liquidity
The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs
that may be reasonably anticipated. This is accomplished by structuring the portfolio so
that sufficient liquid funds are available to meet anticipated demands. Furthermore, since
all possible cash needs cannot be anticipated the portfolio should be diversified and
consist of securities with active secondary or resale markets.
The City's policy is to hold securities and other investments to maturity. Accordingly,
securities shall not be sold prior to maturity with the following exceptions:
► A security with declining credit quality can be sold early to minimize loss of
principal;
► Unanticipated liquidity needs of the portfolio require that one or more securities be
sold.
3. Yield A Risk -Based Market Rate Of Return
The City's investment portfolio shall be structured with the objective of yielding a risk -
based market rate of return throughout budgetary and economic cycles. Return on
investment is less important than the safety and liquidity objectives described above.
The City's Investment Policy does not specify a single benchmark as a goal or target yield
for a rate of return on its investment portfolio. The portfolio's rates of return will be
influenced by several factors, including actions by the Federal Reserve Board, the
marketplace, and overall economic perceptions and conditions. These factors will not
affect yield during the securities' holding period because the City's buy -and -hold policy
fixes the securities' yield at the time of purchase.
As a basis for comparison only, the Treasurer's monthly 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 the yield for the State Treasurer's Local Agency
Investment Fund (LAIF). The Treasurer may use these or any other published rates of
return that the Treasurer deems appropriate for comparison to the return on the City's
investment portfolio.
V MAXIMUM MATURITIES
It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk
of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not
prevent the sale of a security to minimize loss of principal when an issuer or backer suffers
declining credit worthiness or when the liquidity needs of the City require that a security be sold.
The buy -and -hold policy requires that the City's investment portfolio be structured so that
sufficient liquid funds are available from maturing investments and other sources to meet all
reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the
Treasurer have reliable, diligently prepared cash flow projections.
Annually, the Treasurer shall project the amount of funds not expected to be disbursed within five
years. For FY 2008/09, the amount of such funds is projected to be $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".
0
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. The City Manager or an Assistant City Manager
shall acknowledge in writing all purchases and sales of investments prior to their execution by the
City Treasurer.
VIII ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the City's banking and investment process shall conduct the
City's business in an ethical manner and refrain from any activity or relationship that may be, or
have the appearance of, a conflict of interest. Any questionable activity or relationship shall be
reported immediately and comply with the procedures set forth in Section 1.40 — Conflicts of
Interest and Acceptance of Gifts and other Gratuities of the City of La Quinta Personnel Manual.
Reporting must be made in accordance with the personnel policies of the City and, until resolved,
the officer or employee shall refrain from participating in the City's business related to the matter.
Officers and employees may conduct personal business with banks, brokers, and other financial
institutions that are authorized to conduct business with the City provided that the terms of the
activity to the accountholder with the City are the same as those that are available to the public in
general.
IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City Treasurer maintains a listing of financial institutions which are approved for direct
investment purposes. In addition a list will also be maintained of approved broker/dealers selected
by credit worthiness, who maintain an office in the State of California.
1. Broker/Dealers who desire to become bidders for direct investment transactions must supply
the City with the following:
► Current audited financial statements;
► Proof of Financial Industry Regulatory Authority (FINRA) Certification;
► Trading resolution;
► Proof of California registration;
► Resume of Financial broker; and
► Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F)
which contains a certification of having read the City's Investment Policy.
7
The City Treasurer shall evaluate the documentation submitted by the broker/dealer and
independently verify existing reports on file for any firm and individual conducting
investment related business.
The City Treasurer will also contact the following agencies during the verification process:
► Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1-
800-289-9999).
P. State of California Department of Corporations (1-916-445-3062).
All Broker/Dealers selected by the City Treasurer to provide investment services will be
approved by the City Manager subject to City Council approval. The City Attorney will
perform a legal review of the trading resolution/investment contract submitted by each
Broker/Dealer.
Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury
Department regulations. Each mutual fund shall provide a prospectus and statement of additional
information.
2. Financial Institutions will be required to meet the following criteria in order to receive City
funds for deposit or investment (see Appendix E, "Listing of Approved Financial
Institutions"):
A. Insurance - Public Funds shall be deposited only in financial institutions having
accounts insured by the Federal Deposit Insurance Corporation (FDIC).
B. Collateral - The amount of the City's deposits or investments not insured by the
FDIC —shall be collateralized by securities with market values of 110%, or by
mortgages with market values 150%, of the amount of invested funds plus unpaid
interest earnings.
C. Disclosure - Each financial institution maintaining invested funds in excess of the
FDIC insured amount shall furnish the City a copy of the most recent Call Report.
The City shall not invest in excess of the FDIC insured amount in banking
institutions which do not disclose to the city a current listing of securities pledged
for collateralization in public monies.
X PERMISSIBLE DEPOSITS AND INVESTMENTS
Permissible deposits and investments are summarized below. A more comprehensive list is
included in Appendix A.
Permissible Investments and Limitations
(See Appendix A for Additional Information)
Maximum
Allocation
Maximum
Maturity
Restrictions
Checking 8 Savings Accounts FDIC Insured 8 Sweep Accounts
olio
85% Portfolio
/
Sweep Account:
U S. Treasuries
On Demand
and/or GSE's
Certificates of Deposit
60% Portfolio
3 Years
`=$99,000 per
institution
D
Permissible Investments and Limitations
Maximum
Maximum
(See Appendix A for Additional Information)
Allocation
Maturity
Restrictions
U.S. Treasury Bills, Notes and Bonds, and Government National
100% Portfolio
3 Years
`=$8,0000,000
Mortgage Association (GNMA) Securities
maturing 3-5 Yrs
U.S. Government Agency Securities and Federal Government Securities
(except collateralized mortgage obligations (CMO's) or structured notes
which contain embedded rate options):
- Federal National Mortgage Association (FNMA)
$20,000,000
3 Years
- Federal Home Loan Bank Notes & Bonds (FHLB)
$25,000,000
3 Years
- Federal Farm Credit Bank (FFCB)
$30,000,000
3 Years
- Federal Home Loan Mortgage Corporation (FHLMC)
$20,000,0o0
3 years
Prime Commercial Paper
15% Portfolio
90 Days
$5,000,000 per
issuer maximum
Local Agency Investment Fund (LAIF)
30% Portfolio
Current 1
On Demand
$40 million
per account.
Money market mutual funds regulated by the SEC that consist only of US
20% Portfolio
Current!
Maintain $1 per
Treasury Securities or GSE's and maintain a par value of $1 per share
On Demand
share par value
$5,000,000 max
Corporate Notes
10%
3 Years
per issuer, AA
rated or better.
Requires
Professionally Managed Account
10%
3 Years
City Council -
Approved RFP
Checking, Savings, and Sweep Accounts - The City will only maintain checking, savings,
and sweep accounts with FDIC insured financial institutions. As authorized by the City
Council, a U.S, Treasury and/or U.S. Agency Securities Money Market Sweep Account
with a $50,000 target balance may be maintained in conjunction with the checking
account.
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:
A. Certificates of Deposits Insured by the FDIC: The City Treasurer may waive
collateralization of a deposit that is federally insured.
B. 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.
E'
➢ The City does not allow investments in CDAR's or negotiable (secondary market)
certificates of deposit.
3. U.S. Treasury Bills, Notes and Bonds and Government National Mortgage Associations
(GNMA) securities - The City may invest in U.S. Treasury bills, notes, and bonds, and
GNMA securities directly issued and backed by the full faith and credit of the U.S.
Government. The City's Investment Policy limits investments in U.S. Treasury issues and
GNMA's to 100% of the portfolio.
➢ The City's Investment Policy does not allow investments in local and state
indebtedness.
4. U.S. Government Agency Securities and Federal Government Securities - The City may
invest in securities issued by U.S. Government instrumentalities and agencies (commonly
referred to as government sponsored enterprises or GSE's). These securities are not
backed by the full faith and credit of the U.S. Government. Publicly owned GSE's include
Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation
(FHLMC) and Student Loan Marketing Association (SLMA). Non -publicly owned GSE's
include the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal
Land Bank (FLB) and Federal Intermediate Credit Bank (FICB).
The City's Investment Policy allows investment only in securities of FNMA, FHLMC, FHLB
and FFCB. For Fiscal Year 2008/09, the maximum face amount per issuer is $20 million
for FNMA and FHLMC, $25 million for FHLB and $30 million for FFCB. In addition, no
more than 30% of the portfolio surplus may be invested in all GSE's combined with a
maximum $10 million face amount per purchase.
5. Prime Commercial Paper - As authorized in Government Code Section 53601(g), a portion
of the City's portfolio may be invested in commercial paper of the highest rating (A-1 or P-
1) as rated by Moody's or Standard and Poor's. There are a number of other qualifications
regarding investments in commercial paper based on the financial strength of the
corporation and the size of the investment. The City's Investment Policy permits
investments in commercial paper with the following limitations:
A. Maximum 15% of the portfolio.
B. Maximum maturity of 90 days.
C. Maximum of $5 million per issuer.
These limitations are more restrictive than the State code allowed amounts of 25% of the
total portfolio with maturities up to 270 days with no per -issuer limitations.
6. 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 30% of
the portfolio.
T
Money Market Mutual Funds - As authorized in Government Code Section 53601(k), local
agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies (mutual funds) in an amount not to exceed 20% of the agency's
portfolio. There are a number of other qualifications and restrictions regarding allowable
investments in corporate notes and shares of beneficial interest issued by mutual funds
which include (1) attaining the highest ranking or the highest letter and numerical rating
provided by not less than two of the three largest nationally recognized rating services, or
(2) having an investment advisor registered with the Securities and Exchange Commission
with not less than five years' experience investing in the securities and obligations and
with assets under management in excess of five hundred million dollars ($500,000,000)•
The City's Investment Policy only allows investments in mutual funds that are money
market funds maintaining a par value of $1 per share that invest in direct issues of the
U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not
exceeding 90 days and the City limits such investments to 20% of the portfolio.
8. Corporate Notes - As authorized in Government Code Section 53601 (j), local agencies
may invest in corporate notes. The notes must be issued by corporations organized and
operating in the United States or by depository institutions licensed by the United States
or any other state and operating in the United States. The City's Investment Policy allows
investment in corporate notes authorized by the Government Code with the following
limitations:
► Maturities shall not exceed three years from date of purchase.
► Eligible notes shall be regularly quoted and traded in the marketplace.
► Eligible notes shall be rated "AA"or better.
► Total investment shall not exceed 10% of the portfolio, and
► The maximum aggregate investment shall not exceed $5 million face amount for
each issuer.
This is more restrictive than the State code allowed amounts of 30% of the total portfolio
with maturities up to five years with no per -issuer limitations
9. Professionally Managed Account(s) - The City Treasurer may place up to 10% of the
portfolio with a professional portfolio management firm ("PPMF"). The PPMF will be
approved by the City Council based upon the City Treasurer's recommendation pursuant to
completion of a request for proposal (RFP) as outlined in Appendix G. The PPMF shall
have:
(a) An established professional reputation for asset or investment management;
(b) Knowledge and working familiarity with State and Federal laws governing and
restricting the investment of public funds;
(c) Substantial experience providing investment management services to local public
agencies whose investment policies and portfolio size are similar to those of the
City;
(d) Professional liability (errors and omissions) insurance and fidelity bonding in such
amounts as are required by the City;
(a) Registration with the Securities and Exchange Commission under the Investment
Advisers Act of 1940.
Before engagement by the City and except as may be specifically waived or revised, the
PPMF shall commit to adhere to the provisions of the City's Investment Policy with the
following exceptions:
11
(f) The PPMF may be granted the discretion to purchase and sell investment securities
in accordance with Appendix I of this Investment Policy;
(g) The PPMF is not required to adhere to the buy -and -hold policy of the City's
Investment Policy, and;
(h) The PPMF does not need City Manager or City Treasurer approval to make
permissible investments as detailed in column 8 of Appendix H of this Investment
Policy.
XI INVESTMENT POOLS
There are three (3) types of investment pools:
► State -run pools (e.g., LAIF);
► Pools that are operated by a political subdivision where allowed by law and the political
subdivision is the trustee (e.g., County Pools);
► Pools that are operated for profit by third parties.
The City's Investment Policy permits investment only in pools authorized in Section X.
XII PAYMENT AND CUSTODY
The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain
appropriate evidence of the City's ownership of securities and other eligible investments. Such
custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or
seller only after receiving evidence that the City has legal, record ownership of the securities.
Even though ownership is evidenced in book -entry form rather than by actual certificates, this
procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of
securities.
XIII INTEREST EARNING DISTRIBUTION POLICY
Interest earnings are generated from pooled investments and specific investments.
1. Pooled Investments - It is the general policy of the City to pool all available operating cash
of the City of La Quinta, La Quinta Redevelopment Agency and La Quinta Financing
Authority and allocate interest earnings, in the following order, as follows:
A. Payment to the General Fund of an amount equal to the total annual bank service
charges as incurred by the general fund for all operating funds as included in the
annual operating budget.
B. Payment to the General Fund of a management fee equal to 5% of the annual
pooled cash fund investment earnings.
C. Payment to each fund of an amount based on the average computerized
daily cash balance included in the common portfolio for the earning period.
2. Specific Investments - Specific investments purchased by a fund shall incur all earnings
and expenses to that particular fund.
Wj
XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR
The City Treasurer shall establish a system of internal controls to accomplish the following
objectives:
► Safeguard assets;
► The orderly and efficient conduct of its business, including adherence to management
policies;
► Prevention or detection of errors and fraud;
► The accuracy and completeness of accounting records; and
► Timely preparation of reliable financial information.
While no internal control system, however elaborate, can guarantee absolute assurance that the
City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable
assurance that management of the investment function meets the City's objectives.
The internal controls shall address the following:
Control of collusion. Collusion is a situation where two or more employees are working in
conjunction to defraud their employer.
2. Separation of transaction authority from accounting and record keeping. By separating the
person who authorizes or performs the transaction from the people who record or
otherwise account for the transaction, a separation of duties is achieved.
3. 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.
4. 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.
5. 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.
6. Written confirmation or telephone transactions for investments and wire transfers. Due to
the potential for error and improprieties arising from telephone transactions, all telephone
transactions shall be supported by written communications or electronic confirmations and
approved by the appropriate person. Written communications may be via fax if on
letterhead and the safekeeping institution has a list of authorized signatures. Fax
correspondence must be supported by evidence of verbal or written follow-up.
7. Development of a wire transfer agreement with the City's bank and third party custodian.
This agreement should outline the various controls, security provisions, and delineate
responsibilities of each party making and receiving wire transfers.
fKf
The System of Internal Controls developed by the City, shall be reviewed annually by the
independent auditor in connection with the annual audit of the City's Financial Statements.
The independent auditor's 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.
See Appendix D, "Segregation of Major Investment Responsibilities."
XV REPORTING STANDARDS
The City Treasurer shall submit a monthly Treasurers Report to the City Council and the
Investment Advisory Board that includes all cash and investments under the authority of the
Treasurer.
The Treasurer's Report shall summarize cash and investment activity and changes in balances and
include the following:
► A certification by the City Treasurer.
► A listing of purchases and sales/maturities of investments.
► Cash and Investments categorized by authorized investments, except for LAW
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.
XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY
The City's Investment Policy does not apply to the following:
► Cash and Investments raised from Conduit Debt Financing;
► Funds held in trust in the City's name in pension or other post -retirement benefit
programs;
► Cash and Investments held in lieu of retention by banks or other financial
institutions for construction projects;
► 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.
14
XVII INVESTMENT OF BOND PROCEEDS
The City's Investment Policy shall govern bond proceeds and bond reserve fund investments.
California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in
accordance with bond indenture provisions which shall be structured in accordance with the
City's Investment Policy.
Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage
calculations as required and return excess earnings to the US Treasury from investments of
proceeds of bond issues sold after the effective date of this law. These arbitrage calculations
may be contracted with an outside source to provide the necessary technical assistance to
comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept
segregated from other funds and records will be kept in a fashion to facilitate the calculations.
The City's investment position relative to the new arbitrage restrictions is to continue pursuing
the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It
is the City's position to continue maximization of yield and to rebate excess earnings, if
necessary.
XVIII INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA
The Investment Advisory Board (IAB) is a standing board composed of five members from the
public that are appointed by the City Council. Background information will be requested and
potential candidates must agree to a background check and verification. On an annual basis, in
conjunction with the Political Reform Act disclosure statutes, or at any time if a change in
circumstances warrants, each board member will provide the City Council with a disclosure
statement which identifies any matters that have a bearing on the appropriateness of that
member's service on the board. All board members shall report annually to the City Clerk on
Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be,
or have the appearance of, a conflict of interest.
The IAB must meet at least quarterly, but usually meets monthly, to:
1. Review at least annually the City's Investment Policy and recommend appropriate
changes;
2. Review monthly treasury report and note compliance with the Investment Policy and
adequacy of cash and investments for anticipated obligations;
3. Receive and consider other reports provided by the City Treasurer;
4. Meet with the independent auditor after completion of the annual audit of the City's
financial statements, and receive and consider the auditor's comments on auditing
procedures, internal controls and findings for cash and investment activities, and;
5. Serve as a resource for the City Treasurer on matters such as proposed investments,
internal controls, use or change of financial institutions, custodians, brokers and dealers.
The IAB will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting. See Appendix B: "Investment Advisory Board
Provisions".
XIX INVESTMENT POLICY ADOPTION
The City's Investment Policy will be reviewed annually by the City's Investment Advisory Board
15
and the City Treasurer. The Investment Advisory Board will forward the Investment Policy with
any revisions to the City Manager and City Attorney for their review and comment. A joint
meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City
Treasurer to review the Investment Policy and any comments prior to submission to the City
Council for their consideration.
The Investment Policy shall be adopted by resolution of the City Council annually before the end
of June of each year.
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Appendix B
City of La Quinta Municipal Code
Chapter 2.70
INVESTMENT ADVISORY BOARD PROVISIONS
Sections:
2.70.010
General Rules Regarding Appointment.
2.70.020
Board meetings.
2.70.030
Board functions.
2.70.010 General rules regarding appointment
A. Except as set out below, see Chapter 2.06 for General Provisions.
B. The Investment Advisory Board (the "board") is a standing board composed of five (5)
members from the public that are appointed by city council.
C. Background in the investment field and/or related experience is preferred. Background
information will be requested and potential candidates must agree to a background check and
verification.
D. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at
any time if a change in circumstances warrants, each board member will provide the City Council
with a disclosure statement which identifies any matters that have a bearing on the
appropriateness of that member's service on the board. Such matters may include, but are not
limited to, changes in employment, changes in residence, or changes in clients.
2.70.020 Board meetings.
The Board usually will meet monthly, but this schedule may be extended to quarterly
meetings upon the concurrence of the Board and the City Council. The specific meeting dates will
be determined by the Board Members and meetings may be called for on an as needed basis.
2.70.030 Board functions.
A. The principal functions of the Board are: (1) review at least annually the City's Investment
Policy and recommend appropriate changes; (2) review monthly Treasury Report and note
compliance with the Investment Policy and adequacy of cash and investments for anticipated
obligations; (3) receive and consider other reports provided by the City Treasurer; (4) meet with
the independent auditor after completion of the annual audit of the City's financial statements, and
receive and consider the auditor's comments on auditing procedures, internal controls, and findings
for cash and investment activities, and; (5) serve as a resource for the City Treasurer on matters
such as proposed investments, internal controls, use or change of financial institutions, custodians,
brokers and dealers.
B. The Board will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting.
I&I
Appendix C
City of La Quints Municipal Code
Chapter 3.08
INVESTMENT OF MONEYS AND FUNDS
Sections:
3.08.010 Investment of city moneys and deposit of securities.
3.08.020 Authorized investments.
3.08.030 Sales of securities.
3.08.040 City bonds.
3.08.050 Reports.
3.08.060 Deposits of securities.
3.08.070 Trust fund administration.
3.08.010 Investment of city moneys and deposit of securities.
Pursuant to, and in accordance with, and to the extent allowed by, Sections
53607 and 53608 of the Government Code, the authority to invest and reinvest
moneys of the city, to sell or exchange securities, and to deposit them and provide for
their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982)
3.08.020 Authorized investments.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to purchase, at their original sale or after they have been issued, securities
which are permissible investments under any provision of state law relating to the
investing of general city funds, including but not limited to Sections 53601 and 53635 of
the Government Code, as said sections now read or may hereafter be amended, from
moneys in his custody which are not required for the immediate necessities of the city
and as he may deem wise and expedient, and to sell or exchange for other eligible
securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part),
1982)
3.08.030 Sales of Securities.
From time to time the city treasurer shall sell the securities in which city moneys have
been invested pursuant to this chapter, so that the proceeds may, as appropriate, be
applied to the purchase for which the original purchase money may have been designated
or placed in the city treasury. (0rd.2 § I (part),
3.08.040 City bonds.
Bonds issued by the city and purchased pursuant to this chapter may be canceled
either in satisfaction of sinking fund obligations or otherwise if proper and appropriate;
provided, however, that the bonds may be held uncancelled and while so held may be
resold. (Ord. 2 § 1 (part), 1982)
20
3.08.050 Reports.
The city treasurer shall make a monthly report to the city council of all investments
made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982)
3.08.060 Deposits of securities.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to deposit for safekeeping, the securities in which city moneys have been
invested pursuant to this chapter, in any institution or depository authorized by the terms
of any state law, including but not limited to Section 53608 of the Government Code as
it now reads or may hereafter be amended. In accordance with said section, the city
treasurer shall take from the institution or depository a receipt for the securities so
deposited and shall not be responsible for the securities delivered to and receipted for by
the institution or depository until they are withdrawn therefrom by the city treasurer.
(Ord. 2 § 1 (part), 1982
3.08.070 Trust fund administration.
Any departmental trust fund established by the city council pursuant to Section
36523 of the Government Code shall be administered by the city treasurer in accordance
with Section 36523 and 26524 of the Government code and any other applicable
provisions of law. (Ord. 2 § 1 (part), 1982)
21
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Function
Develop and Recommend Modifications
to City's Formal Investment Policy
Review City's Investment Policy
and Recommend City Council Action
Adopt Formal Investment Policy
Implement Formal Investment Policy
Review Financial Institutions & Select Investments
Acknowledge Investment Selections
Execute Investment transactions
Confirm Wires (if applicable)
Record Investment Transactions in City's
Accounting Records
Investment Verification (match broker confirmation
to City investment records)
Reconcile Investment Records
to Accounting Records and Bank Statements
Reconcile Investment Records
to Treasurers Report of Investments
Security of Investments at City
Security of Investments outside City
Review Internal Control Procedures
22
Appendix D
Responsible Parties
Investment Advisory Board
and City Treasurer
City Manager
and City Attorney
City Council
City Treasurer
City Treasurer
City Manager or
Assistant City Manager
City Treasurer or City Manager
Accounting Manager or
Financial Services Assistant
Accounting Manager or
Financial Services Assistant
City Treasurer and Financial
Services Assistant
Financial Services Assistant
Accounting Manager
Vault
Third Party Custodian
External Auditor
Appendix E
LISTING OF APPROVED FINANCIAL INSTITUTIONS
1. Banking Services Wells Fargo Bank, Government Services,
Los Angeles, CA
2. Custodian Services Bank of New York, Los Angeles, CA
3. Deferred Compensation International City/County Management
Association Retirement Corporation
4. Broker/Dealer Services Merrill Lynch, San Francisco, CA
Morgan Stanley, San Rafael, CA
CitiGroup, San Francisco Newport
Beach, CA
5. Government Pool State of California Local Agency
Investment Fund
City of La Quinta Account
La Quinta Redevelopment Agency
6. Bond Trustees 1991 City Hall Revenue Bonds - US Bank
1991 RDA Project Area 1 - US Bank
1992 RDA Project Area 2 - US Bank
1994 RDA Project Area 1 - US Bank
1998 RDA Project Area 1 &2 - US Bank
2001 RDA Project Area 1 - US Bank
2002 RDA Project Area 1 - US Bank
2003 RDA Project Area 1 - US Bank
Assessment Districts - US Bank
No Changes to this listing may be made without City Council approval
23
Appendix F
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1. Name of Firm:
2.
3. Telephone: (_) ( )
4. Broker's Representative to the City (attach resume):
Name:
Title:
Telephone: ( ►
5. Manager/Partner-in-charge (attach resume):
Name:
Title:
Telephone:
6. List all personnel who will be trading with or quoting securities to City employees (attach
resume)
Name:
Telephone:
7. Which of the above personnel have read the City's Investment Policy?
8. Which instruments are offered regularly by your local office? (Must equal 100%)
% U.S. Treasuries
% BA's
• Commercial Paper
• CD's
% Mutual Funds
% Agencies (specify):
% Repos
% Reverse Repos
% CMO's
% Derivatives
• Stocks/Equities
• Other (specify):
9. References -- Please identify your most directly comparable public sector clients in our
geographical area.
Entity
Contact
24
Entity
Contact
Telephone ()
Client Since
Telephone (_)
Client Since
10. Have any of your clients ever sustained a loss on a securities transaction arising from a
misunderstanding or misrepresentation of the risk characteristics of the instrument? If so,
explain.
11
12.
13.
Has your firm or your local office ever been subject to a regulatory or state/ federal
agency investigation for alleged improper, fraudulent, disreputable or unfair activities
related to the sale of securities? Have any of your employees been so investigated? If
so, explain.
Has a client ever claimed in writing that you were responsible for an investment loss?
Yes No If yes, please provide action taken
Has a client ever claimed in writing that your firm was responsible for an investment
loss? Yes No If yes, please provide action taken
Do you have any current or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
Does your firm have any current, or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
Latest Audit Report Date
25
14. How many and what percentage of your transactions failed?
Last month? % $
Last year? % $
15. Describe the method your firm would use to establish capital trading limits for the City of
La Quinta.
16. Is your firm a member in the S.I.P.C. insurance program? Yes No
If yes, explain primary and excess coverage and carriers.
17. What portfolio information, if any, do you require from your clients?
18. What reports and transaction confirmations or any other research publications will the City
receive?
19. Does your firm offer investment training to your clients? Yes No
20. Does your firm have professional liability insurance? Yes No
If yes, please provide the insurance carrier, limits and expiration date.
21. Please list your FINRA/NASD Registration Number
22. Do you have any relatives who work at the City of La Quinta?
Yes No If yes, Name and Department
23.
Do you maintain an office in California?
Yes
No
24.
Do you maintain an office in La Quinta or Riverside County?
Yes
No
25. Please enclose the following:
► Latest audited financial statements.
► Samples of reports, transaction confirmations and any other research/publications the
City will receive.
► Samples of research reports and/or publications that your firm regularly provides to
clients.
► Complete schedule of fees and charges for various transactions.
***CERTIFICATION**'
26
I hereby certify that I have personally read the Statement of Investment Policy of the City of La
Quinta, and have implemented reasonable procedures and a system of controls designed to
preclude imprudent investment activities arising out of transactions conducted between our firm
and the City of La Quinta. All sales personnel will be routinely informed of the City's investment
objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the
City. We pledge to exercise due diligence in informing the City of La Quints of all foreseeable
risks associated with financial transactions conducted with our firm.
By signing this document the City of La Quinta is authorized to conduct any and all background
checks.
Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of
my knowledge.
Broker Representative
Date
Sales Manager and/or Managing Partner*
Title
27
Appendix G
Request for Proposals
Professional Portfolio Management Firm
City of La Quinta, CA
The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms for the
provision of a discretionary investment management services for City of La Quinta, CA. The
portfolio to be managed of the invested assets is will be approximately 10% of the City's
investment portfolio and will be invested between 0 - 3 years.
The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and
the City of La Quinta, CA's investment policy. A copy of the investment policy is attached for
your information.
Questions regarding this RFP should be directed to:
Name:
Title:
City of:
Address:
City, State, Zip Code:
Phone Number:
John M. Falconer
Finance Director/Treasurer
La Quinta, CA
78-495 Calle Tampico
La Quinta, CA 92253
(760)777-7150
I. CRITERIA FOR EVALUATION AND SELECTION
■ Experience of the firm in providing services to public sector entities of similar size
and with similar investment objectives;
■ Professional experience and qualifications of the individuals assigned to the
account;
■ Portfolio management resources, investment philosophy and approach;
■ Responsiveness to the RFP, communicating an understanding of the overall
program and services required;
■ Reporting capabilities;
■ Fees.
II. SELECTION TIMETABLE
A. [Month, Day and Year] Proposals due by [Time] PST.
B. [Month, Day and Year] Proposals evaluated: to be determined
C. [Month, Day and Year] [City of La Quinta, CA] [Board/Council] approves selection
and awards contract.
III. FORMAT FOR PROPOSALS
Please format your response to this RFP in the following manner:
A. Organization
92
1. Describe your organization, date founded, ownership and other business
affiliations. Provide number and location of affiliated offices. Specify the number
of years your organization has provided investment management service.
2. Describe your firm's revenue sources (e.g., investment management, institutional
research, etc.) and comment on your firm's financial condition.
3. Within the past three years, have there been any significant developments in your
organization (e.g., changes in ownership, new business ventures)? Do you expect
any changes in the near future?
4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation
involving your organization, any officer, or employee at any time in the last ten
years.
5. Describe the firm's fiduciary liability and/or errors and omissions insurance
coverage. Include dollar amount of coverage.
B. Personnel
C
Governmental
1. Identify the number of professionals employed by your firm by classification.
2. Provide an organization chart showing function, positions, and titles of all the
professionals in your organization.
3. Provide biographical information on investment professionals that will be involved
in the decision -making process for our portfolio, including number of years at your
firm. Identify the person who will be the primary portfolio manager assigned to the
account.
4. Describe your firm's compensation policies for investment professionals and
address any incentive compensation programs.
Assets Under Management
1. Summarize your institutional investment management asset totals by category for
your latest reporting period in the following table:
Governmental Pension
Non Governmental
Pension
Number Operating funds
of Clients
S
S
S
29
Number of Other Restrictive
Clients Funds
S
0
r a �1pPljratif
�tis'�bl
Corporate $ '_#
lc,
High Net Worth Client $'
- lrcabl
Endowmental/Foun-
dation
E
S
o,.
`I'cabi � o 'A` Uca I
Provide the number of separate accounts whose portfolios consist of operating
funds.
3. List in the following table the percentage by market value of aggregate assets
under all governmental accounts under management for your latest reporting
period:
Type of Asset
U.S. Treasury securities
Federal Agency obligations
Corporate securities rated AAA -AA
Corporate securities rated A
Corporate securities rated BBB or
lower
Other
(specify
Percent by Market
Value
4. Describe the procedures that your firm has in place to address the potential or
actual credit downgrade of an issuer and to disclose and advise a client of the
situation.
5. Provide data on account/asset growth over the past five years. Indicate the
number of government accounts gained and the number of government accounts
lost.
6. List your five governmental largest clients. Identify those that are exclusively
operating fund relationships and/or those that are other relationships (e.g., bond
fund, retirement fund).
7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules).
8. Provide proof of State of California Registration, if your firm is not eligible for SEC
registration.
9. Provide a sample contract for services.
30
D. Philosophy/Approach
1. Describe your firm's investment philosophy for public clients, including your firm's
philosophy regarding average duration, maturity, investment types, credit quality,
and yield.
2. Describe in detail your investment process, as you would apply it to City of La
Quinta, CA's portfolio.
3. What are the primary strategies for adding value to portfolios?
4. Describe the process you would recommend for establishing the investment
objectives and constraints for this account.
5. Describe in detail your process of credit risk management, including how you
analyze credit quality, monitor credits on an ongoing basis, and report credit to
governmental accounts.
6. Describe your firm's trading methodology.
7. Describe your firm's decision -making process in terms of structure, committees,
membership, meeting frequency, responsibilities, integration of research ideas, and
portfolio management.
8. Describe your research capabilities as they would pertain to governmental
accounts. What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker -dealer
community.
E. Portfolio Management
1. Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City of La
Quinta, CA?
4. How frequently are you willing to meet with us?
5. Describe procedures used to ensure that portfolios comply with client investment
objectives, policies, and bond resolutions.
F. Fees Charged
1. Please include a copy of your firm's fee schedule applicable to this RFP.
2. Identify any expenses that would not be covered through this fee structure and
would be required in order to implement the firm's program.
31
3. Is there a minimum annual fee?
G. Performance Reporting
1. Please report on all accounts under $100 million.
2. Please provide performance history for governmental accounts for the last five
years.
3. Please provide risk measurements for governmental accounts for the last five
years.
4. Indicate whether your returns are calculated and compiled in accordance with
the Association for Investment Management and Research (AIMR/CFA Institute)
standards.
5. Do your reports conform to the State of California reporting standards? Are you
willing to customize your reports to meet our specifications?
6. How will you notify us of investment transactions?
7. Are confirmations of investment transactions sent directly by the broker/dealer to
the client?
8. Do your reports include rating information on investments which is required by
GASB 40?
H. References
Provide a list of at least five (5) client references in California. References should be
public agencies with portfolio size and investment objectives similar to City of La Quinta,
CA. Include length of time managing the assets, contact name, and phone number.
I. Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Council]'s approval of any agreement for services.
J. Submittal of proposals
1. Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing
the caption RFP for (City of La Quinta, CA) and addressed to:
City of La Quinta, CA
78-495 Calle Tampico
La Quinta, CA 92253
Attention: John M. Falconer
Finance Director/Treasurer
2. Proposal must be received no later than [Time] PST on [Month, Day, and Year].
32
3. Proposals should be verified before submission. The City of La Quinta, CA shall
not be responsible for errors or omissions on the part of the respondent in
preparation of a proposal. The City of La Quinta, CA reserves the right to reject
any and all proposals, to wave any irregularities, or informalities in the
proposals, and to negotiate modifications to any proposal.
Enclosures: Investment Policy
Treasurers Report
33
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Appendix H
34
Appendix I
Investment Management Process and Risk
Except as provided for in Section 27000.3, Government Code Section 53600.3 declares each
person, treasurer, or governing body authorized to make investment decisions on behalf of
local agencies to be a trustee and therefore a fiduciary subject to the prudent investor
standard. These persons shall act with care, skill, prudence, and diligence under the
circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging,
selling, and managing funds. Section 53600.5 further stipulates that the primary objective of
any person investing public funds is to safeguard principal; secondly, to meet liquidity needs
of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code
Section 27000.5 specifies the same objectives for county treasurers and board of
supervisors).
Risk is inherent throughout the investment process. There is risk assigned to any investment
activity as well as opportunity risk related to inactivity. Market risk is derived from exposure
to overall changes in the general level of interest rates while credit risk is the risk of loss due
to the failure of the insurer of a security. The market value of a security varies inversely with
the level of interest rates. If an investor is required to sell an investment with a five percent
yield in a comparable seven percent rate environment, that security will be sold at a loss. The
magnitude of that loss will depend on the amount of time until maturity.
Purchasing certain allowable securities with a maturity of greater than five years requires
approval of the governing board (see Government Code Section 53601). Part of that approval
process involves assessing and disclosing the risk and possible volatility of longer -term
investments
Another element of market risk is liquidity risk. Instruments with unique call features, special
structures or those issued by little known companies are often thinly traded. Their uniqueness
often makes finding prospective buyers in a secondary market more difficult and,
consequently, the securities' marketability and price are discounted. However, under certain
market conditions, gains are also possible with these types of securities.
Default risk occurs when the borrower is unable to repay the obligation. Generally, securities
issued by the federal government and its agencies are considered the most secure, while
securities issued by private corporations or negotiable certificates of deposit issued by
commercial banks have a greater degree of risk. Securities with additional credit
enhancements, such as bankers acceptances, collateralized repurchase agreements and
collateralized bank deposits are somewhere between the two on the risk spectrum.
The vast majority of portfolios are managed within a buy and hold policy. Investments are
purchased with the intent and capacity to hold that security until maturity. At times, market
forces or operations may dictate swapping one security for another or selling a security before
maturity. Continuous analysis and fine tuning of the investment portfolio are considered
prudent investment management.
35
Appendix J
GLOSSARY
(Adopted from the Municipal Treasurers Association)
The purpose of this glossary is to provide the reader of the City of La Quinta investment
policies with a better understanding of financial terms used in municipal investing.
AGENCIES: Federal agency securities and/or
Government -sponsored enterprises.
ASKED: The price at which securities are offered.
BANKERS' ACCEPTANCE MA): A draft or bill of
exchange accepted by a bank or trust company.
The accepting institution guarantees payment of
the bill, as well as the issuer.
BID: The price offered by a buyer of securities.
(When you are selling securities, you ask for a
bid.) See Offer.
BROKER: A broker brings buyers and sellers
together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit
with a specific maturity evidenced by a
certificate. Large -denomination CD's are typically
negotiable.
COLLATERAL: Securities, evidence of deposit or
other property which a borrower pledges to
secure repayment of a loan. Also refers to
securities pledged by a bank to secure deposits of
public monies.
COMMERCIAL PAPER: Short-term unsecured
promissory notes issued by a corporation to raise
working capital. These negotiable instruments
are purchased at a discount to par value or at par
value with interest bearing. Commercial paper is
issued by corporations such as General Motors
Acceptance Corporation, IBM, Bank America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report for the City of
La Quinta. It includes five combined statements
for each individual fund and account group
prepared in conformity with GAAP. It also
includes supporting schedules necessary to
36
demonstrate compliance with finance -related legal
and contractual provisions, extensive introductory
material, and a detailed Statistical Section.
CONDUIT FINANCING: A form of Financing in
which a government or a government agency
lends its name to a bond issue, although it is
acting only as a conduit between a specific project
and bond holders. The bond holders can look only
to the revenues from the project being financed
for repayment and not to the government or
agency whose name appears on the bond.
COUPON: (a) The annual rate of interest that a
bond's issuer promises to pay the bondholder on
the bond's face value. (b) A certificate attached
to a bond evidencing interest due on a payment
date.
DEALER: A dealer, as opposed to a broker, acts as
a principal in all transactions, buying and selling
for his own account.
DEBENTURE: A bond secured only by the general
credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two
methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery
versus payment is delivery of securities with an
exchange of money for the securities. Delivery
versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose
return profile is linked to, or derived from, the
movement of one or more underlying index or
security, and may include a leveraging factor, or
(2) financial contracts based upon notional
amounts whose value is derived from an
underlying index or security (interest rates, foreign
exchange rates, equities or commodities).
DISCOUNT: The difference between the cost
price of a security and its maturity when quoted
at lower than face value. A security selling
below original offering price shortly after sale also
is considered to be at a discount.
DISCOUNT SECURITIES: Non -interest bearing
money market instruments that are issued a
discount and redeemed at maturity for full face
value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds
among a variety of securities offering
independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the
Federal government set up to supply credit to
various classes of institutions and individuals,
e.g., S&L's, small business firms, students,
farmers, farm cooperatives, and exporters.
1. FNMA's (Federal National Mortgage
Association) - Used to assist the home
mortgage market by purchasing mortgages
insured by the Federal Housing
Administration and the Farmers Home
Administration, as well as those guaranteed by
the Veterans Administration. They are issued in
various maturities and in minimum denominations
of $10,000. Principal and Interest is paid
monthly.
2. FHLB's (Federal Home Loan Bank Notes and
Bonds) - Issued by the Federal Home Loan
Bank System to help finance the housing
industry. The notes and bonds provide
liquidity and home mortgage credit to savings
and loan associations, mutual savings banks,
cooperative banks, insurance companies, and
mortgage -lending institutions. They are
issued irregularly for various maturities. The
minimum denomination is $5,000. The notes
are issued with maturities of less than one
year and interest is paid at maturity.
3. FLB's (Federal Land Bank Bonds) - Long-term
mortgage credit provided to farmers by
Federal Land Banks. These bonds are issued
at irregular times for various maturities
37
ranging from a few months to ten years. The
minimum denomination is $1,000. They carry
semi-annual coupons. Interest is calculated on
a 360-day, 30 day month basis.
4. FFCB's (Federal Farm Credit Bank) - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
national agricultural industry. They are issued
monthly with three- and six-month maturities.
The FFCB issues larger issues (one to ten
year) on a periodic basis. These issues are
highly liquid.
5. FICB's (Federal Intermediate Credit bank
Debentures) - Loans to lending institutions
used to finance the short-term and
intermediate needs of farmers, such as
seasonal production. They are usually issued
monthly in minimum denominations of $3,000
with a nine -month maturity. Interest is
payable at maturity and is calculated on a 360-
day, 30-day month basis.
6. FHLMC's (Federal Home Loan Mortgage
Corporation) - a government sponsored entity
established in 1970 to provide a secondary
market for conventional home mortgages.
Mortgages are purchased solely from the
Federal home Loan Bank System member
lending institutions whose deposits are insured
by agencies of the United States Government.
They are issued for various maturities and in
minimum denominations of $10,000. Principal
and Interest is paid monthly. Other federal
agency issues are Small Business
Administration notes (SBA's), Government
National Mortgage Association notes
(GNMA's), Tennessee Valley Authority notes
(TVA's), and Student Loan Association notes
(SALLIE-MAE's).
FEDERAL DEPOSITOR INSURANCE
CORPORATION (FDIC): A federal agency that
insures bank deposits, currently up to $100,000
per deposit.
FEDERAL FUNDS RATE: The rate of interest at
which Fed funds are traded. This rate is currently
pegged by the Federal Reserve through open -
market operations.
FEDERAL HOME LOAN BANKS (FHLB):
Government sponsored wholesale banks
(currently 12 regional banks) which lend funds
and provide correspondent banking services to
member commercial banks, thrift institutions,
credit unions and insurance companies. The
mission of the FHLB's is to liquefy the housing
related assets of its members who must purchase
stock in their district Bank.
FEDERAL OPEN MARKET COMMITTEE (FOMC):
Consists of seven members of the Federal
Reserve Board and five of the twelve Federal
Reserve Bank Presidents. The President of the
New York Federal Reserve Bank is a permanent
member, while the other Presidents serve on a
rotating basis. The Committee periodically meets
to set Federal Reserve guidelines regarding
purchases and sales of Government Securities in
the open market as a means of influencing the
volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of
the United States created by Congress and
consisting of a seven member Board of Governors
in Washington, D.C., 12 regional banks and about
5,700 commercial banks that are members of the
system.
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA or Ginnie Mae): Securities
influencing the volume of bank credit guaranteed
by GNMA and issued by mortgage bankers,
commercial banks, savings and loan associations,
and other institutions. Security holder is
protected by full faith and credit of the U.S.
Government. Ginnie Mae securities are backed
by the FHA, VA or FMHM mortgages. The term
"pass -through" is often used to describe Ginnie
Maes.
LAIF (Local Agency Investment Fund) - A special
fund in the State Treasury which local agencies
may use to deposit funds for investment. There
is no minimum investment period and the
minimum transaction is $5,000, in multiples of
$1,000 above that, with a maximum balance of
$30,000,000 for any agency. The City is
restricted to a maximum of ten transactions per
month. It offers high liquidity because deposits
38
can be converted to cash in 24 hours and no
interest is lost. All interest is distributed to those
agencies participating on a proportionate share
basis determined by the amounts deposited and
the length of time they are deposited. Interest is
paid quarterly. The State retains an amount for
reasonable costs of making the investments, not
to exceed one -quarter of one percent of the
earnings.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without a
substantial loss of value. In the money market, a
security is said to be liquid if the spread between
bid and asked prices is narrow and reasonable size
can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP):
The aggregate of all funds from political
subdivisions that are placed in the custody of the
State Treasurer for investment and reinvestment
MARKET VALUE: The price at which a security is
trading and could presumably be purchased or
sold.
MASTER REPURCHASE AGREEMENT: A written
contract covering all future transactions between
the parties to repurchase --reverse repurchase
agreements that establishes each party's rights in
the transactions. A master agreement will often
specify, among other things, the right of the
buyer -lender to liquidate the underlying securities
in the vent of default by the seller -borrower.
MATURITY: The date upon which the principal or
stated value of an investment becomes due and
payable
MONEY MARKET: The market in which short-term
debt instruments (bills, commercial paper, banker'
acceptances, etc.) are issued and traded.
OFFER: The price asked by a seller of securities.
(When you are buying securities, you ask for an
offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and
sales of government and certain other securities in
the open market by the New York Federal Reserve
Bank as directed by the FOMC in order to
influence the volume of money and credit in the
economy. Purchases inject reserves into the
bank system and stimulate growth of money and
credit; sales have the opposite effect. Open
market operations are the Federal Reserve's most
important and most flexible monetary policy tool.
PORTFOLIO: Collection of all cash and securities
under the direction of the City Treasurer,
including Bond Proceeds.
PRIMARY DEALER: A group of government
securities dealers who submit daily reports of
market activity and depositions and monthly
financial statements to the Federal Reserve Bank
of New York and are subject to its informal
oversight. Primary dealers include Securities and
Exchange Commission (SEC) -registered securities
broker -dealers, banks and a few unregulated
firms.
QUALIFIED PUBLIC DEPOSITORIES: A financial
institution which does not claim exemption from
the payment of any sales or compensating use or
ad valorem taxes under the laws of this state,
which has segregated for the benefit of the
commission eligible collateral having a value of
not less than its maximum liability and which has
been approved by the Public Deposit Protection
Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a
security based on its purchase price or its current
market price. This may be the amortized yield to
maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A
repurchase agreement is a short-term investment
transaction. Banks buy temporarily idle funds
from a customer by selling U.S. Government or
other securities with a contractual agreement to
repurchase the same securities on a future date.
Repurchase agreements are typically for one to
ten days in maturity. The customer receives
interest from the bank. The interest rate reflects
both the prevailing demand for Federal funds and
the maturity of the repo. Some banks will
execute repurchase agreements for a minimum of
$100,000 to $500,000, but most banks have a
39
minimum of $1,000,000.
REVERSE REPURCHASE AGREEMENTS (RRP or
RevRepo) - A holder of securities sells these
securities to an investor with an agreement to
repurchase them at a fixed price on a fixed date.
The security"buyer" in effect lends the"seller"
money for the period of the agreement, and the
terms of the agreement are structured to
compensate him for this. Dealers use RRP
extensively to finance their positions. Exception:
When the Fed is said to be doing RRP, it is lending
money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered
by banks for a fee whereby securities and
valuables of all types and descriptions are held in
the bank's vaults for protection.
SECONDARY MARKET: A market made for the
purchase and sale of outstanding issues following
the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency
created by Congress to protect investors in
securities transactions by administering securities
legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by
Government Sponsored Enterprises (FHLB,
FNMAS, SLMA, etc.) And Corporations which
have imbedded options (e.g., call features, step-up
coupons, floating rate coupons, derivative -based
returns) into their debt structure. Their market
performance is impacted by the fluctuation of
interest rates, the volatility of the imbedded
options and shifts in the Shape of the yield curve.
SURPLUS FUNDS: Section 53601 of the California
Government Code defines surplus funds as any
money not required for immediate necessities of
the local agency. The City has defined immediate
necessities to be payment due within one week.
TREASURY BILLS: A non -interest bearing discount
security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in
three months, six months or one year.
TREASURY BONDS: Long-term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities of more than 10 years.
TREASURY NOTES: Medium -term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and
Exchange Commission requirement that member
firms as well as nonmember broker -dealers in
securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also
called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm,
including margin loans and commitments to
purchase securities, one reason new public issues
are spread among members of underwriting
syndicates. Liquid capital includes cash and
assets easily converted into cash.
UNIFORM PRUDENT INVESTOR ACT: The State
of California has adopted this Act. The Act
contains the following sections: duty of care,
diversification, review of assets, costs,
compliance determinations, delegation of
investments, terms of prudent investor rule, and
application.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the
security. (b) NET YIELD or YIELD TO MATURITY
is the current income yield minus any premium
above par of plus any discount from par in
purchase price, with the adjustment spread over
the period from the date of purchase to the date
of maturity of the bond.
,X
INVESTMENT ADVISORY BOARD
Meeting Date: June 11, 2008
TITLE:
Month End Cash Report - May 2008
BACKGROUND:
Correspondence & Written
Material Item A
This cash report is not a complete Treasury Report (exclude petty cash, deferred
compensation and fiscal agent balances) but would report in a timely fashion selected
cash balances. This report also includes other statistical investment data for the
Board to review.
RECOMMENDATION:
Information item only.
John M. Falconer, Finance Director
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Bill Lockyer, State Treasurer
Inside the State Treasurer's Office
Local Agency Investment Fund (LAIF)
PMIA Performance Report
e
ily
Yt d
Quartorfo,
VateYleld
e
N days)
5/15/2008
3.07
3.29
196
5/16/2008
3.07
3.29
199
5/17/2008
3.07
3.28
199
5/18/2008
3.07
3.28
199
5/19/ 0008
3.06
3.27
199
5/20/2008
3.05
3.27
199
5/21/2008
3.05
3.27
199
5/22/2008
3.05
3.26
198
5/23/2008
3.03
3.26
200
5/24/2008
3.03
3.25
200
5/25/2008
3.03
3.25
200
5126/2008
1 3.03
3.24
200
5/27/2008
3.01
3.24
194
5/28/2008
13.01
3.24
198
LAW Performance Report
Quarter ending 3/31/2008
Apportionment Rate: 4.18%
Earnings Ratio: 0.00011414123654588
Fair Value Factor: 1.001776145
PMIA Average Monthly Effective Yields
April 2008 3.400%
March 2008 3.777%
February 2008 4.161%
Pooled Money Investment Account
Portfolio Composition
$73.5 Billion
04/30/08
Corporate B,
0.34%
Commercial Pape
9.39%
Time Deposits
13.10%
Loans
19 14R°/
CDs/BNs
22.33%
Treasuries
6.00% Mortgages
Agencies
34.90%
3
Recent Bill Auction Kesutts
Home > Institutional , Announcements, Data & Results , Latest Auction Data > Recent Bill Auction Results
Recent Bill Auction Results
Security
Issue
Maturity
Discount
Investment
Price
CUSIP
Term
Date
Date
Rate %
Rate %
Per$100
4-WEEK
06-05-2008
07-03-2008
1.880
1.909
99.853778
91279SF30
13-WEEK
06-05-2008
09-04-2008
1.820
1.854
99.539944
912795G47
26-WEEK
06-05-2008
12-04-2008
1.950
1.997
99.014167
912795H95
52-WEEK
06-05-2008
06-04-2009
2.105
2.169
97.871611
912795Q79
17-DAY
05-30-2008
06-16-2008
2.150
2.182
99.898472
9127951129
4-WEEK
05-29-2008
06-26-2008
1.965
1.995
99.847167
9127951=22
13-WEEK
05-29-2008
08-28-2008
1.870
1.905
99.527306
912795G39
26-WEEK
05-29-2008
11-28-2008
1.920
1.966
99.024000
912795H87
4-WEEK
05-22-2008
06-19-2008
1.970
2,000
99.846778
912795E98
13-WEEK
05-22-2008
08-21-2008
1.855
1.890
99.531097
912795G21
26-WEEK
05-22-2008
11-20-2008
1.885
1.930
99.047028
912795H79
30-DAY
05-20-2008
06-19-2008
1.990
2.021
99,834167
912795E98
4-WEEK
05-15-2008
06-12-2008
1.870
1.899
99.854556
91279SE80
13-WEEK
05-15-2008
08-14-2008
1.800
1,833
99.545000
91279SF97
126-DAY
05-IS-2008
09-18-2008
1.865
1.903
99.347250
91279SG62
26-WEEK
05-15-2008
11-13-2008
1.850
1.893
99.064722
912795H61
4-WEEK
05-08-2008
06-05-2008
1.550
1.573
99,879444
912795E72
13-WEEK
05-08-2008
08-07-2008
1.610
1.639
99,593028
91279SF89
26-WEEK
05-08-2008
11-06-2008
1.740
1.780
99.120333
912795H53
4-WEEK
05-01-2008
05-29-2008
1.250
1.269
99,902778
912795E64
13-WEEK
05-01-2008
07-31-2008
1.420
1,445
99.641056
912795F71
26-WEEK
05-01-2008
10-30-2008
1.700
1.739
99.140556
912795H46
4-WEEK
04-24-2008
05-22-2008
0.700
0.710
99.945556
912795E56
13-WEEK
04-24-2008
07-24-2008
1.320
1.343
99.666333
91279SF63
26-WEEK
04-24-2008
10-23-2008
1.680
1.718
99.150667
912795H38
4-WEEK
04-17-2008
05-15-2008
0.850
0,862
99.933889
912795E49
13-WEEK
04-17-2008
07-17-2008
1.060
1.078
99.732056
912795F55
26-WEEK
04-17-2008
10-16-2008
1.380
1.409
99.302333
912795H2O
6-DAY
04-16-2008
04-22-2008
2.000
2.028
99.966667
912795M73
5-DAY
04-10-2008
04-15-2008
2.290
2.323
99.968194
91279SUDI
4-WEEK
04-10-2008
05-08-2008
1.260
1.279
99.902000
912795E31
13-WEEK
04-10-2008
07-10-2006
1,450
1.476
99.633472
91279SF48
26-WEEK
04-10-2008
10-09-2008
1.600
1.635
99.191111
912795G96
4-WEEK
04-03-2008
05-01-2008
1.520
1.543
99.881778
912795E23
13-WEEK
04-03-2008
07-03-2008
1.440
1.465
99.636000
912795F30
26-WEEK
04-03-2008
10-02-2008
1.500
1.532
99.241667
91279SG83
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
4-WEEK
03-27-2008
04-24-2008
1.500
1.523
99.883333
912795D99
13-WEEK
03-27-2008
06-26-2008
1.200
1.220
99,696667
912795F22
Effective with the 11/2/98 auction, all bills are auctioned using the single -priced method.
Freedom of Information Act I Law &.Gudance I Privacy & Legal Notices I Website Terms & Condition
U.S. Department of the Treasury, Bureau of the Public Debt
4
http://www.treasurydirect.gov/RI/OFBills 6/4/2008
r": 171.1.)--3e1eC1CU mierest AULUS, wco-vmy many vpuaw--dwie J, cvuo
rase a v>v
Federal Reserve Statistical Release
H.15
Selected Interest Rates (Daily)
Skip to Content
Release Date: June 3, 2008
Weekly release dates I I Iistorical data I Data Download Program (DDP) I About I Announcements
Daily update Other formats: Screen reader I ASCII
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 June 3, 2008
2008
Instruments
Jun
2
Federal funds (effective) 1 2 3
2.06
Commercial Paper 3 4 5
Nonfinancial
1-month
2.12
2-month
2.11
3-month
2.13
Financial
1-month
2.30
2-month
2.41
3-month
2.52
CDs (secondary market) 3 6
1-month
2.44
3-month
2.66
6-month
2.89
Eurodollar deposits (London) 3 7
1-month
2.60
3-month
2.90
6-month
3.05
Bank prime loan 2 3 8
5.00
Discount window primary credit 2 9
2.25
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
1.92
3-month
1.82
6-month
1.95
Treasury constant maturities
Nominal 10
1-month
1.94
3-month
1.85
6-month
1.99
5
http://www.federalreserve.gov/Releases/Hl5/update/ 6/4/2008
r": miD- beiectea interest ►cafes, wen-vnry Many upaate--june j, /vva
rage / 01 Y
1-year
2-year
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 12
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
Footnotes
2.17
2.51
2.82
3.28
3.56
3.98
4.69
4.68
0.88
1.24
1.51
2.11
2.11
2.95
3.37
3.72
3.97
4.14
4.41
4.66
5.10
5.64
7.03
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.
V. 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
6
http://www.federalreserve.gov/Releases/H 15/update/ 6/4/2008
rtcn: n.io--3eiectea interest xaies, weo-uniy tiany update --.rune 3, mus Page 3 of
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
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 Asa 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 £ixe
currently 5, 7, 10, and 20 years.
7
http://www.federalreserve.gov/Releases/H15/update/ 6/4/2008
rtcts: tt.t.)--�ieiectea interest Kates, wert-vmy Lratly Upuate--june ), /cva rage t vi w
---------------------------------------------------------------------------------
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Daily update Other formats: Screen reader I ASCII
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nucess_bdiiy I Contact Us
Last update: June 3, 2008
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http://www.federalreserve.gov/Releases/H15/update/ 6/4/2008
FRB: Commercial Paper Rates and Outstandtngs
rage t Dr 4
Commercial Pa
11,11-11
Release I About I Announcements I Outstand, fines I Volume statistics I Year-end I Maturity Distribution
Data Download Program (DDP)
Announcement: Revisions to Commercial Paner Outstandine
Data as of June 3, 2008
Commercial Paper Rates and Outstanding
Derived from data supplied by The Depository Trust 8 Clearing Corporation
Posted June 4, 2008
Discount rates
FTe
nonfinancial
nonfinancial
financial
AA
asset -backed
1-day
2.09
2.62
2.05
2.42
7-day
2.09
2.72
2.00
2.54
15-day
2.12
2.71
2.10
2.44
30-day
2.07
2.87
2.30
2.56
60-day
2.12
2.81
2.48
2.63
90-day
2.18
n.a.
2.57
2.69
trade data insufficient to support calculation of the 90-day A2/P2 nonfinancial rate for June 3, 2008.
Yield curve
9
http://www.federalreserve.gov/releases/cp/ 6/4/2008
r": tommerciai raper i,-aies anU UIRSMILIHIgS
1 ary � .. ,
iey market basis Percent
— — — AA mifinaneial - 3.5
A2/P2nmFmPn6uI
AA financial - 3.3
AA L-Acd
- 3.1
- 1.9
...... - '2.7
- 2.5
2.3
- --- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
1.9
1 7 15 30 60 90
Days to Maturity
Discount rate spread
Thirty -day A2/P2 less AA nonfinancial commercial paper (daily)
spmad
sPm" 5-day moving avg
Basis points 160
- 140
- 120
t 100
80
60
40
20
0
2001 2002 2003 2004 2005 2006 2007 2008
Discount rate history
http://www.federalreserve.gov/releases/cp/
10
6/4/2008
rtcrs: t ommerciat raper tcares ana vursranumgs
r asc J vi �
i mrty-nay eommerctai paper (aatty) 1 GII Gii4
— — — AA nonfinancial c
....... A2JP2 nonlinaacial
— — AA Gnnndif ..
i
44. ."^tJ,J,.a„ .t i
2001 2002 2003 2004 2005 2006
Outstandings
Weekly (Wednesday), seasonally adjusted
Billions of dollars
fi O
1090
990
890
790
690
590
490
Billions of dollars
— — — Nmfiaancial fright s:alc)
----- financial (ldt aca[O `
t
t
'M
i
2001 2002r rr r rr
6
5
4
3
2
I
290
250
210
170
130
90
The daily commercial paper release will usually be available before 11:00am EST. However, the Federal
Reserve Board makes no guarantee regarding the timing of the daily commercial paper release. When
the Federal Reserve Board is closed on a business day, rates for the previous business day will be
available through the Federal 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)
11
http://www.federalreserve.gov/releases/cp/ 6/4/2008
FRB: Commercial Yaper Kates and Uutstanamgs
rage 4 or 4
Home I Statistical releases
Accessibilitv I Contact Us
Last update: June 4, 2008
12
http://www.federalreserve.gov/releases/ep/ 6/4/2008
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13
INVESTMENT ADVISORY BOARD
Meeting Date:
TITLE:
June 11, 2008
Pooled Money Investment Board Report
for March 2008
BACKGROUND:
Correspondence & Written
Material Item B
The Pooled Money Investment Board Report for March 2008, summary pages have
been attached for the Board's review. A complete copy is available for review upon
request.
RECOMMENDATION:
Receive & File
John M. Falconer, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF MARCH 2O08 WITH MARCH 2O07
(DOLLARS IN THOUSANDS)
MARCH 2O08 MARCH 2O07 CHANfE
Average Daily Portfolio $ 63,771,427
Accrued Earnings $ 204,027 $
Effective Yield 3.777
Average Life -Month End (In Days) 205
Total Security Transactions
Amount $
Number
Total Time Deposit Transactions
Amount $
Number
Average Workday Investment Activity $
Prescribed Demand Account Balances
For Services $
For Uncollected Funds $
1
67,580,012 $ +6,191,415
264,978 $-60,961
5.214 -1.437
170
+35 I
24,927,348
$
28,341,426
$
-3,414,078
620
699
-79
4,728,000
$
3,890,000
$
+838,000
224
208
+16
1,482,767
$
1,465,065
$
+17,702
601,296
$
272,525
$
+328,771
176,369
$
179,017
$
-3,648
BILL LOCKYER
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
MARCH 31, 2008
DIFFERENCE IN
PERCENT OF
TYPE OF SECURITY
AMOUNT
PERCENT OF
PORTFOLIO FROM
PORTFOLIO
PRIOR MONTH
Government
Bills
$
1,340,974
2.06
-0.02
Bonds
0
0.00
0
Notes
1,812,293
2.79
-0.03
Strips
0
0.00
0
Total Government
$
3,153,267
4.85
-0.05
Federal Agency Debentures
$
10,903,933
16.79
+0.12
Certificates of Deposit
12,651,068
19.32
+1.92
Bank Notes
1,100,000
1.69
+0.25
Bankers'Acceptances
0
0.00
0
Repurchases
0
0.00
0
Federal Agency Discount Notes
9,984,443
15.37
-4.15
Time Deposits
9,444,795
14.64
+0.08
GNMAs
173
0.00
0
Commercial Paper
4,200,791
6.47
+0.45
FHLMC/Remics
1,161,572
1.79
-0.06
Corporate Bonds
285,306
0.44
-0.10
AB 56 Loans
7,968,053
12.26
-0.99
GF Loans
4,208,500
6.48
+2.52
Reversed Repurchases
0
0.00
0
Total (All Types)
$
64,951,901
100.00
INVESTMENT ACTIVITY
MARCH2O08
FEBRUARY2008
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
520 $
24,927,348
608
$ 29,183,439
Other
13
3,104
7
18,452
Time Deposits
224
4,728,000
233
4,588,000
Totals
757 $
29,658,452
848
$ 33,789,891
PMIA Monthly Average Effective Yield
3.777
4.161
Year to Date Yield Last Day of Month
4.786
4.921
I•�
Corporate Bond
0.44%
Commercial Paper
6.47%
Time Depos
14.54%
Pooled Money Investment Account
Portfolio Composition
$65.0 Billion
03/31/08
Treasuries
4.85% Mortgages
Loans 1.79%
CDs/BNs
21.01 %
3
Agencies
32.16%
NVESTMENT ADVISORY BOARD
Meeting Date:
TITLE:
June 11, 2008
Correspondence & Written
Material Item C
Continued Update on California Municipal Treasurers Association Conference (CMTA)
BACKGROUND:
Board Member Rassi and Park along with the Treasurer attended the annual CMTA
Conference.
Attached please find the entire program of events. In addition to the sessions, the
attendees also met with vendors at the conference who specialize in meeting the
investment needs of government agencies.
RECOMMENDATION:
Information only.
)4A-r� - d-410-m�
John M. Falconer, Finance Director
Tuesday, April 22
Pre -Conference Workshop
8:30 a.m. — 5: 00 p.m.
EOC Disaster & Cost Recovery Training for Treasury /Finance Professionals
Mike Martinet, Executive Director, Office of Disaster Management, Area G
(Area G is an independent local government authority located in Los Angeles)
Continental Breakfast & Lunch Included
The response following a disaster may last only a few days or weeks, but the post disaster
cost recovery process typically goes on for years. In some cases the cost recovery
process will last for a decade or more. Ironically, training for getting through this long
drawn out recovery period is seldom available. Jurisdictions can, and often do, lose
millions of dollars because they are not prepared to deal with the disaster cost recovery
documentation process.
The EOC Disaster & Cost Recovery Training for Treasury/Finance Professionals
program provides a broad overview of disaster cost recovery processes, including
requirements for obtaining and retaining federal disaster assistance grants. The training
includes detailed information on disaster response cost documentation and disaster
assistance eligibility guidelines. The training includes actual FEMA case studies, group
exercises and illustrative examples taken from actual disasters. Each student receives a
CD-ROM with spreadsheets and forms to help track and organize disaster related costs.
Wednesday, April 23
Conference Opening Session
9:15 a.m.
THE DIAMOND TOUCH, Dr. Nate Booth
We're all familiar with The Golden Rule, "Treat others in the way you would like to be
treated." The Golden Rule is a powerful principle, but it has one shortcoming. Everyone
wants to be treated differently. If you're a service provider, your customers/clients want
to be served differently. If you're a salesperson, your customers/clients want to be
influenced differently. If you're a leader, your people want to be led differently.
This variety of desires is what makes all relationships interesting and challenging. It's
also the reason you can't take a cookie -cutter approach to service, influence and
leadership in today's diverse world. The good news is this variety of desires creates
tremendous opportunities for the companies and people who understand and practice The
Diamond Touch.
2
Here are a few of the dynamic and impactful strategies you will learn:
• Why a "one -size -fits -all" relationship philosophy is doomed to fail in our highly
individualized world.
• How to quickly "get on the same wavelength" with almost anyone you meet.
• The two questions you need to ask to quickly and precisely discover what people
want and how they want it.
• How to use the Five Lifestyle Groups as a guide to apply The Diamond Touch.
• How to use Value Links to connect your service or idea to people's unique
desires.
• Four Costly Mistakes most people make when dealing with customers/clients.
• Three 60-second strategies for dealing with difficult people.
• How to consistently get what you want in life by giving others what they uniquely
desire.
10.45 a.m.
LIFE BALANCE - How to Create a Life that's not just Busy, But Well Lived
Dr. Nate Booth
The demands on your time and attention are intense — work, family, and personal time are
all clamoring for your immediate attention. Congratulations: you're intensely wanted!
The challenge lies in allocating the appropriate time and attention to each area of your
life. Life Balance will show you how to enjoyably get the right things done. Then, the
end of the day, you'll feel the rewards of a life that's not just busy, but well lived!
Here are a few of the dynamic and impactful strategies you will learn:
• How to crystallize what is truly important in your life.
• How to consistently do the things that are important, not just urgent.
• How to create balance and synergy among the various roles in your life.
• How to effectively jump off the harder/faster/more treadmill.
• How to set and achieve balanced goals that produce quality results.
• How to create a weekly guide that will assist you in enjoyably accomplishing the
important goals in your life.
• How to break the vicious cycle of procrastination and crisis.
• How to make time for renewal of body, mind, and spirit.
• How to turn your days into an upward spiral of living and learning.
12:00p.m. Luncheon
State Treasurer, Bill Lockyer
California State Treasurer Bill Lockyer will share the latest news from the Local Agency
Investment Fund (LAIF), news from the State Treasurer's Office and what's happening
in Sacramento.
3
2: 00 p.m.
California and Regional Economic Outlook
Gary Zimmerman, Chief Ec0n0n11s4 Federal Reserve Bank San Francisco
Gary will provide insight directly from the Federal Reserve Bank on California and the
Western States that comprise the Twelfth Federal Reserve District. What does the
Federal Reserve Bank view to be on the economic horizon in the Western States and
what economic factors they focus on to help shape their economic policy.
Concurrent Sessions
3:30 p.m.
Investment Performance Toolkit - Finding the right tool for the job
Dave Witthohn CFA —Director, MBIA Asset Management
Compare and contrast the different types of performance measurements used in reporting
investment performance for local governments. Explore how these various
measurements can be used to inform the government's different constituents. Doesn't
everyone want total return? What about book yield? The GIPS standards, are they really
the standard? Time weighted returns vs. dollar weighted returns, how are they different
and what do they measure? Many governments use weighted average yield to maturity
(WAY) as their performance measure. Is that accurate? How does WAY differ from
amortized cost? Do cash flows affect the return calculation? What part does risk play in
measuring performance? Finally learn new ideas about how to present investment
performance information to the public.
3:30 p.m.
GASB 45 — Ouch ... I have my OPEB number now what!
John Bartel, President, Bartel and Associates
Now that agencies are finally completing their Other Post Employment Benefit (OPEB)
calculations what are the numbers telling us and is it really that bad? What are the ranges
of impact (as a percent of payroll) and are more agencies in trouble that reported by the
media and how are cities implementing the results. What options in the marketplace are
available for agencies to deposit their Annual Required Contribution (ARC) and why are
so many agencies delaying obtaining their OPEB calculations? Get all your OPEB
questions and answers in this informative session.
3:30 p.m.
New Technologies for Managing Debt
John T. Deleray, Vice President, Wells Fargo Bank
Debt management technology cannot only streamline debt issuance and management, but
may also save money for your government. With more tools available than ever before,
treasurers can use technology -based products and the web to assist in selling bonds,
reinvesting bond proceeds, monitoring trustee activities, adhering to disclosure
responsibilities and managing the pre- and post -issuance document process..
4
Thursday, April 24
7.45 a.m.
Business Session (Plated Breakfast)
All conference attendees will enjoy breakfast with their CMTA colleagues during the
Annual Business Meeting. Note: please plan on having at least one individual from your
agency attend this meeting as voting will take place, thank you.
9:00 a.m.
LAIF - Portfolio Decisions from Soup to Nuts
Pam Milliron, Administrator, LAIF
Christine Solich, Assistant Director of Investments, LAIF
The LAIF investment team will share how they go about evaluating, selecting,
purchasing and monitoring the LAIF portfolio. Obtain insights on how LAIF goes about
selecting which investments to purchase, including the research and due diligence before
adding or subtracting investments into the LAIF portfolio.
10.30 a.m.
Check fraud in a paperless world —
(electronic deposits)
Greg Lister, President, SafeChecks
The risks of remote deposit capture
In the rush to adopt the latest and greatest financial technologies, many Treasury
Managers may unknowingly set their municipalities or agencies up for a very big
financial fall. The current cause celebre is "remote deposit capture," aka eDeposit or the
electronic conversion of paper checks into electronic images. The indemnity provision
says that if a loss occurs because the paying bank received a substitute check instead of
the original check, a claim can be filed against the bank that presented the substitute
check to the paying bank and the loss can be charged back. A loss can be charged back
up to one year AFTER the injured party discovers the loss. In some cases the risk to the
converting municipality or agency is 14 months. Find out how to mitigate the risks of
remote deposit capture.
12. 00 p.m.
State Controller, John Chiang
California State Controller John Chiang will provide us with information on programs
and assistance his office is able to provide to local agencies. Including updates on the
State Mandated reimbursements, disbursements by the State and new efficiencies his
office is able to provide. In addition the Controller will share his views on the State
Budget and impacts to local government.
5
Concurrent Sessions
2:00 p.m.
Synchronizing portfolio cash flow with planned expenditures and revenues
Kevin C. Schultze, Director Portfolio Strategy Group, Stone & Youngberg
Management of an investment portfolio for a public entity should use the portfolio's cash
flow to complement budgeted expenditures and revenues. Better cash flow management
can result in higher returns and less vulnerability to unplanned changes in revenues and
expenditures. Through the use of straightforward, easily designed analytics, the portfolio
manager can structure a more efficient portfolio, yet still adhere to statutory and policy
constraints.
2.00 p.m.
Guard your Electronic Transactions — be safe rather than SORRY.
Christine Herrera, Vice President, Bank of the West
Technology is a great asset to have in managing your treasury operations but too often we
hear of systems that have been compromised by hackers who are attempting and
sometimes successful in, and making, illegal transactions from the agency's bank
account. Learn the latest in cutting edge technology that is now being used to assist
treasurers in managing their security systems and learn about the best possible solutions
to managing your electronic transactions.
2:00 p.m.
The changing economic environment and suggested investment strategies.
Kevin Giddis, Managing Director Fixed Income Trading, Morgan Keegan & Co
Karl Moerbe, Managing Director -Fixed Income Research, Morgan Keegan & Co
Investment "times are-a-changin"- Fed funds are at 3% after being lowered by 1.25%
within eight days and more adjustments are expected, 3-month T-bills have fallen below
2%, a slowing economy, bond insurance companies being downgraded and a federal
stimulus package. What do all these mean for agencies managing the portfolio and how
might they affect the investment strategy?
3:1 S p.m.
Nuts & Bolts
This is an opportunity for Goverment Associates and Commercial Associates to meet
independently to ask questions and have your questions answered by your colleagues.
4. 00 p.m.
Nuts & Bolts, Combined Wrap-up
This is the time for the Government and Commercial Associates to meet as a group and
discuss common issues.
0
Friday. April 25
9.00 a.m.
The Investment Environment. Smoke in 2007...Fire in 2008!!
Gary Schlossberg, Senior Economist, Wells Capital Management
The housing slump, falling dollar, credit "squeeze" and still -simmering "boom" in energy
and other commodity prices have created the most challenging operating environment for
businesses, consumers and local government investors in recent memory. Gary will
summarize it all up to help us forecast and plan appropriate investment strategies in 2008
and looking ahead to 2009.
10:30 a.m.
State Budget Outlook
Michael Cohen, Director of Administration, Legislative Analyst's Office
Hear the Director of State Administration from the Legislative Analyst's Office provide
an update on the State's financial outlook for the coming year, the latest on proposed
state take reductions in local government revenues and insight into the Governor's and
Legislature's 2008-2009 plan to balance the Budget.
7
BOARD MEMBER ITEMS
BOARD MEMBER MOULIN'S HANDOUT
Don's Changes to IP 2008-9
Certain revisions of the City's Ordinance Section 2.70 have been marked in the draft
IP. The IAB can only suggest that the CC adopt changes. But if the IAB is initiating
change, consider the following modifications to Section 2.70.010
Qualifications of the members of the board:
Current ordinance: C. Background in the investment field and/or related experience
is preferred.
Comment. The sentence above has carried over without change from the IP for
1998-99 despite its inadequacy. At minimum, the word "securities" should modify
"investment". It needs more than that. I recommend that C be changed to the
following:
Revised: Applicants for the board should have a background in finance, preferably
with knowledge and/or experience in markets, controls and accounting for securities.
Terms of service and their expiration
Background: The 1988 version of 2.70 specified two-year terms of service with
staggered expiration dates. In 1998, the board consisted of seven members. The CC
lengthened the terms to three years, and shortly thereafter, reduced the board to five
members. The tern of service and the need to stagger the expiration of terms were
removed from Section 2.70.
Comment: Continuity of members of the board. is important The CC has appointed
as many as four members in a year, some from resignation, move, conflict of interest
and other reasons. The CC has appointed all successors to three-year terms without
regard for the expiration of the term of their predecessor. To promote continuity, the
CC should return to staggered terms for members of the IAB.
New: E. To promote continuity, the expiration of the three-year terms of the
members of the board shall be staggered.
Page 1 of 1
John Falconer
From:
John Falconer
Sent:
Monday, May 19, 2008 7:11 AM
To:
'RANDY RASSI'
Subject: RE: Suggestions, Investment Policy
Randy
I believe these discussions should be made at the next Board Meeting. I am following up on the reporting
requirements as directed by the Board
Thankyou
John
Subj: Re: Sec VIII of IP
Date: 05/27/08 6:04:45 P.M. Pacific Daylight Time
From: Donbarm
To: 'fai Iconer la c_inta.org,ted theodoreross cam
CC: v_orrantiaj@la-quinta.org
John and Ted:
I am not suggesting a change ' in Section VIII from what was basically agreed at the May meeting.
The only open matter was the reporting procedure. I had not been aware of the 1.40 and 1.97 of
the PM until I received the John's revised draft of VIII. 1.97 deals with fraud and after reading it, I
do not think it belongs in VIII. 1.40 covers conflicts. Both 1.40 and 1.97 specify reporting to one's
supervisor. The last sentence of the first paragraph of 1.40 contains the pertinent information. In
the banking and investment process that VIII covers, the members need to decide whether they are
satisfied with reporting to a supervisor. So I listed four reporting procedures for consideration by
the members and John.
A couple of specifics:
1. 1 agree adding "the City's" before the word banking in the first line.
2. Retain the last phrase in the first paragraph starting with "and, until resolved...
3. Insert the reportee. ( I am hesitant to simply refer to 1.40 if we choose the supervisor. For
those that have read the governing sentence, you may have noted that the final word should be
I'matter" not "manner". Consider ending the first paragraph of
I
the City's Personnel Ma Manual, CONFLICTS OF INTEREST AND ACCEPTANCE OF GIFTS ANDof
OTHER GRATUITIES) -
Daylight Time, jfalconer@la-quinta.org writes:
Ted
Thank you
The Policy has not been sent out as Vianka was out on vacation on Friday. We are still incorporating
Christina's edits into the final version. Regarding Don's request to put two conflict versions in the draft IP, I do
not believe that is the direction the Board made at the May meeting. The Board settled on a version of the
Conflict section and simply asked me to include reporting requirements (basically fill in a blank) which I did by
inserting the references to the two Personnel Policy Sections. I do not believe it is appropriate to insert the
Don's May language back into the document without Board direction. Understanding all of the effort Don has
put forward in the IP I will include a memorandum that will go out with the policy that includes his e-mail and
the May language so that the Board is aware of his concerns and they can be discussed at the June meeting.
Thank you
05/27/2008 AOL: Donbarm
To: ted@theodoreross.com; jfalconer@la-quinta.org
Cc: vorrantia@la-quinta.org
Subject: Sec VM of IP
Ted and John:
Please include two versions of Sec Vlll.in the draft of the IP to be sent to the IAB members before
the June meeting. One version will include the references to Sec 1.40 and 1.97 of the PM. The
other version is based on the Sec Vill draft I submitted at our May meeting. 1 am not enthusiastic
about the reporting procedure in 1.40 and 1.97.. Both sections
specify reporting to one's supervisor,
Remember,'.this Section deals, with Os and E$ involved in 'the banking and investing process.
There are several alternatives for reporting a conflict;
1. Continue, reporting to the CC.
2. Follow Randy's suggestion of CM reporting to CA, ACMs and DF/T reporting to CM
3. Do not state who to report to
4. Refer to 1.40, but employee shall report with one's supervisor to a higher level person.
Don
05/27/2008 AOL: Donbarm
Suggested wording for Ethics and Conflicts of Interest section of IP
May14, 2008
ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the banking and investment process
shall conduct the City's business in an ethical manner and refrain from any
activity or relationship that may be, or have the appearance of, a conflict of
interest. Any questionable activity or relationship shall be reported
immediately to the City Clerk and, until resolved, the officer or employee
shall refrain from participating in theb City's business related to the matter.
Officers and employees may conduct personal business with banks, brokers
and other financial institutions that are authorized to conduct business with
the City provided that the terms of the activity are not more favorable to the
accountholder with the City than are available to the public in general.