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2009 03 11 IABP.O. Box 1504 LA QUIN-rA, CALIFORNIA 92247-1504 78-495 CALLS TAMPICO (760) 7 7 7 - 7 0 0 0 LA QUINTA, CALIFORNIA 92253 FAX (760) 777-7101 AGENDA INVESTMENT ADVISORY BOARD Study Session Room 78-495 Calle Tampico- La Quinta, CA 92253 March 11, 2009 - 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 February 1 1, 2009 for the Investment Advisory Board. BUSINESS SESSION A. Transmittal of Treasury Report for January 2009 B. Continued Discussion of the Investment Advisory Board 2008/09 Work Plan and 2009/10 Investment Policy VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report and other selected Financial Data - February 2009 B. Pooled Money Investment Board Reports - December 2008 VII BOARD MEMBER ITEMS VIII ADJOURNMENT PUBLIC NOTICES The La Quinta Study Session room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the Finance Department at 777-7150, twenty-four (24) hours in advance of the meeting and accommodations will be made. Any writings or documents provided to a majority of the Investment Advisoiy Board regarding any item on this agenda will be made available for public inspection at the City Clerk counter at City Hall located at 76-495 Calle Tampico, La Quinta, CA 92253, during normal business hours. �'�r' INVESTMENT ADVISORY BOARD Meeting February 11, 2009 CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 4:30 p.m. by Chairman Ross, followed by the Pledge of Allegiance. PRESENT: Board Members Moulin, Deniel, Ross and Rassi ABSENT: Board Member Park OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Senior Secretary II PUBLIC COMMENT — None III CONFIRMATION OF AGENDA Board Member Moulin requested a verbal discussion be added to Board Member items in reference to investments. IV CONSENT CALENDAR A. Approval of Minutes of Meeting on January 14, 2009 for the Investment Advisory Board. MOTION: It was moved by Board Members Deniel/Moulin to approve the minutes of January 14, 2009. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for December, 2008 Mr. Falconer presented and reviewed the staff report advising the Board that the December portfolio as indicated on page 2 had slightly increased by approximately $2 million. Page 3 of the report reflects several changes with a $4.2 million deposit from the County for the new Avenue 52 fire station, which will 1 not be recognized as revenue until the commencement of construction. Mr. Falconer further advised that the City purchased land near Dune Palms Road for a secondary access connecting into Costco. Page 7 of the report reflects maturing investments ranging from 2% to 5%; these investments were reinvested at .65%. In response to Board Member Deniel, Mr. Falconer commented that the investments listed at 18 basis points were bond proceeds and had no impact on the pool portfolio, but would result in less interest for redevelopment agency project areas. Mr. Falconer advised that there are no current investments in commercial paper at this time and that page 4 reflects the two outstanding Corporate Notes with U.S. Bank and GE Capital. U.S. Bank is due to mature in April and GE Capital is due to mature in September. In response to Board Member Deniel, Mr. Falconer advised that the coupon rate for U.S. Bank is currently at 5.3% with a yield to maturity at 5.11 % and G.E. Capital coupon rate is at 4.15% with a yield to maturity slightly over 5%. In response to Board Member Denial, Mr. Falconer advised that the current year's interest rate assumptions were budgeted at 3%, with the average rate at 2.6% for the first six months. General discussion ensued amongst the board regarding the City's budgeted interest rate assumptions. MOTION - It was moved by Board Members Moulin/Deniel to approve, receive and file the Treasury Report for December 2008. Motion carried unanimously. B. Continued Consideration of the Fiscal Year 2008/2009 Work Plan Mr. Falconer advised that as indicated at the last Investment Advisory Board meeting, it was the direction of'the Board that staff modify the six-month forecast and present the proposed revisions. Due to time constraints, staff was unable to modify those revisions and will present the revisions at the next K scheduled meeting. Mr. Falconer further advised that the revisions to the City ordinance proposed by Board Member Moulin was the second item carried over for discussion from the February meeting. Chairman Ross requested that the minutes reflect one outstanding proposal by staff to be presented at the next scheduled board meeting. Board concurred. MOTION - It was moved by Board Members Deniel/Moulin to continue the Treasurer's Report discussion in its final presentation to the March meeting. Motion carried unanimously. Mr. Falconer advised that staff researched previous board minutes and included handouts pertaining to suggested changes to the ordinance previously received from Board Member Moulin. Board Member Moulin clarified that the Board cannot change the ordinance but can recommend a change to City Council. Board Member Moulin advised of the qualifications history of Ordinance 2.70.010 Item C, and his current suggested changes to Item C. Discussion ensued by the Board regarding the suggested changes to Item C of Ordinance 2.70.010. It was the conclusion of the board to submit the following change to City Council for approval: Proposed C.: Applicants for the board should have a background in finance and/or securities, preferably with knowledge and/or experience in markets, financial controls and accounting for securities. MOTION - It was moved by Board Members Moulin/Deniel to change the language of the qualifications of the members of the board. Motion carried unanimously. Board Member Moulin advised of the term history of Ordinance 2.70.010, and suggested creating a new paragraph creating an "E" section. ' 110 Discussion ensued by the Board regarding the suggested New "E" of Ordinance 2.70.010; it was the conclusion of the board to submit the following language to City Council for approval: Proposed E.: To promote continuity, the expiration of the terms of the members of the board shall be staggered. The term of service is three years, with the terms of one or two members expiring each year. Mr. Falconer advised that if the portion of the term section is approved by City Council, an adjustment will need to be made to an existing board member term. MOTION - It was moved by Board Members Deniel/Moulin to request that the Finance Director submit the changes to the ordinance to the City Council that address the Investment Advisory Board: 1) qualifications of the applicants; 2) the continuity of the terms of service. Motion carried unanimously. General discussion ensued by the Board regarding the number of members on the board. C. CMTA Conference — Palm Springs, California, April 22 — 24, 2009 Mr. Falconer advised that due to this year's location of the CMTA conference, the budget will allow all five members of the board to attend this year's conference. Board Member Rassi advised that due to his sustaining membership to the CMTA, that there is no charge for him to attend the conference. MOTION - It was moved by Board Members Deniel/Bassi to approve five members of the Board to attend the CMTA Conference in Palm Springs, California on April 22 -24, 2009. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report and other selected Financial Data — January C! Mr. Falconer advised that the LAIF balance as of January 27th has declined below 2%. Noted & Filed B. Pooled Money Investment Board Reports — November 2008 In response to Chairman Ross, Mr. Falconer advised that there was a concern by staff regarding state mandated furloughs and the impact it might have on being able to withdraw LAIF funds. Staff phoned the State Treasurer's office and there was someone there to help with withdrawals if needed. Mr. Falconer advised that due to the upcoming pass -through payments and debt service payments, staff is currently maintaining funds in the Wells Fargo overnight Money Market Fund to meet these commitments. Noted & Filed VII BOARD MEMBER ITEMS Board.Member Moulin commented on Municipal Bonds, their current interest rates and the possibility of the City buying back its bonds. After conversation with staff and the Board, that the bonds are invested, this did not appear to be feasible for the City to do. General discussion ensued by the board regarding municipal bonds and appropriation payments to the state. Vill ADJOURNMENT MOTION - It was moved by Board Members Deniel/Moulin to adjourn the meeting at 5:43 p.m. Motion carried unanimously. S mitted b Vianka Orrantia, Senior Secretary INVESTMENT ADVISORY BOARD Business Session: A Meeting Date: March 11, 2009 ITEM TITLE - Transmittal of Treasury Report for January 31, 2009 BACKGROUND: Attached please find the Treasury Report January 31, 2009 RECOMMENDATION: Review, Receive and File the Treasury Report for January 31, 2009 John M. Falconer, Finance Director 4 4& Quif tro MEMORANDUM TO. La Quinta City Council FROM John M Falconer, Finance Director/Treasurer SUBJECT Treasurer's Report for January 30, 2009 DATE: February 28, 2009 Attached is the Treasurer's Report for the month ending January 30, 2009, The report is submitted to the City Council each month after a reconciliation of accounts is accomplished by the Finance Department The following table summarizes the changes in investment types for the month: Investment Be innin Purchased Notes 1! 10,1111 Lured I Other Endin Chan e LAIF US Treasuries (2) 48,437,946 98,735,438 9,311,607 (1,600,000) 0 56, 149,553 7,711,607 US Gov't Sponsored Enterprises (2) 10,436,930 47,910 98,783,348 47.910 Commercial Paper (2) 19,405 10,456, 335 19,405 Corporate Notes 4,990,591 0 0 0 Mutual Funds 933 4,991,524 933 Subtotal $ 162,600,905 $ 9,311,607 $ 1,600,000 $ 0 68,248 0 $ 170,380,760 $ 0 7,779,855 Cash 3 962,617 17,211,598 I 1 16,248,981 17,211,598 Total1 $ 161,638,288 $ 26,523,205 $ 1,600,000186,629,741 $ 24,991,453 I certify that this report accurately reflects all pooled investments and is in compliance with the California Government Code; and is in conformity with the City Investment Policy. As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated revenues are available to meet the pools expenditure requirements for the next six months. The City of La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York Monthly Custodian Report to determine the fair market value of investments at month end I t �/� 2127 Loo John M. Falconer Rnance Director/Treasurer Date Footnote (1) The amount reported represents the net increase (decrease) of deposits and withdrawals from the previous month (2) The amount reported in the other column represents the amortization of premium/discount for the month on US Treasury, Commercial Paper and Agency investments (3) The cash account may reflect a negative balance This negative balance will be offset with transfers from other investments before warrants are presented for payment by the payee at the bank. K Treasurer's Commentary For the Month of January 2009 Cash Balances — The portfolio size increased by $25 million. The major reason for the increase was a $26.4 million deposit from the County of Riverside for 1' installment property taxes. Investment Activity — The average maturity of the portfolio decreased by 34 days to 82 days at the end of January. The Treasurer follows a buy and hold investment policy and has not sold investments before maturity to take advantage of market conditions. Maturing commercial paper and Agency Paper was replaced with U.S. Treasury Bills with January having no maturing investments. The sweep account earned $35 in interest income for the month of January and the bank fees for the month were $ 2,096 which resulted in a net decrease of $ 2,061 in real savings. Portfolio Performance — The overall portfolio performance decreased by nineteen(19) basis points from the prior month and ended at 1.23% for the month, with the pooled cash investments yielding 1.36%. The portfolio yield will continue to decrease because of market conditions and the treasurer's decision to limit reinvestments in U.S. Treasury securities due to the credit crisis. With the average maturity of 82 days, the portfolio yield should continue to drop downward based upon reinvestments at lower rates. The Treasurer has several longer term investments helping to keep yields higher as interest rates but they will gradually mature and result in a lower yield. At this time last year, the portfolio was yielding 4.22% which reflects the current interest rate environment. Future Thoughts Due to the current liquidity crisis impacting financial and business institutions the Treasurer is concentrating on safety first and foremost. In the short term, the Treasurer will be maintaining LAIF balances at the maximum allowable percentage because its rate declines slower in a declining rate environment. The Treasurer will not be investing in corporate notes, commercial paper or GSE's due to the current economic conditions affecting the financial markets; but instead will be investing in short term (less than one year) U.S. Treasury Bills. 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rUin77a`U ��- ruw»a`c?E� ©' \) )(\}) §()}\) ) ) ) - - !:;lN = !� ■ )\\ (((\\ \\\)\\ § \ \ § y !!rRF ! { §{• !�\ )) m City of La Dune Comparable Rates of Interest January 30, 2009 Year Month 21FY July 2002 August 2002 Sep12002 Oct2002 Nov 2002 Dec 2002 Jan 2003 Feb 2003 Mai Apr2003 May 2003 June 2003 FY 03104 July 2003 August2003 S.pt2003 Oct 2003 Nov 2003 Dec 2003 Jan 2004 Feb 2004 Mar2004 Apr2004 May 2004 June 2004 F Y 04105 July 2004 August2004 Sept 2004 Oct 2004 Nov 2004 Dee2004 Jan 2005 Feb 2005 Mar 2005 Apr2005 May2005 June 2005 FY 05106 July 2005 August2005 Sept2005 Oct 2005 Nov 2005 Dec 2005 Jan 2006 Feb 2006 Mai-2006 Apr2006 May 2006 June 200E FY 06107 July 2006 August 200E Sept 20W Oct2006 Nov2006 Dec 2006 Jan 2007 Feb 2007 Mar200] Apr200] May 2007 June 200➢ FY 01108 July 2007 August 20W Sept 20W Oct 20W Nov 2007 Dec 2007 Jan 2008 Feb 2008 Mar2008 Apr2008 May2008 June 2008 FY 08109 Ju1y2008 August2008 $Fpt2008 Cc12008 Nov 2008 Dec 2008 Jan 2009 Feb 2009 Mar2009 Apr2009 May 2009 June 2009 City of La Ou me Annualized Earnin s Pooled Cash Fiscal Again Claretl 246% 100% 205% 245% 127% 207% 246% 126% 210% 241% 100% 208% 232% 100% 202% 223% 100% 180% 211% 080% 162% 199% 059% 174% 201% 075% 178% 198% 072% 176% 186% 073% 154% 173% 049% 140% 166% 052% 143% 165% 045% 135% 165% 049% 126% 169% 048% 136% 164% 048% 138% 167% 057% 141% 158% 030% 137% 165% 030% 138% 150% 050% 133% 1 50% 0 50 % 1 33% 154% 050% 136% 169% 047% 162% 173% 050% 168% 173% 050% 157% 179% 107% 168% 1 ➢9% 1 14 % 1 72% 1 79% 143% 1 Y3% 1 89% 2 23% 2 08% 200% 225% 212% 216% 226% 222% 216% 267% 243% 227% 269% 249% 247% 270% 258% 259% 310% 283% 265% 311% 287% 264% 311% 281% 3 W% 348% 320% 333% 351% 334% 370% 353 % 355% 381% 363% 367% 411% 400% 406% 414% 401% 409% 421% 445% 431% 430% 446% 437% 467% 448% 460% 474% 498% 483% 493% 600% 496% 494% 501% 497% 498% 501% 499% 500% 502% 501% 504% 503% 503% 508% 504% 506% 518% 512% 516% 519% 513% 517% 521% 503% 515% 520% 514% 515% 520% 505% 516% 519% 488% 510% 62l% 490% 512% 517% 485% 508% 516% 486% 506% 511% 485% 502% 503% 483% 496% 495% 343% 445% 458% 333% 422% 412% 324% 385% 407% 283% 367% 345% 327% 341% 314% 327% 317% 309% 194% 286% 299% 193% 277% 3 16 % 1 92 % 2 88% 281% 192% 264% 266% 261% 261% 238% 236% 236% 160% 018% 142% 136% 018% 123% 172 139 121 109 163 137 131 117 92 74 123 131 110 80 121 98 117 140 120 155 137 137 209 214 172 162 112 113 145 109 104 120 93 64 113 ]3 84 76 65 96 68 112 73 110 92 61 78 95 48 53 6] 62 80 64 45 6] 42 32 85 129 109 129 116 99 123 96 86 ]4 82 63 80 62 51 3] 29 64 116 82 Three 2 18% 2 08% 213% 207% 1 45% 0 9T% 031% 2 59% 2 60% 249% 230% 231% 210% 1 95% 1 98% 186% 180% 1 70% 165% 63% 64% 160% 1 57% 1 55% 1 53% 1 44% 1 4] % 1 45% 143% 143% 160% 1 67% 177% 189% 2 00% 2 13% 226% 2 37% 2 37% 272% 286% 297% 308% 318% 332 % 346% 3 64% 381% 3 96% 404% 414% 431% 4 56% 4 70% 485% 495% 502% 510% 513% 513% 516% 518% 521% 522% 525 % 525% 526% 525% 523% 514% 496% 480% 4 62% 416% 3 78% 340% 307% 289% 279% 278% 21]% 271% 2 5]% 2 35% 2 05% 10 / 1 i i i■ 1 i 1 1 I 01 I O i ■ N i y � i N � wcc- c d ` J � p ' ■ w � � Ow.�. O Go U to o t N- V " o 0 0 0 U.) Im O U� O Ci f7 N N Q O Y O O O O C O O O Lo d o LO 0 2 O O 4) IL 11 INVESTMENT ADVISORY BOARD Business Session: B Meeting Date: March 11, 2009 ITEM TITLE: Continued Consideration of Fiscal Year 2008/09 Work Plan Items & 2009/10 Investment Policy BACKGROUND: As part of the work plan, the Investment Advisory Board is asked to review the Investment Policy and make any recommendations for the City Council's consideration in June of each year. At the March 3, 2009 City Council meeting, the City Council approved the changes to Chapter 2.70 of the Municipal Code discussed at last month's meeting. Consideration of this item with a recommendation to the City Council of any changes to the Fiscal Year 2009/10 Investment Policy. John M. Falconer, Finance Director CITY OF LA QUINTA Investment Policy Fiscal Year 2008-09 Table of Contents Section Topic Page Executive Summary 2 1 General Purpose 4 II Investment Policy 4 III Scope 4 IV Objectives 4 ► Safety of Principal ► Provide Liquidity ► Yield A Risk -Based Market Rate Of Return V Maximum Maturities 6 VI Prudence 6 VII Authority 7 VIII Ethics and Conflicts of Interest 7 IX Authorized Financial Dealers and Institutions 7 ► Broker/Dealers ► Financial Institutions X Permissible Deposits and Investments 8 XI Investment Pools 12 XII Payment and Custody 12 XIII Interest Earning Distribution Policy 12 XIV Internal Controls and Independent Auditors 13 XV Reporting Standards 14 XVI Financial Assets and Investment Activity Not Subject to this Policy 14 XVII Investment of Bond Proceeds 15 XIII Investment Advisory Board - City of La Quinta 15 XIX Investment Policy Adoption 15 Appendices Topic Page A Summary of Permissible Deposits and Investments 17 B City of La Quinta Municipal Code Ordinance 2.70 - Investment Advisory Board 19 C City of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and 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. The City Manager, Assistant City Managers, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. The Treasurer will be permitted to invest only in the permissible deposits and investments described in Section X and Appendix A up to the specified maximum allowable percentages 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 of the City's Investment Policy. Reading this summary does not constitute a complete review, which can only be accomplished by reviewing all of the pages herein. iK City of La Quinta Statement of Investment Policy July 1, 2008 through June 30, 2009 Adopted by the City Council on June 19, 2008 I 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. M 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 1. 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. I.7 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." 9 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 The City Manager, Assistant City Managers, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain from any activity or relationship that may be, or have the appearance of, a conflict of interest. Any questionable activity or relationship shall be reported immediately and in compliance with the procedures set forth in Section 1.40 — Conflicts of Interest and Acceptance of Gifts and other Gratuities of the City of La Quinta Personnel Manual. Reporting must be made in accordance with the personnel policies of the City and, until resolved, the officer or employee shall refrain from participating in the City's business related to the matter. The City Manager, Assistant City Managers, City Treasurer and city employees may conduct personal business with banks, brokers, and other financial institutions that are authorized to conduct business with the City provided that the terms of the activity to the accountholder with the City are the same as those that are available to the public in general. IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Treasurer maintains a listing of financial institutions which are approved for direct investment purposes. In addition a list will also be maintained of approved broker/dealers selected by credit worthiness, who maintain an office in the State of California. 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). ► State of California Department of Corporations (1-916-445-3062). The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. 2. Financial Institutions will be required to meet the following criteria in order to receive City funds for deposit or investment (see Appendix E, "Listing of Approved Financial Institutions"): A. Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC). B. Collateral - The amount of the City's deposits or investments not insured by the FDIC —shall be collateralized by securities with market values of 110%, or by mortgages with market values 1 50%, of the amount of invested funds plus unpaid interest earnings. C. Disclosure - Each financial institution maintaining invested funds in excess of the FDIC insured amount shall furnish the City a copy of the most recent Call Report. The City shall not invest in excess of the FDIC insured amount in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. X PERMISSIBLE DEPOSITS AND INVESTMENTS Permissible deposits and investments are summarized below. A more comprehensive list is included in Appendix A. Permissible Investments and Limitations (See Appendix A for Additional Information) Maximum Allocation Maximum Maturity Restrictions Current / Sweep Account: Checking &Savings Accounts FDIC Insured &Sweep Accounts 86% Portfolio On Demand U.S. Treasuries and/or GSE's Certificates of Deposit 60% Portfolio 3 Years `-$99.000 per institution 0 Permissible Investments and Limitations Maximum Maximum Restrictions (See Appendix A for Additional Information) Allocation Maturity U.S. Treasury Bills, Notes and Bonds, and Government National Mortgage 100% Portfolio 3 Years `=$9,0000,000 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) $20,000,000 3 years Prime Commercial Paper 15% Portfolio 90 Days $5.000,000 per issuer maximum Local Agency Investment Fund (LAIF) 30% Portfolio Current / 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. 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 110% to 150% depending on the specific security pledged as collateral in accordance with Government Code Section 53652. There are no portfolio limits on the amount or maturity for this investment vehicle. Collateralization will be required for Certificates of Deposits in excess of the FDIC insured amount. The type of collateral is limited to City authorized investments. Collateral will always be held by an independent third party from the institution that sells the Certificates of Deposit to the City. Evidence of compliance with State Collateralization policies must be supplied to the City and retained by the City Treasurer as follows: 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. 0 ➢ 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. 10 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 01 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; (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: 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. 12 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: 1 . 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. 13 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 LAIF which will be provided quarterly and show yield and maturity. ► Comparison of month end actual holdings to Investment Policy limitations. ► Current year and prior year monthly history of cash and investments for trend analysis. ► Balance Sheet. ► Distribution of cash and investment balances by fund. ► A comparison of actual and surplus funds. ► A year to date historical cash flow analysis and projection for the next six months. ► A two-year list of historical interest rates. 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. 16 P all N Z W ui w Z 0 Z Q U) H U) O a W O W J m U) 2 fr W CL lL 0 i cQ G N N V 0 CL a .o v c m N E c O M O M O N N 3 � O N l0 4 N a�y E c E O E N X a)M 0-E d c O O � O U N N O C c Co c y o a) N a N cc n N d i-r 3 m � Q N N .N+ c E U d L � F •M Q LD wn W } v ma N = y A 30 �'n�' CA ry N a'LL. :.i a❑ CL T y ❑ No mNOyEm ,b0 Nw_ LL LL N N E a c V C i N i° T C E M Md � E vd d d U jQ T T T T T T } �❑ T T MU M M M M M M rn M U c M M p 0 w W O Y E c c in E a 0 O % y w LL a C U� n E o c �^ m` E n a o o m o d s � w o v v N E 7 C E C 0 0 0 'o O 'o o 0 0 0 0 0 0 0 0 o 0 0 0 x" LL o 0 0 0 f0 0 o 0 W a a a a a0❑ 0^ a a a O 2 e o 0 0 0 o° o R o r CL O O O O N N O O O O Q 7 N N M N y L 4 0 0 0 0 0 0 0 0 0 0 7 N _o O o o 0 0 0 0 0 0 0 0 0 0 0 y 0 0 0 0 0 0 0 0 05 a° a a o 0 0 o a a a° a a U N O e o vi o 0 o e e o e 0 s 0 `m 00 E2 N cm Z E c) d m 'm E E E 0c0 0.2 «a m J E N 0 to M3 j - MO Q 2 U W Mi O l=L N= 0 LL N E C N N O lZL N O M C 0 a� 0 o m UJ cc 0i a m U °SEE LL N 5U' 0 '^ H„v 3 M 0 v CO c Q Z u., m v m �'�' s W.N d @ W N C rn C C C m LL 41 .. a 'c - 0 u at°i U' 2 M s m COO CI Q .r 0 d- L O C" C cL @ N rn y O Z O ¢ s L O N O a N O ?I= O 0 C N N `o Z` O m 0 0 E u d O Z G t� . y Q N = Z S LL T E C 1�- r N N C (L c drn m m m m U M 0 Eny m a 00md U�iOi a v v -0a v Q vo0" 0 E Ll y t U y U N 0 7 w y lL IOi li li 7 N N ' ' a O J O E Z- 0 0 0 U O` a U) U) m 0 N M M M CL` C d E N C N O w 7 a c J .416 0 o z "y C S O w 0 N w w w C E O O N N N 00 C N C N N > c N N w E H 9 Ao Ed w cQ cm m y o m zo y y C Q C cw� c W' Eda NN .°p C�i> d N,a C_NC > C C w J E c t -€ E y cEn Ow.- a 6 C x V w y w N N w C w W a L 90 w E r m> U .o w J m IEOE .N -wo c n w N wy c w E ama w p UONw p, wNcOE a 10 O E oo p anN rym a wywYOLDa oocC LC Nc E E o a JN w J N N= L O U o L j O N z �NlL- ma=y� ou ((p U) Q 9 U'O 6 V'� N (J U y D o m m 0 m c m u `^ OwU N mlpUN�� NJ rLr LL O N V O ww> LLow Uo 02-0N w> m m= E dNr Jdvww .pENC o:mlp A < O_ c O m 1p N J J J N LL N w d w d N E K N a' a v 10 w > c N ,Q� 0 c 0 c Z y C. w dZ c U E E m m o w c w E L 0 y 6 E U a y �p v U O U L C O w U C 0) 0 0 C C O N (O a OI C C C N d ry C 0 U 0 w a Y m U u o x n N N w > c O K n y a d w C N 9 om� 4 W J O w N E W w m N >`0 O o E m EU c« n dp 9£ oa m `w — o E .8_ u �� o U«cav? '�o Sc o c Jp T:N O c D E r m e 3 o c FJ o Oo w mp w— U Ern OS u-4,5N N jj as 10 w Q ? U 9 C o 0 0 ate. N m .. C °� "MawN? > w 0 a o d E J a o Mt N y>a a mma W O omw > C 'g T J u > c md Eyo _LN w E c o w cw w@n mC_ aNn ` v ` w w cNZm E.0 NU 8 8-m 0 c m� w o E E v¢E� 0 m 0 E Z£ nN N w C Y « U N O p N 9 w C a«_ wmm ga O ova y U Ew J N p m w f0N J L Ew O Y n N N v N D ma w y Y o Ea O w Eo16 OI N _ o c:c .cv ao ao cF« m€ T O) w w O l0 Y N U N m C _ O � w w y _ N w U w O L y E w Z�N -w N T O n w p' N 6 j U L U� K m m wIp �j ��p Ula O a3u L w r0 a� O O O w �a a� L nN rJm L6 rm L« ro N w w C C i i Ri al m 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. 19 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 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 L BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION Name of Firm: 2. Address: 3. Telephone: 4. Broker's Representative to the City (attach resume): Title: Telephone: (_) 5. Manager/Partner-in-charge (attach resume): 6. List all personnel who will be trading with or quoting securities to City employees (attach resume) 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 ( ) Telephone () Client Since Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 11. Has your firm or your local office ever been subject to a regulatory or state/ federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of securities? Have any of your employees been so investigated? If so, explain. 12. Has a client ever claimed in writing that you were responsible for an investment loss? Yes No If yes, please provide action taken Has a client ever claimed in writing that your firm was responsible for an investment loss? Yes No If yes, please provide action taken Do you have any current or pending complaints that are unreported to FINRA? Yes No If yes, please provide action taken Does your firm have any current, or pending complaints that are unreported to FINRA? Yes No If yes, please provide action taken 13. Explain your clearing and safekeeping procedures, custody and delivery process. Who audits these fiduciary responsibilities? Latest Audit Report Date 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 If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? No 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_ 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 No 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 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 Title Sales Manager and/or Managing Partner*_ Date 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 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 of Operating Funds Clients $ $ 29 Number of Other Restrictive Clients Funds Not Not Applicable Applicable Not Applicable Not Applicable Corporate $ Not Applicable Not Applicable High Net Worth Client $ Not Not Applicable Applicable Endowmental/Foun- $ Not dation Applicable Not Applicable 2. Provide the number of separate accounts whose portfolios consist of operating funds. 3. List in the following table the percentage by market value of aggregate assets under all governmental accounts under management for your latest reporting period: Type of Asset Percent by Market Value U.S. Treasury securities Federal Agency obligations Corporate securities rated AAA -AA Corporate securities rated A Corporate securities rated BBB or lower Other (specify 4. Describe the procedures that your firm has in place to address the potential or actual credit downgrade of an issuer and to disclose and advise a client of the situation. 5. Provide data on account/asset growth over the past five years. Indicate the number of government accounts gained and the number of government accounts lost. 6. List your five governmental largest clients. Identify those that are exclusively operating fund relationships and/or those that are other relationships (e.g., bond fund, retirement fund). 7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules). 8. Provide proof of State of California Registration, if your firm is not eligible for SEC registration. 9. Provide a sample contract for services. 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. Insurance Requirements Exhibit A defines the insurance requirements that will need to be met prior to the [Board/Councill's approval of any agreement for services. J. Submittal of proposals 1. Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing the caption RFP for (City of La Quinta, CA) and addressed to: City of La Quinta, CA 78-495 Calle Tampico La Quinta, CA 92253 Attention: John M. Falconer Finance Director/Treasurer 2. Proposal must be received no later than [Time] PST on [Month, Day, and Year]. 191K 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 Z4 'a E C ro R O .o O W ga a Z d d O O O O O O O N d N d N d N d N d O N d N d N d N d N d N d N d C Z Z Z Z Z Z Z } } } } } Z } } } } } } } o •- a Q � c o � a` y T o, u y o a o o o o o o o o o o o y y y y y d y 0} y y 3 z z z z z z z z z z z}}}}}} } oi_ QU c c z d a a EQoo 0 Q QQ0 Q a?• c c a c c c c c c a¢¢ c c c c Q 9 c c E zo z z z z z z z¢ z z z z a z z Q o O 0 0 0 0 c o a « O rE 0 0 0 N 0 C w d d d d j e e dc dc dc dd 0 o dO d c O0 c 0 c 0 0 o o 0 0 0 0 0 c 0a `o 0 O 0 Z Z Z z >> Z V m N N Z Z Z Z m N Z Z N 0 0 o `o Y3 n n o 9 JL, Q L O O 0 0 N N t2 e T T N N L2 E OLa E o w adi m d a o o U adi o w o o af0i v O w o adi adi Z Z Z z Z N N W 10 10 N N N 0 o C d r C H a N O c v E w.dN-. o U G C mCd 4`1 N DCC O d U 0- maN z.~NdFd- 12 0 OO O wd a �aN t a=Eo W d mQ C2 dQ Y Q 5 LEN o.o5dc yof Ud E E c T~ D! O U N d C J N J N m- m m U c =� a d Q c> U Q i U c aoi N C u � m w E M UU � s H 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. [... I The Government Code contains specific provisions regarding the types of investments and practices permitted after considering the broad requirement of preserving principal and maintaining liquidity before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust. Chapter II Fund Management Local Agency Investment Guidelines 2007 Issued by California Debt and Investment Advisory Commission 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 (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 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 36 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 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. 37 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 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 M Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and depositions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) -registered securities broker -dealers, banks and a few unregulated firms. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO): A repurchase agreement is a short-term investment transaction. Banks buy temporarily idle funds from a customer by selling U.S. Government or other securities with a contractual agreement to repurchase the same securities on a future date. Repurchase agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal funds and the maturity of the repo. Some banks will execute repurchase agreements for a minimum of $100,000 to $500,000, but most banks have a minimum of $1,000,000. REVERSE REPURCHASE AGREEMENTS (RRP or RevRepo) - A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security"buyer" in effect lends the"seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RRP extensively to finance their positions. Exception: When the Fed is said to be doing RRP, it is lending money that is increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMAS, SLMA, etc.) And Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative -based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the Shape of the yield curve. SURPLUS FUNDS: Section 53601 of the California Government Code defines surplus funds as any money not required for immediate necessities of the local agency. The City has defined immediate necessities to be payment due within one week. TREASURY BILLS: A non -interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year. 39 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. M ORDINANCE NO. 464 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, AMENDING SECTION 2.70.010 OF THE LA QUINTA MUNICIPAL CODE RELATING TO THE INVESTMENT ADVISORY BOARD THE CITY COUNCIL OF THE CITY OF LA QUINTA, CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS: SECTION I. That Chapter 2.70, Section 2.70.010 item :C- aad E. -of the- La Quinta Municipal Ceode is hereby amended to read as follows: C. Applicants for the board should have a verifiable background in finance and/or securities, preferably with knowledge and/or experience in markets, financial controls and accounting for securities. _Background information will be requested and potential candidates must agree to a background check and verification. SECTION 11. That Chapter 2.70 Section 2 70 010 of the La Quinta Municipal Code is hereby amended to add Section 2.70.010 item E as follows: E. To promote continuity, the expiration of the terms of the members of the board shall be staggered. The term of service is three years, with the terms of one or two members expiring each year. SECTION III. EFFECTIVE DATE: This Ordinance shall be in full force and effect thirty (30) days after its adoption. SECTION IVI#. POSTING: —The City Clerk shall within fifteen (15) days after passage of this Ordinance, cause it to be posted in at least three (3) public places designated by resolution of the City Council; shall certify to the adoption and posting of this Ordinance; and shall cause this Ordinance and its certification, together with proof of posting to be entered into the Book of Ordinance of the City of La Quinta. PASSED, APPROVED AND ADOPTED this 17`" 17th-day of March, 2009 by the following votes: AYES: Council Members Franklin, Henderson, Kirk, Sniff, Mayor Adolph Ordinance No. 464 Amend Section 2.70.010 Re: Investment Advisory Board Approved March 3,_2009 Page 2 Br4maflGe-No SeetieN-2- 4. U APProveck Page of 2 NOES: None ABSTAIN: None ABSENT: None DON ADOLPH, Mayor City of La Quinta, California ATTEST: VERONICA J. MONTECINO, CMC, City Clerk City of La Quinta, California (SEAL) APPROVED AS TO FORM: M. KATHERINE JENSON, City Attorney INVESTMENT ADVISORY BOARD Correspondence & Written Material Item A Meeting Date: March 11, 2009 TITLE: Month End Cash Report February 2009 BACKGROUND: This cash report is not a complete Treasury Report (exclude petty cash, deferred compensation and fiscal agent balances), but would report in a timely fashion selected cash balances. RECOMMENDATION: Information item only. John M. Falconer, Finance Director rl rr 8 LL y Dom�v USA N W O N b 0 tp O yy N b W y N C N N N N N n p y) 0 W N W N W N O W C! 0 P 01m0' pm b N N h O m t� 616 O Q N N p V N v v .N.i N O H N CO} W m N N h m P W m N P pO O O O O m m O z d 0 O p O O W N W N W N h m O W m O O O Z�O q O O O O O O O O OOi I�O b O W O N O W m O P N N O Q W N N m b n O P N W w Q N m W Qj N C v� O O m m O 1p W m o m P OR P m n R' m O IQCS 0 m N N P Q f0 N n e di m W m N m Q N m n n n W n DLLm P P m 6 m 00 6� 4 m P N b N m m m n 0 o v v LL m O W O O O OO O goO O O O O � 3 m N N N N 0 0 0 dco IL q j N W m W 10 W O O N W _om N m N m N W m N 3= r m m m ae d 3 u m N m m m N N P� N O N� CI 1� O N O N r mmy W O W g U 3 n N p 100 0 v by v N N O_ 0 P Ol N r n N N W P S"N m m m m m ((VV j N q O Y m q N p N N A m m y E $ d wo 12 d mtias, a A 0 c a v m cc t fox c 'co 1; d ¢�,pW m 52 m m �i o d m mE"EE 2`m q '-° m �q oo �u w O mm555LLLLLLgw�rw ¢ ¢ �¢mOzo,LLi¢�-',m ¢ 2 Bill Lockyer, State Treasurer 1% Inside the State Treasurer's Office Local Agency Investment Fund (LAIF) SAVE THE DATE: LAW ANNUAL CONFERENCE, OCTOBER 21-22, 2009 PMIA Performance Report Date Daily Yield Quarter to Date Yield Average Maturity in days) 2/12/2009 1.87 2.01 216 2/13/2009 1.88 2.00 216 2/14/2009 1.88 2.00 216 2/15/2009 1.88 2.00 216 2/16/2009 1 1.88 2.001 216 2/17/2009 1.86 1.99 211 2/18/2009 1.87 1.99 213 2/19/2009 1.86 1.99 214 2/20/2009 1.83 1.99 216 2/21/2009 1.83 1.98 216 2/22/2009 1.83 1.98 216 2/23/2009 1.83 1.98 211 2/24/2009 1.80 1.97 207 2/25/2009 1 1.771 1.971 204 L 3E Corporate 0.530,, Commei 3.' LAIF Performance Report Quarter ending 12/31/2008 Apportionment Rate: 2.54% Earnings Ratio: 0.00006948964923038 Fair Value Factor: 1.003013411 PMIA Average Monthly Effective Yields Jan 2009 2.046% Dec 2008 2.353% Nov 2008 2.568% Pooled Money Investment Account Portfolio Composition $61.5 Billion 01/31/09 Treasuries Time Deposits CDs/BNs 13.07% 3.78% Mortgages 1.73% 4gencies 23.11 % 3 Recent Bill Auction Results rays 1 U1 1 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 13-WEEK 03-05-2009 06-04-2009 0.280 0.284 99.929222 91279SQ79 26-WEEK 03-05-2009 09-03-2009 0.440 0.447 99.777556 91279SN98 4-WEEK 02-26-2009 03-26-2009 0.205 0.208 99.984056 9127951<91 13-WEEK 02-26-2009 05-28-2009 0.300 0.304 99.924167 912795M24 26-WEEK 02-26-2009 08-27-2009 0.495 0.503 99.749750 912795528 294-DAY 02-26-2009 12-17-2009 0.705 0.718 99.424250 912795569 272-DAY 02-20-2009 11-19-2009 0.645 0.656 99.512667 912795SSI 4-WEEK 02-19-2009 03-19-2009 0.230 0.233 99.982111 912795K83 13-WEEK 02-19-2009 05-21-2009 0.325 0.330 99.917847 9127951-90 26-WEEK 02-19-2009 08-20-2009 0.470 0.478 99.762389 912795N72 4-WEEK 02-12-2009 03-12-2009 0.250 0.254 99.980556 912795K75 13-WEEK 02-12-2009 05-14-2009 0.340 0.345 99.914056 9127951-82 26-WEEK 02-12-2009 08-13-2009 0.480 0.188 99,757333 912795N64 52-WEEK 02-12-2009 02-11-2010 0.610 0,621 99.383222 912795T27 4-WEEK 02-05-2009 03-05-2009 0.285 0.289 99.977833 912795K67 49-DAY 02-05-2009 03-26-2009 0.290 0.294 99.960528 912795K91 13-WEEK 02-05-2009 05-07-2009 0.270 0.274 99.931750 9127951-74 26-WEEK 02-05-2009 08-06-2009 0.390 0.396 99.802833 912795N56 4-WEEK 01-29-2009 02-26-2009 0.040 0.041 99.996889 912795K59 70-DAY 01-29-2009 04-09-2009 0.200 0.203 99.961111 9127951-33 13-WEEK 01-29-2009 04-30-2009 0.150 0.152 99.962083 912795L66 26-WEEK 01-29-2009 07-30-2009 0.345 0.350 99,825583 912795Q95 4-WEEK 01-22-2009 02-19-2009 0.030 0,030 99.997667 91279SK42 70-DAY 01-22-2009 04-02-2009 0.100 0.101 99.960556 9127951-25 13-WEEK 01-22-2009 04-23-2009 0.140 0.142 99.964611 9127951-58 26-WEEK 01-22-2009 07-23-2009 0.320 0.325 99.838222 912795N31 4-WEEK 01-15-2009 02-12-2009 0.020 0.020 99.998444 912795K34 56-DAY 01-15-2009 03-12-2009 0,085 0.086 99.986778 912795K75 13-WEEK 01-15-2009 04-16-2009 0.120 0.122 99.969667 9127951-41 26-WEEK 01-15-2009 07-16-2009 0.290 0.294 99.853389 912795N23 52-WEEK 01-15-2009 01-14-2010 0.430 0.437 99,565222 912795R86 4-WEEK 01-08-2009 02-05-2009 0.060 0.061 99,995333 912795K26 70-DAY 01-08-2009 03-19-2009 0.100 0.101 99.980556 912795K83 13-WEEK 01-08-2009 04-09-2009 0.150 0,152 99.962083 9127951-33 26-WEEK 01-08-2009 07-09-2009 0.320 0.325 99.838222 912795M99 4-WEEK 01-02-2009 01-29-2009 0.030 0.030 99.997750 912795393 62-DAY 01-02-2009 03-05-2009 0.140 0.142 99.975889 912795K67 13-WEEK 01-02-2009 04-02-2009 0.050 0.051 99.987500 9127951-25 26-WEEK 01-02-2009 07-02-2009 0.250 0.254 99.874306 91279SQ87 4-WEEK 12-26-2008 01-22-2009 0.000 0.000 100.000000 912795385 Effective with the 11/2/98 auction, all bills are auctioned using the single -priced method. Freedom of Information Act I Law & Guidance I Privacy & Legal Notices I WebSite Terms & Condition U.S. Department of the Treasury, Bureau of the Public Debt http://www.treasurydirect.gov/RI/0FBills 3/2/2009 4 FRB: H.15--Selected Interest Rates, Web -Only Daily Update --February 27, 2009 Fage 1 of 4 Federal Reserve Statistical Release H.15 Selected Interest Rates (Daily) Skip to Content Release Date: February 27, 2009 Weekly release dates I Historical data I Data Download Program (DDP) I About I Announcements Daily update Other formats: Screen reader I ASCII j,11 Dab Download Program The weekly release is posted on Monday. Daily updates of the weekly release are F through Friday on this site. If Monday is a holiday, the weekly release will be F 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 February 27, 2009 2009 2009 2009 2009 Instruments Feb Feb Feb Feb 23 24 25 26 Federal funds (effective) 1 2 3 0.19 0.21 0.21 0.22 Commercial Paper 3 4 5 6 Nonfinancial 1-month 0.28 0.20 0.35 0.27 2-month 0.44 0.32 0.35 0.39 3-month 0.51 n.a. n.a. n.a. Financial 1-month 0.35 0.41 0.50 0.43 2-month 0.53 0.57 0.80 0.53 3-month 0.74 0.63 0.92 0.60 3-month nonfinancial or financial posted by CPFF 7 Without surcharge 1.23 1.23 1.24 1.25 With surcharge 2.23 2.23 2.24 2.25 CDs (secondary market) 3 8 1-month 0.50 0.50 0.48 0.50 3-month 1.17 1.10 1.15 1.20 6-month 1.77 1.73 1.73 1.80 Eurodollar deposits (London) 3 9 1-month 0.80 0.80 0.80 0.80 3-month 1.65 1.65 1.65 1.65 6-month 2.50 2.50 2.50 2.50 Bank prime loan 2 3 10 3.25 3.25 3.25 3.25 Discount window primary credit 2 11 0.50 0.50 0.50 0.50 U.S. government securities Treasury bills (secondary market) 3 4 4-week 0.18 0.22 0.21 0.18 3-month 0.30 0.32 0.30 0.27 6-month 0.50 0.49 0.51 0.46 1-year 0.67 0.69 0.72 0.70 http://www.federalreserve.gov/Releases/H15/update/ 3/2/2009 5 FK13: H. I �--Nelectea interest Kates, weo-vnry uauy upuatn--rcurueuy L I, wV7 . ar, . .. , Treasury constant maturities Nominal 12 1-month 3-month 6-month 1-year 2-year 3-year 5-year 7-year 10-year 20-year 30-year Inflation indexed 13 5-year 7-year 10-year 20-year Inflation -indexed long-term average 14 Interest rate swaps 15 1-year 2-year 3-year 4-year 5-year 7-year 10-year 30-year Corporate bonds Moody's seasoned Aaa 16 Baa State & local bonds 17 Conventional mortgages 18 n.a. Not available. Footnotes 0.19 0.22 0.21 0.18 0.29 0.32 0.30 0.27 0.50 0.49 0.52 0.47 0.69 0.71 0.75 0.73 0.96 1.03 1.09 1.08 1.34 1.37 1.49 1.50 1.84 1.89 2.06 2.07 2.22 2.26 2.42 2.72 2.78 2.80 2.95 2.98 3.79 3.77 3.88 3.93 3.53 3.49 3.59 3.66 1.24 1.36 1.46 1.48 1.44 1.56 1.69 1.72 1.70 1.82 1.98 2.02 2.22 2.21 2.34 2.45 2.27 2.29 2.40 2.50 1.31 1.32 1.36 1.40 1.59 1.58 1.66 1.73 1.93 1.91 2.01 2.12 2.23 2.20 2.33 2.45 2.45 2.44 2.57 2.71 2.76 2.75 2.87 3.06 3.00 2.99 3.11 3.32 3.19 3.14 3.22 3.45 5.23 5.21 5.31 5.36 8.02 8.03 8.13 8.21 4.87 5.07 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 30-1 60-, and 90-day dates reported on the Board's Commercial Paper Web page (www.federalreserve.gov/releases/cp/). 6. Financial paper that is insured by the FDIC's Temporary Liquidity Guarantee Pr excluded from relevant indexes, nor is any financial or nonfinancial commercial p directly or indirectly affected by one or more of the Federal Reserve's liquidity the rates published after September 19, 2008, likely reflect the direct or indire http://www.federalreserve.gov/Releases/HI5/update/ 3/2/2009 6 r": ri.tz)--,�)eiectea interest icates, weo-unry catty upaate--reoruary / i, 2.uuy rage 1 014 new temporary programs and, accordingly, likely are not comparable for some purpo published prior to that period. 7. CPFF refers to the Federal Reserve's Commercial Paper Funding Facility. The ra under the CPFF for financial and nonfinancial commercial paper. An issuer of comm the CPFF may avoid the surcharge by providing a collateral arrangement or indorse acceptable to the Federal Reserve Bank of New York. Source: Federal Reserve Bank 8. An average of dealer bid rates on nationally traded certificates of deposit. 9. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time. 10. 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. 11. The rate charged for discounts made and advances extended under the Federal R credit discount window program, which became effective January 9, 2003. This rate adjustment credit, which was discontinued after January 8, 2003. For further info www.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/default.htm. The rate for the Federal Reserve Bank of New York. Historical series for the rate on adjus well as the rate on primary credit are available at www.federalreserve.gov/releas 12. 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. 13. 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 14. Based on the unweighted average bid yields for all TIPS with remaining terms more than 10 years. 15. 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. 16. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and A rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds o 17. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Th 18. Contract interest rates on commitments for fixed-rate first mortgages. Source Market Survey(R) data provided by Freddie Mac. 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 7 http://www.federalreserve.gov/ReleasesIH15/update/ 3/2/2009 rtcrs: n.1Z)--Delec1ea Interest tcates, weo-only Lacy vpuate--rcoruary x i, xee7 rage Y ui w Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-7 electronic access to current and historical data, call STAT-USA at 1-800-782-8872 Description of the Treasury Nominal and Inflation -Indexed Constant Maturi Yields on Treasury nominal securities at "constant maturity" are interpolated by from the daily yield curve for non -inflation -indexed Treasury securities. This cu the yield on a security to its time to maturity, is based on the closing market b actively traded Treasury securities in the over-the-counter market. These market calculated from composites of quotations obtained by the Federal Reserve Bank of constant maturity yield values are read from the yield curve at fixed maturities, and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yiel maturity, for example, even if no outstanding security has exactly 10 years remai Similarly, yields on inflation -indexed securities at "constant maturity" are inte daily yield curve for Treasury inflation protected securities in the over-the-cou inflation -indexed constant maturity yields are read from this yield curve at fixe currently 5, 7, 10, and 20 years. Weekly release dates I Historical data I Data Download Program(DDP) I About I Announcements Daily update Other formats: Screen reader I ASCII Statistical releases Home I Economic.researchand data i� �..----............._ ._ Accessibility I Contact Us Last update: February 27, 2009 http://www.federalreserve.gov/Releases/HI5/update/ 3/2/2009 8 1,KB: Commercial raper Kates ana vutstanamgs ragu i Ui � Federal Reserve Release Commercial Paper Release I About I Announcements I Outstandings I Volume statistics I Year-end I Maturity Distribution Data Download Program (DDP) Data as of February 27, 2009 Commercial Paper Rates and Outstanding Derived from data supplied by The Depository Trust & Clearing Corporation Posted March 2, 2009 Dikemmt rntec FTerml nonfinancial nonfinancial financial asset -backed 1-day 0.27 0.82 0.28 0.63 7-day 0.16 0.90 0.29 0.81 15-day 0.29 1.37 0.31. 0.50 30-day 0.37 1.60 0.65 0.71 60-day 0.44 1.16 0.77 0.59 90-day 0.51 1.78 0.77 1.05 Yield curve market Oasts — — — AAnonfnancial ........... A21P2 non€immc[al ---- AA financial t 7 Is Days to Maturity 60 2.5 2.0 1.5 1.0 0.5 0.0 http://www.federaireserve.gov/releases/cp/ 3/2/2009 9 FRB: Commercial Paper Kates and uutstandmgs r ar'vc va✓ Discount rate spread Thirty -day A2/P2 less AA nonfinancial conini rcial paper (daily) Basis --- spmad S.daymovingavg 2001 2002 2003 2004 2006 2006 2007 2008 Discount rate history 2001 2002 2003 2004 2005 2006 2007 2008 Outstandings Weekly (Wednesday), seasonally adjusted 800 700 600 500 400 300 200 100 0 7 6 5 4 3 2 1 0 http://www.federaireserve.gov/releases/cp/ 3/2/2009 10 I,": l,ommerclal raper 1CaleJ a11u vuwtauu1116a .»b-...,_-. 1190 1090 990 890 790 690 590 490 Billions of dollars Billions of dollars --- RonSnatwial (right wale) ^—'•— Financial (left aealc) 1 1 r irty�y i+4'' V 4 2001 2002 2003 2004 2005 2006 2007 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 Qutstandings I Volume statistics I Year-end I Maturity -Distribution Data Download Program (DDP) Home I Statistical releases Accessibility I Contact Us Last update: March 2, 2009 http://www.federalreserve.gov/releases/ep/ 3/2/2009 11 City of La Quetta Cash Flow Budget to Actual January 31, 2009 Cash Basis Account Budget 1/09 Actual 1109 Accrual/ Adjustment Adjusted Total 1109 Variance Over Under Notes Property Tax/Tax increment Transient Occupancy Tax Sales Tax 41,798.516 708,648 679,650 39,029,695 264,668 543,400 72,902 39,029.695 337,570 543,40D (2,768,821) (371,078) (136,250) Credit of$021k from last fiscal year belied aga,mt January payment Decreased due to drop,n tourism Decreased due to drop In spending Other revenues 3,859,359 2.318,044 2,318044 1541,315 Decrease in 01F am General Fund revenues Revenues 47,096,173 42,155,807 72,902 42,228,709 4,817,464) Expenditures Salaries & Fringe Benefits Other expenditures Subtotal 1,004,493 2,996,875 846,531 1.993,319 846.531 1,993.319 (157,962) 1,003,556 General Fund expeMiWres below budget 4,001368 2,839,850 2.839.850 1, 161,518 292,248 1,231,410 1,231,410 939.162 Redevelopment Agency Property Tax Armin Fees$918x Debi Service (Prinp,pal/InteresllPass Through) Subtotal - 13173120 13,173,120 1 13.173.120 Count, of Rrversde Pass tbru reed m January 292,248 14,404 530 14,404.530 14.112,282 730837 730837 730.837 Capital Projects Total Ex endduree 5,024,453 17,975,217 17,975,217 12,950,764 Net Revenues/Expenditures 42,021,720 24,180,590 72,902 24,253,492 18,177,300 NOTE 1 Expenditures are budgeted at 8 34% per month Difference between actual and budget (Underspent) DEPARTMENT Overspent Notes GENERAL GOVERNMENT (74,408) CITY CLERK (20,455] COMMUNITY SERVICES (102,829) Lrorary below budget FINANCE (35,391) BUILDING & SAFETY (133,814) Building Maintenance below budget PUBLIC SAFETY (554,315) Fire Service Casts not reed PLANNING (128,678) Contract Services below butlget PUBLIC WORKS: 295,537 Development Svcs& Traffic below budget SUBTOTAL - GENERAL FUND 1,345,427 Library Gas Tax Federal Assistance JAG Grant Slesf (Cops) Revenue 'Indian Gaming - Lighting & Landscaping - RCTC Development Agreement - CV Violent Crime Task Force (1,782) AB 939 Quimby (2, 919) Infraskd.Id,e Proposition 1B South Coast Art Quality (2,219) Transportation Parks & Recreation Civic Center Library Development Community Center Street Facility - Park Facility - Fire Protection - Ads In Public Places (14,926) Interest Allocation Equipment Replacement (58,024) Information Technology (32,466) Park Maintenance Facility 5,192 SJverRock Golf 1,090 SJverRock Reserve - LO Public Safely Officer (167) Finance Authority (1, 318) Capital Improvement - I Total 1,453,766 12 INVESTMENT ADVISORY BOARD Meeting Date: TITLE: March 11, 2009 Correspondence & Written Material Item B Pooled Money Investment Board Report for December 2008 BACKGROUND: The Pooled Money Investment Board Report for December 2008 is included in the agenda packet. This report is available on-line at www.treasurer.ca.gov. RECOMMENDATION: Receive & File A4-� Ia., John M. Falconer, Finance Director POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF DECEMBER 2008 WITH DECE (DOLLARS IN THOUSANDS) ER 2007 DECEMBER 200811 DECEMBER 2007 CHANGE Average Daily Portfolio $ 59,947,044 $ 59,946,688 $ +456 Accrued Earnings $ 119,799 $ 243,786 $ -123,987 Effective Yield 2.353 4.801 -2.448 Average Life -Month End (In Days) 223 204 +19 Total Security Transactions Amount $ 16,783,128 $ 29,629,407 $ -12,846,279 Number 339 621 -282 Total Time Deposit Transactions Amount $ 2,993,000 $ 3,796,000 $ -803,000 Number 156 190 -34 Average Workday Investment Activity $ 898,915 $ 1,671,270 $ -772,355 Prescribed Demand Account Balances For Services $ 1,199,393 $ 356,968 $ +842,435 For Uncollected Funds $ 150,315 $ 182,522 $ -32,207 i BILL LOCKYER TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) December 31, 2008 DIFFERENCE IN PERCENT OF PERCENT OF PORTFOLIO FROM TYPE OF SECURITY AMOUNT PORTFOLIO PRIOR MONTH Government Bills $ 7,598,685 12.01 +2.27 Bonds 0 0.00 0 Notes 3,773,662 5.96 +0.39 Strips 0 0.00 0 Total Government $ 11,372,347 17.97 +2.66 Federal Agency Debentures $ 10,166,951 16.06 -0.46 Certificates of Deposit 3,950,070 6.24 +0.81 Bank Notes 0 0.00 0 Bankers' Acceptances 0 0.00 0 Repurchases 0 0.00 0 Federal Agency Discount Notes 4,889,729 7.73 +2.16 Time Deposits 8,249,500 13.03 -0.57 GNMAs 144 0.00 0.00 Commercial Paper 1,947,499 3.08 -4.57 FHLMC/Remics 1,070,368 1.69 -0.03 Corporate Bonds 324,434 0.51 -0.02 AB 55 Loans 11,852,564 18.73 -0.18 GF Loans 9,466,600 14.96 +0.04 Reversed Repurchases 0 0.00 +0.16 Total (All Types) $ 63,290,206 100.00 DECEMBER 2008 NOVEMBER 2008 NUMBER AMOUNT NUMBER AMOUNT Pooled Money 339 $ 16,783,128 333 $ 16,345,349 Other 27 130,095 23 1,411,366 Time Deposits 156 2,993,000 107 2,552,000 Totals 522 $ 19,906,223 463 $ 20,308,715 PMIA Monthly Average Effective Yield 2.353 2.568 Year to Data Yield Last Day of Month 2.667 2.726 2 Loans 33.69% Corporate Bonds 0.51 % Commercial F 3.08% Pooled Money Investment Account Portfolio Composition $63.3 Billion 12/31 /08 Treasuries Time Deposits CDs/BNs 13.03% 6.24% Aortgages 1.69% Agencies 23.79% BOARD MEMBER ITEMS rage i of i John Falconer From: Donbarm@aol.com Sent: Wednesday, March 04, 2009 9:37 PM To: John Falconer Subject: Background and Verifiable John, The word "background" was the Council's term not the IAB's. Adding "verifiable" does not help. I favor simplicity and clarity. I suggest: "Applicants for the Board shall have experience in finance, preferably, with knowledge of markets, financial controls and accounting for securities." Will you send this to the IAB (to adhere to the Brown Act.) And If they concur, would it be appropriate for you to dicuss this with Stanley and Terry before the next reading? Don A Good Credit Score is 700 or Above. See yours in just 2 easy stepsl 3/5/2009