2009 07 08 IAB• •;
P.O. Boa 1504
LA QUANTA, CALIFORNIA 92247-1504
78-495 CALLS. TANii,ico (760) 7 7 7 - 7 0 0 0
LA QUINTA, CALIFORNIA 92253 FAX (760) 777-7101
AGENDA
INVESTMENT ADVISORY BOARD
Finance Conference Room
78-495 Calle Tampico- La Quinta, CA 92253
July 8, 2009 - 4:30 P.M.
CALL TO ORDER
a. Pledge of Allegiance
b. Roll Call
II APPOINTMENT OF OFFICERS
A. Appointment of Investment Advisory Board Chairperson
B. Appointment of Investment Advisory Board Vice -Chairperson
III PUBLIC COMMENT - (This is the time set aside for public comment on any matter
not scheduled on the agenda.)
IV CONFIRMATION OF AGENDA
V CONSENT CALENDAR
A. Approval of Minutes of Meeting on June 10, 2009 for the Investment
Advisory Board.
VI BUSINESS SESSION
A. Transmittal of Treasury Report for May 2009
B. FY 2009/2010 Meeting Schedule
C. Consideration of Approval of Investment Advisory Board 2009/2010
Work Plan
D. LAIF Conference
VII CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report - June 2009
B. Pooled Money Investment Board Reports - April 2009
C. Distribution of Investment Policies for Fiscal Year 2009/2010
Vill BOARD MEMBER ITEMS
IX ADJOURNMENT
INVESTMENT ADVISORY BOARD
MEETING
June 10, 2009
(At this time Senior Secretary Orrantia placed the conference call to the City
Attorney.)
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, Ross, Rassi and Park
ABSENT: Board Member Deniel
OTHERS PRESENT: Tom Genovese,
Attorney (Present: via teleconference)
Vianka Orrantia, Senior Secretary
II PUBLIC COMMENT — None.
City Manger, Kathy Jenson, City
John Falconer, Finance Director and
III CONFIRMATION OF AGENDA — None
Il�td�]�F9���iyel��i!1�7_1:1
A. Approval of Minutes of Meeting on May 13, 2009 for the
Investment Advisory Board.
MOTION: It was moved Board Members Moulin/Park to approve
the minutes of May 13, 2009. Motion carried unanimously.
V BUSINESS SESSION
A. Transmittal of Treasury Report for April 2009
Mr. Falconer presented and reviewed the staff report advising the
Board that the City's cash position had increased slightly by $2.2
million, ending the month at $173.7 million due to the following
capital project reimbursements: 1) Riverside County Transportation
Commission for the widening of Highway 111 and; 2) CVAG
Reimbursement for the Fred Waring Drive Widening Project; In
1
addition, the portfolio maturity decreased 15 days to 54 days, with
three higher yielding investments maturing causing the yield to
drop below 1 %, with the overall investment portfolio yield ending
at .85% and the pooled yield ending at .947%.
Mr. Falconer also advised that as a result of the IAB May meeting
allowing the Treasurer to invest in Commercial Paper and Corporate
Notes with FDIC coverage and upon approval by the City Council,
investments have been made in several investment instruments,
which will be reflected in future Treasurer's reports.
Mr. Falconer suggested that the Board consider future strategies
for alternative investments, one of which would be Certificate of
Deposits up to the $250,000 FDIC limit with local banks. Mr.
Falconer advised that Board Member Rassi utilized this particular
investment instrument during his employment as a Finance
Director.
Chairman Ross requested a correction be made to page 3, "Cash
Balances," The portfolio size did increased I...1
Mr. Falconer reviewed the decline in the portfolio percentages
reflected on page 7: Federal Farm Credit maturing at 2.9%; Federal
Home Loan Bank maturing at 2.15%; Corporate Note with US Bank
Corp. maturing at 5.1 %; and the reinvestment of the U.S. Treasury
maturing at .30%. In addition, Mr. Falconer reiterated the
suggested use of Certificates of Deposits.
General discussion ensued among the Board and staff regarding
alternative investments in lieu of LAIF, in addition to a discussion
of next day liquidity.
In response to Board Member Moulin, Mr. Falconer advised that
page 9, title "Funds for Reinvestment" would be changed to
"Available Cash" at the Boards direction. Board concurred.
In response to Board Member Moulin, Mr. Falconer advised staff
would review the $30 million in "other revenues" and if composed
of several dollar amounts, the next report would reflect the
breakdown.
Chairman Ross complemented staff on the commentary listed on
page 9, under "Major Changes in Cash Flow [... 1."
2
MOTION - It was moved by Board Members Moulin/Park to
approve, receive and file the Treasury Report for April 2009.
Motion carried unanimously.
B. Continued Discussion of the Investment Advisory Board 2008/09
Work Plan and 2009/10 Investment Policy
Mr. Falconer stated that Tom Genovese, City Manager was present
and Kathy Jenson, City Attorney was present, via teleconference.
Mr. Falconer presented the final redlined version of the investment
policy with minor changes, in addition to the Executive Summary
with staff's recommendations which included the following: 1)
Increase FDIC Coverage to $250,000 — pages 8 and 17 of the
investment policy; 2) The City is also permitted to invest in
commercial paper issued under the FDIC Temporary Liquidity
Program subject to the aforementioned commercial paper
limitations — page 10 of the investment policy and; 3) The City is
also permitted to invest in corporate notes under the FDIC
Temporary Liquidity Program subject to the aforementioned
corporate note limitations — page 11 of the investment policy. Mr.
Falconer advised, as discussed in previous meetings and upon
review by Board Members Moulin and Rassi, staff drafted
suggested language in regards to the auditor's control letter to be
included as part of the policy on page 14.
Chairman Ross reviewed the changes/deletions to the 2009/10 as
follows:
Page 1 — Table of Contents: Fiscal Year 200SQ9 2009/2010
Page 2 — Fiscal Year 2008/09 2009/2010
Page 4 - July 1, P009 2009 through June 30, 9009 2010
Adopted by the City Council on June 46 19, 2008 2009
Page 6 — V Maximum Maturities — third paragraph, second
sentence: For FY 2008/09 2009/2010, [...I
In response to Chairman Ross, Mr. Falconer advised upon review
by staff the $8 million dollar amount reflected is sufficient.
Page 8 — Chairman Ross requested that the phone numbers listed
be verified.
In response to Chairman Ross, Mr. Falconer advised that the
maximum investment per CD would be up to $250,000, including
interest.
3
In response to Board Member Moulin, Mr. Falconer clarified that the
dollar limitations are direct investments by the City and not a
sweep account; therefore it would not be considered a conflict.
Page 9 - First column, seventh row, Corporate Notes including
Temporary Liquidity Guarantee Program (TLGP)
Ms. Jenson advised that on page 9 Item 2 A. & B., the formatting
of the underline extends beyond where it should.
Page 10 - Item No. 4, second paragraph, second sentence: For
Fiscal Year 2008/09 2009/10 (... I
Item No. 5, last sentence is the proposed language approved by
City Council on May 13.
Page 11 - Item No. 8, last sentence isthe proposed language by
City Council on May 13.
Page 14 - The independent auditor's letter on internal control over
financial reporting and compliance managernent I^++^. comments,
as it pertains peFtaining 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
auditor's letter, as it pertains,
peFtaining 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.
The ,d ,d .d ' letteF On iRt8Fnal 1 eveF fina.,,.'�I
r
Feparting and Gamplianee as it peFtains to eash and investment
any, she" be diFeeted to the Gity MaRageF who Will EI'Feet the Gity
TFeaSUFeF te pFevidea Witten response to the indepeRmen#
auditer's letter The dletteF, as it rtarn^ +^ ash ^
nvestment—aetvTt+es and the G-�t, T FeasuFer's Fespo se shall
eensideratienFollowing" Gernpletion of ^ ^" annual audit,
2
General discussion ensued among the Board regarding the
Management Letter.
Mr. Falconer clarified that the City Manager does meet with the
auditor separately to discuss the results of the audit.
Mr. Genovese summarized for the Board the general purpose of the
meetings with the auditors and what the meeting entails. Mr.
Genovese advised that the proposed language covers two aspects
of the Finance Director's functions: 1) Finance Director and; 2)
Treasurer.
General discussion ensued among the Board regarding the meetings
and the auditor's letter.
Page 17 — Bid Process No. 2, City Restriction: < = $99,000
$250,000 per institution
Bid Process No. 6: Corporate Notes includinq Temporary Liquidity
Guarantee Program (TLGP)
Page 19 — General rules regarding appointment will required to be
updated with the current code language.
Page 22 — Function: Security of Investments at City —
Responsible Party: Vault Accounting Manager and Senior
Secretary
Ms. Jenson advised that function of the "Acknowledge Investment
Selection", the Responsible Party should read City Manager or
either of the Assistant Managers. It was agreed by the Board that
it read City Manager or an Assistant City Manager.
Page 23 — Institutional name changes: Item 2. Bank of New
York/Mellon and Item 4. McHi'. 'Lyne; Banc of America Securities.
Page 28 - Mailing address correction: 78 4@6 Galle Templee P.O.
Box 1504 La Quinta, CA 92263 92247-1504
Page 37 — Item 1 definition to be reviewed and updated. along
with a correction to the formatting.
5
In response to Board Member Park, Chairman Ross advised that
CDARS currently is not a permissible investment within the
investment policy and would be consider as part of the upcoming
Investment Board's work plan.
MOTION - It was moved by Board Members Park/Moulin to approve
the Investment Policy for 2009/2010 as amended. Motion carried
unanimously.
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report and other selected Financial Data — May
2009
Mr. Falconer commented that the April Treasury rates remain low
and the LAIF rates were up slightly at 1.60%.
Noted and Filed
B. Pooled Money Investment Board Reports — March 2009
Mr. Falconer advised that the graph on page 4 reflects a high loan
percentage and Mr. Falconer will contact LAIF and report back to
the Board at the next scheduled meeting.
In response to Chairman Ross, Mr. Falconer advised that in
comparison to page 2 of the report, the loan percentage has
increased by 4%.
General discussion ensued among the Board and Staff regarding
investments in LAIF.
Noted and Filed
VII BOARD MEMBER ITEMS
In response to Board Moulin, Mr. Falconer advised that the Board's
input in regards to CD's was beneficial and further advised that
investment in CD's would be beneficial not only to the City but also in
the community. Mr. Falconer advised that he would like to implement
the investment of CD's in the next couple of weeks and would be
looking at six month and one year CD's.
11
In response to Board Member Rassi, Mr. Falconer advised that he will
investigate the waiving of the 1.10% collateral requirement on
investments smaller than the FDIC guaranteed insurance limit per
institution.
General discussion ensued among the Board and staff as to whether or
not to invest in a six month vs. year's CD.
Chairman Ross asked if there was any opposition by the Board as to
the Treasurer proceeding with the investments of CD's. There was no
opposition.
Chairman Ross expressed his gratitude for Board Member Deniel's
involvement on the Board for the last seven years.
VIII ADJOURNMENT
MOTION - It was moved by Board Members Moulin/Park to adjourn the
meeting at 5:38p.m. Motion carried unanimously.
�m� it
Vianka Orrantia,
Senior Secretary
F]
INVESTMENT ADVISORY BOARD Business Session: A
Meeting Date: July 8, 2009
ITEM TITLE:
Transmittal of Treasury Report
for May 31, 2009
BACKGROUND:
Attached please find the Treasury Report for May 31, 2009.
The list below is a follow-up of several items from last months meeting:
• Staff called the FINRA & State Corporations phone number listed in the
Investment Policy and they remain the same.
■ Staff has broken out in further detail several revenue items in the cash flow
analysis.
■ The City opened four Certificates of Deposits in June and did not waive FDIC
insurance.
RECOMMENDATION:
Review, Receive and File the Treasury Report for May 31, 2009.
A410M e daw,�
John M. Falconer, Finance Director
MEMORANDUM
TO: La Quinta City Council
FROM: John M. Falconer, Finance DirectorrTreasurer
SUBJECT: Treasurer's Report for May 31, 2009
DATE: June 30, 2009
Attached is the Treasurer's Report for the month ending May 31, 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
Beginning
Purchased
Notes
Sold/Matured
Other
Ending
Change
LAIF
US Treasuries (2)
US Gov't Sponsored Enterprises (2)
Commercial Paper (2)
Corporate Notes '
Mutual Funds
51,295,185
115,875,242
1,994,354
1
8,500,000
15,000,000
5,000,000
10,000,000
1
(8,000,000)
31,519
0
(2,171)
128,432
1
59,795,185
122,906,761
0
4,997,829
12,122,786
0
8,500,000
7,031,519
0
4.997,829
10,128,432
1
Subtotal
$ 169,164,782
$ 38,500,000
$ 8,000,000
$ 157,779
$ 199,822,561
$ 30,657,779
Cash 3 4,567,043 1 1,780,034 2,787,009 1,780,034
Total $ 173,731,825 $ 38,500.060 1 $ 9,780,034 $ 157,779 1 $ 202,609,570 $ 28.877.745
I certify that this report accurately reflects allpooled investments and is in compliance with the Califomia
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.
hn M. Falconer
Date
Finance Director7Treasurer
Footnote
(1) The amount reported represents the net increase (decrease) of deposits and withdrawals from
the previous month.
(2) The amount reported in the other column represents the amortization of premium/discount for the
month on US Treasury, Commercial Paper and Agency investments.
(3) The cash account may reflect a negative balance. This negative balance will be offset with transfers from
other investments
before warrants are presented for payment by the payee at the bank.
2
Treasurer's Commentary
For the Month of May 2009
Cash Balances — The portfolio size increased by $28.9 million to end the month at $202.6
million. The major reason for the increase was the receipt of the 2ntl County of Riverside May
property tax installment of $28.8 million.
Investment Activity — The average maturity of the portfolio increased by 26 days to 80 days
at the end of May. The Treasurer follows a buy and hold investment policy and purchased
two (2) TLGP Corporate Notes and one (1) TLGP Commercial Paper investments during the
month which resulted in the increased average maturity. The portfolio continues to not have
direct investments in GSE's at this time and has one corporate Note - GE Capital. The sweep
account earned $83 in interest income for the month of April and the bank fees for the month
were $ 2,017 which resulted in a net decrease of $ 1,934 in real savings.
Portfolio Performance — The overall portfolio performance decreased by one (1) basis point
from the prior month and ended at .84% for the month, with the pooled cash investments
yielding .92%. The portfolio yield should continue to stay at these levels for the near future.
At this time last year, the portfolio was yielding 3.17% which reflects the current interest
rate environment.
Looking Ahead
While the liquidity crisis impacting financial and business institutions has somewat waned, the
Treasurer is still 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 non-
TLGP corporate notes, non-TLGP 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 and Certificates of Deposits with local banks. Bond
proceeds will be laddered in three- and six-month Treasury bills as they mature.
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City of La Ouinta
Comparative Rates of Interest
May 31, 2009
Year
Month
FY 02/03
July 2002
August 2W2
Sept 2002
00 2002
Nov 2W2
Dec 2W2
Jan 2W3
Feb 2003
Mar 2003
Apr 2003
May2W3
June 2003
FY 03m
July 2W3
August 2003
Sept 2W3
O 2W3
Nov 2W3
Dec 2003
Jan 2004
Feb 2W4
Mar 2W4
Apr2W4
May2W4
June 2N l
F Y04,D5
July 2W4
August2W4
Sept 2004
Oct 2W4
Nov 20W
Oec 2004
Jan 2W5
Feb 2W5
Msr2W5
Apr 2005
May 2W5
June 2005
FY 05N6
July 2W5
August 2W5
Sept 2005
Oc12W5
Nov 2W5
Dec 2W5
Jan 20W
Feb 2W6
Mar20W
Apr 20N
May 2006
June 20W
FY WI07
Augugut2sl2Wfi
Sept 20W
Oct 2006
Nov20W
Dec 20N
Jan 2W7
Feb 2007
Mar 2W7
Apr 2W7
May 207
June 2007
FY WIN
July 2W7
August 2W7
Sept 2W7
002W7
Nov 2W7
Dec 2W7
Jan 2W8
Feb 2"
Mar 2W8
Apr20W
May 2008
June 2W8
FY NIN
July 20W
August 2W8
Sept 20M
Oq 2"
Nov 2008
Dec 2W8
Jan 20W
Feb 2W9
Mar20W
Apr 2009
May 2W9
June 20W
Annualizetl Eamin s
Pooled Cash
Fiscal Agent
Overall
246%
1.00 %
2.05%
245%
1,27%
2,07%
2.46%
1.26%
2.10%
241%
1.00%
2.08%
2.32%
100%
202%
223%
100%
1.80%
2,11 %
0.80%
1.62%
1,%%
0.59%
174%
2.01%
075%
1,78%
1.98%
0,72%
1,76%
186%
073%
154%
1.73%
049%
140%
166%
0,52%
143%
1.65%
045%
1.35%
1 65%
0.49%
1.26 %
1,59%
0.48%
1.36%
164%
048%
1.38%
167%
057%
141%
1.58%
0.30%
1.37%
1.65%
0.30%
1.39 %
1,50%
0.50%
133%
1.50%
050%
133%
1.54%
O.W%
1.W%
1,69%
047%
162%
173%
0.50%
1.68%
1.73%
0.50%
1.57%
1.79%
107%
1.68%
179%
1.14%
1.72%
179%
143%
1_73%
1.89%
2.23%
208%
2W%
225%
2.12%
2.16%
2.26%
2,22%
2.16%
267%
243%
2.27%
2.69%
2,49%
247%
2,70%
2.58%
2.59%
310%
2 83%
265%
3.11%
287%
26,1%
3,11%
2.81%
3.07%
3.48%
320%
3.33%
351%
3.34%
370%
353%
355%
3.81%
363%
3,67%
4.11%
4W.
406%
4.14%
4,01%
4.09%
4,21%
445%
4.31 %
430%
446%
437%
4.67%
4.46%
460%
474%
4.98%
4,83%
4.93%
5.W%
4.96%
494%
5.01 %
4.97%
4.98%
5,01%
4.99%
5.00%
5,02%
5,01%
504%
503%
503%
508%
504%
506%
5.18 %
5.12%
5.16%
519%
5,13%
5.17%
521%
503%
515%
520%
5.14%
5.15%
5.20%
506%
5,16%
5.19%
488%
5,10%
521%
4W%
5.12%
5.17%
485%
5.08%
5.16%
4W%
5 W%
5.11%
4,85%
5.02%
503%
483%
4.%%
4,95%
3,43%
445%
4.58%
3,33% -
4.22%
4.12 %
3.24%
3.85%
4,07%
2.83%
3.67%
345%
327%
341%
3.14%
3.27%
3.17%
3 W%
1 94%
2.86%
299%
193%
277%
3.16%
1.92%
2 88%
2.81%
1,92%
264%
2W%
2.61%
261%
2.38%
2.W%
2,W %
160%
0.18%
142%
1,36%
0,18%
1.23%
1.23%
0.18%
1,11%
1.26%
0.18%
1,13%
0.94%
0.18%
085%
0.92%
0.18%
0.84%
Average
tun (days)
Mm Month
Treasury BillsINote
Six Mann
One Year
Two Year
172
173%
172
1.64%
139
162%
121
155%
iW
129%
163
1.27%
137
1.16%
131
1.20%
117
1.18%
92
1.17%
74
1,10%
123
0.86%
131
0.98%
410
106 %
80
1.01%
121
1.04%
98
1.03%
117
099%
140
1 00%
120
1.01%
155
101%
137
1 19%
137
1.38%
2W
173%
214
1.74%
172
1 78%
167
1 95%
112
2.04%
113
237%
145
2%%
1 W
2.56 %
104
2 85%
120
2.85%
93
309%
64
3.11%
113
322%
73
3.54%
54
369%
76
3 75%
65
375%
96
416%
68
420%
112
444%
73
4.58%
110
463%
92
4 74 %
67
484%
78
5.11%
95
506%
48
4 97%
53
5W%
67
4.96%
62
494%
80
4.90%
64
4.98%
45
4.95%
67
4 88%
42
4.84%
32
4.81 %
85
481%
129
4 80%
109
459%
129
4W%
116
3.95%
99
3 34 %
123
3.39 %
%
2.31%
86
2 07 %
74
1.50%
82
170%
63
1.92%
80
2,14%
62
170%
188%
229%
2.75%
51
1.69%
189%
2.14%
ZW%
37
1.42%
1.79%
1'%%
2.W%
29
0.90%
140%
172%
1.5()%
64
0.15%
049%
1.04%
125%
116
0.05%
025%
0,59%
0%%
82
0.15%
0.35%
043%
0.08%
75
030%
0.50%
061%
0.88%
69
020%
042%
070%
ON%
54
031%
0.33%
0.59%
0.88%
W
0,18%
0.30%
0.53%
ON%
2.18%
2W%
2.13 %
2 07%
1 45%
0,97%
031%
048%
0 37%
0,28%
023%
2.59%
2.60 %
249%
2.30%
2.31%
2.10%
1.95%
1.0%
1.86%
1.60%
170%
1.65%
1.63%
1.64 %
1 60%
1.57%
1.55%
53%
"%
147%
145%
1.43%
143%
60%
1.67%
1 77%
1.89%
2 00%
2.13%
2 26%
2.37%
2,37%
272%
2 86%
297%
308%
3.18%
3,32%
3 46%
3 64%
3,81%
3 96%
4.04%
4,14%
431%
4.56%
4 70%
4.85%
4,95%
5,02%
5.10%
5,13%
5.13%
5.16%
5,18%
5.21%
5 22%
5 25%
5.25%
5.26%
5,25%
5,23%
5.14%
4 96%
4.80
462%
4.16%
378%
3 40%
3.07%
2.89%
2 79%
2 78%
2.77%
271%
2,57%
2.35 %
2 05%
137%
1 82%
1.61%
1 53%
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INVESTMENT ADVISORY BOARD MEETING BUSINESS SESSION: B
Meeting Date: July 8, 2009
ITFM TITI F
Meeting Schedule for Fiscal Year
2009/2010•
BACKGROUND:
Attached find a list of meeting dates for Fiscal Year 2009/2010.
RECOMMENDATION:
Approve the meeting schedule of the Investment Advisory Board for Fiscal Year
2009/2010.
John M. Falconer, Finance Director
IO �
MEMORANDUM
TO: Investment Advisory Board Members
FROM: John M. Falconer, Finance Director
DATE: July 8, 2009
RE: Schedule of Investment Advisory Board Meeting Schedule
The City Ordinance specifies that the Investment Advisory Board usually will meet
monthly unless the Board with Council concurrence believes less frequent meetings
are considered necessary. For the last several years the Board has met monthly
however, in the past the Board has elected to not meet in August. In addition, the
Board meetings have been held at 4:30 p.m., Staff would like to know if the Board
would want to meet at another time. Listed below are meeting dates for the
Boards review.
Monthly
July 8, 2009
August 12, 2009
September 9, 2009
October 14, 2009
November 11, 2009
December 9, 2009
January 13, 2010
February 10, 2010
March 10, 2010
April 14, 2010
May 12, 2010
June 9, 2010
Quarterly
September 9, 2009
December 9, 2009
March 10, 2010
June 9, 2010
Please consider the schedules for Fiscal Year 2009/2010 and give Staff direction.
INVESTMENT ADVISORY BOARD Business Session: C
Meeting Date: July 8, 2009
ITEM TITLE:
Fiscal Year 2009/10 Work Plan
BACKGROUND:
Each year the Investment Advisory Board adopts a work plan, which is
subsequently forwarded to the City Council for approval.
In addition to the responsibilities listed in the ordinance, the Board may want to
consider additional items to address during FY 09/10.
Last year the work plan included (1) monitoring and review of GSE's and LAIF(2)
Revise Chapter 2.70 of the Municipal code and (3) review the content and
presentation of the monthly Treasurer's Report.
In Fiscal Year 2009/2010, Staff has identified the following possible work plan
items:
1) Identify a Money Market Mutual Fund
RECOMMENDATION:
Review and approval of work plan items as deemed appropriate, for consideration
by the City Council at their August 4, 2009 meeting.
John M. Falconer, Finance Director
INVESTMENT ADVISORY BOARD
Meeting Date: July 8, 2009
TITLE:
LAIF Conference — Sacramento, CA
October 21 -22, 2009
BACKGROUND:
Business Session: D
The LAIF Conference Agenda has not been printed yet but will be held in Sacramento,
California on October 21 — 22, 2009.
Staff will provide the agenda to the Board as soon as it is available. We wanted to
bring this item to the Board to check their calendars.
RECOMMENDATION:
Select up to two Board members to attend the LAIF Conference.
John M. Falconer, Finance Director
Save The Date
Local Agency Investment Fund (LAIF)
Annual Conference
October 21 — 229 2009
•
•
i
The LAIF Annual Conference will be held on Wednesday, October 21
at the Sacramento Convention Center in downtown Sacramento. A
post -conference tour of Investments/LAIF is scheduled the following
day Thursday, October 22 at the California State Treasurer's Office
(Jesse Unruh Building).
It is anticipated the conference registration form will be posted on the
LAIF website (www.treasurer.ca.gov/pmia-laif) and mailed to
participating LAIF agencies two months prior to the event.
For questions regarding the conference please contact Janice Hayashi at
jhayashi@treasurer.ca.gov or call (916) 653-3001.
INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item A
Meeting Date: July 8, 2009
TITLE:
Month End Cash Report - June 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.
ohn M. Falconer, Finance Director
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Bill Lockyer, State Treasurer
Inside the State Treasurer's Office
Local Agency Investment Fund (LAIF)
SAVE THE DATE: LAW ANNUAL CONFERENCE, OCTOBER 21-22, 2009
PMIA Performance Report
ar.+r
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6/11/2009
1.45
1.56
205
6/12/2009
1.45
1.56
204
6/13/2009
1.45
1.56
204
6/14/2009
1.45
1.55
204
6/15/2009
1.451
1.55
6/16/2009
1.44
1.55
6/17/2009
1.43
1.55
6/18/2009
1.42
1.55
6/19/2009
1.39
1.55
6/20/2009
1.39
1.55
6/21/2009
1.39
1.54
6/22/2009
1.30
1.54
6/23/2009
1.28
1.54
6/24/2009
1.26
1.5411
LAIF Performance Report
Quarter ending 3/31/2009
Apportionment Rate: 1.91%
Earnings Ratio: .00005227211614311
Fair Value Factor: 1.001829532
PMIA Average Monthly Effective Yields
May 2009 1.530%
Apr2009 1.607%
Mar 2009 1.822%
Pooled Money Investment Account
Portfolio Composition
$54.5 Billion
05/31/09
Loans
29.01 %
Corporate E
0.61 %
Commercial Paper
3.57%
Time Deposits
10.25%
CDs/BNs
7.46%
Treasuries
21.95%
Mortgages
1.67%
Agencies
25.48%
3
lcecent t511t Auction lcesulls
. �s
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
339-DAY
07-06-2009
06-10-2010
0,540
0.550
99.491500
912795UT6
4-WEEK
07-02-2009
07-30-2009
0.160
0.162
99.987556
912795Q95
13-WEEK
07-02-2009
10-01-2009
0.195
0.198
99,950708
912795P54
26-WEEK
07-02-2009
12-31-2009
0.350
0.355
99.823056
912795R60
52-WEEK
07-02-2009
07-01-2010
0.545
0.555
99.448944
912795U66
4-WEEK
06-25-2009
07-23-2009
0.150
0.152
99.988333
912795N31
13-WEEK
06-25-2009
09-24-2009
0.195
0.198
99,950708
912795S36
26-WEEK
06-25-2009
12-24-2009
0.335
0.340
99.830639
91279SR52
4-WEEK
06-18-2009
07-16-2009
0.095
0.096
99.992611
912795N23
13-WEEK
06-18-2009
09-17-2009
0.160
0.162
99.959556
912795P39
26-WEEK
06-18-2009
12-17-2009
0.290
0.294
99.853389
912795S69
4-WEEK
06-11-2009
07-09-2009
0.075
0.076
99.994167
912795M99
70-DAY
06-11-2009
08-20-2009
0.180
0.183
99.965000
91279SN72
13-WEEK
06-11-2009
09-10-2009
0.190
0.193
99.951972
912795P21
26-WEEK
06-11-2009
12-10-2009
0.345
0.350
99.825583
9127951137
11-DAY
06-04-2009
06-15-2009
0.160
0.162
99.995111
9127952E0
4-WEEK
06-04-2009
07-02-2009
0.050
0.051
99.996111
912795Q87
70-DAY
06-04-2009
08-13-2009
0.130
0.132
99.974722
912795N64
13-WEEK
06-04-2009
09-03-2009
0.150
0.152
99,962083
912795N98
26-WEEK
06-04-2009
12-03-2009
0.290
0.294
99.853389
912795Q61
52-WEEK
06-04-2009
06-03-2010
0.445
0.453
99.550056
912795U58
4-WEEK
05-28-2009
06-25-2009
0.120
0.122
99.990667
912795M65
70-DAY
05-28-2009
08-06-2009
0.170
0.172
99.966944
912795N56
13-WEEK
05-28-2009
08-27-2009
0.175
0.178
99.955764
912795528
26-WEEK
05-28-2009
11-27-2009
0.300
0.305
99.847500
912795Q53
4-WEEK
05-21-2009
06-18-2009
0.130
0.132
99.989889
912795M57
70-DAY
05-21-2009
07-30-2009
0.175
0.177
99.965972
91279SQ95
13-WEEK
05-21-2009
08-20-2009
0.185
0.188
99,953236
9127951172
26-WEEK
05-21-2009
11-19-2009
0.295
0.300
99.850861
912795S51
321-DAY
05-15-2009
04-01-2010
0,500
0.509
99.S54167
912795UL3
4-WEEK
05-14-2009
06-11-2009
0.140
0.142
99.989111
91279SM40
70-DAY
05-14-2009
07-23-2009
0.170
0.172
99.966944
912795N31
13-WEEK
05-14-2009
08-13-2009
0.190
0.193
99.951972
912795N64
26-WEEK
05-14-2009
11-12-2009
0.305
0.310
99.845806
912795Q38
4-WEEK
05-07-2009
06-04-2009
0.145
0.147
99.988722
91279SQ79
70-DAY
05-07-2009
07-16-2009
0.145
0.147
99.971806
912795N23
13-WEEK
05-07-2009
08-06-2009
0.195
0.198
99,950708
9127951\156
26-WEEK
05-07-2009
11-05-2009
0.330
0.335
99.833167
912795Q20
52-WEEK
05-07-2009
05-06-2010
0.530
0.540
99.464111
912795U41
4-WEEK
04-30-2009
05-28-2009
0.055
0.056
99.995722
912795M24
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 „& Conditions I r
U.S,..Department „of the Treasury, Bureau. of the Public -Debt
4
http://www.treasurydirect.gov/RI/OFBills 7/2/2009
i,Kts: ti.i3--5eiectea interest rates, weD-tiny Uauy upuale--Juty t, /-VV7
r asc i ui �
Federal Reserve Statistical Release
H.15
Selected Interest Rates (Daily)
Ship to Content
Release Date: July 1, 2009
Weekly release dates I Historical data I Data Download Program (DDP) I About I Announcements
Daily update Other formats: Screen reader I ASCII
Data Download
0 Program
The weekly release is posted on Monday. Daily updates of the weekly release are post
through Friday on this site. If Monday is a holiday, the weekly release will be post
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
July
1, 2009
2009
2009
Instruments
Jun
Jun
29
30
Federal funds (effective) 1 2 3
0.17
0.22
Commercial Paper 3 4 5 6
Nonfinancial
1-month
0.17
0.20
2-month
0.23
0.25
3-month
0.34
0.24
Financial
1-month
0.26
0.25
2-month
0.41
0.41
3-month
0.33
0.35
3-month nonfinancial or financial
posted by CPFF 7
Without surcharge
1.22
1.22
With surcharge
2.22
2.22
CDs (secondary market) 3 6
1-month
0.28
0.29
3-month
0.38
0.39
6-month
0.63
0.65
Eurodollar deposits (London) 3 9
1-month
0.65
0.65
3-month
1.05
1.05
6-month -
1.40
1.40
Bank prime loan 2 3 10
3.25
3.25
Discount window primary credit 2 11
0.50
0.50
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
0.10
0.17
3-month
0.20
0.19
6-month
0.36
0.35
1-year
0.46
0.55
5
http://www.federalreserve.gov/Releases/H 15/update/ 7/2/2009
1'Kti: t1.1J--5eteetea interest Kates, wen-vnry catty upaaie--Jury 1, tuy7
rayc c u1 w
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
Footnotes
0.11 0.17
0.20 0.19
0.36 0.35
0.51 0.56
1.11 1.11
1.63 1.64
2.53 2.54
3.18 3.19
3.51 3.53
4.29 4.30
4.31 4.32
1.32 1.20
1.55 1.46
1.83 1.78
2.19 2.12
2.22 2.15
0.88 0.89
1.50 1.54
2.10 2.15
2.57 2.61
2.91 2.96
3.36 3.41
3.71 3.75
4.12 4.17
5.37 5.37
7.20 7.17
1. The daily effective federal funds rate is a weighted average of rates on brokered
2. _Weekly figures are averages of 7 calendar days ending on Wednesday of the current
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 settled
Depository Trust Company. The trades represent sales of commercial paper by dealers
issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are eq
30-, 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 Progr
excluded from relevant indexes, nor is any financial or nonfinancial commercial pape
directly or indirectly affected by one or more of the Federal Reserve's liquidity fa
the rates published after September 19, 2008, likely reflect the direct or indirect
new temporary programs and, accordingly, likely are not comparable for some purposes
6
http://www.federalreserve.gov/Releases/Hl5/update/ 7/2/2009
PF-B: H.1J--Jeiectea 1nteresr Kaies, weo-uniy uany upuale -July 1, /vv7 rage J Vi �
published prior to that period.
7. CPFF refers to the Federal Reserve's Commercial Paper Funding Facility. The rates
under the CPFF for financial and nonfinancial commercial paper. An issuer of commerc
the CPFF may avoid the surcharge by providing a collateral arrangement or indorsemen
acceptable to the Federal Reserve Bank of New York. Source: Federal Reserve Bank of
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.S.
commercial banks. Prime is one of several base rates used by banks to price short-te
loans.
11. The rate charged for discounts made and advances extended under the Federal Rese
credit discount window program, which became effective January 9, 2003. This rate re
adjustment credit, which was discontinued after January 8, 2003. For further informa
www.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/default.htm. The rate re
for the Federal Reserve Bank of New York. Historical series for the rate on adjustme
well as the rate on primary credit are available at www.federalreserve.gov/releases/
12. Yields on actively traded non -inflation -indexed issues adjusted to constant matu
30-year Treasury constant maturity series was discontinued on February 18, 2002, and
on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S. Treasury
factor for adjusting the daily nominal 20-year constant maturity in order to estimat
nominal rate. The historical adjustment factor can be found at
www.treas.gov/offices/domestic-finance/debt-management/interest-rate/Itcompositeinde
Source: U.S. Treasury.
13. Yields on Treasury inflation protected securities (TIPS) adjusted to constant ma
Source: U.S. Treasury. Additional information on both nominal and inflation -indexed
found at www.treas.gov/offices/domestic-finance/debt-management/interest-rate/index.
14. Based on the unweighted average bid yields for all TIPS with remaining terms to
more than 10 years.
15. International Swaps and Derivatives Association (ISDA(R)) mid -market par swap ra
for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on r
at 11:00 a.m. Eastern time by Garban Intercapital plc and published on Reuters Page
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 Aaa
rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds only
17. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thurs
18. Contract interest rates on commitments for fixed-rate first mortgages. Source: P
Market Survey(R) data provided by Freddie Mac.
Note: Weekly and monthly figures on this release, as well as annual figures availabl
Board's historical H.15 web site (see below), are averages of business days unless o
Current and historical H.15 data are available on the Federal Reserve Board's web si
(www.federalreserve.gov/). For information about individual copies or subscriptions,
Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-728-
7
http://www.federalreserve.gov/Releases/Hl 5/update/ 7/2/2009
i,Kb: H.la--�electea interest Kates, weD-vnty tjauy upaate--juty i, /vu7 rage 4 ut'+
electronic access to current and historical data, call STAT-USA at 1-800-782-8872 or
Description of the Treasury Nominal and Inflation -Indexed Constant Maturity
Yields on Treasury nominal securities at "constant maturity" are interpolated by the
from the daily yield curve for non -inflation -indexed Treasury securities. This curve
the yield on a security to its time to maturity, is based on the closing market bid
actively traded Treasury securities in the over-the-counter market. These market yie
calculated from composites of quotations obtained by the Federal Reserve Bank of New
constant maturity yield values are read from the yield curve at fixed maturities, cu
and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield f
maturity, for example, even if no outstanding security has exactly 10 years remainin
Similarly, yields on inflation -indexed securities at "constant maturity" are interpo
daily yield curve for Treasury inflation protected securities in the over-the-counte
inflation -indexed constant maturity yields are read from this yield curve at fixed m
currently 5, 7, 10, and 20 years.
Weekly release dates I Historical data I Data Download Program ([)DP) I About I Announcements
Daily update Other formats: Screen reader I ASCII
Statistical releases
Home I Fcionomic research and data
Accessibility I Contact Us
Last update: July 1, 2009
8
http://www.federalreserve.gov/Releases/H 15/update/ 7/2/2009
r": �,,ommercrat raper rcatcs WILL vutNta IUIIIgb
Federal Reserve Release
Release I About I Announcements I Outstandings I Volume statistics I Year-end I Maturi Distribution I Data
Download Program (DDP)
Data as of July 1, 2009
Commercial Paper Rates and Outstanding
Derived from data supplied by The Depository Trust & Clearing Corporation
Posted July 2, 2009
Discount rates
FT.]
nonfinancial
nonfinancial
financial
asset -backed
1-day
0.17
0.50
0.18
0.48
7-day
0.19
0.55
0.45
0.78
15-day
0.14
0.46
0.36
0.49
30-day
0.18
0.69
0.26
0.38
60-day
0.25
0.85
0.30
0.43
90-day
0.32
n.a.
0.42
0.50
Trade data insufficient to support calculation of the 90-day A2/P2 nonfinancial rate for July 1, 2009.
Yield curve
Money market basis
-.--- AA nonfinancial
•••••••`•• A2lP2 nonfinancial
-`- AA financial
AA
Percent
- - - -
-_--_ - ------__- -
15 s0
Days to Maturity
a
1.25
1.00
0.75
0.50
0.25
0.00
9
http://www.federalreserve.gov/releases/cp/ 7/2/2009
t,Kti: uommerciat raper Kates ana vutstanaings
. aS' ....,
Discount rate spread
:fl
1!
.1f
!f
'1
i!
1!
fi
f
2ool 2002!! 11' 2005 2006 2007 2008 2009
Discount rate history
7
6
5
4
3
2
1
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Outstandings
Weekly (Wednesday), seasonally adjusted
http://www.federalreserve.gov/releases/ep/
10
7/2/2009
FKB: Commercial Yaper Kates ana Uutstanaings
rage -) or
1260
1160
1060
960
860
760
660
560
460
Billions of dollars Billions of dollars
— — — Nanfinanciaf(right sculc)
�— Financial (le:f( stale)
1 ..' .'1=fi I'ei:2Ll ICIi 4
th c Ye1�1
Ilk
290
250
210
170
130
90
2001 2002 2003 2004 2005 2006 2007 2008 2009
The daily commercial paper release will usually be available before t t: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 M13P). This policy is subject to change at
any time without notice.
Release I About I Announcements I Outstandings I Volume statistics I Year-end I Maturity_ Distribution i Data
Download Program_(DDP)
Home I Statistical releases
Accessibility I Contact Us
Last update: July 2, 2009
11
http://www.federalreserve.gov/releases/cp/ 7/2/2009
City of La Quinta
Cash Flow
Budget to Actual
May 31. 2D09
Cash Basis
Budget
Actual
Accrual/
Adjusted Total
Variance
Account
5I09
5/09
Adjustment
5109
Over Under
Notes
Property Tax/ Tax Increment
47,336,810
40,864,324
-
40,864,324
(6,472,486)
Property Tax add less Man budgeted
Transient Occupancy Tax
675.048
592.071
592,071
(82,977)
Sales Tax
663,234
1,638,123
1.638,123
974,889
Rec'd$1.1 in Sales Tax Reimbursement
Silve,Rock Golf
291.255
286,986
286,986
(4,269)
Library
-
RCTC
-
-
Decrease In DIF and General Fund
Other revenues
5,929,119
4.531,729
4531729
1397,390
revenues
Revenues
54,895,485
47,913,233
47,913,233
1 (6,982,232
Expenditures
Salaries S Fringe Benefits
1.004,493
1,195,843
1,195,843
191,350
Variance due to vacant positions
Other expenditures
2904368
3903939
3903939
999.571
Paid 2 monMS POGcemvoices
3,908,861
5099,782
5,099,782
1.190,921
Subtotal
Mid year $1001, Foreclosure Acqulstion nor
Redevelopment Agency
330,648
401,191
401,191
70,543
utilized yet
Pass-thru Payments paid In May but
Debt Service(Principal/InteresVPass Through)
13,740,859
13,740,859
13,740.859
miscast to be paid in June
330,648
14,142,050
14,142,050
13,811 402
Subtotal
Capital Projects
812,447
812447
812,447
-
Total Expenditures
5,051,956
20,054,279
201
15,002,323
Net RevenueslExpenditures
49,943,509
27,858,954
1
27,858,954
8,020,091
N0TE 1:
Expenditures are budgeted at 8.34% per month
Difference between actual and budget
(Underspent)
DEPARTMENT
Overspent
Notes
GENERAL GOVERNMENT
(152,112)
CITY CLERK
593
COMMUNITY SERVICES
(86,409)
FINANCE
3,942
I
BUILDING B SAFETY
(23,815)
PUBLIC SAFETY
1,497,736
Paid 2 months Police invoices
PLANNING
(52,004)
PUBLIC WORKS:
175,]00
1.012,231
SUBTOTAL -GENERAL FUND
Library
Gas Tax
Federel Assistance
-
JAG Grant
Seat (Cops) Revenue
-
Indian Gaming
Lighting 8 Landscaping
RCTC
Development Agreement
-
CV Violent Crime Task Force
(1,777)
AS 939
275
Quimby
(5,599)
Infrastructure
Proposition 1B
-
South Coast Air Quality
(2,219)
Transportation
-
Parks 8 Recreation
-
Civic Center
-
Library Development
Community Center
Street Facility
-
Park Facility
-
Fire Protection
Arts In Public Places
(10,610)
Interest Allocation
Equipment Replacement
(54,524)
Information Technology
(27,265)
Park Maintenance Facility
(9,138)
SilyerRock Golf
(39,617)
SilverRock Reserve
-
LQ Public Safety Officer
(167)
Finance Authority
(1,316)
Capitol Improvement
-
Total
660,273
12
INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item B
Meeting Date: July 8, 2009
TITLE:
Pooled Money Investment Board Report
for April 2009
BACKGROUND:
The Pooled Money Investment Board Report for April, 2009, summary pages have
been attached for the Board's review. A complete copy is available for review upon
request.
Staff contacted LAIF on June 251" and inquired about the AB55 Loans. Staff was
directed to two LAIF reports which had been distributed to the Board in the past
and was told that these policies are still in place.
RECOMMENDATION:
4Recive && File
John M. Falco er, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF APRIL 2009 WITH APRIL 2008
(DOLLARS IN THOUSANDS)
Average Daily Portfolio
Accrued Earnings
I Effective Yield
Life -Month End (In Days)
Total Security Transactions
APRIL 200911 APRIL'2008 CHANGE
$ 59,011,679 $ 65,233,836 $-6,222,157
$ 77,957 $ 181,804 $-103,847
1.607 3.400 -1.793
172
201
Amount
$
14,953,827
$
31,689,800
$
-16,735,973
Number
299
655
-356
Total Time Deposit Transactions
Amount
$
5,779,200
$
6,976,295
$
-197,095
Number
236
195
+41
Average Workday Investment Activity
$
942,410
$
1,712,095
$
-769,685
Prescribed Demand Account Balances
For Services
$
1,030,114
$
730,449
$
+299,665
For Uncollected Funds
$
304,137
$
363,808
$
-59,671
NOW Account
Average Balance
$
7,201,569
$
0
$
+7,201,569
.1
BILL LOCKYER
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
April 30, 2009
DIFFERENCE IN
PERCENT OF
PERCENT OF
PORTFOLIO FROM
TYPE OF SECURITY
AMOUNT
PORTFOLIO
PRIOR MONTH
Government
Bills
$ 8,997,530
14.59
+1.13
Bonds
0
0.00
0
Notes
4,537,199
7.36
+0.96
Strips
0
0.00
0
Total Government
$ 13,534,729
21.95
+2.09
Federal Agency Debentures
$ 8,864,429
14.38
-0.74
Certificates of Deposit
4,200,027
6.81
+3.66
Bank Notes
400,000
0.65
+0.22
Bankers' Acceptances
0
0.00
0
Repurchases
0
0.00
0
Federal Agency Discount Notes
6,538,686
10.61
+4.66
Time Deposits
6,315,700
10.26
-1.64
GNMAs
131
0.00
0
Commercial Paper
2,199,522
3.57
+3.06
FHLMC/Remics
1,027,668
1.67
-0.11
Corporate Bonds
378,942
0.61
+0.14
AB 55 Loans
6,738,328
10.93
-9.13
GF Loans
11,148,300
18.08
-2.70
Other
300,000
0.49
+0.49
Reversed Repurchases
0
0.00
0
Total (All Types)
$ 61,646,462
100.00
NOW Account Balance
$ 14,103,236
INVESTMENT ACTIVITY
APRIL 2009
MARCH 2O09
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
299
$ 14,953,827
255
$ 12,592,778
Other
22
350,232
17
327,614
Time Deposits
236
5,779,200
123
2,919,000
Totals
557
$ 21,083,259
395
$ 15,839,392
PMIA Monthly Average Effective Yield
1.607
1.822
Year to Date Yield Last Day of Month
2.353
2.431
S
Loans
29.01 %
Corporate Bonds
0.61 %
Commercial Paper
3.57%
Tirr
Pooled Money Investment Account
Portfolio Composition
$61.6 Billion
04/30/09
CDs/BNs
7.46%
c
Treasuries
Mortgages
1.67%
cies
8%
INVESTMENT ADVISORY BOARD MEETING Correspondence and
Written Material: C
Meeting Date: July 8, 2009
ITEM TITLE
Distribution of Investment Policies
for Fiscal Year 2009/2010
BACKGROUND:
On June 16, 2009 the City Council approved the Investment Policies for Fiscal Year
2009/2010 which is attached.
RECOMMENDATION:
Receive and File.
John M. Falconer, Finance Director
AB55 Loan Comments
rasc r vi c
Gat1fornia State g'reasu.rer
Pooled Money Investment Account
AB55 Loan Comments
The Pooled Money Investment Board (PMIB) on Dec. 17, 2008, unanimously voted to limit the further servicing of loans
to bond -funded infrastructure projects (AB 55 Loans). The PMIB took this action to ensure that the Pooled Money
Investment Account (PMIA) continues to meet its primary responsibility to provide appropriate liquidity ongoing to all Pool
participants. The PMIB determined the loan restrictions were necessary because the State cannot issue either
commercial paper or bonds — the two essential methods of repaying AB 55 loan expenditures.
The inability to issue debt is directly attributable to the State's worsening fiscal condition. Current projections by the State
Controller show the State will run out of cash to pay its bills in February, while the Department of Finance projects a
budget shortfall of $40 billion through FY 2009-10. Until the Legislature and Governor enact a credible solution to the
budget problem, Treasurer Lockyer has determined the State will not be able to sell bonds.
In light of these recent developments, I wanted to stress two points:
1. The PMIB's limits on further AB 55 expenditures do NOT suggest, imply, or connote any credit concerns with the
loans themselves, the agencies responsible for the loans, or the pending bond sales backing the loans. The AB 55
Loans, therefore, remain credible obligations within the PMIA portfolio until -- not if -- the State can sell bonds or
commercial paper, and provide the PMIA the funds necessary to pay back the expended principal and interest.
2. Assets held in the Local Agency Investment Fund (LAIF) are not affected in ANY way. Our city, county, school and
special district partners can rest assured -- there is no reason for concern about the safety or availability of LAW
funds. They belong to you. The State cannot touch them.
AB 55 Loans
AB 55 Loans are lines of credit extended by the PMIB to State agencies or departments to provide funds for startup costs
or progress payments on authorized bond projects. After a vetting process that includes verification of the project, the
legal authority for bond issuance, and the ability of the borrower to repay the expended line of credit, the PMIB agrees to
the department or agency request and the line of credit is provided by the Pool. All lines of credit are granted for a period
of 364 days, bear the interest rate of the daily Pooled rate from the day before, and may be increased or extended upon
request of the borrower.
The State created the AB 55 Loan Program in response to the Tax Reform Act of 1986. The objective of the program was
to minimize the requirement to track arbitrage earnings and rebates of excessive earnings on bonds. The line of credit
was considered more of a service to the requesting agency or department than an investment.
Because the AB 55 Loan Program was a service, the PMIB's primary responsibilities to the PMIA continued to be
preserving capital, maintaining prudent liquidity to PMIA participants, and earning appropriately competitive incremental
returns for all commingled funds.
As long as adequate liquidity remains available on demand, the PMIA can continue to maintain the AB 55 lines of credit.
However, when the draws on these lines of credit encroach on the prudent level of liquidity for PMIA participants, the
PMIB has a legal duty to consider whether to continue funding AB 55 loans. The State's cash flow crisis placed the PMIA
in exactly that position. And that is why the PMIB took action on Dec. 17, 2008, to significantly restrict further
expenditures of AB 55 Loans.
Since the AB 55 Loan Program started more than 20 years ago, the PMIA has been able to facilitate AB 55 Loans and to
provide sufficient liquidity for all PMIA participants. The PMIA has been able to carry out both functions because the State
has been able to successfully sell commercial paper or bonds, or both.
http://www.treasurer.ca.gov/pmia-laif/news/ab55.asp 6/25/2009
AB55 Loan Comments
raga L VL L
Now the nationwide credit crunch and the State's budget crisis have combined to close the bond market to the State.
Monthly draws on AB 55 lines of credit were averaging approximately $660 million a month. Faced with a continued drain
on the PMIA's resources, and considering the PMIA's responsibility to provide necessary liquidity to all participants, the
PMIB correctly, though with great regret, voted to limit further AB 55 expenditures.
The suspension of the Pool's provision for continued lines of credit does NOT indicate any likelihood of default,
insolvency, bankruptcy, or any other credit deficiency involving either the loan project, the bond program underlying the
loan project, or the department or agency responsible for the project.
Since the PMIB's action limited interim funding of qualified bond projects through the PMIA loan program, the AB 55
Loans will remain open project loans until the State once again has access to the commercial paper and municipal bond
markets. There is no issue with the credit of the borrowing department or agency, and there is no challenge to the
authority to issue the project bond. For those reasons, the current AB 55 Loans will continue accruing interest to the
PMIA. The principal and interest on these AB 55 Loans will be paid back to the Pool when - not if - the State sells the
bonds related to the loans.
Should you have any further questions or concerns, please do not hesitate to call me.
Daniel S. Dowell
Director of Investments
http://www.treasurer.ca.gov/pmia-jaif/news/ab55.asp 6/25/2009
LAIP Ueposits Are Y U U K Money
Yage 1 of 1
lddwh
dL'164*a 4,a evv
California State 7reasta_rer
Pooled Money Investment Account
LAIF Deposits Are YOUR Money
As Treasurer of the State of California, I believe it is my duty as California's chief fiscal officer to do all that 1 can to
preserve and protect the financial integrity of this state. I do not take that responsibility lightly. Consequently, I have
commented publicly that a national economic stabilization plan is absolutely and urgently necessary to begin to restore
investor confidence in financial marketplaces. I have not advocated the specifics of any proposal, but I have said and I
am convinced that failure by Congress to enact a timely and effective plan jeopardizes the ability of public and private
debt issuers to come to market. Chief among those imperiled public debt issuers at the moment is the State of California,
though many of your jurisdictions have surely also been affected by the credit freeze. As Controller John Chiang and I
have recently mentioned publicly, the State's cash reserves will be depleted by late October, making passage of a
stabilization plan and unlocking the nation's credit market essential to permit the state lto meet its cash needs before the
end of the month.
As State Treasurer I am also the steward of State money and Local Government money which is voluntarily commingled
within the Pooled Money Investment Account (PMIA). The State's fiscal crisis has an impact on the PMIA, but only to the
extent of determining the pro rata participation of the State in the commingled fund. If the cash reserves of the State of
California are exhausted, then the participation by the State's General Fund in the PMIA is zero. Nothing more and
nothing less. There is no correlation between General Fund cash reserves and your funds on deposit in the LAIF. Those
funds were yours before they were deposited, they remain yours while on deposit, and they will be returned directly to
you upon only your demand.
I or my staff will be happy to answer any questions arising from my comments regarding the state's financial condition
and the need for Federal intervention in the financial markets, or from any event that might ever cause you concern. If
you have a question or concern, please contact the professionals in my Investment Division and LAIF unit.
Sincerely,
http://www.treasurer.ca.gov/pmia-laif/news/deposits.asp 6/25/2009
INVESTMENT ADVISORY BOARD MEETING Correspondence and
Written Material: C
Meeting Date: July 8, 2009
Distribution of Investment Policies
for Fiscal Year 2009/2010
BACKGROUND:
On June 16, 2009 the City Council approved the Investment Policies for Fiscal Year
2009/2010 which is attached.
and File.
John M. Falconer, Finance Director
City of La Quinta
GEM of the DESERT
Investment Policy
Fiscal Year 2009-2010
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2009/2010
Table of Contents
Section
To is
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
16
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 2009/2010
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.
K
P.O. Box 1504
..-CA'QurN[a-,-- CAL IFOxu,-A-y2.247-1504-
78-495 CALLS IAMPICO (760) 777-7000
LA QUINTA, CALIFORNIA 92253 FAX (760) 777-7101
City of La Quints
Statement of Investment Policy
July 1, 2009 through June 30, 2010
Adopted by the City Council on June 16, 2009
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.
4 `U
Investments shall be undertaken in a manner that seeks to ensure the preservation of
principal of the overall portfolio in accordance with the permissible deposits and
investments.
The City shall endeavor to preserve its investment principal by making only permissible
deposits and investments, undertaken in a controlled manner to minimize the possibility of
loss or misappropriation through malfeasance or otherwise. Investments not backed by
the full faith and credit of the United States Government shall be diversified by allocating
assets between different types of permissible investments, maturities, and issuers as a
means to mitigate credit risk and interest rate risk.
A. Credit Risk is the risk of loss from the failure of the security issuer or backer.
Credit risk may be mitigated by:
► Limiting investments to investment grade securities as permitted in Section X;
► Diversifying the issuers of the securities in the investment portfolio so that
potential losses due to issuer failure or individual securities downgrades may be
minimized.
B. Interest Rate Risk is the risk that market values of securities in the portfolio will
decline due to changes in general interest rates. Interest rate risk may be mitigated
by:
► Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell securities
on the open market prior to maturity; and
► Investing operating funds primarily in shorter -term securities.
C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique
features or structure or because it is thinly traded. Liquidity risk is not a material
issue for the City's portfolio because of the permissible deposits and investments
(see Section X) and because the City maintains a buy -and -hold policy and holds
securities and other investments to maturity. A discussion of the City's investment
process and risk is presented in Appendix I.
2. Provide Liquidity
The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs
that may be reasonably anticipated. This is accomplished by structuring the portfolio so
that sufficient liquid funds are available to meet anticipated demands. Furthermore, since
all possible cash needs cannot be anticipated the portfolio should be diversified and
consist of securities with active secondary or resale markets.
The City's policy is to hold securities and other investments to maturity. Accordingly,
securities shall not be sold prior to maturity with the following exceptions:
► A I 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.
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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 2009/2010, 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."
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.
1. Broker/Dealers who desire to become bidders for direct investment transactions must
supply the City with the following:
► Current audited financial statements;
► Proof of Financial Industry Regulatory Authority (FINRA) Certification;
► Trading resolution;
► Proof of California registration;
► Resume of Financial broker; and
► Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F)
which contains a certification of having read the City's Investment Policy.
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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
85 % Portfolio
On Demand
U.S. Treasuries
and/or GSE's
— $250,000,
Certificates of Deposit
60% Portfolio
3 Years
including interest
per institution
Permissible Investments and Limitations
Maximum
Maximum
(See Appendix A for Additional Information)
Allocation
Maturity
Restrictions
U.S. Treasury Bills, Notes and Bonds, and Government National
`'$8,0000,000
Mortgage Association (GNMA) Securities
100 % Portfolio
3 Years
maturing 3-5 Yfs
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 including Temporary Liquidity Guarantee
$5,000,000 per
Program (TLGP)
15 % Portfolio
90 Days
y
issuer maximum.
Local Agency Investment Fund (LAIF)
30% Portfolio
Current /
$40 million
On Demand
per account.
Money market mutual funds regulated by the SEC that consist only of US
Current /
Maintain $1 per
Treasury Securities or GSE's and maintain a par value of $1 per share
20% Portfolio
On Demand
share par value
Corporate Notes including Temporary Liquidity Guarantee Program
$5,000,000 max
(TLGP)
a
10/
3 Years
per issuer, AA
rated or better.
Requires
Professionally Managed Account
10%
3 Years
City Council -
Approved RFP
1. Checking, Savings, and Sweep Accounts — The City will only maintain checking, savings,
and sweep accounts with FDIC insured financial institutions. As authorized by the City
Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account
with a $50,000 target balance may be maintained in conjunction with the checking
account.
2. Certificates of Deposit- As authorized in Government Code Section 53649, Certificates of
Deposit are fixed term investments which are required to be collateralized from 1 10% to
150% depending on the specific security pledged as collateral in accordance with
Government Code Section 53652. There are no portfolio limits on the amount or maturity
for this investment vehicle.
Collateralization will be required for Certificates of Deposits in excess of the FDIC insured
amount. The type of collateral is limited to City authorized investments. Collateral will
always be held by an independent third party from the institution that sells the Certificates
of Deposit to the City. Evidence of compliance with State Collateralization policies must
be supplied to the City and retained by the City Treasurer as follows:
A. Certificates of Deposits Insured by the FDIC: The City Treasurer may waive
collateral ization 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.
9
The City's Investment Policy limits the percentage of Certificates of Deposit to 60% of the
portfolio.
➢ 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 2009/2010, 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.
The City is also permitted to invest in commercial paper issued under the FDIC Temporary
Liquidity Guarantee Program subject to the aforementioned commercial paper limitations.
6. State Treasurer's Local Agency Investment Fund (LAIF) - As authorized in Government
Code Section 16429.1 and by LAW 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.
f[t
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.
7. Money Market Mutual Funds - As authorized in Government Code Section 53601(k), local
agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies (mutual funds) in an amount not to exceed 20% of the agency's
portfolio. There are a number of other qualifications and restrictions regarding allowable
investments in corporate notes and shares of beneficial interest issued by mutual funds
which include (1) attaining the highest ranking or the highest letter and numerical rating
provided by not less than two of the three largest nationally recognized rating services, or
(2) having an investment advisor registered with the Securities and Exchange Commission
with not less than five years' experience investing in the securities and obligations and
with assets under management in excess of five hundred million dollars ($500,000,000).
The City's Investment Policy only allows investments in mutual funds that are money
market funds maintaining a par value of $1 per share that invest in direct issues of the
U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not
exceeding 90 days and the City limits such investments to 20% of the portfolio.
8. Corporate Notes - As authorized in Government Code Section 53601 G1, 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 "Wor 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.
The City is also permitted to invest in corporate notes issued under the FDIC Temporary
Liquidity Guarantee Program subject to the aforementioned corporate note 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;
11
(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:
(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.
Pooled Investments - It is the general policy of the City to pool all available operating cash
of the City of La Quinta, La Quinta Redevelopment Agency and La Quinta Financing
Authority and allocate interest earnings, in the following order, as follows:
A. Payment to the General Fund of an amount equal to the total annual bank service
charges as incurred by the general fund for all operating funds as included in the
annual operating budget.
12
B. Payment to the General Fund of a management fee equal to 5% of the annual
pooled cash fund investment earnings.
C. Payment to each fund of an amount based on the average computerized
daily cash balance included in the common portfolio for the earning period.
2. Specific Investments - Specific investments purchased by a fund shall incur all earnings
and expenses to that particular fund.
XIV . INTERNAL CONTROLS AND INDEPENDENT AUDITOR
The City Treasurer shall establish a system of internal controls to accomplish the following
objectives:
► Safeguard assets;
► The orderly and efficient conduct of its business, including adherence to management
policies;
► Prevention or detection of errors and fraud;
► The accuracy and completeness of accounting records; and
► Timely preparation of reliable financial information.
While no internal control system, however elaborate, can guarantee absolute assurance that the
City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable
assurance that management of the investment function meets the City's objectives.
The internal controls shall address the following:
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
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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.
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 letter on internal control over financial reporting and compliance as it
pertains 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 auditor's
letter, as it pertains, 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;
14
► 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.
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.
15
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
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
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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. Applicants for the board should have a background in finance, preferably with knowledge
and/or experience in markets, controls and accounting for securities. 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.
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 one or two terms expiring each year.
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)
1►041
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 an
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
Accounting Manager or Senior
Secretary
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/Mellon, Los Angeles,
CA
3. Deferred Compensation International City/County Management
Association Retirement Corporation
4. Broker/Dealer Services Banc of America Securities, San
Francisco, CA
Morgan Stanley, San Rafael, CA
CitiGroup, San Francisco, CA
5. Government Pool State of California Local Agency
Investment Fund
City of La Quinta Account
La Quinta Redevelopment Agency
6. Bond Trustees 1991 City Hall Revenue Bonds - US Bank
1991 RDA Project Area 1 - US Bank
1992 RDA Project Area 2 - US Bank
1994 RDA Project Area 1 -US Bank
1998 RDA Project Area 1 &2 - US Bank
2001 RDA Project Area 1 - US Bank
2002 RDA Project Area 1 - US Bank
2003 RDA Project Area 1 - US Bank
Assessment Districts - US Bank
No Changes to this listing may be made without City Council approval
FCl
Appendix F
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1 . Name of Firm:
2.
3. Telephone: ( )
4. Broker's Representative to the City (attach resume):
Name:
Title:_
Telephone: ( 1
5. Manager/Partner-in-charge (attach resume):
Title:
Telephone:
6. List all personnel who will be trading with or quoting securities to City employees (attach
resume)
Name:
Title:
Telephone:
7. Which of the above personnel have read the City's Investment Policy?
8. Which instruments are offered regularly by your local office? (Must equal 100%)
• U.S. Treasuries
• BA's
• Commercial Paper
% CD's
Mutual Funds
Agencies (specify):
% Repos
Reverse Repos
CMO's
Derivatives
% Stocks/Equities
% Other (specify):
9. References -- Please identify your most directly comparable public sector clients in our
geographical area.
Entity
Contact
24
Entity
Contact
Telephone
Client Since
Telephone
Client Since
10. Have any of your clients ever sustained a loss on a securities transaction arising from a
misunderstanding or misrepresentation of the risk characteristics of the instrument? If so,
explain.
11
12.
13.
Has your firm or your local office ever been subject to a regulatory or state/ federal
agency investigation for alleged improper, fraudulent, disreputable or unfair activities
related to the sale of securities? Have any of your employees been so investigated? If
so, explain.
Has a client ever claimed in writing that you were responsible for an investment loss?
Yes No If yes, please provide action taken
Has a client ever claimed in writing that your firm was responsible for an investment
loss? Yes_ No If yes, please provide action taken
Do you have any current or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
Does your firm have any current, or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
Latest Audit Report Date
25
14. How many and what percentage of your transactions failed?
Last month? % $
Last year? % $
15. Describe the method your firm would use to establish capital trading limits for the City of
La Quinta.
16. Is your firm a member in the S.I.P.C. insurance program? Yes No
If yes, explain primary and excess coverage and carriers.
17. What portfolio information, if any, do you require from your clients?
18. What reports and transaction confirmations or any other research publications will the City
receive?
19. Does your firm offer investment training to your clients? Yes No
20. Does your firm have professional liability insurance? Yes No
If yes, please provide the insurance carrier, limits and expiration date.
21. Please list your FINRA/NASD Registration Number
22
Do you have any relatives who work at the City of La Quinta?
Yes No If yes, Name and Department
23. Do you maintain an office in California? Yes No
24. Do you maintain an office in La Quinta or Riverside County? Yes No
25. Please enclose the following:
► Latest audited financial statements.
► Samples of reports, transaction confirmations and any other research/publications the
City will receive.
► Samples of research reports and/or publications that your firm regularly provides to
clients.
► Complete schedule of fees and charges for various transactions.
`CERTIFICATION`
* 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
Date Title
Sales Manager and/or Managing Partner*
Date Title
27
Request for Proposals Appendix G
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
P.O. Box 1504
La Quinta, CA 92247-1504
(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
go
1. Describe your organization, date founded, ownership and other business
affiliations. Provide number and location of affiliated offices. Specify the number
of years your organization has provided investment management service.
2. Describe your firm's revenue sources (e.g., investment management, institutional
research, etc.) and comment on your firm's financial condition.
3. Within the past three years, have there been any significant developments in your
organization (e.g., changes in ownership, new business ventures)? Do you expect
any changes in the near future?
4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation
involving your organization, any officer, or employee at any time in the last ten
years.
5. Describe the firm's fiduciary liability and/or errors and omissions insurance
coverage. Include dollar amount of coverage.
B. Personnel
C
Governmental
1 . Identify the number of professionals employed by your firm by classification.
2. Provide an organization chart showing function, positions, and titles of all the
professionals in your organization.
3. Provide biographical information on investment professionals that will be involved
in the decision -making process for our portfolio, including number of years at your
firm. Identify the person who will be the primary portfolio manager assigned to the
account.
4. Describe your firm's compensation policies for investment professionals and
address any incentive compensation programs.
Assets Under Management
1. Summarize your institutional investment management asset totals by category for
your latest reporting period in the following table:
Governmental Pension
Non Governmental
Pension
Number Operating Funds
of Clients
V
S
S
0
Number of Other Restrictive
Clients Funds
Not
%applicable
Not
Appl�icab('e
S
Corporate S Not
Applicable Not %Applicable
High Net Worth Client
A . hcat l 1 Not Applicable
e
Endo wmental/Foun- S No
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
U.S. Treasury securities
Federal Agency obligations
Corporate securities rated AAA -AA
Corporate securities rated A
Corporate securities rated BBB or
lower
Other
(specify
Percent by Market
Value
4. Describe the procedures that your firm has in place to address the potential or
actual credit downgrade of an issuer and to disclose and advise a client of the
situation.
5. Provide data on account/asset growth over the past five years. Indicate the
number of government accounts gained and the number of government accounts
lost.
6. List your five governmental largest clients. Identify those that are exclusively
operating fund relationships and/or those that are other relationships (e.g., bond
fund, retirement fund).
7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules).
8. Provide proof of State of California Registration, if your firm is not eligible for SEC
registration.
9. Provide a sample contract for services.
30
D. Philosophy/Approach
1 , Describe your firm's investment philosophy for public clients, including your firm's
philosophy regarding average duration, maturity, investment types, credit quality,
and yield.
2. Describe in detail your investment process, as you would apply it to City of La
Quinta, CA's portfolio.
3. What are the primary strategies for adding value to portfolios?
4. Describe the process you would recommend for establishing the investment
objectives and constraints for this account.
5. Describe in detail your process of credit risk management, including how you
analyze credit quality, monitor credits on an ongoing basis, and report credit to
governmental accounts.
6. Describe your firm's trading methodology.
7. Describe your firm's decision -making process in terms of structure, committees,
membership, meeting frequency, responsibilities, integration of research ideas, and
portfolio management.
8. Describe your research capabilities as they would pertain to governmental
accounts. What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker -dealer
community.
E. Portfolio Management
1 . Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City of La
Quinta, CA?
4. How frequently are you willing to meet with us?
5. Describe procedures used to ensure that portfolios comply with client investment
objectives, policies, and bond resolutions.
F. Fees Charged
Please include a copy of your firm's fee schedule applicable to this RFP.
2. Identify any expenses that would not be covered through this fee structure and
would be required in order to implement the firm's program.
31
3. Is there a minimum annual fee?
G. Performance Reporting
1. Please report on all accounts under $100 million.
2. Please provide performance history for governmental accounts for the last five
years.
3. Please provide risk measurements for governmental accounts for the last five
years.
4. Indicate whether your returns are calculated and compiled in accordance with
the Association for Investment Management and Research (AIMR/CFA Institute)
standards.
5. Do your reports conform to the State of California reporting standards? Are you
willing to customize your reports to meet our specifications?
6. How will you notify us of investment transactions?
7. Are confirmations of investment transactions sent directly by the broker/dealer to
the client?
8. Do your reports include rating information on investments which is required by
GASB 40?
H. References
Provide a list of at least five (5) client references in California. References should be
public agencies with portfolio size and investment objectives similar to City of La Quinta,
CA. Include length of time managing the assets, contact name, and phone number.
I. Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Council]'s approval of any agreement for services.
J. Submittal of proposals
1 . Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing
the caption RFP for (City of La Quinta, CA) and addressed to:
City of La Quinta, CA
P.O. Box 1504
La Quinta, CA 92247-1504
Attention: John M. Falconer
Finance Director/Treasurer
2. Proposal must be received no later than [Time] PST on [Month, Day, and Year].
32
3. Proposals should be verified before submission. The City of La Quinta, CA shall
not be responsible for errors or omissions on the part of the respondent in
preparation of a proposal. The City of La Quinta, CA reserves the right to reject
any and all proposals, to wave.any irregularities, or informalities in the
proposals, and to negotiate modifications to any proposal.
Enclosures: Investment Policy
Treasurers Report
33
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Appendix 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
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.
FNMA's (Federal National Mortgage
Association) - Like GNMA was chartered
under the Federal National Mortgage
Association Act in 1938. FNMA is a federal
corporation working under the auspices of the
Department of Housing and Urban
Development (HUD). It is the largest single
provider of residential mortgage funds in the
United States. Fannie Mae, as the corporation
is called, is a private stockholder -owned
corporation. The corporation's purchases
include a variety of adjustable mortgages and
second loans, in addition to fixed-rate
mortgages. FNMA's securities are also highly
liquid and are widely accepted. FNMA
assumes and guarantees that all security
holders will receive timely payment of
principal and interest.
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 $250,000
per deposit.
FEDERAL FUNDS RATE: The rate of interest at
which Fed funds are traded. This rate is currently
37
pegged by the Federal Reserve through open -
market operations.
FEDERAL HOME LOAN BANKS (FHLB):
Government sponsored wholesale banks
(currently 12 regional banks) which lend funds
and provide correspondent banking services to
member commercial banks, thrift institutions,
credit unions and insurance companies. The
mission of the FHLB's is to liquefy the housing
related assets of its members who must purchase
stock in their district Bank.
FEDERAL OPEN MARKET COMMITTEE (FOMC):
Consists of seven members of the Federal
Reserve Board and five of the twelve Federal
Reserve Bank Presidents. The President of the
New York Federal Reserve Bank is a permanent
member, while the other Presidents serve on a
rotating basis. The Committee periodically meets
to set Federal Reserve guidelines regarding
purchases and sales of Government Securities in
the open market as a means of influencing the
volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of
the United States created by Congress and
consisting of a seven member Board of Governors
in Washington, D.C., 12 regional banks and about
5,700 commercial banks that are members of the
system.
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA or Ginnie Mae): Securities
influencing the volume of bank credit guaranteed
by GNMA and issued by mortgage bankers,
commercial banks, savings and loan associations,
and other institutions. Security holder is
protected by full faith and credit of the U.S.
Government. Ginnie Mae securities are backed
by the FHA, VA or FMHM mortgages. The term
"pass -through" is often used to describe Ginnie
Maes.
LAIF (Local Agency Investment Fund) - A special
fund in the State Treasury which local agencies
may use to deposit funds for investment. There
is no minimum investment period and the
minimum transaction is $5,000, in multiples of
$1,000 above that, with a maximum balance of
$40,000,000 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
Bank as directed by the FOMC in order to
1981
influence the volume of money and credit in the
economy. Purchases inject reserves into the
bank system and stimulate growth of money and
credit; sales have the opposite effect. Open
market operations are the Federal Reserve's most
important and most flexible monetary policy tool.
PORTFOLIO: Collection of all cash and securities
under the direction of the City Treasurer,
including Bond Proceeds..
PRIMARY DEALER: A group of government
securities dealers who submit daily reports of
market activity and depositions and monthly
financial statements to the Federal Reserve Bank
of New York and are subject to its informal
oversight. Primary dealers include Securities and
Exchange Commission (SEC) -registered securities
broker -dealers, banks and a few unregulated
firms.
QUALIFIED PUBLIC DEPOSITORIES: A financial
institution which does not claim exemption from
the payment of any sales or compensating use or
ad valorem taxes under the laws of this state,
which has segregated for the benefit of the
commission eligible collateral having a value of
not less than its maximum liability and which has
been approved by the Public Deposit Protection
Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a
security based on its purchase price or its current
market price. This may be the amortized yield to
maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A
repurchase agreement is a short-term investment
transaction. Banks buy temporarily idle funds
from a customer by selling U.S. Government or
other securities with a contractual agreement to
repurchase the same securities on a future date.
Repurchase agreements are typically for one to
ten days in maturity. The customer receives
interest from the bank. The interest rate reflects
both the prevailing demand for Federal funds and
the maturity of the repo. Some banks will
execute repurchase agreements for a minimum of
$100,000 to $500,000, but most banks have a
minimum of $1,000,000.
REVERSE REPURCHASE AGREEMENTS (RRP or
RevRepo) - A holder of securities sells these
securities to an investor with an agreement to
repurchase them at a fixed price on a fixed date.
The security"buyer" in effect lends the"seller"
money for the period of the agreement, and the
terms, of the agreement are structured to
compensate him for this. Dealers use RRP
extensively to finance their positions. Exception:
When the Fed is said to be doing RRP, it is lending
money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered
by banks for a fee whereby securities and
valuables of all types and descriptions are held in
the bank's vaults for protection.
SECONDARY MARKET: A market made for the
purchase and sale of outstanding issues following
the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency
created by Congress to protect investors in
securities transactions by administering securities
legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by
Government Sponsored Enterprises (FHLB,
FNMAS, SLMA, etc.) And Corporations which
have imbedded options (e.g., call features, step-up
coupons, floating rate coupons, derivative -based
returns) into their debt structure. Their market
performance is impacted by the fluctuation of
interest rates, the volatility of the imbedded
options and shifts in the Shape of the yield curve.
SURPLUS FUNDS: Section 53601 of the California
Government Code defines surplus funds as any
money not required for immediate necessities of
the local agency. The City has defined immediate
necessities to be payment due within one week.
TREASURY BILLS: A non -interest bearing discount
security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in
three months, six months or one year.
TREASURY BONDS: Long-term coupon -bearing
U.S. Treasury securities issued as direct
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obligations of the U.S. Government and having
initial maturities of more than 10 years.
TREASURY NOTES: Medium -term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and
Exchange Commission requirement that member
firms as well as nonmember broker -dealers in
securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also
called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm,
including margin loans and commitments to
purchase securities, one reason new public issues
are spread among members of underwriting
syndicates. Liquid capital includes cash and
assets easily converted into cash.
UNIFORM PRUDENT INVESTOR ACT: The State
of California has adopted this Act. The Act
contains the following sections: duty of care,
diversification, review of assets, costs,
compliance determinations, delegation of
investments, terms of prudent investor rule, and
application.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the
security. (b) NET YIELD or YIELD TO MATURITY
is the current income yield minus any premium
above par of plus any discount from par in
purchase price, with the adjustment spread over
the period from the date of purchase to the date
of maturity of the bond.
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