2011 02 09 IABP.O. Box 1504
La QuIN,r9, CALIFORNIA 92247-1504
78-495 CALLS TAmhlco (760) 7 7 7 - 7 0 0 0
LA QUINI-A, CALIFORNIA 92253 FAX (760) 777-7101
AGENDA
INVESTMENT ADVISORY BOARD
Caucus Room
78-495 Calle Tampico- La Quinta, CA 92253
February 9, 2011 — 4:00 P.M.
CALL TO ORDER
A. Pledge of Allegiance
B. Roll Call
II PUBLIC COMMENT - (This is the time set aside for public comment on any matter not
scheduled on the agenda.)
III CONFIRMATION OF AGENDA
IV CONSENT CALENDAR
A. Approval of Minutes of Meeting on January 12, 2011 for the Investment
Advisory Board.
V BUSINESS SESSION
A. Transmittal of Treasury Report for December, 2010
B. Consideration of Fiscal Year 2011-12 Work Plan Items and Review the 2011-12
Investment Policy
C. California Municipal Treasurer's Conference — San Diego, CA
April 19-22, 2011
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report - January 2011
B. Pooled Money Investment Board Reports - November, 2010
VII BOARD MEMBER ITEMS
VIII ADJOURNMENT
PUBLIC NOTICES
The La Quinta Caucus Room is handicapped accessible. If special equipment is needed for the hearing impaired, pinase call the
Finance Department at 777-7150, twenty-four (24) hours in advance of the meeting and accommodations will be made.
Any writings or documents provided to a majority of the Investment Advisory Board regarding any item on this agenda will be made
available for public inspection at the City Clerk counter at City Hall located at 78-495 Calle Tampico, La Quinta, CA 92253, during
normal business hours.
INVESTMENT ADVISORY BOARD
Meeting
January 12, 2011
CALL TO ORDER
Regular meeting of the La Quinta Investment Advisory Board was called to order at
the hour of 4:07 p.m. by Chairman Park followed by the Pledge of Allegiance.
PRESENT: Board Members Mortenson, Spirtos and Blum (4:20)
ABSENT: None
OTHERS PRESENT:John Falconer, Finance Director and Monika Radeva, Secretary
II APPOINTMENT OF OFFICERS — This item was deferred until the arrival of
Board Member Blum.
III PUBLIC COMMENT — None.
IV CONFIRMATION OF AGENDA — Confirmed as amended.
Mr. Falconer advised of the badges handed out to each board member for
the upcoming Bob Hope Chrysler Classic, in addition to the resignation letter
from Board Member Rassi due to his relocation. Mr. Falconer further advised
that the letter was presented to the Mayor and the City Council, and due to
the expiration of Board Member Rassi's term, it was the decision of the City
Council to leave the position vacant until July 1, 2011. As a result of Board
Member Rassi's resignation, also included on the agenda was the
appointment of a Vice -Chairperson.
V CONSENT CALENDAR
1. Approval of Minutes of Meeting on December 8, 2010 for the Investment
Advisory Board.
MOTION - It was moved by Board Members Mortenson/Spirtos to approve
the Minutes of December 8, 2010. Motion carried unanimously.
Investment Advisory Board January 12, 2011
Minutes
VI BUSINESS SESSION
A. Transmittal of Treasury Report for November 2010
Mr. Falconer presented and reviewed the staff report for the month of
November, advising the Board that the cash balance was slightly over $147
million with an overall decrease of $2 million for the month, in addition to
one reinvestment of a $13 million Treasury. The $2 million dollar reduction
was due to payments to the Riverside County Sheriff's Department for
$855,000 and capital projects estimated at $700,000. As stated earlier
there was one reinvestment with the average maturity decreasing by four
days.
Upon review of the November report, Mr. Falconer advised that on page 3 of
the report "48 days" should be corrected to read "84" days.
Mr. Falconer advised that the interest rates have remained the same for the
past year, with the portfolio previously yielding .53% with the current yield
at .49% and the pooled investments at .53%.
In response to Board Member Mortenson, Mr. Falconer advised that he
would not be investing in Non-TLG Corporate Notes, Fannie Mae and Freddie
Mac due to the current issues with the housing market.
In response to Chairman Park, Mr. Falconer advised that there were no
comments made at the LAIF Conference in regards to the interest rates.
General comments ensued amongst the Board regarding the current interest
rates.
In response to Chairman Park, Mr. Falconer advised that $700,000 paid for
capital improvements were various projects.
In response to Board Member Spirtos, Mr. Falconer advised that the Morgan
Stanley Medium Term Corporate Notes are backed by the Federal
Government and they have no effect on the City's investments.
2
Investment Advisory Board
Minutes
January 12, 2011
Mr. Falconer summarized for the Board the $37 million investment completed
in the month of December.
General conversation ensued amongst the Board and staff in reference to
possibility of the state's elimination of the RDA's.
MOTION - It was moved Board Members Spirtos/Mortensen to review,
receive, and file the Treasurers Report for November, 2010. Motion carried
unanimously.
VII CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report - December 2010
Noted and Filed
B. Pooled Money Investment Board Reports - October 2010
Mr. Falconer advised of the impact to LAIF if the state decides to eliminate
the RDA.
Noted and Filed
C. November 9, 2010 Joint Meeting Minutes with the City Council
Noted and Filed
VIII BOARD MEMBER ITEMS - None
AT THE TIME ITEM II WAS DISCUSSED
Appointment of Investment Advisory Board Vice -Chairperson
Board Member Spirtos volunteered herself as Vice -Chairperson
Motion - It was moved by Board Members Blum/Mortenson to elect Board Member
Spirtos to serve as Vice -Chairperson for the Investment Advisory Board. Motion
carried unanimously.
3
Investment Advisory Board
Minutes
IX ADJOURNMENT
January 12, 2011
MOTION - It was moved by Board Members Blum/Mortenson to adjourn the
meeting at 4:40 p.m. Motion carried unanimously.
itted lAv,/i I
Vianka Ofrantia, Senior 9'ecretary for
Monika"Radeva, Secretary
M
INVESTMENT ADVISORY BOARD Business Session: A
Meeting Date: February 9, 2011
ITEM TITLE:
Transmittal of Treasury Report
for December 31, 2011
BACKGROUND:
Attached please find the Treasury Report December 31, 2011
RECOMMENDATION:
Review, Receive and File the Treasury Report for December 31, 2011
A4 /� q-d�
John M. Falconer, Finance Director
MEMORANDUM
TO:
La Quinta City Council
FROM:
John M. Falconer, Finance Directon Treasurer
SUBJECT:
Treasurer's Report for December 31, 2010
DATE:
January 31, 2011
Attached is the Treasurers Report for the month ending December 31, 2010. 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
I Sold/Matured
Other
Ending
Change
LAIF
Certificates of Deposit
US Treasuries
US Gov't Sponsored Enterprises
Commercial Paper
Corporate Notes
Mutual Funds
$ 41,973,654
969,000
87,990,217
-
15.119,416
581,796
$ 1,000,000
60,000,000
(2)
(2)
(2)
(2)
1
$ (11,600,000)
(53,000,000)
1
(110,901)
0
0
(12,177)
3,012,159
$ 31,373,655
969,000
94,879,316
0
0
15,107,239
3,593,955
(10,599,999)
0
6.889,099
0
0
(12,177)
3,012,159
Subtotal
$ 146,634,083
$ 61,000,000
$ 64,600,000
$ 2.889,082
$ 145.923,165
$ 710.918
Cash Is 656,616 $ 269.995 1 & 3 $ 926,611 269,995
Total1 $ 147.290,699 1 $ 61,269,995 1 1 $ 64,600,000 $ 2,889,082 1 $ 146,849,776 1 $ 440,923
I certify that this report accurately reflects all pooled investments and is in compliance with the California
Government Code; and is in conformity with the City Investment Policy.
As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated
revenues are available to meet the pools expenditure requirements for the next six months. The City of
La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York
Monthly Custodian Report to determine the fair market value of investments at month end.
A4-4m.
1%3 1 Lo I l
John M. Falconer
Date
Finance Director/Treasurer
Footnote
(1) The amount reported represents the net increase (decrease) of deposits and withdrawals from
the previous month.
(2) The amount reported in the other column represents the amortization of premium/discount for the
month on US Treasury, Commercial Paper and Agency investments.
(3) The cash account may reflect a negative balance. This negative balance will be offset with transfers from other investments
before warrants are presented for payment by the payee at the bank.
2
Treasurer's Commentary
For the Month of December 2010
Cash Balances - The portfolio size decreased by $441,000 to end the month at $146.85
million. The major reason for the decrease was due to normal cash flows.
Investment Activity - The investment activity resulted in an average maturity increase of 181
days from the prior month to end the month of December at 265 days. The Treasurer follows
a buy and hold investment policy with four (4) US Treasury Bills/Note investments purchased
made during the month of December for $60 million. The average maturity increased because
$30 million of the US Treasury Notes were for a two year maturity and $17 million in US
Treasury Bills were for a one year maturity. In addition, the LAIF balances were decreased by
$10 million and invested in two year US Treasury Notes. The sweep account earned $15 in
interest income for the month of December and the bank fees for the month were $ 2,039
which resulted in a net decrease of $2,024 in real savings.
Portfolio Performance - The overall portfolio performance had a three basis point increase
from the prior month and ended at .52% for the month, with the pooled cash investments at
.57%. The portfolio yield should continue to stay at these levels for the near future. At this
time last year, the portfolio was yielding .51 % which reflects the current interest rate
environment.
Looking Ahead
The Treasurer is still concentrating on safety first and foremost. In the short term, the
Treasurer will be maintaining a lesser percentage in LAIF due to the Governor's FY 201 1 /12
budget proposal to eliminate Redevelopment Agencies state-wide.
With the decrease in LAIF, the Treasurer will be investing in commercial paper and Federal
Home Loan or Federal Farm Credit Sponsored Enterprises (GSE).
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City of La arm
Comparative Rates of Inte ... t
�nnbdr al, 20, 0 - -
City of La
Ounda
Connnercial Paper
Annualized
lianninq
Average
Trea,puN Bd1WN
2L
Th.. Month
Pooled Cabin
Fiscal Anent
O�mll
Thdal Mopth
Sr. Month
On. Yea, IT..
Year
year
Month
MatudW fd.��j
Non-i-inancial
t .1c
485%
FY 06107
July 2006
493%
500%
4.96%
95
506%
August2006
4,P4%
601%
497%
46
497%
495%
Sept 2006
498%
501%
4.99%
53
500%
502%
at 2006
500%
602%
501%
67
496%
5 10%
No� 2W6
504%
5,03%
5,03%
62
494%
5 13%
Dec2006
508%
5.04%
5,06%
80
4.0%
513%
Jan 2N7
5,18%
5,12%
516%
6'1
4a%
5,16%
Feb 2007
5,19%
5.13%
5,17%
45
495%
518%
Mar 2017
5,21%
503%
516%
67
4.N%
521%
AV 2007
520%
5.14%
6,16%
42
4.U%
5,22%
Wy2007
520%
5,05%
6.16%
32
4,81%
525%
June 2007
&19%
4,88%
6.10%
85
4,81%
525%
FY 07/08
July 2007
521%
4.0%
5,12%
129
4,80%
526%
AugustZ007
517%
4,05%
5,08%
109
-459%
525%
Sapt2007
5A6%
4�86%
6,06%
120
400%
523%
002007
5 11%
485%
502%
116
395%
514%
Noy 207
503%
403%
4,95%
99
3 3p1%
496%
Dec 2007
495%
143%
445%
123
339%
480%
Jan 2008
458%
333%
412%
SO
231%
462%
Feb 2008
412%
324%
3.86%
86
207%
416%
Mar 2008
407%
283%
3.67%
74
1�50%
378%
Api-2008
345%
3,27%
341%
82
170%
340%
May 2008
314%
327%
3,17%
63
192%
307%
June 2008
309%
1,94%
2,86%
80
2 14%
2,89%
FY 08/09
July 2008
2,99%
1,93%
Z77%
62
170%
188%
229%
275%
2 18%
2.79%
Augus[2008
3.16%
1.92%
288%
61
169%
1 89%
2.14%
238%
208%
2 78%
Sept2008
281%
192%
Z64%
37
142%
1�79%
1.96%
200%
213%
277%
Oct2OO8
2613%
2.61%
261%
29
090%
1 40%
172%
150%
207%
271%
N.v 2008
2,38%
236%
236%
64
015%
049%
104%
125%
145%
2 57%
Due 2008
160%
018%
142%
116
005%
025%
059%
ON%
097%
235%
Jan 2009
136%
a 18%
123%
82
015%
0,35%
0,43%
068%
031%
205%
Feb 2009
1,23%
0 18%
1 11%
75
030%
0,50%
061%
ON%
048%
187%
Mar2009
126%
018%
1A3%
69
0.20%
042%
070%
0�88%
037%
1,82%
Apr2000
O'lPi%
0,18%
OS5%
64
0,31%
033%
059%
088%
0,28%
161%
May 2009
0,92%
0,18%
O'Sim
80
0.18%
030%
053%
0,88%
0,23%
1 63%
June 2009
0,85%
029%
ON%
ill
0,20%
035%
055%
1.13%
026%
138%
FY 09110
July 2N9
069%
030%
OS5%
Ill
0.19%
0,28%
047%
1,00%
0,28%
10`1%
AuquW20N
)'�%
030%
0,61%
92
016%
026%
0,48%
100%
024%
0,93%
Sep12OO9
0,56%
031%
053%
112
0,12%
0.19%
0.41%
100%
0.19%
075%
Oct2OO9
052%
031%
0.50%
90
008%
0,19%
0,38%
100%
0.19%
0,65%
Wry 2009
0,56%
031%
0,53%
152
004%
0,14%
0.32%
075%
0,15%
061%
Dec 2009
0,56%
015%
0.51%
239
OAi%
020%
016%
I,DO%
0,16%
057%
Jan 201 D
046%
OA5%
OA3%
179
006%
0,14%
034%
0.88%
013%
056%
Feb 2010
0,51%
016%
048%
162
0,13%
019%
032%
ON%
0.15%
058%
Mar-2010
050%
016%
047%
172
0.15%
024%
0'313%
1,00%
0.2G%
055%
Api-2010
052%
0,16%
048%
162
0,15%
024%
0.49%
IN%
023%
059%
May20lO
052%
0,16%
048%
116
0,17%
022%
037%
075%
028%
056%
June 2010
057%
OA4%
052%
lu
0,16%
on%
0,32%
0,63%
O�%
063%
FY 101il
Ju1y20lO
050%
0,15%
047%
119
016%
0.20%
030%
T63%
0213%
053%
Augus[20101
049%
OA6%
046%
108
015%
019%
026%
0.38%
025%
051%
Sept 2010
0 55%
0,15%
051%
107
0,16%
019%
027%
038%
0.24%
050%
Oct 2010
055%
015%
051%
88
OA3%
0 17%
023%
038%
0,23%
048%
Noy20
053%
015%
049%
At
0.18%
- -.
021%
� -.1
0,28%
. -
050%
, -
023%
h 11.
045%
046%
WD]
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11
INVESTMENT ADVISORY BOARD Business Session: B
Meeting Date: February 9, 2011
ITFIVI TIT[ F-
Consideration of the Fiscal Year 2011-2012 Work Plan and Review the 2011-2012
Investment Policy
BACKGROUND:
As part of the work plan, the Investment Advisory Board is asked to review the
Investment Policy and make any recommendations for the City Council's
consideration in June of each year.
Attached please find the draft Fiscal Year 2011-2012 Investment Policy and the
Fiscal Year 2010-2011 Investment Advisory Board Work Plan.
RECOMMENDATION:
Continued review of the Fiscal Year 2011-2012 Work Plan and Review the 2011 -
2012 Investment Policy for approval by City Council in June 2011.
/1& f-1
(,-,)John M. Falco 0 ner, Finance Director
4 strzo Q,", &,,rev
AGENDA CATEGORY:
COUNCIL/RDA MEETING DATE: August 3, 2010
ITEM TITLE: Consideration of Investment Advisory
Board 2010-2011 Work Plan
RECOMMENDATION:
V,
BUSINESS SESSION: C:
CONSENT CALENDAR:
STUDY SESSION:
PUBLIC HEARING:
Approve the Investment Advisory Board 2010-2011 Work Plan.
FISCAL IMPLICATIONS:
Fiscal implications consist of Board Members meeting expenses, budgeted at
$4,500, and staff support time.
CHARTER CITY IMPLICATIONS:
None.
BACKGROUND AND OVERVIEW:
Municipal Code Section 2.70.030 sets forth the work plan items for the Investment
Advisory Board for each year as follows:
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 of
change of financial institutions, custodians, brokers and dealers.
1
The Investment Advisory Board met on July 14, 2010 and is not recommending
that any additional Work Plan Items be added to those outlined in the Municipal
Code.
FINDINGS AND ALTERNATIVES:
The alternatives available to the City Council include:
1. Approve the Investment Advisory Board 2010-2011 Work Plan; or
2. Do not approve the Investment Advisory Board 2010-2011 Work Plan; or
3. Provide staff with alternative direction.
Respectfully submitted,
John M. Falconer, Finance Director
Approved for submission by:
OIX4
Thomas P. Genovese, City Manager
2
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2010/2011
Table of Contents
Section
Topiq
Page
Executive Summary
2
1
General Purpose
4
11
Investment Policy
4
III
Scope
4
IV
Objectives
4
I� Safety of Principal
0. Provide Liquidity
01 Yield A Risk -Based Market Rate Of Return
V
Maximum Maturities
6
V1
Prudence
6
VII
Authority
7
Vill
Ethics and Conflicts of Interest
7
IX
Authorized Financial Dealers and Institutions
7
1� Broker/Dealers
1� 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 2010/2011
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 and Housing Authorities (the"City").
It is the City's policy to deposit and invest public funds in a manner that shall provide:
N� Safety of principal;
1� Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated;
1� 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:
ll� Safeguard assets;
1� The orderly and efficient conduct of its business, including adherence to all City
management policies;
1� Prevention or detection of errors and fraud;
0� The accuracy and completeness of accounting records;
O� 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:
1� FDIC -insured Checking, Savings, and Sweep Accounts;
1� Certificates of Deposit;
1� U.S. Government Agency Securities and Federal Government Securities;
1� Prime Commercial Paper;
0- Local Agency Investment Fund (LAIF);
0- Money Market Mutual Funds;
1� 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 Bill, six-month Bill, and the one
and two-year U.S. Treasury Note, 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.
9
City of La Quinta
Statement of Investment Policy
July 1, 2010 through June 30, 2011
Adopted by the City Council on June 15, 2010
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.
11 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 and Housing Authorities (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:
1� General
I� Special Revenue
1� Capital Projects
1� Debt Service
1� Enterprise
0� Internal Service
0� Trust and Agency
1� 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.
El.
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:
O� Limiting investments to investment grade s ecurities as permitted in Section X;
0- 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:
1� 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
1� Investing operating funds primarily in shorter -term securities.
C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique
features or structure or because it is thinly traded. Liquidity risk is not a material
issue for the City's portfolio because of the permissible deposits and investments
(see Section X) and because the City maintains a buy -and -hold policy and holds
securities and other investments to maturity. A discussion of the City's investment
process and risk is presented in Appendix 1.
2. Provide Liquidity
The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs
that may be reasonably anticipated. This is accomplished by structuring the portfolio so
that sufficient liquid funds are available to meet anticipated demands. Furthermore, since
all possible cash needs cannot be anticipated the portfolio should be diversified and
consist of securities with active secondary or resale markets.
The City's policy is to hold securities and other investments to maturity. Accordingly,
securities shall not be sold prior to maturity with the following exceptions:
0� A security with declining credit quality can be sold early to minimize loss of
principal;
0. Unanticipated liquidity needs of the portfolio require that one or more securities be
sold.
3. Yield A Risk -Based Market Rate Of Return
The City's investment portfolio shall be structured with the objective of yielding a risk -
based market rate of return throughout budgetary and economic cycles. Return on
investment is less important than the safety and liquidity objectives described above.
The City's Investment Policy does not specify a single benchmark as a goal or target yield
for a rate of return on its investment portfolio. The portfolio's rates of return will be
influenced by several factors, including actions by the Federal Reserve Board, the
marketplace, and overall economic perceptions and conditions. These factors will not
affect yield during the securities' holding period because the City's buy -and -hold policy
fixes the securities' yield at the time of purchase.
As a basis for comparison only, the Treasurer's monthly reports will display the rates of
return on the three-month Bill, six-month Bill, and one and two-year U.S. Treasury Note,
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
reason a bly-a ntic i pated 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 2010/2011, the amount of such funds is projected to be $4 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."
1.1
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.
Vill 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:
0. Current audited financial statements;
0. Proof of Financial Industry Regulatory Authority (FINRA) Certification;
I� Trading resolution;
I� Proof of California registration;
0� Resume of Financial broker; and
0. 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.
KA
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 150%, of the amount of invested funds plus unpaid
interest earnings.
C. Disclosure - Each financial institution maintaining invested funds in excess of the
FDIC insured amount shall furnish the City a copy of the most recent Call Report.
The City shall not invest in excess of the FDIC insured amount in banking
institutions which do not disclose to the city a current listing of securities pledged
for collateralization in public monies.
X PERMISSIBLE DEPOSITS AND INVESTMENTS
Permissible deposits and investments are summarized below. A more comprehensive list is
included in Appendix A.
Permissible Investments and Limitations
(See Appendix A for Additional Information)
Maximum
Allocation
Maximum
Maturity
Restrictions
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
M
Permissible Investments and Limitations
Maximum
Maximum
Restrictions
(See Appendix A for Additional Information)
Allocation
Maturity
U.S. Treasury Bills, Notes and Bonds, and Government National
100% Portfolio
3 Years
<=$4,0000,000
Mortgage Association IGNMA) Securities
maturing 3-5 Yrs
U.S. Government Agency Securities and Federal Government Securities
(except collateralized mortgage obligations (CMO's) or structured notes
which contain embedded rate options):
- Federal National Mortgage Association (FNMA)
$20,000,000
3 Years
- Federal Home Loan Bank Notes & Bonds (FHLB)
$25,000,000
3 Years
- Federal Farm Credit Bank (FFCB)
$30,000,000
3 Years
- Federal Home Loan Mortgage Corporation (FHLMC)
$20,000,000
3 years
Prime Commercial Paper including Temporary Liquidity Guarantee
15% Portfolio
90 Days
$5,000,000 per
Program (TLGP)
issuer maximum.
Local Agency Investment Fund (LAIF)
30% Portfolio
Current
On Demand
$50 million
per account.
Money market mutual funds regulated by the SEC that consist only of US
20% Portfolio
Current /
Maintain $1 per
Treasury Securities or GSE's and maintain a par value of $1 per share
On Demand
share par value
$5,000,000 max
Corporate Notes
10%
3 Years
per issuer AA
rated or better
$10,000,000 max
Corporate Notes - Temporary Liquidity Guarantee Program (TLGP)
20%
3 Years
per issuer, AA
rated or better.
Requires
Professionally Managed Account
10%
3 Years
City Council -
I
Approved RFP
Checking, Savings, and Sweep Accounts — The City will only maintain checking, savings,
and sweep accounts with FDIC insured financial institutions. As authorized by the City
Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account
with a $50,000 target balance may be maintained in conjunction with the checking
account.
2. Certificates of Deposit - As authorized in Government Code Section 53649, Certificates of
Deposit are fixed term investments which are required to be collateralized from 110% to
150% depending on the specific security pledged as collateral in accordance with
Government Code Section �3652. There are no portfolio limits on the amount or maturity
for this investment vehicle.
Collateralization will be required for Certificates of Deposits in excess of the FDIC insured
amount. The type of collateral is limited to City authorized investments. Collateral will
always be held by an independent third party from the institution that sells the Certificates
of Deposit to the City. Evidence of compliance with State Collateralization policies must
be supplied to the City and retained by the City Treasurer as follows:
A. Certificates of Deposits insured by the FDIC: The City Treasurer may waive
collateralization of a deposit that is federally insured.
B. Certificates of Deposit in excess of FDIC Limits: The amount not federally insured
shall be 110% collateralized securities or 150% mortgages market value of that
amount of invested funds plus unpaid interest earnings.
M
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 2010/2011, 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 LAIF procedures, local government agencies are each
authorized to invest a maximum of $50 million per account in this investment program
administered by the California State Treasurer.
10
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 (j), local agencies
may invest in corporate notes. The notes must be issued by corporations organized and
operating in the United States or by depository institutions licensed by the United States
or any other state and operating in the United States. The City's Investment Policy allows
investment in corporate notes authorized by the Government Code with the following
limitations:
Maturities shall not exceed three years from date of purchase.
Eligible notes shall be regularly quoted and traded in the marketplace.
Eligible notes shall be rated "Wor better.
Total investment shall not exceed 10% of the portfolio for non- Temporary
Liquidity Guarantee Program (TLGP) Corporate Notes and 20% of the portfolio for
TLGP Corporate Notes, 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, except that corporate notes issued under the Temporary Liquidity Guarantee
Program or otherwise backed by the United States government shall be limited to 20% of
the portfolio and the maximum aggregate investment for such notes shall not exceed $10
million face amount for each issuer.
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;
11
(b) Knowledge and working familiarity with State and Federal laws governing and
restricting the investment of public funds;
(c) Substantial experience providing investment management services to local public
agencies whose investment policies and portfolio size are similar to those of the
City;
(d) Professional liability (errors and omissions) insurance and fidelity bonding in such
amounts as are required by the City;
(e) Registration with the Securities and Exchange Commission under the Investment
Advisers Act of 1940.
Before engagement by the City and except as may be specifically waived or revised, the
PPMF shall commit to adhere to the provisions of the City's Investment Policy with the
following exceptions:
(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.
X1 INVESTMENT POOLS
There are three (3) types of investment pools:
I- State -run pools (e.g., LAIF);
1� Pools that are operated by a political subdivision where allowed by law and the political
subdivision is the trustee (e.g., County Pools);
0- Pools that are operated for profit by third parties.
The City's Investment Policy permits investment only in pools authorized in Section X.
X11 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 forthetransfer of
securities.
XIII INTEREST EARNING DISTRIBUTION POLICY
Interest earnings are generated from pooled investments and specific investments.
1 Pooled Investments - It is the general policy of the City to pool all available operating cash
of the City of I �_QL inta, La Quinta Redevelopment Agency and La Quinta Financing and
Housing Authorities and allocate interest earnings, in the following order, as follows:
12
A. Payment to the General Fund of an amount equal to the total annual bank service
charges as incurred by the general fund for all operating funds as included in the
annual operating budget.
B. Payment to the General Fund of a management fee equal to 5% of the annual
pooled cash fund investment earnings.
C. Payment to each fund of an amount based on the average computerized
daily cash balance included in the common portfolio for the earning period.
2. Specific Investments - Specific investments purchased by a fund shall incur all earnings
and expenses to that particular fund.
XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR
The City Treasurer shall establish a system of internal controls to accomplish the following
objectives:
1� Safeguard assets;
0- The orderly and efficient conduct of its business, including adherence to management
policies;
1� Prevention or detection of errors and fraud;
O� The accuracy and completeness of accounting records; and
0� 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
13
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. Dueto
the potential for error and improprieties arising from telephone transactions, all telephone
transactions shall be supported by written communications or electronic confirmations and
approved by the appropriate person. Written communications may be via fax if on
letterhead and the safekeeping institution has a list of authorized signatures. Fax
correspondence must be supported by evidence of verbal or written follow-up.
7. Development of a wire transfer agreement with the City's bank and third party custodian.
This agreement should outline the various controls, security provisions, and delineate
responsibilities of each party making and receiving wire transfers.
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:
1� A certification by the City Treasurer.
P. A listing of purchases and sales/maturities of investments.
0. Cash and Investments categorized by authorized investments, except for LAIF
which will be provided quarterly and show yield and maturity.
01 Comparison of month end actual holdings to Investment Policy limitations.
0. Current year and prior year monthly history of cash and investments for trend
analysis.
01 Balance Sheet.
1� Distribution of cash and investment balances by fund.
0. A year to date historical cash flow analysis and projection for the next six months.
P. A two-year list of historical interest rates.
14
XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY
The City's Investment Policy does not apply to the following:
P. Cash and Investments raised from Conduit Debt Financing;
1� Funds held in trust in the City's name in pension or other post -retirement benefit
programs;
11� Cash and Investments held in lieu of retention by banks or other financial
institutions for construction projects;
1� 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;
15
4. Meet with the independent auditor after completion of the annual audit of the City's
financial statements, and receive and consider the auditor's comments on auditing
procedures, internal controls and findings for cash and investment activities, and;
5. Serve as a resource for the City Treasurer on matters such as proposed investments,
internal controls, use or change of financial institutions, custodians, brokers and dealers.
The IAB will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting. See Appendix B: "Investment Advisory Board
Provisions".
XIX INVESTMENT POLICY ADOPTION
The City's Investment Policy will be reviewed annually by the City's Investment Advisory Board
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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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 cancelled
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)
P401
3.08.050 Reports.
The city treasurer shall make a monthly report to the city council of all investments
made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982)
3.08.060 Deposits of securities.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to deposit for safekeeping, the securities in which city moneys have been
invested pursuant to this chapter, in any institution or depository authorized by the terms
of any state law, including but not limited to Section 53608 of the Government Code as
it now reads or may hereafter be amended. In accordance with said section, the city
treasurer shall take from the institution or depository a receipt for the securities so
deposited and shall not be responsible for the securities delivered to and receipted for by
the institution or depository until they are withdrawn therefrom by the city treasurer.
(Ord. 2 § 1 *(part), 1982
3.08.070 Trust fund administration.
Any departmental trust fund established by the city council pursuant to Section
36523 of the Government Code shall be administered by the city treasurer in accordance
with Section 36523 and 26524 of the Government code and any other applicable
provisions of law. (Ord. 2 § 1 (part), 1982)
21
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Fiinntinn
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
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, Costa Mesa, CA
5. Government Pool State of California Local Agency
Investment Fund
City of La Quinta Account
La Quinta Redevelopment Agency Account
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
4c]
Appendix F
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1 . Name of Firm:
2. Address:
3. Telephone:
4. Broker's Representative to the City (attach resume):
Name:
Title:
Telephone:
5. Manager/Partner-in-charge (attach resume):
Name:
Title:
Telephone:
6. List all personnel who will be trading with or quoting securities to City employees (attach
resume)
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
PZ11
Entity
Contact
Telephone Telephone
Client Since Client Since
10. Have any of your clients ever sustained a loss on a securities transaction arising from a
misunderstanding or misrepresentation of the risk characteristics of the instrument? If so,
explain.
11. Has your firm or your local office ever been subject to a regulatory or state/ federal
agency investigation for alleged improper, fraudulent, disreputable or unfair activities
related to the sale of securities? Have any of your employees been so investigated? If
so, explain.
12. Has a client ever claimed in writing that you were responsible for an investment loss?
Yes No_ If yes, please provide action taken
Has a client ever claimed in writing that your firm was responsible for an investment
loss? Yes No If yes, please provide action taken -
Do you have any current or pending complaints that are unreported to FINRA?
Yes No_ If yes, please provide action taken
Does your firm have any current, or pending complaints that are unreported to FINRA?
Yes No_ If yes, please provide action taken
13. Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
Latest Audit Report
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.
MT
Is your firm a member in the S.I.P.C. insurance program? Yes
If yes, explain primary and excess coverage and carriers.
No
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:
O� Latest audited financial statements.
0� Samples of reports, transaction confirmations and any other research/publications the
City will receive.
O� Samples of research reports and/or publications that your firm regularly provides to
clients.
1� Complete schedule of fees and charges for various transactions.
26
'CERTIFICATION'
I hereby certify that I have personally read the Statement of Investment Policy of the City of La
Quinta, and have implemented reasonable procedures and a system of controls designed to
preclude imprudent investment activities arising out of transactions conducted between our firm
and the City of La Quinta. All sales personnel will be routinely informed of the City's investment
objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the
City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable
risks associated with financial transactions conducted with our firm.
By signing this document the City of La Quinta is authorized to conduct any and all background
checks.
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 Tit
27
Appendix G
Request for Proposals
Professional Portfolio Management Firm
City of La Quinta, CA
The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms for the
provision of a discretionary investment management services for City of La Quinta, CA. The
portfolio to be managed of the invested assets is will be approximately 10% of the City's
investment portfolio and will be invested between 0 — 3 years.
The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and
the City of La Quinta, CA's investment policy. A copy of the investment policy is attached for
your information.
Questions regarding this RFP should be directed to:
Name:
Title:
City of:
Address:
City, State, Zip Code:
Phone Number:
John M. Falconer
Finance Director/Treasurer
La Quinta, CA
P.O. Box 1504
La Quinta, CA 92247-1504
(760)777-7150
1. 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.
11. 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.
Ill. FORMAT FOR PROPOSALS
Please format your response to this RFP in the following manner:
A. Organization
W-1
Describe your organization, date founded, ownership and other business
affiliations. Provide number and location of affiliated offices. Specify the number
of years your organization has provided investment management service.
2. Describe your firm's revenue sources (e.g., investment management, institutional
research, etc.) and comment on your firm's financial condition.
3. Within the past three years, have there been any significant developments in your
organization (e.g., changes in ownership, new business ventures)? Do you expect
any changes in the near future?
4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation
involving your organization, any officer, or employee at any time in the last ten
years.
5. Describe the firm's fiduciary liability and/or errors and omissions insurance
coverage. Include dollar amount of coverage.
B. Personnel
Identify the number of professionals employed by your firm by classification
2. Provide an organization chart showing function, positions, and titles of all the
professionals in your organization.
3. Provide biographical information on investment professionals that will be involved
in the decision -making process for our portfolio, including number of years at your
firm. Identify the person who will be the primary portfolio manager assigned to the
account.
4. Describe your firm's compensation policies for investment professionals and
address any incentive compensation programs.
C. Assets Under Management
1. Summarize your institutional investment management asset totals by category for
your latest reporting period in the following table:
Other Restrictive
Number Operating Funds Number of Funds
of Clients Clients
Governmental $_ - $
Governmental Pension $_ N/A N/A
Non Governmental $ N/A N/A
Pension
29
Corporate $- N/A N/A
High Net Worth Client $ N/A N/A
Endowmental/Foun- $ N/A N/A
clation
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 11 (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
Describe your firm's investment philosophy for public clients, including your firm's
philosophy regarding average duration, maturity, investment types, credit quality,
and yield.
2. Describe in detail your investment process, as you would apply it to City of La
Quinta, CA's portfolio.
3. What are the primary strategies for adding value to portfolios?
4. Describe the process you would recommend for establishing the investment
objectives and constraints for this account.
5. Describe in detail your process of credit risk management, including how you
analyze credit quality, monitor credits on an ongoing basis, and report credit to
governmental accounts.
6. Describe your firm's trading methodology.
7. Describe your firm's decision -making process in terms of structure, committees,
membership, meeting frequency, responsibilities, integration of research ideas, and
portfolio management.
8. Describe your research capabilities as they would pertain to governmental
accounts. What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker -dealer
community.
E. Portfolio Management
1 . Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City of La
Quinta, CA?
4. How frequently are you willing to meet with us?
5. Describe procedures used to ensure that portfolios comply with client investment
objectives, policies, and bond resolutions.
F. Fees Charged
1 . Please include a copy of your firm's fee schedule applicable to this RFP.
2. Identify any expenses that would not be covered through this fee structure and
would be required in order to implement the firm's program.
31
3. Is there a minimum annual fee?
G. Performance Reporting
1 . Please report on all accounts under $100 million.
2. Please provide performance history for governmental accounts for the last five
years,
3. Please provide risk measurements for governmental accounts for the last five
years.
4. Indicate whether your returns are calculated and compiled in accordance with
the Association for Investment Management and Research (AIMR/CFA Institute)
standards,
5. Do your reports conform to the State of California reporting standards? Are you
willing to customize your reports to meet our specifications?
6. How will you notify us of investment transactions?
7. Are confirmations of investment transactions sent directly by the broker/dealer to
the client?
8. Do your reports include rating information on investments which is required by
GASB 40?
H. References
Provide a list of at least five (5) client references in California. References should be
public agencies with portfolio size and investment objectives similar to City of La Quinta,
CA. Include length of time managing the assets, contact name, and phone number.
1. Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Councill's approval of any agreement for services.
J. Submittal of proposals
1 Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing
the caption RFP for (City of La Quinta, CA) and addressed to:
City of La Quinta, CA
P.O. Box 1504
La Quinta, CA 92247-1504
Attention: John 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 as a trustee
each person, treasurer, or governing body authorized to make investment decisions on behalf of local
agencies. As trustees are 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 investment risk associated with any
investment activity and 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 approvak 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 or special
structures, or those issued by little known companies, are examples of "story bonds" and 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 represents the possibility that the borrower may be unable to repay the obligation as
scheduled. 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 Il. Fund Management
Local Agency Investment Guidelines 2010 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 or
exchange accepted by a bank or trust company.
The accepting institution guarantees payment of
the bill, as well as the issuer.
BID: The price offered by a buyer of securities.
(When you are selling securities, you ask for a
bid.) See Offer.
BROKER: A broker brings buyers and sellers
together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit
with a specific maturity evidenced by a
certificate. Large -denomination CD's are typically
negotiable.
COLLATERAL: Securities, evidence of deposit or
other property which a borrower pledges to
secure repayment of a loan. Also refers to
securities pledged by a bank to secure deposits of
public monies.
COMMERCIAL PAPER: Short-term unsecured
promissory notes issued by a corporation to raise
working capital. These negotiable instruments
are purchased at a discount to par value or at par
value with interest bearing. Commercial paper is
issued by corporations such as General Motors
Acceptance Corporation, IBM, Bank America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report for the City of
La Quinta. It includes five combined statements
for each individual fund and account group
prepared in conformity with GAAP. It also
includes supporting schedules necessary to
demonstrate compliance with finance -related
legal and contractual provisions, extensive
introductory material, and a detailed Statistical
Section.
CONDUIT FINANCING: A form of Financing in
which a government or a government agency
lends its name to a bond issue, although it is
acting only as a conduit between a specific project
and bond holders. The bond holders can look only
to the revenues from the project being financed
for repayment and not to the government or
agency whose name appears on the bond.
COUPON: (a) The annual rate of interest that a
bond's issuer promises to pay the bondholder on
the bond's face value. (b) A certificate attached
to a bond evidencing interest due on a payment
date.
DEALER: A dealer, as opposed to a broker, acts as
a principal in all transactions, buying and selling
for his own account.
DEBENTURE: A bond secured only by the general
credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two
methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery
versus payment is delivery of securities with an
exchange of money for the securities. Delivery
versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose
return profile is linked to, or derived from, the
movement of one or more underlying index or
security, and may include a leveraging factor, or
(2) financial contracts based upon notional
amounts whose value is derived from an
underlying index or security (interest rates, foreign
exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price
of a security and its maturity when quoted at
36
lower than face value. A security selling below
original offering price shortly after sale also is
considered to be at a discount.
DISCOUNT SECURITIES: Non -interest bearing
money market instruments that are issued a
discount and redeemed at maturity for full face
value, e.g., U.S. Treasury Bills.
ro
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. 5
1 FNMAs (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. FHLBs (Federal Home Loan Bank Notes and
Bonds) - Issued by the Federal Home Loan
Bank System to help finance the housing
industry. The notes and bonds provide
liquidity and home mortgage credit to savings
and loan associations, mutual savings banks,
cooperative banks, insurance companies, and
mortgage -lending institutions. They are
issued irregularly for various maturities. The
minimum denomination is $5,000. The notes
are issued with maturities of less than one
year and interest is paid at maturity.
3. FLBs (Federal Land Bank Bonds) - Long-term
37
mortgage credit provided to farmers by Federal
Land Banks. These bonds are issued at
irregular times for various maturities ranging
from a few months to ten years. The
minimum denomination is$ 1,000. They carry
semi-annual coupons. Interest is calculated on
a 360-day, 30 day month basis.
FFCBs (Federal Farm Credit Bank) - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
national agricultural industry. They are issued
monthly with three- and six-month maturities.
The FFCB issues larger issues (one to ten
year) on a periodic basis. These issues are
highly liquid.
FICBs (Federal Intermediate Credit Bank
Debentures) - Loans to lending institutions
used to finance the short-term and
intermediate needs of farmers, such as
seasonal production. They are usually issued
monthly in minimum denominations of $3,000
with a nine -month maturity. Interest is
payable at maturity and is calculated on a 360-
day, 30-day month basis.
6. FHLMCs (Federal Home Loan Mortgage
Corporation) - a government sponsored entity
established in 1970 to provide a secondary
market for conventional home mortgages.
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 DEPOSIT INSURANCE CORPORATION
(FDIC): A federal agency that insures bank
deposits, currently up to $250,000 per deposit
through December 31, 2013.
FEDERAL FUNDS RATE: The rate of interest at
which Fed funds are traded. This rate is currently
pegged by the Federal Reserve through open -
market operations.
FEDERAL HOME LOAN BANKS (FHLB):
Government sponsored wholesale banks
(currently 12 regional banks) which lend funds
and provide correspondent banking services to
member commercial banks, thrift institutions,
credit unions and insurance companies. The
mission of the FHLBs is to liquefy the housing
related assets of its members who must purchase
stock in their district Bank.
FEDERAL OPEN MARKET COMMITTEE (FOMC):
Consists of seven members of the Federal
Reserve Board and five of the twelve Federal
Reserve Bank Presidents. The President of the
New York Federal Reserve Bank is a permanent
member, while the other Presidents serve on a
rotating basis. The Committee periodically meets
to set Federal Reserve guidelines regarding
purchases and sales of Government Securities in
the open market as a means of influencing the
volume 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-throughs" 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
$50,000,000 for any agency. The City is
restricted to a maximum of ten transactions per
38
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-half 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 ILGIP):
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 event 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,
bankers' acceptances, etc.) are issued and traded.
OFFER: The price asked by a seller of securities.
(When you are buying securities, you ask for an
offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and
sales of government and certain other securities in
the open market by the New York Federal Reserve
Bank as directed by the FOMC in order to
influence the volume of money and credit in the
economy. Purchases inject reserves into the
bank system and stimulate growth of money and
credit; sales have the opposite effect. Open
market operations are the Federal Reserve's most
important and most flexible monetary policy tool.
PORTFOLIO: Collection of all cash and securities
under the direction of the City Treasurer,
including Bond Proceeds.
PRIMARY DEALER: A group of government
securities dealers who submit daily reports of
market activity and positions 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
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 RP extensively to finance their
positions. Exception: When the Fed is said to be
doing RP, it is lending money that is increasing
bank reserves.
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"
39
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, FNMA,
SLMA, etc.) and Corporations which have
imbedded options (e.g., call features, step-up
coupons, floating rate coupons, derivative -based
returns) into their debt structure. Their market
performance is impacted by the fluctuation of
interest rates, the volatility of the imbedded
options and shifts in the shape of the yield curve.
SURPLUS FUNDS: Section 53601 of the California
Government Code defines surplus funds as any
money not required for immediate necessities of
the local agency. The City has defined immediate
necessities to be payment due within one week.
TREASURY BILLS: A non -interest bearing discount
security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in
three months, six months or one year.
TREASURY BONDS: Long-term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities of more than 10 years.
TREASURY NOTES: Medium -term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and
Exchange Commission requirement that member
firms as well as nonmember broker -dealers in
securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also
called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm,
including margin loans and commitments to
purchase securities, one reason new public issues
are spread among members of underwriting
syndicates. Liquid capital includes cash and
assets easily converted into cash.
UNIFORM PRUDENT INVESTOR ACT: The State
of California has adopted this Act. The Act
contains the following sections: duty of care,
diversification, review of assets, costs,
compliance determinations, delegation of
investments, terms of prudent investor rule, and
application.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the
security. (b) NET YIELD or YIELD TO MATURITY
is the current income yield minus any premium
above par or 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.
ME
INVESTMENT ADVISORY BOARD Business Session: C
Meeting Date: February 9, 2011
TITLE:
California Municipal Treasurer's Conference — San Diego, CA
April 19-22, 2011
BACKGROUND:
Each year the City budgets funds for the Treasurer and two Investment Advisory Board
members to attend the Treasurer's Conference.
Staff is requesting the names of those interested in attending. Conference materials
are not available at this time, but wanted members to check their schedules for
availability to take advantage of early registration, subject to City Council approval.
RECOMMENDATION:
Select up to two Board members to attend the Treasurer's Conference.
INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item A
Meeting Date: February 9, 2011
TITLE:
Month End Cash Report for January 2011 and
Other selected Financial Data
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.
M. Falconer, Finance Director
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1/20/2011
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LAIF Performance Report
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Earnings Ratio.
Fair Value Factor:
Daily:
Quarter To Date:
Average Life:
0.46%
.00001248725439840
1.001461323
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0.47%
215
PMlA Average Monthly Effective Yields
DEC 2010 0.462%
NOV 2010 0.454%
OCT 2010 0.480%
Pooled Money Investment Account
Portfolio Composition
$74.5 Billion
12131/10
Loans
11.44%
Corporate Bonds
0.00%
Commercial PaPE
09.03%
Time Deposits
5.29%
CDs/BNs
10.75%
Agencies Mortgages
13.62% 0.74%
Treasuries
49.13%
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q127952C�
5 6 DAY
. )7 2 all
03 24
2
0 1 60
1�7
0 62
99.975111
gt27952H3
3 WEEK
0 , 27 2...
04 2
2011
0,155
0,157
99 960819
9127952NO
26 WEEK
01 27 2 oll
0 7 2:
20
0 180
0,183
99,909000
91279SX63
4 WEEK
01 " 2eli
02 17
2"1
0,55
0 157
99 987944
9127952B6
56 DAY
01-20 20 li
G3-17
20 11
G'�60
0 lG2
99 975ill
912MkG5
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01 20 20 11
0� 21
20 11
0 55
0 157
99 960819
9127952M2
26-WEEK
- 20-2 11
'1
07-21-2
11
0.18
0 tell
99 9064/2
9127953A7
4 WEEK
0 - 13-20011
02-10
20011
0.1�'5
0 147
99 988722
91279Sv40
56 DAY
01
03-0-2011
0,155
0�157
99 975889
912795vA9
13-WEEK
�3-201�
at- 3 20
04
0 lW
0.152
99,962083
9127952L4
1 26 WLEK
1 11
01 3 20
07 �4
4
2 0 1
0 18 0
O'l83
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9l27952ZI
, 2 _WEE K
at- I ' 11
ol 1 2
-2012
0 275
0.279
99,7219�4
4IV952Y6
4 Wittir
01_06-�Gli
02-03-2
al l
0 120
0.�22
99 990667
912,,95Y21
55-DAY
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03-03
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0
0
99 978222
9UMSM
13-WEEK
01-06 20 1
GA 0 '
_2 0
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0 5
l42
0 52
9 9 962083
912795VDU
26-14EEK
01-06-2011
07-07
20 a,
0,190
0 193
9 901 '44
9127952XB
� WEEK
12 - 30 2010
at a 7-2011
0�065
0,066
99 994944
912795X97
56-DAY
12-30-2010
02-24-2011
0 120
0.127
99,981333
9127952CA
3-WEEK
l2-30-2010
03-31-2011
0 l8G
0.183
99,95,500
9127952P
6-WEEK
12-30 2010
06 30-2011
0 225
0.228
99,886250
912795X22
4 WEEK
12 23 2010
01-20
2011
0 070
0.071
99,994556
91279SX69
56 DAY
IZ-23 2010
02-17
2011
0 13.
0 132
99,979778
912795256
13-.FEit
12-23-2010
03-24
2011
0 130
, 32
99 967139
912795243
26-WEEK
12-23-2010
06-23
2011
CASS
0,188
99,906472
91219s2wo
4-.EEK
O� 13
2011
0 Gas
0 Gas
99 993389
912795UX7
56 - DAY
�2-�6-2010
2- 5-20 0
0 -10
20
0 .125
0,127
99.980556
9l2791v40
13-WEEK
12-16 2010
03-17-2011
0 140
0,1�z
99.9646lt
912795265
2 E K
6 W EK
06-16
2011
cl90
0,193
99.903944
912795ZV2
52-11E,
�2-16-2010
Z-V6 2010
12-15-2011
0,295
0 300
99 /Ol/22
9127952l7
4-YVEEK
12 09 2011
01-GG-2011
0 060
Goal
99 993778
91279501
5 6-OAY
12-09 2010
02 03-2011
0 125
0 127
99 980556
91279SY21
2-WEEK
12 09-20lo
03-10-2011
0 145
0,141
99v633�1
912795V99
26 WEEK
12 09-2010
06-09-2011
0.165
oJ88
M906472
9127952U4
/-DAY
12 08-2010
12-15
2010
0,140
0.112
99.997278
9127956D8
4 WEEK
12 02 2010
17-30-2010
0.175
0,�77
99 986389
91279SX55
56 DAY
12 02 2010
01-77
NII
0 ISE
0 57
99 975889
912795Y97
13 WEEK
12 02 2.,o
03 03
2011
0,175
0,178
99 955764
9177952DZ
Effective with Me 1112198 auction, all bill, are auctioned using the single -priced method.
F bedriu of Will ....... l At, 1 1"" A Gl . .... , le I P111.11 & L,G1 'Jult'll I & Cr,ldl11-1 I ArteAlIbility I Ull' Q-IttY
IJ.S. hPlvirlipe,it of the Tea,uy, BulV�L5 tithe Poick Debt
4
http://www.treasurydirect.gov/RI/OFBills 2/1/2011
Recent Note, Bond, and TIPS Auction Kesuits
I r" I �. .
TreasuryDirect
,I.", I llllrl�acrll � AaInQaBcard�iill� tellt 6 'Peang ' 01rit dugrac" Data ' "'caflt Ran Borld, and I gi� Adarlite Resells
Recent Note, Bond, and TIPS Auction Results
t ... i 1.1cle,il Yield Bid.
Se .. it, Twa, TYRA Dill. Part, ..I. % . P1r r. CUSIp
1 2 YEAR NOTE 01-31 2RI1 01 31 2013 0,625 0 650 99 950404 917828PRS
5_YEAR NOTE 01-31-2011 01-31-2016 2,000 2 04T 99RC605? 911828PS3
7 YEAR NOTE 0�-3�-' O�: 01 31-2018 2 625 2,744 99,246792 91 2628RT1
10 YEAR TIRS 0 3 -20 0 -15-2021 1 125 1 170 as 599898 P12828PN
3 Y' AN NOTE 01 16 2OU 01 15 2014 1 000 1,027 99,920611 9128SEQ7
9 YEAR to On TR NOTE BE 18-1all It 15 2020 2�625 3 388 93,664061 912828 K8
29 YEAR 10-MORTH DOND 01 18-2011 IT 15-2040 4.250 R "is 95 669689 912810QL5
2 YEAR NOTE 12 31 2010 12-31-2012 0.625 0,740 99372112 912828PW4
5-YEAR NOT
N E �2_31-20�O �2 31 20�5 2.125 2 lire 99S66797 912828PMO
7 YEAR or[ z 3 20'. '2 3 - 20,7 2 750 2 830 99 4MBI 912828PN4
3 YEAR NOTE 12 IS-20 0 2 15-20 3 0 75 0 0 862 99.669011 91282SPL8
9 YEAR 11-MONTH NOTE 12-15-ZMD 11-15-2020 2�`,25 3,a40 94.002822 912828RCS
29-YEAR 11-MONTH NOND 12-15-2010 11-15 2040 C25S 4 410 97,349324 912810QL5
2-YEAR NOTE - 30-2010 11-30-2012 0.500 0 520 99 960259 9128281IV6
5-YEAR C`TE �� 30-2010 11-30-20 5 T 375 1411 ge 826792 11182SPIl
7-YEAR NOUE 11-30-2010 11-30-20�7 2.250 2 253 99.9806/3 912828PKO
3 YEAR N Ole �1-15-2010 11 15-20 3 0 500 0 575 99./7124/ 91282BPU8
9-YEAR a ERCRETH TIES 1 5-20110 07-15-2020 1.250 0 09 108,103581 912828NM8
10�YRAR NOTE 11-25,2010 11 15 2020 2 675 2,63E 99,903856 qT2828POR
3G-YEAR BONO �� 15-2010 11 15-2040 4 250 4,320 98 MIA? 912810QL5
2-YEAR NOTE .01-2010 10-31-2012 0.375 0 400 99 950315 q12B23PDN
5-YFAN N GTE 11 BIT 2010 10 31-2015 1.25. 1 330 90 614412 91282sIE4
'-Y'AR NOTE 11 (1-2alis Is 11-20�7 1,:7S 1 970 ON381626 917828PFI
4 YEAR B NCNTlI TIPS 10 29-2010 04 15-20 5 0 00 CS50 105,505507 912828M13
3 YEAR NOTE 10-15 2010 10 IS 2013 0 500 0,569 99 795045 9T2828TIEW
9 YEAR 10 NORTH NOTE 10-15 2010 08 Is 2020 2 625 2 475 101 298742 912828IFF3
29 YEAR 10 MUNTR BOND 10-15 2010 08 15-2010 3.875 3 852 100,397647 911111QN7
2 YEAR NOTE 09-30 2010 09 30-2012 0,375 0 441 99 868724 912828NX4
5-YER,R NOTE 09-30-2010 09-30-20�5 1,250 1 260 99 951690 912828NZ9
7-YBAR N OTE 09-30-2010 09-30-20 7 IS75 IAq0 99,9020SI 912828PA2
3-YEAR NOTE 09 15-2010 09-15 2UIa 0 750 0.790 99 881642 912828rJY2
8 912828NP8
9 YEAR �O-MON re TIPS 09 15 2010 07 15 2020 1,250 1.019 102 10918
9-YEAR I MO N IN NOTE 09 15 2010 08 15-2120 2 625 2,670 P9.607796 91282ONT3
29-YEAR 11-MON1. PON 0 09-15-2010 08 IN 204B 3,875 3,820 100 9"530 912810QK7
2-YEAR NOTE 06-31 2010 08 31-2012 0.375 0 1 98 99 755524 9 128281PTY
5-YE,K NOTE 06 3 2010 08-11-2015 '.250 A 31R 99 402197 912828.W)
7-YERik NOTE 08 31-2DIO 00-31 2017 I.Fr`5 198" 99 a"B"93 912828NW6
�29 YEAR 6 MONTH TIPS OS-31-201E 02 15 2040 2.12S 1 M 109.086149 112M,eg
3 YEAR NOTE 08 16-2010 08 15 2013 0.750 0 944 99 722358 912828NUO
I P YENR NOTE 08-16-2010 08-15 1020 2 S25 2.7se 99,086655 91287..T3
*Denotes TIPS bond; all other TIPS without asterisks are notes
Frecdoni at Infigiral. Art I Lee, I CderdBla I Pi,vacy R Legal Nouces I witsit, jefeis & C� lid tic i� I Acces,T)Airy I M,, Q01"i
ITS, Depa,taterg It IT, Tldslry, UTea I Qf the Rabic Debt
5
http://www.treasurydirect.gov/RI/OFNtebnd 2/1/2011
FRB: H.15--Selected interest Fates, werl-unty L)any upaaTe--i anuary / o, ztj i i
i ar,� � �� ,
Federal Reserve Statistical Release
H. 15
Selected Interest Rates (Daily)
sk, t" 0"w'A
Release Date: January 28, 2011
Weekly release dat s I Hist ta I Data DoNvnload ograni
orical da ----Pr -(DDP) I About I AnnOlIncen-lents
Daily update Otherformats: Screen reader I ASCII
Data Download
Program
The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday
through Friday on this site. If Monday is a holiday, the weekly release will be posted on Tuesday
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
January
28,
2011
2011
2011
2011
2011
Instruments
Jan
Jan
Jan
Jan
24
25
26
27
Federal funds (effective) 1 2 3
0.18
0.17
0.17
0.17
Commercial Paper 3 4 5 6
Nonfinancial
1-month
0.18
0.20
0.20
0.20
2-month
0.19
0.23
0.22
0.21
3-month
0.22
n.a.
0.24
n.a.
Financial
1-month
0.21
0.21
0.20
0.20
2-month
0.24
0.23
0.24
0.24
3-month
0.24
0.27
0.25
0.26
CDs (secondary market) 3 7
1-month
0.25
0.24
0.24
0.24
3-month
0.29
0.28
0.28
0.28
6-month
0.39
0.39
0.39
0.39
Eurodollar deposits (London) 3 8
1-month
0.32
0.32
0.32
0.32
3-month
0.39
0.39
0.39
0.39
6-month
0.55
0.55
0.55
0.55
Bank prime loan 2 3 9
3.25
3.25
3.25
3.25
Discount window primary credit 2 10
0.75
0.75
0.75
0.75
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
0.15
0.15
0.15
0.13
3-month
0.16
0.16
0.16
0.15
6-month
0.18
0.18
0.18
0.17
I -year
0.27
0.26
0.26
0.24
Treasury constant maturities
Nominal 11
1-month
0.15
0.15
0.15
0.13
3-month
0.16
0.16
0.16
0.15
6-month
0.18
0.18
0.18
0.17
1-year
0.28
0.27
0.27
0.25
2-year
0.65
0.62
0.62
0.59
3-year
1.05
1.00
1.05
1.00
5-year
2.03
1.96
2.03
1.98
7-year
2.76
2.68
2.76
2.75
10-year
3.43
3.35
3.45
3.42
20-year
4.31
4.23
4.34
4.31
30-year
4.55
4.48
4.59
4.57
Inflation indexed 12
5-year
0.10
0.02
0.07
0.08
6
http://www.federalreserve.gov/Releases/li I 5/update/ 2/1/2011
FRB: H.15--Selected interest Rates, Web -only Daily upciate--januarY /o, /u, I
� �r" . �� ,
7-year
10-year
20-year
30-year
Inflation -indexed long-term average 13
Interest rate swaps 14
1-year
2-year
3-year
4-year
5-year
7-year
10-year
30-year
Corporate bonds
Moody's seasoned
Aaa 15
Baa
State & local bonds 16
Conventional mortgages 17
n.a. Not available.
Footnotes
0.70
0.60
0.65
0.67
1.18
1.11
1.16
1.16
1.79
1.75
1.82
1.82
2.03
2.00
2.07
2.08
1.80
1.76
1.82
1.62
0.45
0.45
0.45
0.43
0.85
0.85
0.83
0.81
1.32
1.33
1.31
1.31
1.79
1.60
1.79
1.80
2.22
2.24
2.22
2.25
2.88
2.90
2.88
2.94
3.47
3.49
3.47
3.54
4.27
4.29
4.27
4.34
5.06
4.98
5.12
5.09
6.10
6.01
6.13
6.09
5.25
4.80
1. The daily effective federal funds rate is a weighted average of rates on brokered trades.
2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly
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 by The
Depository Trust Company. The trades represent sales of commercial paper by dealers or direct
issuers to investors (that is, the offer side). The l-, 2-, and 3-month rates are equivalent to the
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 Program is not
excluded from relevant indexes, nor is any financial or nonfinancial commercial paper that may be
directly or indirectly affected by one or more of the Federal Reserve's liquidity facilities. Thus
the rates published after September 19, 2008, likely reflect the direct or indirect effects of the
new temporary programs and, accordingly, likely are not comparable for some purposes to rates
published prior to that period.
7. An average of dealer bid rates on nationally traded certificates of deposit.
8. Source: Bloomberg and CTRB ICAP Fixed Income & Money market Products.
9. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-Chartered
commercial banks. Prime is one of several base rates used by banks to price short-term business
loans.
10. The rate charged for discounts made and advances extended under the Federal Reserve's primary
credit discount window program, which became effective January 9, 2003. This rate replaces that for
adjustment credit, which was discontinued after January 8, 2003. For further information, see
w�.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/default.htm. The rate reported is that
for the Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as
well as the rate on primary credit are available at www.federaireserve.gov/releases/hl5/data.htm.
11. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The
30-year Treasury constant maturity series was discontinued on February 18, 2002, and reintroduced
on February 9, 2006. From February 16, 2002, to February 9, 2006, the U.S. Treasury published a
factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year
nominal rate. The historical adjustment factor can be found at
www.treasury.gov/resource-center/data-chart-center/interest-rates/. Source: U.S. Treasury.
7
http://www.federalreserve-gov/Releases/Hl 5/update/ 2/1/2011
FRB: H.15--Selected Interest Rates, Wety-uray uaity upame--january z6, /ul 1 rare; i v� �
12. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities.
Source: U.S. Treasury. Additional information on both nominal and inflation -indexed yields may be
found at www.treasury.gov/resource-center/data-chart-center/interest-rates/.
13. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of
more than 10 years.
14. International Swaps and Derivatives Association (ISDA?� mid -market par swap rates. Rates are
for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on rates collected
at 11:00 a.m. Eastern time by Garban Intercapital plc and published on Reuters Page ISDAFIX?l.
ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited.
15. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa industrial bond
rates. As of December 7, 2001, these rates are averages of Asa industrial bonds only.
16. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations.
17. Contract interest rates on commitments for fixed-rate first mortgages. Source: Primary Mortgage
Market Survey? data provided by Freddie Mac.
---------------------------------------------------------------------------------------------------
Note: Weekly and monthly figures on this release, as well as annual figures available on the
Board's historical H.15 web site (see below), are averages of business days unless otherwise noted.
Current and historical H.15 data are available on the Federal Reserve Board-s web site
(www.federalreserve.gov/). For information about individual copies or subscriptions, contact
Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-728-5886).
Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series
Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S. Treasury
from the daily yield curve for non -inflation -indexed Treasury securities. This Curve, which relates
the yield on a security to its time to maturity, is based on the closing market bid yields on
actively traded Treasury securities in the over-the-counter market. These market yields are
calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The
constant maturity yield values are read from the yield curve at fixed maturities, currently 1, 3,
and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year
maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity.
Similarly, yields on inflation -indexed securities at "constant maturity" are interpolated from the
daily yield curve for Treasury inflation protected securities in the.over-the-counter market. The
inflation -indexed constant maturity yields are read from this yield curve at fixed maturities,
currently 5, 7, 10, and 20 years.
Weekly- release dates I Historical data I Data Download Prograrn (DDP) I About I A1111OUncernents
Daily update 01herformats: Screen leader I ASCII
Statistical releases
Home I Economic r�seaich mid data
Accessibility I Conlact Us
Last update: January 28, 2011
8
http://www.federalreserve-gov/Releases/Hl 5/update/ 2/1/2011
v KB: luommerciai raper Kates ana utas uartaings
. r" . �. ,
Federal Reserve Release
�k, ,� , , , .
Release I bout I Announcement I Outstandings I Volume statistius I Year-md I Mat Diswribution I Data
Download Program DDP)
Data as of January 31, 2011
Commercial Paper Rates and Outstanding
Derived from data supplied by The Depository Trust & Clearing Corporation
Posted February 1, 2011
Discount rates
FTerm
E�
E�
EKE�
Tr.d� Hain inqufficipmt to sunnort calculation
ot the 90-dav AA nonfinancial and 90-day A2/P2 nont
Yield curve
Money market basis
A A no"financial
........ I A2�IP2 nonfinancial
AA financial
� A :, , �4��-, !-�,!
1 7 15 30
Days to Maturity
Ell
iancial rates for January 31, 2011.
Percent
0.75
- 0.50
- 0.25
0.00
90
http://www.federalreserve.gov/Releases/CP/ 2/1/2011 9
FRB: Commercial Faper Kates ana k.)Utstanuilip
- -I- - -- -
Discount rate spread
Thirty -day A2JP2 less AA nonfmancial commercial paper (daily) Basis poiiits 800
— '�Pwlui
— — — spread. 5�diy moving aw - 700
- 600
- 500
- 40C
- 300
- 200
- 100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Discount rate history
7
6
5
4
3
2
1
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Outstandings
Weekly (Wednesday), seasonally adjusted
http://www.federalreserve.gov/Releases/CP/ 2/1/2011 10
FRB: Commercial Paper Rates and Outstandings
ray,� J VI J
1230
1130
1030
930
830
730
630
530
430
330
Rilfinft#�, of dollars
Nonflinamial Iright
Financial (Icft scale)
f-tl Ld,
2001 2003 2005 2007
Billions of dollars
KM
M
FM#
M
160
120
M.#
The daily commercial paper release will usually be available before I 1:00am 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 ProgranI-(DDP). This policy is subject to change at
any time without notice.
Release I About I Ann
ouncements, I Outstandings I Volume statistics I Year-end I Maturity. Distribution I Data
Download Program (QDP)
Home I Statistical releases
Accessibility I Contact Us
Last update: February 1, 2011
http://www.federalreserve.gov/Releases/CP/ 2/1/2011 11
City of La Courts
Cash Flow
Budget to Actual
December 31 2010
---Cash Bas's
Budget
-Ad�a
call I
jested Total
Variance
Account
12/10
12110 -
Adjustment
12110
Over(Uni
Notes
Property Tax) Tax Increment
859,254
1,630,534
1,630,534
771,280
Forces, Tax higher than budgeted
Transient Occupancy Tax
300,546
580.053
(229.686)
350,367
49821
Sales Tax
451,980
479,607
479,607
27 627
ShIverRock Golf
182,155
294830
294,830
112 675
Gelformull inferrer than budgeted
Reimbursement for museum & Library experest
Library
485
393283
393283
392,799
for the ,age,
Developer fees 31191, mers than budget
Other revenues
978,360
1 302,568
1,302,568
324,208
recognized S128k Prop 1 S revenue
Revenues
2,772,780
4,680,875
(229,686)
4,451,189
1,678,409
Expenditures
Salaries & Fringe Benefits
876,595
947,619
947,619
71,024
Vacation & Sick buy out
Other expenditures
1,890,014
1,479,425
1,479,425
(410,589)
Did not reddive Police invoice
2,766,609
2,427044
2,427,044
Sunni
Redevelopment Agency
450,417
467,474
467,474
17,057
Debt Service Frinciffiallinterest/Pass, Through)
694.285
715,381
715,381
21,096
1,144.702
1,182.855
1,182.855
38,153
ScIthomal
Capital Projects
1,674,314
1,674,314
1 674,314
-
Total Expenditures
5.585.625
5�21M.2113
1
Dl��l
(301,41 1
�j
I
Net Reverculoofformanaltures
gbV3,338ill
izzu'ledbil
'I
NOTE 1
Expenditures are budgeted at 8.34% per month
Difference between actual and budget
(Underspent)
DEPARTMENT
Overspent
Notes
GENERAL GOVERNMENT
68,536
CITY CLERK
(13,179)
COMMUNITY SERVICES
310,056
FINANCE
(12,545)
BUILDING & SAFETY
(70,585)
PUBLIC SAFETY
(1,032627)
Did net receive Police
muce
PLANNING
77 339
PUBLIC WORKS
(69,771)
(742,776)
SUBTOTAL GENERAL FUND
Library
Gas Tax
Federal Assistance
JAG Grant
Sleof (Cops) Revenue
CMAO
Lighting & Landscaping
RCTC
De,el.prorent Agreement
-
AB 939
2,124
Quimby
Infrastructure
Proposition I B
-
South Coast Air Quality
(4 079)
Transportation
Parks & Recreation
-
Ce,xt Center
2,042
Library Development
-
Community Center
Street Facility
Park Facility
Fire Protection
And In Public Places
(23.035�
Interest Allocation
4610
Equipment Replacement
(35,455:
Information Technology
(31,102)
Park Maintenance Facility
(37.563)
SilverRock Golf
29,515
SilverRock Reserve
I Public Safety Officer
(167)
Housing Authority
388
Finance Authority
(1,066)
Capital improvement
Total
��-836 564�
12
INVESTMENT ADVISORY BOARD
Meeting Date:
TITLE:
February 9, 2011
Pooled Money Investment Board Report
for November 2011
BACKGROUND:
Correspondence
& Written Material Item B
The Pooled Money Investment Board Report for November 2011 is included in the
agenda packet.
RECOMMENDATION:
Receive & File
V
John M. Falconer, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF NOVEMBER 2010 WITH NOVEMBER 2009
(DOLLARS IN THOUSANDS)
NOVEMBER 201011 NOVEMBER 20091
Average Daily Portfolio
$
66,312,942
$
63,645,120
$
+2,667,822
Accrued Earnings
$
24,776
$
31,969
$
-7,193
Effective Yield
0.454
%
0.611
%
-0.157%
Average Life -Month End (in Days)
184
222
-38
Total Security Transactions
Amount
$
27,237,972
$
14,291,334
$
+12,946,638
Number
553
296
+257
Total Time Deposit Transactions
Amount
$
1,753,990
$
2,412,000
$
-658,010
Number
92
106
-14
Average Workday Investment Activity
$
1,526,893
$
927,963
$
+597,930
Prescribed Demand Account Balances
For Services
$
1,375,647
$
1,161,463
$
+214,184
I
BILL LOCKYER
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
November 30, 2010
DIFFERENCE IN
PERCENT OF
PERCENT OF
PORTFOLIO FROM
TYPE OF SECURITY
AMOUNT
PORTFOLIO
PRIOR MONTH
Government
Bills
$
27,662,804
41.15
+2.43
Bonds
0
0.00
Notes
6,348,956
9.44
-0.25
Strips
0
0.00
Total Government
$
34,011,760
50.59
+2.18
Federal Agency Debentures
$
1,372,572
2.05
+0.04
Certificates of Deposit
4,900,002
7.29
-0.58
Bank Notes
0
0.00
-0.15
Bankers' Acceptances
0
0.00
0
Repurchases
0
0.00
-0.73
Federal Agency Discount Notes
7,278,005
10.83
+0.22
Time Deposits
4,181,140
6.22
+0.11
GNMAs
61
0.00
0
Commercial Paper
6,663,214
9.91
-1.18
FHLMC/Remics
566,198
0.84
-0.01
Corporate Bonds
0
0.00
0
AB 55 Loans
346,192
0.51
+0.04
GF Loans
7,603,600
11.31
+0.05
NOW Accounts
0
0.00
0
Other
300,000
0.45
+0.01
Reversed Repurchases
0
0.00
0
Total (All Types)
$
67,222,744
100.00
INVESTMENT ACTIVITY
NOVEMBER 2010
OCTOBER 2010
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
553
$ 27,237,972
720
$
35,257,908
Other
23
123,570
16
$
1,431,702
Time Deposits
92
1,753,990
150
$
3,770,000
Totals
668
$ 29,115,532
886
$
40,459,610
PM1A Monthly Average Effective Yield
0.454
0.480
Year to Date Yield Last Day of Month
0.496
0.506
2
Pooled Money Investment Account
Portfolio Composition
$67.2 Billion
11/30/10
Corporat(
O.Oc
Commercial Paper
9.91%
Time Deposits
6.22%
CDs/BNs
7.29%
Loans
11.82%
13.33% Mortgages
0.84%
Treasuries
50.59%