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2011 07 13 IABAlf oo- P.O. Box 1504 LA QUINIA, CALIFORNIA 92247-1504 78-495 CALLE TAMPICO LA QUINIA, CALIFORNIA 92253 AGENDA INVESTMENT ADVISORY BOARD Caucus Room 78-495 Calls Tampico- La Quints, CA 92253 July 13, 2011 - 4:00 P.M. VIA CONFERENCE CALL: Kurt Mortenson 218 Main St., S.W. Menahga, MN 56464 CALL TO ORDER a. Pledge of Allegiance b. Roll Call 11 APPOINTMENT OF OFFICERS A. Appointment of Investment Advisory Board Chairperson B. Appointment of Investment Advisory Board Vice -Chairperson (7 6 0) 7 7 7 - 7 0 0 0 FAX (760) 777-7101 III PUBLIC COMMENT - (This is the time set aside for public comment on any matter not scheduled on the agenda.) IV CONFIRMATION OF AGENDA V CONSENT CALENDAR A. Approval of Minutes of Meeting on June 8, 2011 for the Investment Advisory Board. VI BUSINESS SESSION A. Transmittal of Treasury Report for May 2011 B. FY 2011/2012 Meeting Schedule VII CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - June 2011 B. Pooled Money Investment Board Reports - April 2011 C. Distribution of Investment Policies for Fiscal Year 2011/2012 - Vill BOARD MEMBER ITEMS IX ADJOURNMENT PUBLIC NOTICES The 1 3 Cur,ta Caucus Room is handicapped accessible. if special equipment i., needed for the hearing mpa;ryd, please call the Finance Department at 77 7-7150, t �enty four (241 hours in ad,,a,,a of the neeting attill accommodations will be made. Any writings of docurdends proeided to a majority of the Investment Advisory Board regarli any itern on this agenda will be made availatole for public inspection at the City Clerk cointer at City Hall located td! 78 495 Calle Tamoico, La Quirla. CA 92253 during rininnal bus reas hours, INVESTMENT ADVISORY BOARD Business Session: A Meeting Date: July 13, 2011 ITEM TITLE: Transmittal of Treasury Report for May 31, 2010 BACKGROUND: Attached please find the Treasury Report for May 31, 2011. RECOMMENDATION: Review, Receive and File the Treasury Report for May 31, 2011 aJohn M M E M 0 R TO: La Quinta City Council FROM: John M. Falconer, Finance DirectortTreasurer SUBJECT: Treasurer's Report for May 31, 2011 DATE: June 30,2011 Attached is the Treasurer's Report for the month ending May 31. 2011. The re; the City Council each month after a reconciliation of accounts is accomplished I The following table summarizes the changes in investment types for the month: a" N D U M is submitted to he Finance Department. Investment Beginning Pwchased Notes Sold/Matured Other Ending Change LAIF Certificates of Deposit US Treasuries US Gov't Sponsored Enterprises Commercial Paper Corporate Notes Mutual Funds $ 31,088.191 969.000 84,921,301 19,985,818 4,998,261 10,063,571 1,380,031 $ 12,500.000 15,000,000 (2) (2) (2) (2) (1) $ (6,000.000) (13,000,000) 0 8,851 2.911 (3,399) (9,839) 0 $ 37.588,191 969,000 71,930.152 19,988,729 19.994,862 10,053.732 1,380,031 6,500.000 0 (12,991,149) 2,911 14,996,601 (9,839) 0 jSubtotal 1 $ , 153,406,173 _ $ 27,500,000 $ (19,000,000), $ (1,476), $ 161,904,697 $ 8,498,524 1 lCash Is 692,742 1 (1) & (3) $ (1,475,554)1 1 $ (782,812)1 (1,475,554) iTotal L�_ �,G98,915 1 $ 27,500,000 1 $ (20.475.554)] $ (1.476)1 $ 161,121,885 1 7022970 I certify that this report accurately reflects all pooled investments and is in 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 lic revenues are available to meet the pools expenditure requirements for the next si La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and Monthly Custodian Report to determine the fair market value of investments at m( A4�fl John M. Falconer Finance Director/Treasurer Footnote (1) The amount reported represents the net increase (decrease) of deposits the previous month. (2) The amount reported in the other column represents the amortization of month on US Treasury, Commercial Paper and Agency investments. 13) The cash account may reflect a negative balance. This negative balance before warrants are presented for payment by the payee at the bank. the California fldity and anticipated months. The City of he Bank of New York ith end. 715-1-2-01 t ' Date withdrawals from forthe offset with transfers from other investments I Treasurer's Commentary For the Month of May 2011 Cash Balances — The portfolio size increased by $7.02 million to end the month at $161.1 million. The major reason for the increase was $25.7 million received from the County of Riverside from the second property tax installment. Offsetting this increase was $12.27 million spent on pass through payments to other taxing entities, $4.85 million spent on a SERAF shift, $1.7 million spent on Police protection, and $1.1 million spent on Capital Improvement Projects. Capital improvement projects included $336,000 spent on Village land acquisition, $107,000 spent on the Coral Mountain Apartment project, and $105,000 spent onthe Eisenhower Drive synchronization project. Investment Activity — The investment activity resulted in an average maturity decrease of thirty six (36) days from the prior month to end the month of May at 156 days. The Treasurer follows a buy and hold investment policy with three investments of Commercial Paper made in the month of May. The sweep account earned $66 in interest income for the month of May and the bank fees for the month were $ 2,049 which resulted in a net decrease of $1,983 in real savings. Portfolio Performance — The overall portfolio performance had a seven (7) basis point decrease from the prior month and ended at .41% for the month, with the pooled cash investments at .48%. The portfolio yield should continue to stay at these levels for the near future. At this time last year, the portfolio was yielding .48% 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 investing in Commercial Paper as opposed to short term GSE's and US Treasury investments and has reduced the LAW RDA Account to zero until the Governor's budget proposal has been finalized. 3 Z 00 W 0 E E E N 0 '24 2 m E E 0 z 0 z 0 z 0 z 0 z 0 x w Z. CY *61 f2 0 EL c c m *6 0 E E r E 0. > 0 E 0 t2 Lc > E SE 0 XE- v I P I I I I Z: ci 0 0 0 0 ct 1800 0 c ci S E w 0 MH Ah Mo 16 Id 16 w; C� c; '6 E o 2,A �o � B go iN z E E 0 02 laz 0 3t u 0 '0 w > ro 'm 0 E 0 m o 80 Eur L), 0 ow > c 0 16 E E Lo L T 0 0 L) M ii 0 E 76 -T '0 . . . 0 0 OXXIE j u 80 0 190 w . I I . � 2 00. 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Pit 9 9 H'M226, WHO RHO Irl E Cdy of La Guinta C4noawatve Rauts & hIbmeM May 31. 2011 CRY of La 0*0 AlaxA 2ON 4.U% 501% 417% 46 4,97% 40% SW 2006 4.113% SD1% 499% 53 S.(m 502% Od 2" 5,00% &02% 5,01% 67 4M% 5.10% Noy2OW 5.04% 5,03% 5,03% 62 4,EK% 5,13% � 2OW 508% 504% 506% 80 4 90% 5.13% Jan 2007 5,18% 5.12% 5.16% u 498% 5A6% Feb 2007 5.1im 5.13% 5.17% 45 495% 5.18% Mar 2007 521% 503% 515% 67 4�W% 5.21% AW 2007 5,20% 5.14% 515% 42 484% 5.22% May 2007 520% 505% 516% 32 4.81% 5,25% Jwe 2007 5AM 4.W% 51m w 481% 525% i'r 07M �Jy 2007 521% 4W% 512% 129 480% U15% Au" 2W7 517% 485% 508% 109 459% 5.25% S802007 5.16% 486% 5W% 129 4 00% 523% Od 2007 511% 4M% 5 OM 116 395% &14% Noy 2007 5.03% 4W% 4%% 3 �% 496% Dec 2007 4.95% 3.43% 4,45% 123 339% 4�i]O% JW20W 456% 333% 422% 96 231% 4�62% FabZOW 412% 324% 1135% w 207% 416% Mar 2DW 4.07% 2.83% 367% 74 150% 378% AV 2ON 145% 327% 341% 82 1.70% 340% May 2" 314% 327% 317% 63 192% 307% � 2ON 3 09% IN% 2 N% w 214% 2fy^ FY08m J* 20W 2,� 193% 277% 62 1,70% IN% 229% 2,75% 2AM 2,79% A�st 200f 3.16% 1,92% ZW% 51 169% 189% 214% 2.ZU3% 2N% 278% sept � 281% 192% 26,4% 37 142% 179% 1 %% 200% 213%. 2.77% od2ow 2,W% 261% 261% 29 0,90% 1.� 172% 150% 2.OM 2,71% l4ay2ON 2U% Z36% 236% $4 0,15% OA9% 1,04% 115% IA5% 2.57% 0.2008 1.(10% OA8% 1 �42% 116 005% 025% o5ii% ON% 0,97% 2�M% 136% 018% 123% 82 0.15% 035% 0,43% ON% 0,31% 105% Feb 2OD9 In% 0,18% 111% 75 030% 0,50% 061% 0 SB% 048% 187% M&-20W 1,26% 0.18% 1.13% 69 0 20% 042% 070% OW% 037% 182% A92OW OW% 0,18% 0,85% 54 0.31% 033% O.W% 0.1343% 02M 1,61% May 2OD9 O.� 018% OU% 60 0,18% 0,30% 0.53% 0.88% 0.23% 153% � 2OD9 0.65% 0,21)% OW% 111 020% 0.35% 055% IA3% 0,26% I.W% "10 J*� 0 69% 030% 065% 111 Ol� 028% 047% t00% 0 2M 1.04% AIGMIR 200,1 O,U% 030% 061% 92 0.16% O��% O'�% t00% 0.24% 0 m SW 2OD9 O.W% 031% 053% 112 012% ol� 0.41% tw% O.Ilm 0,75% Od 2" OSM 0,31% 0 50% w 006% olm O.W% 1.00% 0.1� O(Z% 0,56% 0.31% 053% 1 u 004% 014% 032% 0,75% 0.15% 0.61% 2OW 0,56% 0.15% 051% 239 Oli% 020% 016% 100% 016% 0.57% J. 2010 0445% 015% 0,43% in ON% OA4% OU% OW% 01:3% 0.56% Feb 2010 051% 016% 048% 162 013% OA� 0 3� 0�1343% 015% 058% M,w2O1O a 50% 016% 047% 172 015% 014% O�W% I.W% 0,20% 0,55% AW2010 0,52% 016% 048% 162 0,15% 024% 0 4� 1 W% 0,23% 05� May mo OU% 016% O'�% 116 017% OU% 037% 075% 0,28% O.W% J" 2010 0.4443% 017% 041% 134 016% OU% 0,32% 0,63% On% Om% F'Y lotl I J*2010 0,50% 015% 047% 119 016% 02M Om% 063% 026% om% A.9usA2OI( 0 4M 015% O�% IN 015% 011)% 026% OW% 025% 051% Sept2OIO O.M% 015% 051% 107 0,16% 0,1� 027% O.W% 024% 050% 002010 O�m% 015% 051% a 013% 0 17% 023% O'� 023% 0 � l4a,2010 053% 015% 049% 018% 021% 028% a 50% 023% 0,45% 0OC2010 0,57% 014% 052% 2M 015% 0,19% 0 � OW% 0,23% O�% J. 2011 051% 014% OA3% 2N 016% 018% 0,28% 063% 0,24% 0,54% Felb 2011 055% 0,17% O�% 210 015% 017% 031% 063% 0,23% 0,51% M. 2011 054% 017% 045% 218 005% 013% 026% 075% 023% 0 50% A� 2011 05M 0,17% 046% 192 O�W% 010% 028% 0,63% 0,20% 0 5� WC < o t C LL 04 cc 0 0 fA CY 0 0 14..) 6 04 c C) C� C) C) C> C) 0 CD C) C) co 1�1 w W) M 04 0 ci ci IL 11 INVESTMENT ADVISORY BOARD MEETING BUSINESS SESSION: B Meeting Date: July 13, 2011 ITEM TITLE Meeting Schedule for Fiscal Year 2011/2012 BACKGROUND: Attached find a list of meeting dates for Fiscal Year 2011/2012. RECOMMENDATION: Approve the meeting schedule of the Investment Advisory Board for Fiscal Year 2011/2012. M. Falconer) Finance Director TO:, FROM DATE: RE: MEMORANDUM Investment Advisory Board Members John M. Falconer, Finance Director July 13, 2011 Schedule of Investment Advisory Board Meeting Schedule The City Ordinance specifies that the Investment Advisory Board usually will meet monthly unless the Board with Council concurrence believes less frequent meetings are considered necessary. For the last several years the Board has met monthly however, in the past the Board has elected to not meet in August. Listed below are meeting dates for the Boards review. Monthly July 13, 2011 August 10, 2011 September 14, 2011 October 12, 2011 November 9, 2011 December 14, 2011 January 11, 2012 February 8, 2012 March 14, 2012 April 11, 2012 May 9, 2012 June 13, 2012 Quarterly September 14, 2011 December 14, 2011 March 14, 2012 June 13, 2012 Please consider the schedules for Fiscal Year 2011/2012 and give Staff direction. INVESTMENT ADVISORY BOARD Correspondence & Written Material Item A Meeting Date: July 13, 2011 TITLE: Month End Cash Report - June 2011 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. e 4tvv--� M. Falconer, Finance Director 2 0 v 0 W '6 f= Q zl . . C5 0 22 2. cn 0 Qa N a vk I- t�dO 16 qs �!28 0 z 0 aN 0 0. ci ON O�V ci 0 0 ci ci 0.00 .00. .6 'n 6 Iq Ilk wo 6 6 ci 94 0 j C6 cli 0 C; 0 C6 ci m MM NM 0 0 c WOE 0 T E E 0 g 8 , 2t�E il ?,� 0 o 0 zo,Um<� < 16 U 16 10 E v 0 _0 0 es _s RIA Bill Lockyer, State Treasurer Inside the State Treasurer's Office Local Agency Investment Fund (LAIF) PMIA Performance Report In 6/15/2011 - w- 0.38 e 1 0.48 e 41 5 202 6/16/2011 0.38 0.48 200 6/17/2011 0.38 0.48 201 6/18/2011 0.38 0.47 201 6/19/2011 0.381 0.47 201 6/20/2011 0.371 0.47 204 6/21/2011 0.371 0.47 20� 6/22/2011 0.371 0.47 202 6/23/2011 0.38 0.47 229 6/24/2011 0.38 0.47 224 6/25/2011 0.38 0.47 224 1 6/2612011 0.38 0.471 1 F6-/27/2011 0.37 0.481 2111 rg/� 0. 39 704�8� *Daily yield does not reflect capital gains or losses Commercia 9.131 Time Deposits 5.73% CDs1BNs 15.35% LAW Performance Report Quarter ending 03/31/2011 Apportionment Rate: Eamings Ratio: Fair Value Factor: Daily: Quarter To Date: Average Life: 0.51% .00001390282087521 1.001262155 0.45% 0.52% 193 PMIA Average Monthly Effective Yields MAY 2011 0.413% APR 2011 0.588% MAR 2011 0.500% Pooled Money Investment Account Portfolio Composition $69.4 Billion 05/31/11 Loans Corporate 6.15% Bonds 0.00% Agencies Mortgages 15.26% 0.69% Treasuries 47.69% 3 xecent t5in auction iscesuns - -I- . __ - M�� I lo,ro � ImArmloral I Amod.1111111111,, .,, & ,IdI Aa,,.�a D,�. , Falll,lt Poll A al I,.., RrIoRy Recent Bill Auction Results Security U... 14.1-i" DI ..out I.—yereent Price CUSIP TE'. are Date .:,a . Rate ca Par $VD. 4 WEEK 06-30 2011 07 28 2011 0,005 0 005 99,99961, 912795X63 at WEEK F6 30 2011 09 29 2011 0,025 0 025 q9.993681 sr27933L3 76 WEEK 06 30 2011 12-29 20 1 DOLS am97 99,a51972 912795372 52 WEEK 06 30 20 06 ' a ' 0�2 0 2 so 0,204 99,797778 9127953W9 4 WEEK 06 23 2M 01-21 20 . 0,005 0.005 99,999(tI 9127953A7 11 WEEK 06 21 2 A 11 09 22-2011 0 035 0,036 99 991IS3 9127952F7 26-WEEK 06 23 2011 12 22 2011 0,100 0 102 99 949444 9127953Y5 a WEEK 06 Is 20 11 U7 1', 2011 0.015 0,015 49s98833 9127952Z3 13-WEEK 06 20 09 2011 0,0550 0 051 99A87361 9127953K5 26-WEE K 16 06- 6-20 j� r " '_2011 0 C 0 0 1 07 99 9 46917 911 7952T7 -CAy 06 09-21 06 15-2011 0040 DA41 99.999333 91279S734 4 WEEK a 6- C9 20 07-D7-20 0 005 00 0 1 99 9996 912795M -WEEK 06 09 2011 09 0 -11 11 1 5 a 4 0046 6;1 ties 5 912795318 26 -WEEK 06 -09 2011 1 ' -it: _" a DE. 0. 'a 7 99 946 17 9127953X7 4 INK Ea -02-2011 06-30 2DII O.Jao (Ed4C 99 9 96:89 91279SX22 al-.ECK 09-01-2011 0,060 0.061 99 984833 9127953F6 26 WEEK )6-0 2 0 12ml-M�I 0.115 0 7 9 9K1861 9127953V1 52 WEEK �1 � 06-0 20 1 05_31_ 0 2 2 0 so D �13 1: 816000 9127953$8 4-WEEK DS - 26-2011 06-23-2DII 0 .35 0 036 99,997Z78 9127952WO I�I-WFEK 05 25-201r 08-25 2011 0,055 0,056 ql,986097 9127952A8 26-.EEK 05-26 2011 11-25-2DII 0 100 0 102 99,9491 E7 9t27953U3 I-.FFK 05 Mi-2011 06-16 2011 0,025 0 025 go 998056 9127952V2 56 DAY 05-19-2011 07-14-2011 0 020 0 020 99,9,68m) 9127952Z3 13-WEEK .1-a9-20. c.-IE-20t, ODN ODLEF 99.99240 "279SIE9 26-WEEK 05 19 20ti 11-17 2011 0 070 0 07L 99 964611 912"52e5 4 WEEK .1 12-2011 06-09-2011 0,015 0,015 99,998833 9127952.c 13-WEEK 05 12 2011 08 11-2011 0 025 0 025 99 99368, 9127953DI 26 WEEK 05 12-201F 11-10-2.11 0,065 0,066 99 967139 9127953T6 4-WEEK 05 05-20�1 06 02 2011 0 005 0 005 99999611 9D2795W(A 13-WEEK Us- 05-20 1 08-04-2011 0 050 0,051 99 987361 912755355 26-WCEK 05 '5-2 " 1 11-03-2011 0 100 0,102 99�949444 9127953RO 52 WEI K 05 05-2 or 1 05-03-2012 0 200 0,204 99 797776 9127953N9 4 WEEK 04 2:-2011 OS-26-2011 0 030 0.030 , 99 997667 9127952S9 13-WEEK 04 2 20 11 07 28-2011 0 065 0,066 99sa3569 91279SX63 26 WEEK N 2 8-2011 10-27-20il 0 115 0 it, 99,941861 9121953Q2 1 4-.EEK 04 21-MI 05-E9 2011 0,030 0,030 q9s97667 9127952PI 13 WEEK 0,1 21 Mir 01 2r 20al 0,050 0 061 ca.9RICE33 907953A7 76-.EEK 04 21-2011 10 20 2011 0.1to OJI2 ",9�4389 9127952K6 4 WEEK 04 E4 ?011 05 12 2011 0 025 ODLE 99,99805u 9127952Q3 11 WEFK 04 14 2011 07 14 2011 0.050 0 list 94.987361 9127952Z3 Effectiere With tha 11/2/98 Dijon, .11 bills are auctioned using the tangle -priced method, Freedom OfInformatean Act I Ld� & ruiderce I PrIvocy & Legal Notices I W�LSftc_Tmirs & CogutoOri� I ACCr�Sibfllftcy I Data.QuIlItY 11.5, D,,d1mgo1ufIhE TIe,11.1, BrIgall tthIPUmfil fo�bd 4 http://www.treasurydirect.gov/RI/OFBills 7/1/2011 Kecent Note, tsona, ano i m!t Auction risuNum � -I,- . — . TreasuryDirect jj�r,e , fr,TtT1r!1TH1,11 I A1T11.1uuC1r111A5. Oata & Resuts I LatCSt AUCtIon D.tit I EO,1fit Nltt, 80 Id, Tfill IP', �uTllnl Rr�Hftl Recent Note, Bond, and TIPS Auction Results . . . . Maturity interest Yield Price CHSIP sn,iun, Ter or Type Date Date Rate 1 -1 P " $too 2 YEAR NOTE 06 30 2011 06-30-2013 D 375 OT95 99 96.197 91 7828PA) 5 YEAR NOTE 06 30 20IT 06 30-2016 1 Soo 1,615 99 441734 i12828QR4 7 YEAR NOTE 05 30 2011 06-30-2018 2A75 Z �10 99,647122 912626QTO -2�-YEAR 9 MONTH 7 FEET 06-30 02 15 2oII 2,125 1,744 111 NIBIII 9128I.QP6 3 YEAR NOTE a 6 1 5 20 06 15 2014 0,750 0 765 99 955596 91282.QS2 9-YEAR It MONTH NOTE 06 15 20" 05 15 2021 3 125 2 967 101,345530 912828QN3 29.YEAR 11 MET N TH BOND 06 Ib 2011 05 15 204 4 375 4 233 102,104368 9�28ITTQQT4 2 YEAR NOTE 05 IT 2 0 1 0 5 31 20 1; 0 500 A 560 ggoinpi�s 9 2828QZ6 1 S YEAR NOTE 05 31 2011 05 31-2016 1 750 180 99,700152 912828QP8 7-YEAR NOTE 05 31 2011 05 3T 2018 2 375 2A29 99,654311 912818QQ6 t_YtAR 8 MONTH IT V 05 31 2011 01 15 202 1 1 125 08.1 104 359912 912.28,T19 3 t1al I NO E 05 05 15-2014 1000 1.000 99999,61 91 .28QM5 2 10-YEAR ort �t-�Olj 05- 6 1 05 15 202t 3 , 25 3,2 IG 99 , 778b2 912828QN3 30 YEAR BOND 05 16-2011 05 is-2041 4,375 4 ISO 99,916711 912510QQ4 2 YEan NOTE 05-02 2011 04-30 20t3 0,625 0 613 99,90S041 9t282RQE3 5 YEAR NOTE 05-02-2011 (M-30 2016 2 000 2 1�4 ".415214 912826QFO / YEAR NOTE 05 02 2011 04-30 2018 2 625 2 /12 ",448900 912828QGB I YEAR 11� 04-29 201; 04 0,125 -0.180 101 /54296 912828QDS 3 WAR NOTE 4-15 2 0 1 �5-22016 04 5 01 4 1 250 1,280 99,911THE? P2B28QC7 Ti YEAR 10 MONTH NOTE 04-15 2011 02 IS-2021 3R25 3.494 101 075834 91 2826W 29-YEAR 10-.O.TH 80 N " 04-1 5 -201� 02-15-2041 4.750 4,531 103 552179 P12810QNI 2 YEAR NOTE a 3 3 1 _2. 1 03 3�-?00�3 0 75 0 B 7TE' 99 922763 912828QL7 1. YEAR N OT F 03-3 - 0 1 I ' I 13 3 -2 6 2 250 2.260 9 952972 912828QA1 , YEAR NOTE 03-31 2011 03 3 -2 8 2 B75 2,895 9, $74094 912828TY59 9 YEAR 10-MONTH TIPS 03 31 2011 01-15-2dil 1.125 0 920 102BE4550 412828PP9 3-lEAR NOTE 03-15-2011 03 15 2 0 14 1.250 1296 99 8592TS 912828pzl 9-YEA R It -MONTH NOTE 03 15 2011 02-15 2021 3 625 3,499 101 044608 912826PX2 29-YEAR 11-MONTH BOND 03 15-2011 02-15 2041 4.750 4 569 IO2A29408 �128TDQNT 2-YEAR 11071 02 1: 10�� 02-2B 2013 0 625 0 7,15 99 762218 912t28Q" 5 YEAR o Olf B2 2 -20 IT 2 29 2016 2.125 2,190 99 693745 912828QJ2 7-YFAR NOTE 02 28-2011 02-20 2016 2.750 2 frb� 99 344326 91282SPYO -3 0 YEAR TIPS 02-28-2011 02 15 2041 2 12S 2 190 98 ESS406 9,260Q" T YEAR N 0' F 02 02-�5 20 14 1 2 , 0 1,4 99�709887 912828QH6 i0-oAR NOTE �5-10�� 0 _ 5 0 2 2 02- 5-2021 3 6� 5 1 165 99 661623 912828p)(2 30-YEAR 'ONO 02-15 2011 02-15-2NIT A 150 4,/50 100.000000 912810QNI 2 YEAR NOTE 01-31 201T 01-31 20�3 0 625 o650 99.950404 912828PR5 5-YkAR NOTE 01-31 2011 01 11-20 6 000 2 01, 99 806052 91282SPE33 I -YEAR NOTE 01-31-2011 01-31-2016 625 2,7�� 99.246192 912628PTI 10 YEAR IT s 01 31 20IT 01 15 2021 1,125 1.170 99 59�896 912828Pes 3 YEAR NOTF 01 18-2011 01-15-2014 1,000 1 02, 99,9206t t 912828PQ7 Denotes TIPS bond; Ell the, TIPS R,th..t asterisk., are Notes 1.1 RT, If TIE,1111,11 11H All [ ITH, G.ru,, I i Tr,E,, & I i,ul N.I,el I .1b"ll I "IT" & Cr�lral I lclrll�il�htl [ Otis Q11,11il U,1, D,,.rurn�r, a ITT, T-11url, B-1.11 .1 The PubITY Plel 5 http://www.treasurydirect.gov/RI/OFNtebnd 7/1/2011 rnnLCr VCjsjLnj - 1:)L)UIU U1 UVV�111VI� V1 Lll� I �.. .'.�XVV �.70t�XLI . -el- � - Selected Interest Rates (Daily) - H. 15 .Current Release Release Dates Daily Update Historical Data About Announcements PO�y..Update ....... Release Date: June 30, 2011 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. June 30, 2011 Selected Interest Rates Yields in percent per annum Instruments 2011 Jun 27 2011 Jun 28 2011 Jun 29 Federal funds (effective) 1 2 3 0.08 0.08 0.07 Commercial Paper 3456 Nonfinancial 1-month 0.10 0.10 0.07 2-month 0.14 0.15 0.12 3-month 0.13 n.a. n.a. Financial 1-month 0.10 0.05 0.07 .2-month 0.17 0.13 0.13 3-month 0.12 0.18 0.12 CDs (secondary market) 3 7 1-month 0.18 0.19 0.19 3-month 0.27 0.27 0.27 6-month 0.39 0.40 0.40 Eurodollar deposits (London) 3 8 1-month 0.24 0.24 0.24 3-month 0.35 0.35 0.35 6-month 0.52 0.52 0.52 Bank prime loan 2 3 9 3.25 ------ 3.25 3.25 i 7 T- 6 http://www.federalreserve.gov/Releases/H I 5/update/ 7/1/2011 YnnEer version - Douru oi k_juvuinvib vi uiv 1 �u�lm �.Y ... 5 - Discount window primary credit 2 10 0.75 0.75 0.75 U.S. government securities Treasury bills (secondary market) 3 4 4-week 0.01 0.01 0.01 3-month 0.02 0.03 0.02 6-month 0.10 1 0.11 0.11 1-year 0.16 0.21 0.19 Treasury constant maturities Nominal 11 1-month 0.01 0.01 0.01 3-month 0.02 0.03 0.02 6-month 0.10 0.11 1 0.11 1-year 0.18 0.21 0.19 2-year 0.41 0.48 0.47 3-year 0.64 0.75 0.79 5-year 1.47 1.62 1.70 7-year 2.19 2.33 2.44 10-year 2.95 3.05 3.14 20-year 3.94 4.01 4.08 30-year 4.28 4.33 4.39 Inflation indexed 12 S-year -0.33 -0.26 -0.30_ 7-year 0.20 0.26 0.24 10-year 0.67 0.73 0.74 20-year 1.41 1.47 1.49 30-year 1.73 1.75 1.77 inflation -indexed long-term average '3 1.42 1.46 1.48 Interest rate swaps 14 1-year 0.45 0.43 0.41 2-year 0.66 0.67 0.70 3-year 0.98 1.02 1.10 - 4-year 1.37 1.42 1.53 5-year 1.77 1.83 1.94 7-year 2.41 2.47 2.58 10-year 3.01 1 3.08 3.19 1 VA http://www.federalreserve.gov/Releases/H I 5/update/ 7/1/2011 Printer Version - Board of Uovernors of the P ederal Reserve system Fage 3 of 4 30-year 3.88 3.95 4.01 Corporate bonds Moody's seasoned Aaa is 5.04 5.09 5.13 Sea 5.82 1 5.86 5.89 State & local bonds 16 Conventional mortgages 17 n.a. Not available. Footnotes 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 1, 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.f'cderalrcserx,c.gov"relc�iscs,'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 www.1ederali,eseiwe.govllboar(ldocs/press/�bereg,12002/200210312/default.btin. 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 w�kw.federaireseme.gov/rcle�se.��liI 5/datq.htni. 8 http://www.federalreserve.gov/Releases/H I 5/update/ 7/1/2011 rnmer version - tsoara or uovernors or ine r eaerat meserve 3ystern rage f oi,+ 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 18, 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.treki�'Liry.gov/resource-cetiler,,dat�-cbiirl-ceiiter/�interest-rates/. Source: U.S. Treasury. 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.ir��istit�i.gov./resotircc-ccnter,data-chart- center,linterest-rates/. 13. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of more than 10 yews. 14. International Swaps and Derivatives Association (ISDA(g) mid -market par swap rates. Rates me 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 pic and published on Reuters Page ISDAFIXVL ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited. 15. Moody's Am rates through December 6, 2001, are averages of Am utility and Am industrial bond rates. As of December 7, 2001, these rates are averages of Am 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 SurvcyO data provided by Freddie Mae. 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 HA 5 data are available on the Federal Reserve Board's web site (www.feder�tireserve.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 secturities 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. 9 http://www.federalreserve.gov/Releases/H I 5/update/ 7/1/2011 rK": t-ornmercizu raper 117SdlUb UUU "ULbLclJ1U111r, OW11411,21y . .6� . �. . What's New - What's Next - Site Map - A� Index - Careem - RSS - All Video. - Current FAGs banking foo...1d Consumer coouai.oft About New. Mon., Information payo`�n Rensi Iff-ti.o tft� 1.d & E-n. R,,.uU.n syl... a Beta Hdn� > Economic Ressonh & Dula , Sd.fist,oai RdleaSeS and Historical Data Commercial Paper R,,poning .,l,uu.. F. Summary Rates Volume Statistics Outstanding Year-end Maturty-Distribution About Announcements Commercial Paper Rates and Outstanding Summary Derived from data supplied by The Depository Trust & Clearing Corporation . ....... .. 0 11111ODP aPrM Data a� oll June 30, 2011 Posted July 1, 2011 Thecommercial paper release will usually be posteddaily at 9:45am. How"er, the Federal Reserue Board! makes no guarantee regaialingthetiming ofthedaily posting, This policy is subject to change at any time without motice. Rates Note ne. indicates Mat made data was insufficient to support calculation of Me partic.tar rate AA financial Period 1-day 7-day 15-day 30-day 1 60-day 90-day June 24 0.0� 0.07 1 0.071 0.07 1� 0.09 0.18 June 27 0.07 0.07 1 0.07 1 �i 0.17 0.12 June 28 0.07 0.07 0.09 1 0.13 1 0.18 June 29 0.07 0. 1'3'1 0.12 June 30 0.05 0.08 0.031 0.11 0.14! 0.18 AA a.set-backed � ___ - - _. __ __ -1 ---. � I 1-day 7-da, 15-da, 30-day 60-ray 90-d.y 0.14 0.22 0.24 0.22 0.23 0. 23 0.14 0._21 O�21 0.19 0.23 0.22 0.14 0.241 0.18 0.20 0.21 0.22 __O��5 0.724 0.'29 1.26 0. 20 0.21 0.13 0.267 0.26 0.22 0.28 0 - .21 - Note n a, indicates that trade date was insuffickent to support calculation of Me partcular rate. Outstanding Levels Seasonally adjusted Billions.N.Ilars Nonfinancial Financial Asset - Period Total backed Other Total Domestic Forei 9 Total Domestic F. reign i lukhthly-end again; 2011-Feb. 1,031.0 138.0 1 98.6 39.4 527.7 313.3 214.4 365.2 .0 Mar. 1,075.1 155.9 i 107.9 48.0 546.1 318.9 227.2 373.1 .0 J Apr. 1,166.1 T_ 165.5 , 120.3 45.2 617.7 381.5 236.2 1 382.91 .0 may 1,171.7 175.3 1 122.2 53.1 603.1 362 2 2409 3933 0 June 1,167.9 185.6 121.8 63.8 580.9 352 I 228�8 T 401�5 .0 Weeldy (Wednesday) levels 10 http://www.federalreserve.gov/Releases/CP/ 7/1/2011 r": ii.-,ommerciat raper rwies anu uutsumuing awinitetty L arc; � vi � June 1 1,197.3 174.7 , 120.1 54.6 628.4 378.4 1 250.01 394.1 .0 June 8 1,221.4 178.11 123.6 55.2 632.5 375.7 256.7 410.1 .0 June 15 1,206.6 178.2 120.7 57.5 610.7 357.3 253.3 417.7 .0 June 22 1,227.4, 196.8 136.8 60.0 , 610.1 356.6 253.5 420.5 .0 June 29 1,230.6 196. 133.6 63.2 611.81 367.2 244.7 421.9 .0 Not seasonally adjusted Billi...fdollana Return to top Home I Economic research and data Accessibility Disclaimer Contact us 0 unklog Policy FOIA PDF Reader http://www.federalreserve.gov/Releases/CP/ 7/1/2011 City of La Quinta Cash Fla. Budget to Actual May 31, 2011 --Cash Basis Account Bluget 5111 Actual 5111 --ikipcoi.1 Adjustment —Ad —J.btldT.tal �11 Va- hand, Over(Under) Notes Property Tas] Tax Increment Transient Occupancy Tax Sales Tax SilverRock Golf Library 38,555,994 556.151 518,682 315,495 - 35,599,482 774,918 578,700 394,066 - 9,950 35,599,482 784,868 578,700 394,066 - (2,956.512) (71,283) 60,018 78,571 Preaderty Tax IMS than budgeted Interest $2281, unutertudget;Developer Fees $341, undertaudget; General Fund revenue $1 W undersudged Gas Tax revenue $181, Other revenues 2.200,038 1,372,4N 1,372,49,11 (827,544) underibudget. I-que, & Landi 155k undertaidget Ranandes 42,446,359 38,719,6610 9,950 38,729,610 (3,716,7491 Expenditures Salaries & Fringe Benefits Other expenditures Subtotal 855,275 2.239,481 791.338 2,720,998 791.338 2,720.998 (93,937) 481,517 3,124756 3512.336 3,512.336 387,580 228,415 28,554,543 164507 28,554 544 164,507 28,554,644 (63.goll 1 Radenvelopment Agency Debt Service (Principal/laterest/Pass Through) Subtotal 28,782,968 28.719.060 28,719,050 (63,907) 1,114 647 11114,647 1,114,647 Capital Projects Tonsil Expenditures 3,16,033 33,U6,033 32�6712 Net Revendes/Expenditures 9,423,998 5,4fi'lide, 9,95n, 1 3"771 NOTE I Expenditures are budgeted at 8.34% per month Difference between actual and budget (Underspent DEPARTMENT Overspent Notes GENERAL GOVERNMENT (63,361) CITY CLERK (11,608) COMMUNITY SERVICES 37,412 FINANCE (13,808) BUILDING & SAFETY (98,311) Building Maintenance $7a, overcall Code Coariphilinci $91, undardaudget PUBLIC SAFETY 700 771 Paid or Mo nioul Poide, Inwider PLANNING (71,459) PUBLIC WORKS (216763) Admurn $54k undertudgelStridete Maintenance $Uk undkerbudgeti-fil & Landscape $57k undfienbudget. Engineer, $171, undroudget 262,873 SUBTOTAL - GENERAL FUND Library - Gas Tax Federal Assistance JAG Grant Slesf (Cops) Revenue CMAO Lighting & Landscaping RCTC Development Agreement AB 939 (2,584) Quimby Infrastructure Proposition I B South Coast Air Quality (4,079) Transportation Parks & Recreation Civic Center Library Development Community Center Street Facility Park Facility Fire Protection Afts In Public Places (23,035) Interest Allocation Equipment Replacement (25.118) Information Technology 6.718 Park Maintenance Facility (4,921) SilverRack Golf 18,604 SilverRock, Reserve - LO Public Safety Officer (167) Housing Authorty (32,621) Finance Authority (36,306) Capital Improvement (1 412) Total 12 INVESTMENT ADVISORY BOARD Meeting Date TITLE: July 13, 2011 Pooled Money Investment Board Report for April 2011 BACKGROUND: Correspondence & Written Material Item B The Pooled Money Investment Board Report for April, 2011, summary pages have been attached for the Board's review. A complete copy is available for review upon request. RECOMMENDATION: Receive & File POOLED MONEY INVESTMENT ACCOUNT SUMMARY OF INVESTMENT DATA A COMPARISON OF APRIL 2011 WITH APRIL 2010 (DOLLARS IN THOUSANDS) I Average Daily Portfolio Accrued Earnings Effective Yield I Average Life -Month End (in Days) IAPRIL 2011 j I APFUL 2010 $ 66,329,767 $ $ 32,046 $ 0.588 % Total Security Transactions Amount $ Number Total Time Deposit Transactions Amount $ Number Average Workday Investment Activity $ Prescribed Demand Account Balances For Services $ 176 70,946,296 $ -4,616,628 34,290 $ -2,244 0.588% 0% 190 -15 22,200,718 $ 20,916,243 $ +1,284,476 448 426 +22 3,354,500 $ 4,558,280 $ -1,203,780 147 207 -60 1,216,916 $ 1,157,933 $ +68,982 1,713,397 $ 1,487,072 $ +226,326 1 BILL LOCKYER TREASURER STATE OF CALIFORNIA INVESTMENT DIVISION SELECTED INVESTMENT DATA ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO (000 OMITTED) APRIL 30, 2011 DIFFERENCE IN PERCENT OF PERCENT OF PORTFOLIO FROM TYPE OF SECURITY AMOUNT PORTFOLIO PRIOR MONTH Government Bills $ 26,481,083 37.81 +0.62 Bonds 0 0.00 Notes 6,602,055 9.43 -1.68 Strips 0 0.00 Total Government $ 33,083,138 47.24 -1.06 Federal Agency Debentures $ 2,114,586 3.02 -0.08 Certificates of Deposit 8,234,998 11.76 +2.00 Bank Notes 650,0100 0.93 -0.03 Bankers'Acceptances 0 0.00 0 Repurchases 0 0.00 0 Federal Agency Discount Notes 8,676,516 12.39 -0.30 Time Deposits 3,863,140 5.51 -0.05 GNMAs' 51 0.00 0 Commercial Paper 7,876,053 11.25 +1.55 FHLMC/Remics 489,775 0.70 -0.04 Corporate Bonds 0 0.00 0 AB 65 Loans 343,537 0.49 -0.01 GF Loans 4,398,300 6.28 -1.97 NOWAccounts 0 0.00 0 Other 300,000 0.43 -0.01 Reversed Repurchases 0 0.00 0 Total (All Types) $ 70,030,094 100.00 INVESTMENT ACTIVITY APRIL 2011 MARCH 2011 NUMBER AMOUNT NUMBER AMOUNT Pooled Money 448 $ 22,200,718 550 $ 27,241,149 Other 9 30,352 14 $ 804,876 Time Deposits 147 ____L354,500 126 $ 2,512,000 Totals 604 $ 25,585,570 690 $ 30,558,025 PMIA Monthly Average Effective Yield 0.588 0.600 Year to Date Yield Last Day of Month 0.508 0.499 Pooled Money Investment Account Portfolio Composition $70 Billion 04/30/11 Commercial 1 11.25% Time Deposits 5.51% CDs/BNs 12.69% Loans Corporate Bonds 6.77% 0.00% Agencies Mortgages 15.84% 0.70% Treasuries 47.24% INVESTMENT ADVISORY BOARD MEETING Meeting Date: July 13, 2011 ITEM TITLE Distribution of Investment Policies for Fiscal Year 2011/2012 BACKGROUND: Correspondence and Written Material: C On June 21, 2011 the City Council approved the Investment Policy for Fiscal Year 2011/2012, which is attached. Also, attached is the Bloomberg screen print of Cook County, Illinois investment in the Rabobank Collateralized Certificate of Deposit Program. It should be noted that during the final editing process, page 6 under item V. third paragraph the fact that the U.S. Treasury Bills maximum maturity of one year was not incorporated into the Investment Policy. Staff apologizes for this oversight and can either go back to the City Council with an amended policy or incorporate it as update for next year. RECOMMENDATION: Receive and File. John M. Falconer, Finance Director C�- C-) c. C) 71 CL I -I Ul R - i:I -i rl Li F O� r-H CD r-j C� -C) r-i T-H E CU. L--L --J 1 0-1 r-) CL N - r-j LL L] T--i LLJ z rr:j `10 C) -7r_ CD (N-1 (.D IN r-i ca C_n fl) F-- 0 z (N cc <c co Q) Cl CO C� CD CK; ri C:--) LLJ r CD LO U -rl �D U- LLJ' C) 4-J U Z: cc Cr, r-H LLJ -_c LLJ .7, 0 u E <1' Lu C4 --i m 0 T C� �r C=4 = ',-j r J --J' LLJ :-4 LLJ C4 LLJ U __j rj) ;--1 V) -Z� LJ-J ___j rTl r-j u _r __j CD r_ri Q) fj� L Z: C�- Cie C-_ I CD U-j Lri Z-_) < LL Lj W� Uf) LU C) C�' C (24 LJ 4—J 0 ':C' ut cl, W !�4 LU I rr.— F-ri LLJ "P, I I I L LD �---4 i LLJ r-1 (D C) 4-4 Ln Z -I() �l . CZ) C:) F-H CD U-i U CC) vi A. CL F-� <Z __j __j Lo u) LLJ u cz� CD (';-j ZD Ce r --- U fz� CD H IF=) C, = �rj I-- (z) C�n CL (Z Ln Li- --J --- i r--� ;CM "�' Z: LF, LLJ G) Z: < CD� U-j r�51 ul U-1 0 �4 c cl� C� LLJ Z Z: U-i �-j uj ::D cr- mo I— 4-j a-i 0 LU �-r UJ LL.J fz� u I= -0 U- I-ri LL CQ rr L-D, Lu -0 Cla, =,- I =1 LU r_- ra� K In CD U C�l LD CD LLJ >- LLJ CD' 4-J c'j- 0 3" i Vi LU CL UJ �-n (-I_ L�-� c- LL- ac� kjc:) �'rl Llj CIO 03 LL! LU �=l LLJ C:) Q- LL <Z all =t U (Z� f n CZZ U c Cf� 4-J C:) CL Lij 4-J CD CC 1=1 L Ce- - 7, LLJ L-L- IV] ARTANTIM,,W1 MM - — GEM of the DESERT --- Investment Policy Fiscal Year 2011-2012 CITY OF LA QUINTA Investment Policy Fiscal Year 2011/2012 Table of Contents Section Page Executive Summary 2 1 General Purpose 4 11 Investment Policy 4 III Scope 4 IV Objectives 4 P. Safety of Principal ll� Provide Liquidity ll� Yield A Risk -Based Market Rate Of Return V Maximum Maturities 6 VI Prudence 6 Vil Authority 7 Vill Ethics and Conflicts of Interest 7 lX Authorized Financial Dealers and Institutions 7 I� Broker/Dealers po. Financial Institutions x Permissible Deposits and Investments 8 X1 Investment Pools 13 X11 Payment and Custody 13 Xill Interest Earning Distribution Policy 13 XlV Internal Controls and Independent Auditors 14 XV Reporting Standards 15 XVI Financial Assets and Investment Activity Not Subject to this Policy 15 Xvil Investment of Bond Proceeds 15 Xill Investment Advisory Board - City of La Quinta 16 XiX Investment Policy Adoption 16 Appendices 12pic Page A Summary of Permissible Deposits and Investments 18 B City of La Quinta Municipal Code Ordinance 2.70 - Investment Advisory Board 20 C City of La Quinta Municipal Code Ordinance 3.08 - Investment of Moneys and Funds2l D Segregation of Major Investment Responsibilities 23 E Listing of Approved Financial Institutions 24 F Broker/Dealer Questionnaire and Certification 25 G Request for Proposal for Professional Portfolio Management Firm 29 H Permissible Investment Chart — Professional Portfolio Management Firm 35 1 Investment Management Process and Risk 36 J Glossary 37 1 CITY OF LA QUINTA Investment Policy Fiscal Year 2011/2012 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: 0- 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: 1� Safeguard assets; 1� The orderly and efficient conduct of its business, including adherence to all City management policies; 0- Prevention or detection of errors and fraud; 1� The accuracy and completeness of accounting records; lo- 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, 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: lo- FDIC -insured Checking, Savings, and Sweep Accounts; 1� Collateralized Bank Deposits; 0- Certificates of Deposit; 1� U.S. Government Agency Securities and Federal Government Securities; Do- Prime Commercial Paper; 1� Local Agency Investment Fund (LAIF); 0� Money Market Mutual Funds; 1� Corporate Notes; 0- 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. Additionally, funds may be invested for up to ten (10) years as further discussed in Section V. 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 summary does not constitute a complete review, of the pages herein. )f the City's Investment Policy. Reading this which can only be accomplished by reviewing all P.O. Box 1504 LA QUINIA, CALIFORNIA 92247-1504 78-495 CALLE TAMPICO LA QUINJA, CALIFORNIA 92253 City of La QuInta Statement of Investment Policy July 1, 2011 through June 30, 2012 Adopted by the City Council on June 21, 2011 GENERAL PURPOSE (7 6 0) 7 7 7 - 7 0 0 0 FAX (760) 777-7101 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: I� General 1� Special Revenue I- Capital Projects W Debt Service 11� Enterprise I� Internal Service 1� Trust and Agency I- 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 4 objective of the City's investment program,� 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: 10- Limiting investments to investment grade securities 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: ll� 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 ll� Investing operating funds primarily in shorter -term securities. C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique features or structure or because it is thinly traded. Liquidity risk is not a material issue for the City's portfolio because of the permissible deposits and investments (see Section X) and because the City maintains a buy -and -hold policy and holds securities and other investments to maturity. A discussion of the City's investment process and risk is presented in Appendix 1. 2. Provide Liquidity The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs that may be reasonably anticipated. This is accomplished by structuring the portfolio so that sufficient liquid funds are available to meet anticipated demands. Furthermore, since all possible cash needs cannot be anticipated the portfolio should be diversified and consist of securities with active secondary or resale markets. The City's policy is to hold securities and other investments to maturity. Accordingly, securities shall not be sold prior to maturity with the following exceptions: A security with declining credit quality can be sold early to minimize loss of principal; Unanticipated liquidity needs of the portfolio require that one or more securities be sold. 5 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 reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the Treasurer have reliable, diligently prepared cash flow projections. Annually, the Treasurer shall project the amount of funds not expected to be disbursed within ten years. For FY 2011/2012, the amount of such funds is projected to be $30 million. Funds up to that amount may be invested in U.S. Treasury, notes and bonds Local Agency Obligations, and California Local Agency Obligations maturing between 3 and 10 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 theterms 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." 1.71 Vil 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 his/her designee 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, 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, 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: ll� Current audited financial statements; 01 Proof of Financial Industry Regulatory Authority (FINRA) Certification; 0. Trading resolution; ll� Proof of California registration; 10. Resume of Financial broker; and ll� Completion of the City of La Quints Broker/Dealer questionnaire (see Appendix F) which contains a certification of having read the City's Investment Policy. 7 The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. The City Treasurer will also contact the following agencies during the verification process: 110. Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1- 800-289-9999). ll� 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 collateral ization 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 interest bearing acUve bank deposits — non FDIC insured collateralized by 600/6 Portfolio Current $40million I 10% of eligible securities On Demand perbank n Permissible Investments and Limitations I Maximum Maximum (See Appendix A for Additional Information) Allocation Maturity Restrictions Certificates of Deposit - FDIC Insured <= $250.000, 60% Portfolio 3 Years including interest per institution <=$30,0000,000 U.S. Treasury Bills, Notes and Bonds, and Government National 100% Portfolio 3 Years maturing 3-10 Mortgage Association (GNMA) Securities Yrs. $30,0000,000 maturing 3-10 Local Agency Bonds/California Local Agency Obligations 100% Portfolio 10 Years Yrs. Longterm "A, A2, A" or better 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 (FHUMC) $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 $40 million On Demand 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 I Approved RFP Long -Term Scale S&P AAA, AA +, AA, AA-, A+, A Moody's Aaa, Aal, Aa2, Aa3, Al, A2 Fitch AAA, AA +, AA, AA-, A+, A 1 Checking, Savings, and Sweep Accounts - The City will only maintain checking, savings, and sweep accounts with FDIC insured financial institutions. As authorized by the City Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account with a $50,000 target balance may be maintained in conjunction with the checking account. In addition, the Treasurer may investment in an interest bearing active deposit account as approved Government Code Section 53632. The deposit account must be collateralized with securities that are in accordance with Government Code Sections 53632.5(c). In addition the market value of the collateralized securities must be maintained in accordance with 53652 (a), and be held by a custodian in accordance with the requirements of Government Code Section 53656. The proposition of the City's share of the deposit account shall be determined in accordance with Government Code Section 53658. M 2. Certificates of Deposit - As authorized in Government Code Section 53649, Certificates of Deposit are fixed term investments which are required to be collateralized from 110% to 150% depending on the specific security pledged as collateral in accordance with Government Code Section 53652. There are no portfolio limits on the amount or maturity for this investment vehicle. Collateralization will be required for Certificates of Deposits in excess of the FDIC insured amount. The type of collateral is limited to City authorized investments. Collateral will always be held by an independent third party from the institution that sells the Certificates of Deposit to the City. Evidence of compliance with State Collateralization policies must be supplied to the City and retained by the City Treasurer as follows: A. Certificates of Deposits Insured by the FDIC: The City Treasurer may waive collateralization of a deposit that is federally insured. B. Certificates of Deposit in excess of FDIC Limits: The amount not federally insured shall be 110% collateralized securities or 150% mortgages market value of that amount of invested funds plus unpaid interest earnings. The City's Investment Policy limits the percentage of Certificates of Deposit to 60% of the portfolio. )0 The City does not allow investments in CDAR's, or negotiable (secondary market) certificates of deposit. 3. U.S. Treasury Bills, Notes, and Bonds and Government National Mortgage Associations (GNMA) securities — The City may invest in U.S. Treasury bills, notes, and bonds, and GNMA securities directly issued and backed by the full faith and credit of the U.S. Government. The City's Investment Policy limits investments in U.S. Treasury issues and GNMA's to 100% of the portfolio. > The City's Investment Policy does not allow investments in 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 10 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. The City Treasurer may not invest more than $40 million per account in LAIF. 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 W, 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. ll� Eligible notes shall be rated "AA"or better. 01 Total investment shall not exceed 10% of the portfolio for non- Temporary Liquidity Guarantee Program (TLGP) Corporate Notes and 20% of the portfolio for 11 TLGP Corporate Notes, and 11� 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; (b) Knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds; (c) Substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City; (d) Professional liability (errors and omissions) insurance and fidelity bonding in such amounts as are required by the City; (a) Registration with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Before engagement by the City and except as may be specifically waived or revised, the PPMF shall commit to adhere to the provisions of the City's Investment Policy with the following exceptions: (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. 10. Local Agency Bonds and California Local Agency Obligations - The City may invest in California local agency obligations pursuant to 56301 (a) and 53301 (a). 53601 (a) pertains to investing in bonds issued by a local agency, department, board, agency or authority of t . he local agency. 53601 (a) pertains to investing in bonds and other defined indebtedness of a local agency or department, board, agency or authority of the local agency within the State of California. The City's Investment Policy limits investments in Local Agency Bonds and California Local Agency obligations to 30% of the portfolio with up to a ten year maximum maturity. In addition, the Agency obligations must be invested in the long term rating of A, A2, A or better by S&P, Moody's or Fitch. 12 In the case of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. If the case of secondary issues, the Treasurer will rely on the approved Broker/Dealers. X1 INVESTMENT POOLS There are three (3) types of investment pools: 10, State -run pools (e.g., LAIF); 0- Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools); li� Pools that are operated for profit by third parties. The City's Investment Policy permits investment only in pools authorized in Section X. XII PAYMENT AND CUSTODY The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain appropriate evidence of the City's ownership of securities and other eligible investments. Such custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or seller only after receiving evidence that the City has legal, record ownership of the securities. Even though ownership is evidenced in book -entry form rather than by actual certificates, this procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of securities. XIII INTEREST EARNING DISTRIBUTION POLICY Interest earnings are generated from pooled investments and specific investments. 1 Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, La Quinta Redevelopment Agency and La Quinta Financing and Housing Authorities and allocate interest earnings, in the following order, as follows: A. Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund for all operating funds as included in the annual operating budget. B. Payment to the General Fund of a management fee equal to 5% of the annual pooled cash fund investment earnings. C. Payment to each fund of an amount based on the average computerized daily cash balance included in the common portfolio. for the earning period. 2. Specific Investments - Specific investments purchased by a fund shall incur all earnings and expenses to that particular fund. 13 XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR The City Treasurer shall establish a system of internal controls to accomplish thefollowing objectives: 1� Safeguard assets; 1� The orderly and efficient conduct of its business, including adherence to management policies; 0, Prevention or detection of errors and fraud; 0- The accuracy and completeness of accounting records; and 1� Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. 2. Separation of transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. 3. Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping. 4. Avoidance of physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. 5. Clear delegation of authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities as outlined in the Segregation of Major Investment Responsibilities appendices. 6. Written confirmation or telephone transactions for investments and wire transfers. 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. 14 The independent auditor's letter on internal control over financial reporting and compliance as it pertains to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditor's letter. The auditor's letter, as it pertains, to cash and investment activities and the City Treasurer's response shall be provided to the City's Investment Advisory Board for their. consideration. Following the completion of each annual audit, the independent auditor shall meet with the Investment Advisory Board and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. See Appendix D, "Segregation of Major Investment Responsibilities." XV REPORTING STANDARDS The City Treasurer shall submit a monthly Treasurers Report to the City Council and the Investment Advisory Board that includes all cash and investments under the authority of the Treasurer. The Treasurer's Report shall summarize cash and investment activity and changes in balances and include the following: A certification by the City Treasurer. A listing of purchases and sales/maturities of investments. Cash and Investments categorized by authorized investments, except for LAW which will be provided quarterly and show yield and maturity. Comparison of month end actual holdings to Investment Policy limitations. Current year and prior year monthly history of cash and investments for trend analysis. Balance Sheet. Distribution of cash and investment balance s by fund. A year to date historical cash flow analysis and projection for the next six months. A two-year list of historical interest rates. XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY The City's Investment Policy does not apply to the following: P. Cash and Investments raised from Conduit Debt Financing; ll� Funds held in trust in the City's name in pension or other post -retirement benefit programs; li� Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; 01 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. 15 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. 3- Review monthly treasury report and note compliance with the Investment Policy and adequacy of cash and investments for anticipated obligations; 4. Receive and consider other reports provided by the City Treasurer; 5. 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; 6. 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 16 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. 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E- � 2 0 0 < 0 12,E < > e - 'm z 0, 7RW 0 0 < UO 3: 2 m m < 0 o o m- E m L) > m mm CO 0 0 0 Ox E Fj 62 U) S; , - 0 um E c = E E m 0 0 0 0 .0 E , �s T z T 1: CL > m pu -ma 02 Z v m 0 e 75 0 Z5 Q. iU 2- 2! (5- , M 00 0 0, 2 C2 v 0 ui = w (6 0 w v 0 U. 0 0 va 0 E10 0 0 z :j 0) ;5 . . . . Q.(q 2 0 > 0 0 a. (L 18 0 x CL 0 16 !2 0 E eT o m.L = < 0 v -0 !2 E E 0 '6 so < 0 0 0 a- E 0 16 C, E 2 ol w E Z; MM> ac� 0 M E 0 Q E —0 N' 0 0 0 ow 0 E 0 —w C) w- � oe E.6 C *cc oa 0 0 - 0 < E 0 e OF- 0 E E 0 s E M 0 V �j� � 2! BE�E 0 E z w 0 co M�VOOVW2 N 0 0 0 0 �2! w ofz 0 06 0-1 0 v > 0 < cz ;o 0 16 0 zi 0 75 wo, 0 o_ 00 c) 0 E 0 C) '0 �f z. 0 0 v 0 0 0,73 a ZO M�Ei > 00, - 0 0 0 0 M x m Ox M 0 OV, w .0 0 > 0 0. E 0 o ,a- V E u C , , E > 0 0 -.0 '60 M e Q- < - . e 2 . Q- 0 . - . W- - 0 V- w -. Q- 0 o_= w L.Lj 0 w 0 r �j c 0 0 c 02 0 5 E W.- 0 m 0 0 0 32 0 0 EL 0 00 0 (9 .0 00 > 0 0 - E �i �� 0 ui E . V; 0 iT) w 2 c 0 �: V - u E M 0 ." 0 > 2 2�2 �i me > � B o a , . E 0 0 -0 so 0 V -z' - E 2- 0 0 0 a -cu E 0 C) 0 W,- 0 CY -6 Z; , E < 0- E U) Me E E w 0 0- c 0 0 E v 0 0 0 m E -e 0.- 0. co o',-, 0 0 M = 0 E w e 16 0, OM zi E r , , = a E = 0 MM 5 v 0-- > 0 E am -�, m 0 E M. E Q. 0- v 0 0, � e 0 M a M 0 -a M w . ,-o , = 0 M 0 0 0 0-2-5 e F- C) o w 21 M v 0 6 z 0 0 19 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. 20 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 foe 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) 21 3.08.050 Reports. The city treasurer shall make a monthly report to the city council of all investment's 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 se ' purities 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) 22 SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Develop and Recommend Modifications to City's Formal Investment Policy Review City's Investment Policy and Recommend City Council Action Adopt Formal Investment Policy Implement Formal Investment Policy Review Financial Institutions & Select Investments Acknowledge Investment Selections Execute Investment transactions Confirm Wires (if applicable) Record Investment Transactions in City's Accounting Records Investment Verification (match broker confirmation to City investment records) Reconcile Investment Records to Accounting Records and Bank Statements Reconcile Investment Records to Treasurers Report of Investments Security of Investments at City Security of Investments outside City Review Internal Control Procedures 23 Appendix D Responsible Parties Investment Advisory Board and City Treasurer City Manager and City Attorney City Council City Treasurer City Treasurer City Manager or his/her designee City Treasurer or City Manager Accounting Manager or Financial Services Assistant Accounting Manager or Financial Services Assistant City Treasurer and Financial Services Assistant Financial Services Assistant Accounting Manager Accounting Manager or Senior Secretary Third Party Custodian External Auditor Appendix E LISTING OF APPROVED FINANCIAL INSTITUTIONS 1. Banking Services Wells Fargo Bank, Government Services, . Los Angeles, CA (Banking Services) Rabobank N.A., Government Banking Group, Roseville, CA (Collateralized Bank Deposits) 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/ Merrill Lynch, 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 2011 RDA Project Area 2 - US Bank 2011 Fin Auth Housing 1 &2 - US Bank Assessment Districts - US Bank No Changes to this listing may be made without City Council approval 24 Appendix F BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION 1 . Name of Firm:- 2. Address: 3. Telephone: I—) 4. 5. 6. 7 13 Broker's Representative to the City (attach resume): Name: Telephone: I—) Manager/Partner-in-charge (attach resume): Name: T List all personnel who will be trading with or quoting securities to City employees (attach resume) Title: Telephone: Which of the above personnel have read the City's Investment Policy? Which instruments are offered regularly by your local office? (Must equal 106%) —% 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 25 Entity Contact Telephone Client Sinc Contact Telephone Client Since 10. Have any of your clients ever sustained a loss on a securities transaction arising from a misunderstanding or misrepresentation of the risk characteristics of the instrument? If so, explain. 11. 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? 26 , Latest Audit Report 14. How many and what percentage of your transactions failed? Last month? $ Last year? $ 15. Describe the method your firm would use to establish capital trading limits for the City of La Quinta. 16. Is your firm a member in the S.I.P.C. insurance program? Yes No If yes, explain primary and excess coverage and carriers. 17. What portfolio information, if any, do you require from your clients? 18. What reports and transaction confirmations or any other research publications will the City receive? 19. Does your firm offer investment training to your clients? Yes No 20. Does your firm have professional liability insurance? Yes — No If yes, please provide the insurance carrier, limits and expiration date. 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: 0- Latest audited financial statements. 0- Samples of reports, transaction confirmations and any other research/publications the City will receive. lo- Samples of research reports and/or publications that your firm regularly provides to clients. ll� Complete schedule of fees and charges for various transactions. 27 ***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 Date Title Sales Manager and/or Managing Partner*- INLI 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 1 . Identify the number of professionals employed by your firm by classification. 2. Provide an organization chart showing function, positions, and titles of all the professionals in your organization. 3. Provide biographical information on investment professionals that will be involved in the decision -making process for our portfolio, including number of years at your firm. Identify the person who will be the primary portfolio manager assigned to the account. C Governmental 4. Describe your firm's compensation policies for investment professionals and address any incentive compensation programs. Assets Under Management 1. Summarize your institutional investment management asset totals by category for your latest reporting period in the following table: Governmental Pension Non Governmental Pension Other Restrictive Number Number of Funds of Clients Operating)"unds Clients $ N/A N/A q 30 N/A N/A Corporate $- N/A N/A High Net Worth Client $ N/A N/A Endow mental/Fo u n- $ 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 Percent by Market Value U.S. Treasury securities Federal Agency obligations Corporate securities rated AAA -AA Corporate securities rated A Corporate securities rated BBB or lower Other (specify 4. Describe the procedures that your firm has in place to address the potential or actual credit downgrade of an issuer and to disclose and advise a client of the situation. 5. Provide data on account/asset growth over the past five years. Indicate the number of government accounts gained and the number of government accounts lost. 6. List your five governmental largest clients. Identify those that are exclusively operating fund relationships and/or those that are other relationships (e.g., bond fund, retirement fund). 7. Provide a copy of the firm's Form ADV, Parts I and 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. 31 D. Philosophy/Approach 1 Describe your firm's investment philosophy for public clients, including your firm's philosophy regarding average duration, maturity, investment types, credit quality, and yield. 2. Describe in detail your investment process, as you would apply it to City of La Quinta, CA's portfolio. 3. What are the primary strategies for adding value to portfolios? 4. Describe the process you would recommend for establishing the investment objectives and constraints for this account. 5. Describe in detail your process of credit risk management, including how you analyze credit quality, monitor credits on an ongoing basis, and report credit to governmental accounts. 6. Describe your firm's trading methodology. 7. Describe your firm's decision -making process in terms of structure, committees, membership, meeting frequency, responsibilities, integration of research ideas, and portfolio management. 8. Describe your research capabilities as they would pertain to governmental accounts. What types of analysis do you use? 9. Describe the firm's approach to managing relationships with the broker -dealer community. E. Portfolio Management 1 . Are portfolios managed by teams or by one individual? 2. What is the average number of accounts handled per manager? 3. Which professional staff member will be the primary client contact for City of La Quinte, CA? 4. How frequently are you willing to meet with us? 5. Describe procedures used to ensure that portfolios comply with client investment objectives, policies, and bond resolutions. F. Fees Charged Please include a copy of your firm's fee schedule applicable to this RFP. 2. Identify any expenses that would not be covered through this fee structure and would be required in order to implement the firm's program. 32 3. Is there a minimum annual fee? G. Performance Reporting Please report on all accounts under $100 million. 2. Please provide performance history for governmental accounts for the last five years. 3. Please provide risk measurements for governmental accounts for the last five years. 4. Indicate whether your returns are calculated and compiled in accordance with the Association for Investment Management and Research (AIMR/CFA Institute) standards. 5. Do your reports conform to the State of California reporting standards? Are you willing to customize your reports to meet our specifications? 6. How will you notify us of investment transactions? 7. Are confirmations of investment transactions sent directly by the broker/dealer to the client? 8. Do your reports include rating information on investments which is required by GASB 40? H. References Provide a list of at least five (5) client references in California. References should be public agencies with portfolio size and investment objectives similar to City of La Quinta, CA. Include length of time managing the assets, contact name, and phone number. Insurance Requirements Exhibit A defines the insurance requirements that will need to be met prior to the [Board /Councill's approval of any agreement for services. J. Submittal of proposals 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 Yearb 33 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 34 CL Q :D1 �i LL E (D 0) co 0 0 0 CL 0 (D 0 LA E > (D (D IL a a --------------------- Z E - r�.!: 0 0 U; MIL , I -a ' , , , 0 c E zzzZZ22>T� >T z >T >T >T >T 22 Q.2 ----------------- 0 m o o o o o o o w o o o o zzzzzzz>OzzzzMo�!>->- ------------------ 0 e Z E 0 m E 0 0 0 ------------------ _0 - - - '0 z 0 z 0 z 0 z 0 z 0 z 0 z 0 z 0 z a z z z z z z ----------------- .2 .2 0 0 a �2 0 0 0 0 0 0 0 > IL .E - 0 . 0 . 0 c 0 . 0 -M 0 0 . 0 . e 'g , e 0 g 0 o o o o o o a . 0 o a 0 0 0 0 a 'o 'o z z z z > > z z Z Z Z Z o Z Z 0 0 on 0 0 ------------------ E B� E2 e La 0 0 ko 0 0 , M E c m m Z6 o C M M .9 0 0 0 0 0 0 0 z z Z Z Z Z 0 a W , r 0 !2 c 0 E 16 .0 E C) E 0 2 0 M , m < a m 0 o T < > z 0 0 La 8, m a - 76 0 a < m m 0 0 IT 0 co E < 2 0 < < E ' < o M !2 0 ca E . �a E A, 0. 0 U Z 0 2 E *6 2 E2 > 0 0 0 ,W-Ovz--az a 0 ow 0 03 < 0 a 0 ,2 0 0 F.;, 0 r2 E 0 a a_ E E 02 E 00 ca 0 .0 -0 > O.c 0 0 z 35 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 approval process involves assessing and disclosing the risk and possible volatility of longer -term investments Another element of market risk is liquidity risk. Instruments with unique call features 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 11. Fund Management Local Agency investment Guidelines 2010 Issued by California Debt and Investment Advisory Commission 36 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 37 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. 3 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 $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. 3. FLBs (Federal Land Bank Bonds) - Long-term 38 mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is$ 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 39 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 (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase --reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer -lender to liquidate the underlying securities in the 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 6 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" 40 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 Nei 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. 41 BOARD MEMBER ITEMS