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2019 04 10 FAC Special MeetingFINANCIAL ADVISORY COMMISSION 1 APRIL 10, 2019 SPECIAL MEETING NOTICE OF SPECIAL MEETING OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION TO THE COMMISSIONERS OF THE LA QUINTA FINANCIAL ADVISORY COMMISSION: NOTICE IS HEREBY GIVEN that a special meeting of the La Quinta Financial Advisory Commission is hereby called to be held on Wednesday, April 10, at 4:00 p.m. at the La Quinta City Hall located at 78495 Calle Tampico, La Quinta, CA 92253 for the following purpose: CONSENT CALENDAR 1. Approve Minutes Dated March 20, 2019 2. Receive and File Revenue and Expenditure Report Dated January 31, 2019 3. Receive and File Revenue and Expenditure Report Dated February 28, 2019 BUSINESS SESSION 1. Approve the Proposed Uses of Measure G Sales Tax Funds within the 2019/20 Capital Improvement Program 2. Review and Approve Accounts Receivable Write-Off and Unclaimed Property Policy 3. Receive and File Fiscal Year 2018/19 Third Quarter Budget Report STUDY SESSION 1. Discuss Fiscal Year 2019/20 Investment Policy DEPARTMENTAL REPORTS 1. Highway 111 Corridor Area Plan Verbal Update 2. Verbal Update on Request for Proposal for Banking and Merchant Services 3. Verbal Update on Request for Information for Investment Brokers Dated: April 4, 2019 /s/ W. Richard Mills W. RICHARD MILLS, Chairperson Attest: JESSICA DELGADO, Management Assistant DECLARATION OF POSTING I, Jessica Delgado, Management Assistant, do hereby declare that the foregoing notice for the La Quinta Financial Advisory Commission special meeting of April 10, 2019 was posted on the City’s website, near the entrance to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and 51-321 Avenida Bermudas, on April 4, 2019. Jessica Delgado, Management Assistant FINANCIAL ADVISORY COMMISSION AGENDA 1 APRIL 10, 2019 SPECIAL MEETING FINANCIAL ADVISORY COMMISSION AGENDA CITY HALL STUDY SESSION ROOM 78-495 Calle Tampico, La Quinta SPECIAL MEETING ON WEDNESDAY, APRIL 10, 2019 AT 4:00 P.M. Roll Call: Commissioners: Batavick, Hunter, Lopez, Rosen, Turbow, Twohey and Chairperson Mills PLEDGE OF ALLEGIANCE PUBLIC COMMENT At this time members of the public may address the Commission on any matter not listed on the agenda. Please complete a “Request to Speak” form and limit your comments to three minutes. The Financial Advisory Commission values your comments; however, in accordance with State law, no action shall be taken on any item not appearing on the agenda unless it is an emergency item authorized by GC 54954.2(b). CONFIRMATION OF AGENDA ANNOUNCEMENTS, PRESENTATIONS AND WRITTEN COMMUNICATIONS – None CONSENT CALENDAR 1. Approve Minutes Dated March 20, 2019 2. Receive and File Revenue and Expenditure Report Dated January 31, 2019 3. Receive and File Revenue and Expenditure Report Dated February 28, 2019 BUSINESS SESSION 1. Approve the Proposed Uses of Measure G Sales Tax Funds Within the 2019/20 Capital Improvement Program 2. Review and Approve Accounts Receivable Write-Off and Unclaimed Property Policy 3. Receive and File Fiscal Year 2018/19 Third Quarter Budget Report STUDY SESSION 1. Discuss Fiscal Year 2019/20 Investment Policy Financial Advisory Commission agendas and staff reports are now available on the City’s web page: www.laquintaca.gov FINANCIAL ADVISORY COMMISSION AGENDA 2 APRIL 10, 2019 SPECIAL MEETING DEPARTMENTAL REPORTS 1. Highway 111 Corridor Area Plan Verbal Update 2. Verbal Update on Request for Proposal for Banking and Merchant Services 3. Verbal Update on Request for Information for Investment Brokers COMMISSIONERS’ ITEMS ADJOURNMENT The next regular quarterly meeting of the La Quinta Financial Advisory Commission will be held on May 15, 2019 commencing at 4:00 p.m. at the La Quinta Study Session Room, 78-495 Calle Tampico, La Quinta, CA 92253. DECLARATION OF POSTING I, Jessica Delgado, Management Assistant, of the City of La Quinta, do hereby declare that the foregoing Agenda for the La Quinta Financial Advisory Commission special meeting was posted on the City’s website, near the entrance to the Council Chamber at 78-495 Calle Tampico, and the bulletin boards at 78-630 Highway 111, and 51-321 Avenida Bermudas, on April 4, 2019. DATED: April 4, 2019 Jessica Delgado, Management Assistant City of La Quinta, California Public Notices The La Quinta City Study Session Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the City Clerk’s office at (760) 777-7092, twenty- four (24) hours in advance of the meeting and accommodations will be made. If special electronic equipment is needed to make presentations to the Financial Advisory Commission, arrangements should be made in advance by contacting the City Clerk’s office at (760) 777-7092. A one (1) week notice is required. If background material is to be presented to the Financial Advisory Commission (FAC) during a special FAC meeting, please be advised that eight (8) copies of all documents, exhibits, etc., must be supplied to the Management Assistant for distribution. It is requested that this take place prior to the beginning of the meeting. Any Writings or documents provided to a majority of the Financial Advisory Commission regarding any item(s) on the agenda will be made available for public inspection at the Community Development counter at City Hall located at 78-495 Calle Tampico, La Quinta, California, 92253, during normal business hours. FINANCIAL ADVISORY COMMISSION MINUTES 1 MARCH 20, 2019 SPECIAL MEETING FINANCIAL ADVISORY COMMISSION MINUTES WEDNESDAY, MARCH 20, 2019 CALL TO ORDER A special meeting of the La Quinta Financial Advisory Commission (Commission) was called to order at 4:00 p.m. by Chairperson Mills. PRESENT: Commissioners: Batavick, Lopez, Rosen, Turbow, Twohey, and Chairperson Mills ABSENT: Commissioner Hunter PLEDGE OF ALLEGIANCE Commissioner Rosen led the audience in the Pledge of Allegiance. PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA – None CONFIRMATION OF AGENDA – Confirmed ANNOUNCEMENTS, PRESENTATIONS, AND WRITTEN COMMUNICATIONS – None CONSENT CALENDAR ITEMS 1. APPROVE FINANCIAL ADVISORY COMMISSION MINUTES DATED FEBRUARY 13, 2019 Motion – A motion was made and seconded by Commissioners Twohey/Lopez to approve the Consent Calendar, as submitted. Motion passed: ayes 6, noes 0, absent 1 (Hunter). COMMISSIONER HUNTER JOINED THE MEETING AT 4:02 P.M. BUSINESS SESSION 1. APPOINT TWO COMMISSIONERS TO SERVE ON THE INVESTMENT STRATEGY SUB-COMMITTEE FOR PUBLIC AGENCY RETIREMENT SERVICES Finance Director Campos presented the staff report, which is on file in the Finance Department. Commissioners Twohey and Hunter expressed their willingness to serve on the Investment Strategy Sub-Committee for Public Agency Retirement Services (PARS). CONSENT CALENDAR ITEM NO. 1 FINANCIAL ADVISORY COMMISSION MINUTES 2 MARCH 20, 2019 SPECIAL MEETING Motion – A motion was made and seconded by Commissioners Batavick/Mills to appoint Commissioners Twohey and Hunter to serve on the Investment Strategy Sub-Committee for PARS. Motion passed unanimously. 2. APPOINT TWO COMMISSIONERS TO SERVE ON THE REVIEW AND SELECTION COMMITTEE FOR INVESTMENT BROKERS AND PROVIDE AN UPDATE ON CURRENT INVESTMENT BROKER CHANGES Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. Commissioners Turbow and Rosen expressed their willingness to serve on the Review and Selection Committee for Investment Brokers and provide an update on current investment broker changes. Motion – A motion was made and seconded by Commissioners Lopez/Twohey to appoint Commissioners Turbow and Rosen to serve on the Review and Selection Committee for Investment Brokers and provide an update on current investment broker changes. Motion passed unanimously. STUDY SESSION 1. DISCUSS LA QUINTA X-PARK OPERATIONS Facilities Director Howlett presented the staff report, which is on file in the Finance Department. General discussion followed regarding the X-Park’s design; location; parking adequacy; site amenities that may be provided; management of the facility and estimated managed facility cost; possible fees and memberships; types of funds that will be used to build this project; the capital replacement reserve analysis for the project; and Council’s approval of design alternate additions and appropriation of Measure G funds at the March 19, 2019 City Council meeting. City Attorney Ihrke and Risk Management Specialist Nieto discussed with the Commission the potential liability exposure, state law, and insurance requirements. 2. DISCUSS THE 2019 COMMUNITY WORKSHOP AND 2019/20 BUDGET PROCESS Finance Director Campos, Management Analyst Mignogna, and City Engineer McKinney presented the staff report, which is on file in the Finance Department. General discussion followed regarding appropriations included in the budget; Council’s review of the 2019/20 Capital Improvement Program proposed budget on March 19, 2019; project timeframes and possible traffic impacts during construction and public outreach; process for bidding and procuring contractors for the projects; summary of current Measure G appropriation for projects; current proposed projects and their designs; locations of transportation projects; funding sources for transportation projects; completed improvements as of the 2018/19 third quarter; and capital improvement revenue projections. FINANCIAL ADVISORY COMMISSION MINUTES 3 MARCH 20, 2019 SPECIAL MEETING DEPARTMENTAL REPORTS Staff provided the Commission with verbal updates on the following Departmental Reports: 1. HIGHWAY 111 CORRIDOR AREA PLAN VERBAL UPDATE Commissioner Turbow shared his experience at the Highway 111 Corridor Area Plan Special Meeting Community Workshop held on Monday, March 18, at City Hall. Staff noted that a calendar invite will be sent to the Commission for the upcoming 3-day charrette for this event scheduled for April 24, 25, and 26. 2. VERBAL UPDATE ON REQUEST FOR PROPOSAL FOR BANKING AND MERCHANT SERVICES Finance Director Campos mentioned that six banks have responded, proposals were under review, and interviews are scheduled for early April. She announced the City’s joint Council and Commission meeting is scheduled for Wednesday, March 27, starting at 5:30 p.m. at the La Quinta Wellness Center. COMMISSIONERS’ ITEMS Commissioner Batavick announced that the City will hold a Pillar of the Community event on Wednesday, March 27 starting at 10:00 a.m. He mentioned former Commissioner Mark Johnson will be recognized at this event. Commissioner Mills inquired about funding for the La Quinta Indian Wells Ironman 70.3 Triathlon. Finance Director Campos replied that both the City of La Quinta and the City of Indian Wells are contributing $75,000 each, and that the City’s portion is allocated from the General Fund under the Community Resources Special Events budget. Commissioner Mills thanked the Commission for their thoughtful input and participation at this special meeting. ADJOURNMENT There being no further business, it was moved and seconded by Commissioners Turbow/Twohey to adjourn this meeting at 6:13 p.m. Motion passed unanimously. Respectfully submitted, Jessica Delgado, Management Assistant City of La Quinta, California City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 10, 2019 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED JANUARY 31, 2019 RECOMMENDATION Receive and file revenue and expenditure report dated January 31, 2019. EXECUTIVE SUMMARY •The report summarizes the City’s year-to-date (YTD) revenues and period expenditures for January 2019 (Attachment 1). •These revenue and expenditure reports were also reviewed by the City Council on March 5, 2019. FISCAL IMPACT - None BACKGROUND/ANALYSIS Below is a summary of the column headers used on the Revenue and Expenditure Summary Reports: Original Total Budget – represents revenue and expenditure budgets the Council adopted in June 2018 for fiscal year 2018/19. Current Total Budget – represents original adopted budgets plus any carryovers (typically associated with long-term Capital Improvement Projects (CIP) from the prior fiscal year) and any Council approved budget amendments from throughout the year. Period Activity – represents actual revenues received and expenditures outlaid in the reporting month. Fiscal Activity – represents actual revenues received and expenditures outlaid YTD. Variance Favorable/ (Unfavorable) - represents the dollar difference between YTD collections/expenditures and the current budgeted amount. Percent Used – represents the percentage activity as compared to budget YTD. CONSENT CALENDAR ITEM NO. 2 Top Five Revenue/Income Sources for January General Fund Non-General Fund Property Tax $ 1,176,477 County Government Revenue for Debt Measure G Sales Tax $ 958,386 Finance Authority Debt Service Inco Sales Tax $ 872,219 SilverRock Greens Fees Transient Occupancy (Hotel) Tax $ 790,239 Allocated Interest Public Works Permits $ 92,072 Gas Tax Top Five Expenditures/Outlays for January General Fund Non-General Fund Civic Center payment to Finance Authority $ 667,511 SilverRock Maintenance Greater Palm Springs Convention Bureau $ 120,644 Capital Improvement Program (CIP)- D Marketing and Tourism Promotions $ 72,569 CIP - Construction(4) Contract Legal Services $ 55,634 CIP - Professional Services(5) On-call Planning Services $ 25,631 Vehicle Leases (1) Redevelopment Successor Agency semi-annual debt service obligations (2) Final reconciliation of 1996 Civic Center bond retired in October 2018 MTD YTD YTD Percent of Budget General Fund 4,356,636$ 17,716,720$ 32.58% All Funds 13,875,900$ 38,357,379$ 25.73% MTD YTD YTD Percent of Budget General Fund 1,860,992$ 17,177,744$ 28.54% Payroll - General Fund 658,227$ 5,354,121$ 52.38% All Funds 2,568,006$ 50,402,728$ 30.27% January Revenues January Expenditures General Fund Non-General Fund Property Tax 1,176,477$ County Government Revenue for Debt Service (1)7,540,182$ Measure G Sales Tax 958,386$ Finance Authority Debt Service Income (2)667,511$ Sales Tax 872,219$ SilverRock Greens Fees 390,676$ Transient Occupancy (Hotel) Tax 790,239$ Allocated Interest 370,115$ Public Works Permits 92,072$ Gas Tax 182,997$ General Fund Non-General Fund Civic Center payment to Finance Authority 667,511$ SilverRock Maintenance 96,658$ Greater Palm Springs Convention Bureau 120,644$ Capital Improvement Program (CIP)- Design(3)74,136$ Marketing and Tourism Promotions 72,569$ CIP - Construction(4)52,984$ Contract Legal Services 55,634$ CIP - Professional Services (5)27,180$ On-call Planning Services 25,631$ Vehicle Leases 18,485$ (1) Redevelopment Successor Agency semi-annual debt service obligations (2) Final reconciliation of 1996 Civic Center bond retired in October 2018 Top Five Revenue/Income Sources for January Top Five Expenditures/Outlays for January (3) CIP Design: Calle Tampico drainage improvements; SRR event site; SRR infrastructure Phase II; Eisenhower drainage project (4) CIP Construction: Old Town parking lot project (5) CIP Professional Services: Consulting related to Dune Palms projects; Village Complete Streets; Avenida Bermudas ADA improvements; and drainage and turf conversion projects (3) CIP Design: Calle Tampico drainage improvements; SRR event site; SRR infrastructure Phase II; Eisenhow (4) CIP Construction: Old Town parking lot project (5) CIP Professional Services: Consulting related to Dune Palms projects; Village Complete Streets; Avenida Bermudas ADA improv projects The revenue report includes revenues and transfers into funds from other funds (income items). Revenues are not received uniformly throughout the year, resulting in peaks and valleys. For example, large property tax payments are usually received in December and May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received in January and June. Any timing imbalance of revenue receipts versus expenditures is funded from the City’s cash flow reserve. The expenditure report includes expenditures and transfers out to other funds. Unlike revenues, expenditures are more likely to be consistent from month to month. However, large debt service payments or CIP expenditures can cause swings. All funds are generally on target or under budget regarding expenditures. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Karla Campos, Finance Director Attachment 1: Revenue and Expenditure Report for January 31, 2019 ATTACHMENT 1 For Fiscal: 2018/19 Period Ending: 01/31/2019 2/25/2019 Page 1 of 2 Revenue Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 17,716,7204,356,63652,297,400 54,385,000 -36,668,280 32.58 % 201 - GAS TAX FUND 1,088,389182,9971,965,500 1,965,500 -877,111 55.37 % 202 - LIBRARY & MUSEUM FUND 1,149,6443822,333,000 2,333,000 -1,183,356 49.28 % 203 - PUBLIC SAFETY FUND (MEASURE G)200,0670200,000 203,000 -2,934 98.55 % 210 - FEDERAL ASSISTANCE FUND 0072,000 66,226 -66,226 0.00 % 212 - SLESA (COPS) FUND 90,43316,667100,100 100,100 -9,667 90.34 % 213 - JAG FUND 26800213 55 125.88 % 215 - LIGHTING & LANDSCAPING FUND 636,87601,586,100 1,586,100 -949,224 40.15 % 217 - DEVELOPMENT AGREEMENT -22300800 -1,023 27.89 % 219 - ASSET FORFEITURE 0000 0 0.00 % 220 - QUIMBY FUND -3,5290367,000 383,000 -386,529 0.92 % 221 - AB 939 - CALRECYCLE FUND 11,4812,75863,700 66,200 -54,719 17.34 % 223 - MEASURE A FUND 338,83969,368971,708 974,708 -635,869 34.76 % 224 - TUMF FUND -10000 -10 0.00 % 225 - INFRASTRUCTURE FUND -160100100 -116 15.68 % 230 - CASp FUND, AB 1379 11,5263,0524,000 10,000 1,526 115.26 % 231 - SUCCESSOR AGCY PA 1 RORF 7,559,3357,540,182020,482,627 -12,923,292 36.91 % 235 - SO COAST AIR QUALITY FUND 13,102051,500 51,500 -38,398 25.44 % 237 - SUCCESSOR AGCY PA 1 ADMIN 1,5001,500012,005 -10,505 12.49 % 241 - HOUSING AUTHORITY 327,87377315,000 543,000 -215,127 60.38 % 243 - RDA Low-Mod Housing Fund -1,20908,000 18,000 -19,209 6.71 % 248 - SA 2004 LO/MOD BOND FUND (Refinanced in 2014)00010,000 -10,000 0.00 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)208,52697,65530,000 170,000 38,526 122.66 % 250 - TRANSPORTATION DIF FUND 275,18031,262369,000 379,000 -103,820 72.61 % 251 - PARKS & REC DIF FUND 225,28022,528508,200 512,200 -286,920 43.98 % 252 - CIVIC CENTER DIF FUND 82,58910,362110,000 110,000 -27,411 75.08 % 253 - LIBRARY DEVELOPMENT DIF 37,8403,78430,000 30,000 7,840 126.13 % 254 - COMMUNITY CENTER DIF 14,1431,41915,400 15,400 -1,257 91.84 % 255 - STREET FACILITY DIF FUND 15,3081,27615,000 15,000 308 102.05 % 256 - PARK FACILITY DIF FUND 4,4014404,000 4,000 401 110.03 % 257 - FIRE PROTECTION DIF 37,9854,76340,000 40,000 -2,015 94.96 % 270 - ART IN PUBLIC PLACES FUND 46,0878,70188,500 88,500 -42,413 52.08 % 275 - LQ PUBLIC SAFETY OFFICER 1,97502,100 2,100 -125 94.06 % 299 - INTEREST ALLOCATION FUND 1,230,927370,11500 1,230,927 0.00 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 667,861667,511671,600 671,600 -3,739 99.44 % 401 - CAPITAL IMPROVEMENT PROGRAMS 2,949,472011,955,941 55,543,794 -52,594,321 5.31 % 501 - FACILITY & FLEET REPLACEMENT 474,76620,925923,700 938,700 -463,934 50.58 % 502 - INFORMATION TECHNOLOGY 551,3821,7591,189,800 1,496,800 -945,418 36.84 % 503 - PARK EQUIP & FACILITY FUND 325,3890675,000 690,000 -364,611 47.16 % 504 - INSURANCE FUND 460,0540923,600 923,600 -463,546 49.81 % 601 - SILVERROCK RESORT 1,681,263459,7814,092,800 4,147,800 -2,466,537 40.53 % 602 - SILVERROCK GOLF RESERVE -203070,000 70,000 -70,203 0.29 % 760 - SUPPLEMENTAL PENSION PLAN -100000 -100 0.00 % 761 - CERBT OPEB TRUST -73,8150020,000 -93,815 369.07 % Report Total:13,875,900 38,357,37982,049,749 149,059,573 -110,702,194 25.73 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. For Fiscal: 2018/19 Period Ending: 01/31/2019 2/25/2019 Page 2 of 2 Expenditure Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 17,177,7441,860,99251,153,413 60,178,941 43,001,198 28.54 % 201 - GAS TAX FUND 952,79766,0541,959,900 2,010,829 1,058,033 47.38 % 202 - LIBRARY & MUSEUM FUND 536,18016,6491,628,200 1,793,400 1,257,220 29.90 % 210 - FEDERAL ASSISTANCE FUND 0072,000 66,226 66,226 0.00 % 212 - SLESA (COPS) FUND 00100,000 100,000 100,000 0.00 % 215 - LIGHTING & LANDSCAPING FUND 798,74674,4391,582,700 1,785,400 986,654 44.74 % 217 - DEVELOPMENT AGREEMENT 12,6492,77067,000 67,000 54,351 18.88 % 220 - QUIMBY FUND 384,69403,956,000 5,748,488 5,363,794 6.69 % 221 - AB 939 - CALRECYCLE FUND 35,6292,01535,000 95,000 59,371 37.50 % 223 - MEASURE A FUND 304,7320961,708 4,733,403 4,428,671 6.44 % 225 - INFRASTRUCTURE FUND 00028,571 28,571 0.00 % 227 - State Homeland Security Programs (SHSP)3,013000 -3,013 0.00 % 230 - CASp FUND, AB 1379 004,000 4,000 4,000 0.00 % 231 - SUCCESSOR AGCY PA 1 RORF 12,947,699009,339,728 -3,607,971 138.63 % 235 - SO COAST AIR QUALITY FUND 10,91810,24654,000 54,000 43,082 20.22 % 237 - SUCCESSOR AGCY PA 1 ADMIN 10,3006,300012,005 1,705 85.80 % 241 - HOUSING AUTHORITY 247,96216,251604,000 602,500 354,538 41.16 % 243 - RDA Low-Mod Housing Fund 00250,000 250,000 250,000 0.00 % 248 - SA 2004 LO/MOD BOND FUND (Refinanced in 2014)899,0776,53201,451,947 552,870 61.92 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)7,376,024007,416,000 39,976 99.46 % 250 - TRANSPORTATION DIF FUND 410,1570400,000 2,557,460 2,147,304 16.04 % 251 - PARKS & REC DIF FUND 0002,405,952 2,405,952 0.00 % 252 - CIVIC CENTER DIF FUND 60,7580110,000 115,952 55,194 52.40 % 253 - LIBRARY DEVELOPMENT DIF 13,467030,000 35,952 22,485 37.46 % 254 - COMMUNITY CENTER DIF 000107,591 107,591 0.00 % 255 - STREET FACILITY DIF FUND 16,279015,000 20,952 4,673 77.70 % 256 - PARK FACILITY DIF FUND 3,96604,000 9,952 5,986 39.85 % 257 - FIRE PROTECTION DIF 4,149040,000 45,952 41,803 9.03 % 270 - ART IN PUBLIC PLACES FUND 47,4830322,000 722,000 674,517 6.58 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 668,0380671,600 671,600 3,563 99.47 % 401 - CAPITAL IMPROVEMENT PROGRAMS 3,214,728165,34411,955,941 55,554,801 52,340,072 5.79 % 501 - FACILITY & FLEET REPLACEMENT 361,17929,708923,700 1,005,784 644,605 35.91 % 502 - INFORMATION TECHNOLOGY 545,56449,3421,090,700 1,574,200 1,028,636 34.66 % 503 - PARK EQUIP & FACILITY FUND 177,3615,366705,000 775,000 597,639 22.89 % 504 - INSURANCE FUND 739,9284,408921,100 918,500 178,572 80.56 % 601 - SILVERROCK RESORT 2,378,475251,5914,090,800 4,146,000 1,767,525 57.37 % 602 - SILVERROCK GOLF RESERVE 50,200050,200 105,200 55,000 47.72 % 760 - SUPPLEMENTAL PENSION PLAN 12,833000 -12,833 0.00 % Report Total:2,568,006 50,402,72883,757,962 166,510,286 116,107,559 30.27 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 10, 2019 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED February 28, 2019 RECOMMENDATION Receive and file revenue and expenditure report dated February 28, 2019. EXECUTIVE SUMMARY •The report summarizes the City’s year-to-date (YTD) revenues and period expenditures for February 2019 (Attachment 1). •This revenue and expenditure reports was also reviewed by the City Council on April 2, 2019. FISCAL IMPACT - None BACKGROUND/ANALYSIS Below is a summary of the column headers used on the Revenue and Expenditure Summary Reports: Original Total Budget – represents revenue and expenditure budgets the Council adopted in June 2018 for fiscal year 2018/19. Current Total Budget – represents original adopted budgets plus any carryovers (typically associated with long-term Capital Improvement Projects (CIP) from the prior fiscal year) and any Council approved budget amendments from throughout the year. Period Activity – represents actual revenues received and expenditures outlaid in the reporting month. Fiscal Activity – represents actual revenues received and expenditures outlaid YTD. Variance Favorable/ (Unfavorable) - represents the dollar difference between YTD collections/expenditures and the current budgeted amount. Percent Used – represents the percentage activity as compared to budget YTD. CONSENT CALENDAR ITEM NO. 3 The revenue report includes revenues and transfers into funds from other funds (income items). Revenues are not received uniformly throughout the year, resulting in peaks and valleys. For example, large property tax payments are usually received in December and May. Similarly, Redevelopment Property Tax Trust Fund payments are typically received in January and June. Any timing imbalance of revenue receipts versus expenditures is funded from the City’s cash flow reserve. The expenditure report includes expenditures and transfers out to other funds. Unlike revenues, expenditures are more likely to be consistent from month to month. However, large debt service payments or CIP expenditures can cause swings. All funds are generally on target or under budget regarding expenditures. Prepared by: Rosemary Hallick, Financial Services Analyst Approved by: Karla Campos, Finance Director Attachment 1: Revenue and Expenditure Report for February 28, 2019 MTD YTD YTD Percent of Budget General Fund 6,658,494$ 24,492,179$ 45.03% All Funds 8,392,194$ 46,890,895$ 31.46% MTD YTD YTD Percent of Budget General Fund 2,259,709$ 19,437,453$ 32.30% Payroll - General Fund 669,984$ 6,024,105$ 58.94% All Funds 3,298,264$ 53,720,768$ 32.26% February Revenues February Expenditures General Fund Non-General Fund Property Tax in lieu of Vehicle License Fees 2,053,157$ Lighting and Landscape District Assessments 498,999$ Property Tax 1,506,828$ SilverRock Greens Fees 476,716$ Measure G Sales Tax 1,000,091$ Surface Transportation Program Grant(1)188,606$ Sales Tax 948,015$ Gas Tax - SB1 116,640$ Transient Occupancy (Hotel) Tax 563,498$ SB 821 Grant(2)109,500$ General Fund Non-General Fund Sheriff Contract (October-November)1,123,986$ Capital Improvement Program (CIP)- Design(4)181,827$ Marketing and Tourism Promotions 79,193$ SilverRock Maintenance 158,045$ Fire Service Costs 59,265$ Museum Operations 50,010$ Professsional Sevices- Planning (3)40,000$ Makerspace Operations 41,298$ Contract Legal Services 38,172$ CIP- Professional Services (5)39,184$ (1) Grant associated with Capital Improvement Project - Dune Palms Bridge (2) Grant associated with Capital Improvement Project - LQ High School ADA Improvements Top Five Revenue/Income Sources for February Top Five Expenditures/Outlays for February (3) Planning services- traffic analysis study for Dune Palms (4) CIP Design: SilverRock (SRR) Phase II infrastructure and Dune Palms Bridge (5) CIP Professional Services: Consulting related to multiple CIP projects including Dune Palms Bridge and road improvements; Village Complete Streets; SRR Event Site; and traffic, drainage, and turf conversion projects For Fiscal: 2018/19 Period Ending: 02/28/2019 3/25/2019 10:32:02 AM Page 1 of 2 Revenue Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 24,492,1796,658,49452,297,400 54,385,000 -29,892,821 45.03 % 201 - GAS TAX FUND 1,205,029116,6401,965,500 1,965,500 -760,471 61.31 % 202 - LIBRARY & MUSEUM FUND 1,149,8662212,333,000 2,333,000 -1,183,134 49.29 % 203 - PUBLIC SAFETY FUND (MEASURE G)200,0670200,000 203,000 -2,934 98.55 % 210 - FEDERAL ASSISTANCE FUND 0072,000 66,226 -66,226 0.00 % 212 - SLESA (COPS) FUND 90,4330100,100 100,100 -9,667 90.34 % 213 - JAG FUND 26800213 55 125.88 % 215 - LIGHTING & LANDSCAPING FUND 1,135,875498,9991,586,100 1,586,100 -450,225 71.61 % 217 - DEVELOPMENT AGREEMENT -22300800 -1,023 27.89 % 219 - ASSET FORFEITURE 0000 0 0.00 % 220 - QUIMBY FUND -3,5290367,000 383,000 -386,529 0.92 % 221 - AB 939 - CALRECYCLE FUND 14,2782,79663,700 66,200 -51,922 21.57 % 223 - MEASURE A FUND 405,00466,165971,708 974,708 -569,704 41.55 % 224 - TUMF FUND -10000 -10 0.00 % 225 - INFRASTRUCTURE FUND -160100100 -116 15.68 % 230 - CASp FUND, AB 1379 13,8302,3044,000 10,000 3,830 138.30 % 231 - SUCCESSOR AGCY PA 1 RORF 7,559,3430020,482,627 -12,923,284 36.91 % 235 - SO COAST AIR QUALITY FUND 13,102051,500 51,500 -38,398 25.44 % 237 - SUCCESSOR AGCY PA 1 ADMIN 1,5000012,005 -10,505 12.49 % 241 - HOUSING AUTHORITY 376,57324,350315,000 543,000 -166,427 69.35 % 243 - RDA Low-Mod Housing Fund -1,20908,000 18,000 -19,209 6.71 % 248 - SA 2004 LO/MOD BOND FUND (Refinanced in 2014)00010,000 -10,000 0.00 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)208,526030,000 170,000 38,526 122.66 % 250 - TRANSPORTATION DIF FUND 303,60028,420369,000 379,000 -75,400 80.11 % 251 - PARKS & REC DIF FUND 245,76020,480508,200 512,200 -266,440 47.98 % 252 - CIVIC CENTER DIF FUND 92,0099,420110,000 110,000 -17,991 83.64 % 253 - LIBRARY DEVELOPMENT DIF 41,2803,44030,000 30,000 11,280 137.60 % 254 - COMMUNITY CENTER DIF 15,4331,29015,400 15,400 33 100.22 % 255 - STREET FACILITY DIF FUND 16,4681,16015,000 15,000 1,468 109.79 % 256 - PARK FACILITY DIF FUND 4,8014004,000 4,000 801 120.03 % 257 - FIRE PROTECTION DIF 42,3154,33040,000 40,000 2,315 105.79 % 270 - ART IN PUBLIC PLACES FUND 47,7801,69388,500 88,500 -40,720 53.99 % 275 - LQ PUBLIC SAFETY OFFICER 1,97502,100 2,100 -125 94.06 % 299 - INTEREST ALLOCATION FUND 1,331,102100,17500 1,331,102 0.00 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 667,8610671,600 671,600 -3,739 99.44 % 401 - CAPITAL IMPROVEMENT PROGRAMS 3,247,578298,10611,955,941 55,543,794 -52,296,215 5.85 % 501 - FACILITY & FLEET REPLACEMENT 478,8664,100923,700 938,700 -459,834 51.01 % 502 - INFORMATION TECHNOLOGY 553,3051,9231,189,800 1,496,800 -943,495 36.97 % 503 - PARK EQUIP & FACILITY FUND 325,3890675,000 690,000 -364,611 47.16 % 504 - INSURANCE FUND 460,0540923,600 923,600 -463,546 49.81 % 601 - SILVERROCK RESORT 2,228,550547,2874,092,800 4,147,800 -1,919,250 53.73 % 602 - SILVERROCK GOLF RESERVE -203070,000 70,000 -70,203 0.29 % 760 - SUPPLEMENTAL PENSION PLAN -100000 -100 0.00 % 761 - CERBT OPEB TRUST -73,8150020,000 -93,815 369.07 % Report Total:8,392,194 46,890,89582,049,749 149,059,573 -102,168,678 31.46 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. ATTACHMENT 1 For Fiscal: 2018/19 Period Ending: 02/28/2019 3/25/2019 10:29:57 AM Page 2 of 2 Expenditure Summary Fiscal Activity Variance Favorable (Unfavorable)Fund Period Activity Current Total Budget Original Total Budget Percent Used 101 - GENERAL FUND 19,437,4532,259,70951,153,413 60,178,941 40,741,488 32.30 % 201 - GAS TAX FUND 1,015,88363,0861,959,900 2,010,829 994,947 50.52 % 202 - LIBRARY & MUSEUM FUND 646,682110,5031,628,200 1,793,400 1,146,718 36.06 % 210 - FEDERAL ASSISTANCE FUND 0072,000 66,226 66,226 0.00 % 212 - SLESA (COPS) FUND 00100,000 100,000 100,000 0.00 % 215 - LIGHTING & LANDSCAPING FUND 866,52467,7791,582,700 1,785,400 918,876 48.53 % 217 - DEVELOPMENT AGREEMENT 12,649067,000 67,000 54,351 18.88 % 220 - QUIMBY FUND 384,69403,956,000 5,748,488 5,363,794 6.69 % 221 - AB 939 - CALRECYCLE FUND 41,1625,53335,000 95,000 53,838 43.33 % 223 - MEASURE A FUND 304,7320961,708 4,733,403 4,428,671 6.44 % 225 - INFRASTRUCTURE FUND 00028,571 28,571 0.00 % 227 - State Homeland Security Programs (SHSP)3,013000 -3,013 0.00 % 230 - CASp FUND, AB 1379 004,000 4,000 4,000 0.00 % 231 - SUCCESSOR AGCY PA 1 RORF 12,947,699009,339,728 -3,607,971 138.63 % 235 - SO COAST AIR QUALITY FUND 11,20929154,000 54,000 42,791 20.76 % 237 - SUCCESSOR AGCY PA 1 ADMIN 13,3000012,005 -1,295 110.79 % 241 - HOUSING AUTHORITY 305,72240,984604,000 602,500 296,778 50.74 % 243 - RDA Low-Mod Housing Fund 00250,000 267,667 267,667 0.00 % 248 - SA 2004 LO/MOD BOND FUND (Refinanced in 2014)922,83023,75301,451,947 529,117 63.56 % 249 - SA 2011 LOW/MOD BOND FUND (Refinanced in 2016)7,376,024007,416,000 39,976 99.46 % 250 - TRANSPORTATION DIF FUND 410,1570400,000 2,557,460 2,147,304 16.04 % 251 - PARKS & REC DIF FUND 0002,405,952 2,405,952 0.00 % 252 - CIVIC CENTER DIF FUND 60,7580110,000 115,952 55,194 52.40 % 253 - LIBRARY DEVELOPMENT DIF 13,467030,000 35,952 22,485 37.46 % 254 - COMMUNITY CENTER DIF 000107,591 107,591 0.00 % 255 - STREET FACILITY DIF FUND 16,279015,000 20,952 4,673 77.70 % 256 - PARK FACILITY DIF FUND 3,96604,000 9,952 5,986 39.85 % 257 - FIRE PROTECTION DIF 4,149040,000 45,952 41,803 9.03 % 270 - ART IN PUBLIC PLACES FUND 50,4833,000322,000 722,000 671,517 6.99 % 310 - LQ FINANCE AUTHORITY DEBT SERVICE 668,0380671,600 671,600 3,563 99.47 % 401 - CAPITAL IMPROVEMENT PROGRAMS 3,445,802231,07411,955,941 55,554,801 52,108,998 6.20 % 501 - FACILITY & FLEET REPLACEMENT 388,77927,601923,700 1,005,784 617,004 38.65 % 502 - INFORMATION TECHNOLOGY 570,89625,3331,090,700 1,574,200 1,003,304 36.27 % 503 - PARK EQUIP & FACILITY FUND 184,1586,797705,000 775,000 590,842 23.76 % 504 - INSURANCE FUND 786,46446,536921,100 918,500 132,036 85.62 % 601 - SILVERROCK RESORT 2,764,761386,2864,090,800 4,146,000 1,381,239 66.69 % 602 - SILVERROCK GOLF RESERVE 50,200050,200 105,200 55,000 47.72 % 760 - SUPPLEMENTAL PENSION PLAN 12,833000 -12,833 0.00 % Report Total:3,298,264 53,720,76883,757,962 166,527,953 112,807,185 32.26 % Accounts are subject to adjusting entries and audit. The City's Comprehensive Annual Financial Report (CAFR), published annually in December, is the best resource for all final audited numbers. City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 10, 2019 STAFF REPORT AGENDA TITLE: APPROVE THE PROPOSED USE OF MEASURE G SALES TAX FUNDS WITHIN THE 2019/20 CAPITAL IMPROVEMENT PROGRAM RECOMMENDATION Approve the proposed use of Measure G sales tax funds within the 2019/20 Capital Improvement Program. EXECUTIVE SUMMARY • The Capital Improvement Program (CIP) is a five-year plan for major construction projects such as bridges, streets, traffic signals, drainage facilities, landscaping, lighting, parks, and other facilities. • Based upon Council and resident input over the past year, Staff developed a preliminary scope and budget for various projects for the 2019/20 CIP budget. • In March, a draft CIP was presented to City Council and the Financial Advisory Commission (FAC) during Study Sessions. • Council will be requested to appropriate funds for the 2019/20 CIP improvements when the Operating and Capital Improvement Program Budget is considered by Council on June 18, 2019. FISCAL IMPACT $5,580,116 of Measure G funds are proposed in the 2019/20 CIP program. Total anticipated Measure G revenue for 2019/20 is $10,246,500 for a total remaining unappropriated balance of $4,666,384. In addition, the current Measure G reserve balance is anticipated to end the 2018/19 fiscal year at $6,908,857. BACKGROUND/ANALYSIS The FAC provides oversight of Measure G sales tax revenue. The 2019/20 CIP Program proposes using $5,580,116 of Measure G funds for four projects. All projects identified fall within the scope of the sales tax measure. On March 19, 2019 staff presented the 2019/20 through 2023/24 Capital Improvement Program to City Council. Subsequently the same report was BUSINESS SESSION ITEM NO. 1 presented to the FAC on March 20, 2019. Both City Council and the FAC agreed with the recommended projects as presented. This report focuses on projects and operations funded with Measure G revenue. The following capital projects are proposed to receive Measure G funding in 2019/20. Parks and Facilities Projects • La Quinta Landscape Renovation Project (Measure G: $3,859,103) A continuation of the multi-year initiative to refurbish the neighborhood parkways for the communities north of Highway 111. The Year 4 phase will focus on the Topaz, Marabella, Sierra Del Rey and Desert Pride parkways per the schedule presented in Attachment 3. • Corporate Yard Facility (Measure G: $411,013) This improvement will complete the Phase II Corporate Yard Facility Improvements. Space planning and facility design would occur in 2019/20. • Village Art Plaza Promenade (Measure G: $310,000 National Endowment of the Arts Grant Funds: $200,000) The Village Art Promenade would be constructed on the vacant City property southwest of Avenida Navarro adjacent to the former lumberyard building. Improvements would include, but not be limited to, seating and socializing area, landscape and irrigation, walkways, permanent and temporary art spaces, and shade structures. The Village Art Promenade would be designed in a manner that allows for connectivity to the adjacent Village Art Plaza (prior lumberyard building) and the City Museum. Economic Development • Highway 111 Corridor Area Plan Implementation (Measure G: $1,000,000) Implement the Highway 111 Corridor Area Plan improvements, which may include landscape, connectivity and circulation improvements, entry monuments, wayfinding, catalyst project sites, lighting, and art installations. Measure G Sales Tax Summary A summary of inception-to-date Measure G revenue and expenditures is below. This fiscal year (2018/19), revenue projections were adjusted with the Mid- Year and Third Quarter Budget Reports, for an adjusted revenue budget of $10,145,000. These new projections set the tone for the 2019/20 budget projections, which are estimated at $10,246,500. All unappropriated revenues remain in Measure G Sales Tax Reserves. The estimated reserve balance at fiscal year-end is $6,908,857. ALTERNATIVES: The FAC may recommend only some or none of the projects be funded. Prepared by: Karla Campos, Finance Director Revenues 2016/17 Actual 1,462,650$ 2017/18 Actual 9,967,657 2018/19 Estimated Budget (Adjusted)*10,145,000 TOTAL 21,575,307$ Expenditures Operational Capital Reserves 2016/17 Eisenhower Dr. Retention Basin 750,000 Measure G Reserves 2016/17 (Xpark)- 2017/18 Public Safety Fund 300,000 North La Quinta Landscape Improvements 1,802,576 Citywide Drainage Enhancements 2,407,373 La Quinta Village Road Diet Project 1,000,388 Measure G Reserves 2017/18 4,309,970 2018/19 Public Safety Fund 200,000 Public Safety Services 2,750,000 Citywide Drainage Enhancements 1,166,500 North La Quinta Landscape Improvements 2,129,613 SilverRock Event Space 1,300,000 Xpark (Used 16/17 & 17/18 Reserves)860,000 Measure G Reserves 2018/19 (Adjusted)*2,598,887 TOTAL 3,250,000$ 11,416,450$ 6,908,857$ 15%53%32% MEASURE G REVENUES AND EXPENDITURES SUMMARY * Includes an anticipated 2018/19 3rd quarter budget adjustment to increase revenue by $800,000. 18/19 Reserves are increased by the new anticipated revenue. In 2018/19, the City allocated $860,000 from reserves for the XPark. 2016/17 ($712,650) and a portion of 2018/19 ($147,350) Reserves. City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 10, 2019 STAFF REPORT AGENDA TITLE: REVIEW AND APPROVE ACCOUNTS RECEIVABLE WRITE-OFF AND UNCLAIMED PROPERTY POLICY RECOMMENDATION Review and approve an Accounts Receivable Write-Off and Unclaimed Property Policy. EXECUTIVE SUMMARY • The Financial Advisory Commission (FAC) is asked to review and discuss further changes to the Policy. • The Policy is new and would facilitate operational processes, provide written procedures for the collection and write-off of accounts receivables. • Staff, City Attorney, and an independent auditing firm have reviewed the proposed Policy. The Policy conforms to current laws and governmental accounting best practices. • Subsequent to FAC approval the policy will be presented to City Council for adoption. FISCAL IMPACT The adoption of this policy does not have a monetary impact. However, the approval of this policy will facilitate internal processes and result in a reduction of administrative processing time. BACKGROUND/ANALYSIS As an advisor to the Finance department, the FAC is asked to review, discuss, and approve the recommended Accounts Receivable Write-Off’s and Unclaimed Property Policy (Policy). The City does not currently have a policy governing accounts receivables or write-offs. This policy is to ensure all reasonable due diligence has been used to collect accounts receivable, improve measurement of the City’s accounts receivables and ensure the most efficient use of City revenue collection resources. BUSINESS SESSION ITEM NO. 2 The policy establishes guidelines for the escheatment of unclaimed money, including unclaimed checks, from the City, consistent with the provisions of Government Code Sections 50050 through 50057. This policy also ensures year-end financial statements reflect actual collectible accounts. To ensure compliance with current laws and regulatory requirements, the Policy was reviewed by staff, City Attorney, and an independent governmental accounting auditing firm. ALTERNATIVES: The purpose of this item is to get input from the Commission. The Commission may either approve as presented or recommend further changes. Prepared by: Karla Campos, Finance Director Attachment: 1. Accounts Receivable Write-Off’s and Unclaimed Property Policy Accounts Receivables Write-Offs and Unclaimed Property Policy I. Purpose. It is the City of La Quinta’s (City’s) policy to prevent the creation of accounts receivables by requiring payment at the time of or before services are rendered. In some cases, however, an accounts receivable account may be established and may become delinquent. It is the City’s policy to actively pursue collection of all receivables, regularly review the status of past-due accounts, and write-off accounts determined to be uncollectable. This policy is to ensure all reasonable due diligence has been used to collect accounts receivable, improve measurement of the City’s accounts receivables and ensure the most efficient use of City revenue collection resources. The policy establishes guidelines for the escheatment of unclaimed money, including unclaimed checks, from the City, consistent with the provisions of Government Code Sections 50050 through 50057. This policy also ensures year-end financial statements reflect actual collectible accounts. II. Scope. This policy applies to all City departments and Funds. Types of receivables covered by this policy include but are not limited to business licenses, permits, transient occupancy tax, fees for services, mitigation fees, reimbursements, recovery of damage to City property, fines, fees, penalties, false alarms, and legal judgements. Unclaimed property includes but is not limited to uncashed checks and overpayments. III. Accounts Receivables and Write-Off Procedures. A. Accounts Receivable Processing Terms of payment for all debts to the City shall be net 30 from the invoice date, unless otherwise provided in a contract. Because normal City business is conducted Monday through Friday, due dates that occur on a Saturday or Sunday shall be advanced to the following Monday. Due dates that occur on a City observed holiday shall be advanced to the next business day. B. Written Disputes of Debts If a customer submits a written dispute of the debt, the originating department will have thirty (30) days to evaluate the validity of the dispute and reach a decision. The collection process will be put on hold until completion of the appeal process. A response letter shall be sent to the customer notifying them of the decision. If an appeal is upheld, a new invoice summarizing the amount due will be issued. C. Late Fees and Interest Charges Late fees and interest charges may begin accruing on all eligible accounts receivables not paid within 10 days after the invoice due date. In accordance with Government Code section 16583.1, the City may impose a reasonable fee, not to exceed the actual costs, to recover the collection costs on a past due account. For purposes of this paragraph, eligible accounts are defined as those adopted by resolution with a City fee study. The City shall routinely notify customers when payment is due. To facilitate recovery of the principal balance the elimination of penalties, interest, and/or any other fee(s) that has been applied to an accounts receivable item due to delinquency may be written-off in accordance with the approval authorities in Section G of this policy. D. Payment Plans Payment plans may be granted by City staff with the approval of a direct Manager or Supervisor and the Finance Director or their designee. Payment arrangements may be approved under the following conditions: • All debt due must be paid within 24 months. • A promissory note with a payment schedule must be signed with an agreement including a provision that calls for full payment if the note is defaulted upon. A write-off of from the City’s accounting records does not constitute forgiveness of the debt or gift of public funds. Subsequent collection of an account previously written off will be treated as reimbursable revenue in the appropriate Fund. E. Collection Agency Only delinquent accounts over 365 days past due and $100.00 or more may be considered for collections. Accounts transferred to a collection account would be considered written off. If a payment is received from the collection agency it will be deposited as miscellaneous revenue in the appropriate Fund. F. Designation of an Account as Uncollectible An account will be considered uncollectible if it meets one or more of the following criteria: • The City’s collection procedures have been followed and the account remains unpaid for greater than 365 days after the due date shown on the original invoice; • The debtor cannot be located, nor any of the debtor’s assets in the event the assets could be seized, claimed or otherwise used to satisfy debt obligations; • The debtor has no reasonably available assets that may be used for payment of the debt, and there is no reasonable expectation they will have any in the reasonably foreseeable future; • The debt is disputed, and the City has insufficient documentation to pursue collection efforts; • The debtor has died and there is no known estate or guarantor; • The debtor is a company which is no longer in business; • The debt is discharged through legal action (bankruptcy or court judgement). G. Approval Authority for Write-Offs The Finance Department will periodically (but not less than bi-annually) review all accounts receivables. Write-off requests shall include all necessary due diligence documentation. Once Finance staff has prepared the write-off request(s), the qualified accounts will be presented to the Senior Accountant or their designee for review and subsequently obtain the corresponding approval(s) based on the following authority levels: IV. Under and Overpayments. A. Underpayments Underpayments of less than $5.00 may be waived at the desecration of the City upon approval of the Finance Director; unless the under collected fee constitutes a third-party liability or pass through payment, which must be collected and remitted in full. B. Overpayments In accordance with Government Code Section 50053, individual items of less than $15.00, or any amount if the depositor’s name is unknown, that remain unclaimed in the official custody of the City for the period of one year or upon an order of the court may be transferred to the General Fund by the City Council without the necessity of publication in a newspaper. A formal request for refund may be made within one year by the payee. Write-Off Approver(s) Approval Limit (per item) Finance Director Up to $15,000 City Manager Up to $50,000 City Council Over $50,000 Commented [KC1]: Mirrors current Purchasing Policy limits. V. Escheatment of Unclaimed Money Procedures. Escheatment is the process of identifying customer deposits or unclaimed checks that are considered abandoned. A. Public Notice Money that is not the property of the City that remains unclaimed for a period of more than three (3) years shall become the property of the City forty-five (45) days after publication once a week for two successive weeks in a newspaper of general circulation published in the local agency and the City website. When any such money becomes the property of the City and is in a special fund, the City Council may transfer it to the General Fund. Public notice shall include the following information: • The individual or business name as shown on the issued check; • The amount of the issued check; • The fund in which it is held; • A statement announcing that the money shall become the property of the City on the date that is forty-five (45) days nor more than sixty (60) days after the first publication of the notice. B. Filing a Claim A party of interest may file a claim at any time until the date on which the money becomes the property of the City. The City shall obtain proper identification and assurance that the claimant is owed the money prior to re-issuing such payment. Proof of ownership may include but is not limited to: • The claimant’s name, address, telephone number, and Social Security Number or Federal Employer Identification Number; • Proof of identity such as a copy of a driver’s license, social security card, or birth certificate; • Amount of the claim(s); • The grounds on which the claim is founded. If a claim is rejected, the party who submitted the claim may file a verified complaint seeking to recover all, or a designed part, of the money in a court of competent jurisdiction within the county in which the notice was published. A copy of the complaint and the summons shall be served within thirty (30) days of receiving notice that the claim was rejected. The City shall withhold the release of the portion of unclaimed property for which a court action has been filed until a decision is rendered by the court. VI. POLICY REVIEW. The Finance Director shall review this Policy at a minimum of every five (5) years and recommend any changes to the City Manager and City Council. Commented [KC2]: Must be in local paper. Governed by Government Code section 50051. But we can also post online – progressive and increases notification availability. Commented [KC3]: Per Government Code section 50053. Can include approval in quarterly budget reports or separate staff report to Council. Commented [KC4]: Not to exceed 60 days is in Government Code Section 50051. Commented [KC5]: Per Government Code section 50052. City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 10, 2019 STAFF REPORT AGENDA TITLE: RECEIVE AND FILE FISCAL YEAR 2018/19 THIRD QUARTER BUDGET REPORT RECOMMENDATION Receive and file 2018/19 Third Quarter Budget Report. EXECUTIVE SUMMARY • The 2018/19 Third Quarter Budget Report (Attachment 1) provides an update of the City’s fiscal activities from July 2018 to March 2019. • Quarterly, a budget report is prepared to assess the budget and incorporate adjustments based on current economic conditions and operational requirements. • Additional adjustments may be considered and approved prior to June 30, 2019. FISCAL IMPACT Staff recommended adjustments to funds as outlined below. All adjustments were approved by City Council on April 2, 2019. BUSINESS SESSION ITEM NO. 3 Fund Revenues Expenses General Fund (101)1,325,250$ 938,500$ Gas Tax Fund (201)*- - Library and Museum Fund (202)(20,000) - Development Agreement Fund (217)30,000 30,000 Emergency Management Program Fund (226)12,000 12,000 State Homeland Security Programs Fund (227)6,000 6,000 CASp Fund, AB 1379 (230)- 15,000 Capital Improvement Fund (401)260,000 260,000 SilverRock Golf Resort (601)*- - 2000-1 Assessment District Funds (740 & 741)114,651 PARS Supplemental Pension Trust Fund (760)800 12,850 TOTAL ADJUSTMENTS 1,614,050$ 1,389,001$ * Revenue adjustments result in no overall increase. 2018/19 Third Quarter Adjustment Requests (All Funds) BACKGROUND/ANALYSIS Throughout the fiscal year each Department monitors their budget and proposes adjustments to reflect current conditions and ongoing operational needs. Requests are reviewed and discussed with the City Manager, Finance Director and Executive Team before presenting recommendations for Council consideration. City Funds with no adjustments are excluded. This report was presented to the City Council on April 2, 2019. Staff will provide a verbal update to the FAC of discussions from the City Council meeting. All adjustments presented within the report were adopted by Council as presented. Additional adjustments may be presented to City Council for approval prior to June 30, 2019. ALTERNTIVES There are no alternatives recommended. Prepared by: Karla Campos, Finance Director Attachment: 1. 2018/19 Third Quarter Budget Report 1 Adjustments are based on current year- to-date activity and updated forecasts and provide resources to implement anticipated operational needs to end the fiscal year. Updated revenue projections are a foundation for the upcoming 2019/20 Budget. REVENUES The California Department of Tax and Fee Administration appears to have resolved most of the software-driven reporting issues which affected the first and second quarter sales tax distributions. In addition, economic conditions remain strong, resulting in increased sales tax revenue. An increase of $400,000 in Bradley Burns sales tax for a total budget of $9,300,000 and $800,000 for Measure G sales tax for a total budget of $10,145,000 are recommended. Measure G sales tax revenue will remain in reserves until appropriated by Council. If approved, at fiscal year-end the Measure G sales tax reserve balance is anticipated to be $6,908,857. Assessment District 2000-1 Bonds, used to fund Cove sewer improvements, were fully paid and remaining funds (totaling $144,651) were distributed to the General Fund ($114,250) for administration expenses and Coachella Valley Water District ($30,401) for the sewer infrastructure maintenance. Expenses associated with these restricted funds are depicted in Exhibit 2. Adjustments to fees and service charges totaling $11,000 reflect current and anticipated activity to end the fiscal year. April 2, 2019 2018/19 Third Quarter Budget Report Proposed Budget Adjustments are detailed in Exhibits 1 and 2. A summary for the General Fund is provided below. GENERAL FUND Cannabis Delivery Licenses (5,000) Fire Plan Review Fees 5,000 Fire Inspection Fees 7,000 General Plan Amendments (5,000) Tentative Parcel Map 5,000 Short-Term Vacation Rental Inspections 4,000 11,000$ Adjustment to Various Fee/Service Charges 2 EXPENSES As noted in the 2018/19 First Quarter Budget Report, costs associated with responding to public records requests involving extensive research have resulted in increased legal oversite. An adjustment of $50,000 is requested to ensure enough funds are available for operational legal services. After a 90-day pilot program of the public safety camera system is completed (May 2019), the City will issue a third-party survey anticipated to cost $30,000. The City was awarded a $1,971,000 Highway Safety Improvement Grant which is being utilized for the traffic signal interconnect project. Anticipated project costs have increased by $260,000 for the installation of metal conduit, replacement of existing pull boxes, and the removal of existing copper wiring. The current project budget includes a General Fund contribution of $30,000. If approved, the adjusted General Fund contribution would be $290,000 for a total project budget of $2,261,000. The Capital Improvement Fund would recognize the $260,000 revenue (transfer in) and capital expenditure adjustments as noted in Exhibit 2. A General Fund transfer out of $30,000 to the Development Agreement Fund supports costs associated with Village area parking lot construction improvements, which are further described in the “Other Special Revenue Funds” section of this report. Multiple days of rain, frost and high winds during the recent winter months, which is typically peak play season, have resulted in decreased golf course revenues, including golf play, golf pro-shop and restaurant sales. The current budget anticipated an operational shortage of $50,000. However, based on updated SilverRock golf course projections an additional $400,000 from the General Fund to the SilverRock Operating Fund is recommended. A transfer out of $168,500 from the General Fund to the Gas Tax Fund is needed to support anticipated expenses. In 2018, the State Board of Equalization failed to enact an anticipated gas tax rate increase to Section 2103 Local Street and Roads, which has resulted in lower gas tax revenue for all agencies. This fund is restricted for road maintenance and improvements. Without this transfer, programmed expenditures for street striping, the replacement of traffic control signs, and storm drain maintenance would be reduced and/or postponed. 3 After nine months of operations several budgetary adjustments have been incorporated into the General Fund. A summary of approved adjustments, including those proposed in this report, reflect an anticipated adjusted budget surplus of $781,637 to end the fiscal year. Additional adjustments may be presented for consideration and City Council approval until June 30, 2019. After the year-end audit is complete, a final year-end budget report will be presented in November 2019. Adjusted Measure G sales tax revenue is allocated as follows for this fiscal year. 29% for Public Safety 45% for Capital Improvements 26% for Measure G Reserves YEAR-TO-DATE SUMMARY General Fund Current Budget Revenues Original Budget 52,297,400 Capital Carryovers 4,996,815 Operational Carryovers 2,186,500 1st Quarter Adjustments, Reserves 295,000 Fire Positions, Fire Property Taxes 90,600 Measure G Reserves (SRR Park)1,300,000 2nd Quarter Adjustments 1,997,000 Pension Trust Reserves 6,540,000 Measure G Reserves (Xpark)860,000 3rd Quarter Adjustments 1,325,250 Total Revenues 71,888,565 Expenditures Original Budget 51,153,413 Capital Carryovers 4,996,815 Operational Carryovers 2,186,500 1st Quarter Adjustments 295,000 Fire Positions (2)90,600 SilverRock Event Space 1,300,000 2nd Quarter Adjustments 147,213 Pension Trust 6,540,000 Xpark Enhancements 860,000 3rd Quarter Adjustments 938,500 Total Expenditures 68,508,041 Budget Surplus 3,380,524 Measure G Reserves (2,598,887) Adjusted Budget Surplus 781,637 Public Safety Fund 200,000 Public Safety Services 2,750,000 Citywide Drainage 1,166,500 Landscape Improvements 2,129,613 SilverRock Event Space 1,300,000 Measure G Reserves 2,598,887 TOTAL 10,145,000 2018/19 Measure G Expenses 4 Special Revenue Funds are restricted to specific expenditures. Adjustments to these funds include amended revenue projections, state pass-through payments, capital improvement expenses, an assessment district closure, and pension obligation. A summary by fund is presented below with line item details located in Exhibit 2. A decrease in Gas Tax Fund revenue ($168,500) is due to a suspended gas tax rate increase in 2018. The General Fund supports the Gas Tax Fund to ensure properly maintained roads. With this proposed adjustment the total General Fund support for 2018/19 would be $423,500. Creation Station Makerspace opened in the summer of 2018, a decrease of $20,000 in revenue for a total budget of $5,000 reflects current memberships. A budget increase is anticipated in 2019/20 as programs expand and popularity increases. The Development Agreement Fund is restricted for Village Area parking improvements and revenue is limited to development agreements. To extend available parking, in 2017/18 the City purchased the vacant lot adjacent to the Frontier building. Improvement costs included a utility line removal, lot surveying, and site preparation. A budget increase of $30,000 is requested to supplement these costs. Total project costs, including the acquisition of land, are estimated at $162,200. The City was awarded a $12,000 Emergency Management Program Grant which will be used for emergency operation center tools and equipment. Additionally, a $6,000 grant from the State Homeland Security Program was awarded for CERT (Community Emergency Response Team) Training. Adjustments in these funds recognize new grant revenues and programmed expenses. In January 2018, with the passage of SB 1186, the Division of State Architect increased an ADA compliance business license fee from $1 to $4 per license. Quarterly the City remits 10% of fee revenue collected to the State. With increased revenue the City is anticipating a $1,500 increase OTHER SPECIAL REVENUE FUNDS Fund Revenues Expenses Gas Tax Fund (201) *- - Library and Museum Fund (202)(20,000) - Development Agreement Fund (217)30,000 30,000 Emergency Management Program Fund (226)12,000 12,000 State Homeland Security Programs Fund (227)6,000 6,000 CASp Fund, AB 1379 (230)- 1,500 Capital Improvement Fund (401)260,000 260,000 2000-1 Assessment District Funds (740 & 741)144,651 PARS Supplemental Pension Trust Fund (760)800 12,850 TOTAL ADJUSTMENTS 288,800$ 467,001$ * Revenue adjustments result in no overall increase. 2018/19 Third Quarter Adjustment Requests (Special Funds) 5 to the state contribution. As mandated by AB3002, revenue and expenses for this fee are segregated in a CASp (Certified Access Specialist) Fund. In 2011, under economic hardship, the City established a supplemental pension plan with PARS (Public Agency Retirement Services). The plan was established with an initial lump sum contribution of $200,054 and was used as a fiscally responsible reduction plan offered to employees eligible for retirement. The adopted plan requires an annual contribution of $12,850. Adjustments recognize interest earnings of $800 and annual expenses associated with the plan. The current pension plan fund balance is $104,400. Account No. Description Revenues Expenses Finance 101-0000-41320 Sales Tax 400,000 101-0000-41326 Measure G Sales Tax 800,000 101-0000-49500 Transfer In from 2000-1 AD 114,250 101-0000-41601 Cannabis Delivery Licenses (5,000) 101-0000-42420 Fire Plan Review Fees 5,000 101-0000-42446 General Plan Amendments (5,000) 101-0000-42448 Tentative Parcel Map 5,000 101-0000-41411 Short-term Vacation Rental Inspections 4,000 Total Revenue Adjustments 1,318,250$ City Attorney 101-1003-60153 Legal Expenses, Records Requests 50,000 Community Resources 101-2001-60103 Professional Services, Camera Survey 30,000 Design and Development 101-1007-99900 Transfer Out, HSIP Traffic Signal Interconnect (Project Number 201602)260,000 101-1007-99900 Transfer Out, Frontier Parking Lot 30,000 Facilities 101-1007-99900 Transfer Out, SilverRock Operating Fund 400,000 Finance 101-1007-99900 Transfer Out, Gas Tax Fund 168,500 TOTAL GENERAL FUND 1,318,250$ 938,500$ General Fund (Fund 101) City of La Quinta FY 2018/19 Recommended Third Quarter Budget Adjustments Exhibit 2 Account No. Description Revenues Expenses 201-0000-42900 Gas Tax Section 2103 (146,000) 201-0000-42922 Road Maintenance Rehab Act (SB1)(22,500) 201-0000-49500 Transfer In from General Fund 168,500 Fund Total - - Account No. Description Revenues Expenses 202-0000-42218 Membership Fees - Makerspace (20,000) Account No. Description Revenues Expenses 217-0000-49500 Transfer In from General Fund for Frontier Parking Lot Improvements (Project Number 201814) 30,000 217-0000-74010 Land Acquisition and Improvements 30,000 Account No. Description Revenues Expenses 226-0000-43120 EMP Grant Revenue 12,000 226-0000-60432 Tools/Equipment 12,000 Account No. Description Revenues Expenses 227-0000-43120 SHSP Grant Revenue 6,000 227-0000-60320 Travel and Training 6,000 Account No. Description Revenues Expenses 230-0000-60480 Contributions to State Agency 1,500 Account No. Description Revenues Expenses 401-0000-49500 Transfer In from General Fund for HSIP Intersection Interconnect (Project Number 201602) 260,000 401-0000-60188 Construction 260,000 Account No. Description Revenues Expenses 601-0000-44000 Green Fees (350,000) 601-0000-44002 Merchandise Sales (50,000) 601-0000-49500 Transfer In from General Fund 400,000 - Account No. Description Revenues Expenses 740-0000-99900 Transfer Out to General Fund 113,908 740-0000-60691 Sewer Maintenance to CVWD 30,401 741-0000-99900 Transfer Out to General Fund 342 Fund Total 144,651 Account No. Description Revenues Expenses 760-0000-41900 Allocated Interest 800 760-0000-50199 Annual PARS Contribution 12,850 TOTAL ALL OTHER FUNDS 288,800 467,001 PARS Supplemental Pension Plan (Fund 760) Gas Tax (Fund 201) Capital Improvements (Fund 401) 2000-1 Assessment District (Funds 740 & 741) CASP Fund, AB 1379 (Fund 230) Development Agreement (Fund 217) Library and Museum (Fund 202) Emergency Management Program (Fund 226) State Homeland Security Programs (Fund 227) SilverRock Golf Resort (Fund 601) City of La Quinta FINANCIAL ADVISORY COMMISSION MEETING: April 10, 2019 STAFF REPORT AGENDA TITLE: DISCUSS FISCAL YEAR 2019/20 INVESTMENT POLICY RECOMMENDATION Discuss the Fiscal Year 2019/20 Investment Policy draft and provide input. EXECUTIVE SUMMARY •As part of their work plan, The Financial Advisory Commission (FAC) is asked to review the City’s Investment Policy annually. •Any suggested changes are sent to City Council for consideration by June of each year. FISCAL IMPACT - None. BACKGROUND For Fiscal Year (FY) 2018/19, the City submitted the Policy for certification by the California Municipal Treasurers Association (CMTA); the City was granted the certification, and the reviewers offered suggestions to further clarify the document and ensure consistency throughout. There were no new regulatory changes in FY 2018/19 that affected the City’s policy; however, based on the suggestions received and other research conducted, staff has highlighted some edits which are identified as red lined in Attachment 1. The following is a summary of the proposed changes by section: •Table of Contents will be updated to reflect correct page numbers when final draft is completed. •Sections XVI and XVII were moved and incorporated into Section III- Scope. •Section VIII updated with correct reference to Personnel Manual and added a reference to the City Code regarding Conflicts of Interest. •Section IX updated to add an annual review of the approved broker/dealers and financial institutions. •Section X updated to include a heading for the section regarding collateralization of funds. A portion of IX.2 was moved here and incorporated as well. STUDY SESSION ITEM NO. 1 • Section X updated with minor changes regarding government agencies such as the removal of the Student Loan Marketing Association (Sallie Mae) which is no longer a government sponsored enterprise. • Section XI added clarifying language and state code references for investment pools. • Section XII removed reference to a process that is no longer completed as part of the interest allocation. • Section XVI (new) created a new section calling for an annual review of the investment portfolio to confirm adherence to the policy. • Edits to Appendix C, Segregation of Major Investment Responsibilities, to reflect accurate titles for responsible parties by related function. • Footnoted Appendix D, Listing of Approved Financial Institutions, to reflect the ongoing Request for Information (RFI) for broker services and Request for Proposals (RFP) for banking services. If necessary based on input from the Commission, the policy may be amended further, and will be presented to the FAC for approval on May 15th, in order to move forward to City Council approval in June. ALTERNATIVES The purpose of this item is to get input from Commissioners; the Commission may either approve as presented or incorporate further changes. Prepared by: Rosemary Hallick Approved by: Karla Campos, Finance Director Attachment: 1. Draft Investment Policy for Fiscal Year 2019/20 (red-lined) 2. Draft Investment Policy for Fiscal Year 2019/20 2019/20 INVESTMENT POLICY 1 of 24 Fiscal year 2019/2020 Table of Contents Section Topic Executive Summary Pag e 2 I General Purpose 3 II Investment Policy 3 III Scope 3 IV Objectives 3 V Maximum Maturities 5 VI Prudence 5 VII Authority 5 VIII Ethics and Conflicts of Interest 6 IX Authorized Financial Dealers and Institutions 6 X Permissible Deposits and Investments 7 XI Investment Pools 9 XII Payment and Custody 10 XIII Interest Earning Distribution Policy 10 XIV Internal Controls and Independent Auditors 10 XV Reporting Standards 12 XVI Financial Assets and Investment Activity Not subject to this Policy 12 XVII Investment of Bond Proceeds 12 XVIII Financial Advisory Commission – City of La Quinta 12 XIX Investment Policy Adoption 13 Appendice s Topic Pag e A City of La Quinta Municipal Code Ordinance 2.70 – Financial Advisory Commission 14 B City of La Quinta Municipal Code Ordinance 3.08 – Investment of Moneys and Funds 15 C Segregation of Major Investment Responsibilities 17 D Listing of Approved Financial Institutions 18 E Investment Management Process and Risk 19 F Glossary 20 Commented [RH1]: 2 of 24 CITY OF LA QUINTA Investment Policy Fiscal Year 2018/20192019/2020 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 (the “City”) 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, with the exception of bond proceeds and those noted in section XVI III herein. It is the City's policy to deposit and invest public funds in a manner that shall provide safety of principal, liquidity to meet all of the City’s obligations and requirements that may be reasonably anticipated, and a risk-based market rate of return. Authority to manage the City's investment portfolio is derived from the City Municipal Code. 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 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 Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual basis, before the end of each fiscal year (June). 3 of 24 City of La Quinta Statement of Investment Policy July 1, 2018 through June 30, 2019 Adopted by the City Council on May 15, 2018 July 1, 2019 through June 30, 2020 Adopted by the City Council on XXXX XX, XXXX GENERAL PURPOSE The general purpose of this document is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. INVESTMENT POLICY It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall conform to all State and local statutes governing the investment of public funds and set forth the permissible deposits and investments of the City's funds and the limitations thereon. SCOPE Except as further detailed in Sections XVI and XVII , this Investment Policy applies to all deposits and investments of the City of La Quinta, the Successor Agency to the 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" or the “Agency”). These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within the following fund types: ➢ General ➢ Special Revenue ➢ Capital Projects ➢ Debt Service ➢ Enterprise ➢ Internal Service ➢ Trust and Agency ➢ Any new fund types and fund(s) that may be created. Financial assets and investment activity not subject to this policy The City's Investment Policy does not apply to the following: ➢ Cash and Investments raised from Conduit Debt Financing; ➢ Funds held in trust in the City's name in pension or other post- retirement benefit programs; ➢ Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; and ➢ Short or long term loans made to other entities by the City or Agency, ➢ 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 Formatted: Indent: Left: 0.63", No bullets or numbering Commented [RH2]: 4 of 24 Agency. ➢ Investment of bond proceeds The City's Investment Policy shall not 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. 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. ➢ OBJECTIVES The objectives of the City's investment activity, in order of priority and importance, are: Safety of Principal Safety of principal is the foremost 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. Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk may be mitigated by: ➢ Limiting investments to investment grade securities as permitted in Section X; and ➢ 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. 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: Formatted: Bulleted + Level: 1 + Aligned at: 1.08" + Indent at: 1.33" Formatted: Font: Verdana Formatted: Normal, No bullets or numbering 5 of 24 ➢ Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and ➢ Investing operating funds primarily in shorter-term securities. 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). A discussion of the City's investment process and risk is presented in Appendix E. 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 generally hold securities and other investments to maturity. Accordingly, securities may be sold prior to maturity under certain circumstances as follow: ➢ 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. ➢ When a sale/repurchase is fiscally advantageous based on market conditions and fits the needs of the portfolio 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. Performance Standards: As a basis for comparison only, the Treasurer's quarterly 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. The investment portfolio shall be designed with the objective of obtaining a Formatted: Font: Bold 6 of 24 market rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. MAXIMUM MATURITIES It is the City's policy to generally hold securities and other investments until maturity. This buy- and-hold policy shall not prevent the sale of a security as listed in section IV.3 The general buy-and-hold strategy 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. The City shall follow Title 5 of the California Government Code §53601 (the “State Code”) regarding maximum maturities, in that “no investment shall be made in any security…that at the time of the investment has a term remaining to maturity in excess of five years”. PRUDENCE and FIDUCIARY DUTY The City shall follow the State Code §53600.3 regarding fiduciary duty and the Prudent Investment Investor Standard as follows: Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then pr evailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. AUTHORITY Authority to manage the City's investment portfolio is derived from section 3.08 of the City's Municipal Code. 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 7 of 24 and shall establish a system of controls to regulate the activities of subordinate officials. 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 inThe City will maintain compliance with the procedures set forth in the City of La Quinta Personnel Manual Section 1.402.2 - Conflicts of Interest and Acceptance of Gifts and other Gratuities of the City of La Quinta Personnel Manualand the City’s Municipal Code Chapter 2.60 Conflicts of Interest. Any questionable activity or relationship shall be reported immediately and Rreporting 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. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Treasurer maintains a listing of financial institutions which are approved for direct investment purposes, as well as. In addition, a list will also be maintained of approved broker/dealers. selected by credit worthiness. Broker/Dealers who desire to become bidders for direct investment transactions must supply the City with the following: ➢ Current audited financial statements; ➢ Proof of Financial Industry Regulatory Authority (FINRA) Certification; ➢ Trading resolution;Proof of State of California registration ➢ Resume of Financial broker; and ➢ Completion of the City of La Quinta Broker/Dealer questionnaire, which contains a certification of having read the City's Investment Policy. The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. The City Treasurer will also contact the following agencies during the verification process: ➢ Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1-800- 289-9999). ➢ State of California Department of Corporations (1-916-445-3062). Formatted: Left, Indent: Hanging: 0.01", Right: 0.67", Line spacing: Multiple 1.07 li 8 of 24 A professional investment manager or management firm, if engaged by the City pursuant to Section X of this policy, may utilize their own list of approved broker/dealers on the condition that any such list is provided to the City upon request. 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 regulationsAn annual review of the financial condition and registrations of approved broker/dealers will be conducted by the City Treasurer or designee. Current audited financial statements and/or SSAE 16 internal control (SOC-1) reports will be maintained on file for each financial institution and broker/dealer with which the City conducts business. Each mutual fund shall provide a prospectus and statement of additional information. Financial Institutions will be required to meet the following criteria in order to receive City funds for deposit or investment (see Appendix D, "Listing of Approved Financial Institutions"): ➢ Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC). ➢ 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. ➢ Disclosure - Each financial institution maintaining invested funds in excess of the FDIC insured amount shall furnish the City a copy of the most recent Call Report. The City shall not invest in excess of the FDIC insured amount in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. PERMISSIBLE DEPOSITS AND INVESTMENTS It is the City’s policy to follow the applicable State Code in regard to allowable securities, and to be sufficiently diversified with regard to security type and issuer. Permissible deposits and investments, as allowed by Chapter 4, Part 1, Division 2, Title 5 (hereinafter cited by §), include, but are not limited to, the following: Checking. Savings. and Sweep Accounts - The City will only maintain checking and savings, accounts with state or national banks, savings associations, federal associations, and/or credit unions in accordance with §53635.2. ➢ Collateralization: Collateral- The amount of the City's deposits or investments not insured by the FDIC shall be collateralized by securities in accordance with California code §53652. In addition, tThe Treasurer may invest in an interest-bearing active deposit account as approved in Formatted: List Paragraph, Indent: Left: 1.13", Hanging: 0", Bulleted + Level: 2 + Aligned at: 1.08" + Indent at: 1.33", Tab stops: 1.38", Left 9 of 24 §53632. The deposit account must be collateralized with securities that are in accordance with §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 §53656. The proposition proportion of the City's share of the deposit account shall be determined in accordance with §53658. Certificates of Deposit (Negotiable and Non-negotiable) - The City may invest in Non- Negotiable and Negotiable Certificates of Deposits (CD) up to 30% of the overall portfolio §53601(i). In no instance shall a CD or combined CD’s with a single issuer exceed the FDIC or NCUSIF insurance limit of $250,000. 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 provides for investments in U.S. Treasury issues and GNMA's of 100% of the portfolio §53601(b). 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) §53601(f). These securities are notmay not be backed by the full faith and credit of the U.S. Government (with the exception of Government National Mortgage Association (GNMA) securities). Publicly ownedExamples of 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), and GNMA securities. The City's Investment Policy allows investment only in securities of GNMA, FNMA, FHLMC, FHLB and FFCB. For Fiscal Year 2018-192019-20, the maximum face amount per issuer is $20 million and the maximum face amount per purchase is $10 million. Prime Commercial Paper - As authorized in §53601(h), a portion of the City's portfolio may be invested in commercial paper of the highest rating as provided for by a nationally recognized statistical rating organization (NRSRO) such as; i.e. Moody’s, Fitch, or S&PStandard & Poor’s (S&P).) There are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. Per state code, "Eligible commercial paper shall have a maximum maturity of 270 days or less. Local agencies, other than counties or a city and county, may invest no more than 25 percent of their moneys in eligible commercial paper. Local agencies, other than counties or city and county, may purchase no more than 10 percent of the outstanding commercial Formatted: Font: Not Bold 10 of 24 paper of any single issuer”. Local Agency Investment Fund (LAIF) - As authorized in §16429.1 and by LAIF procedures, local government agencies are each authorized to invest a maximum of $65 million per account in this investment program administered by the California State Treasurer. The City Treasurer may not invest more than $65 million per account in LAIF. Money Market Mutual Funds - As authorized in §53601(l), 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). Corporate Notes - As authorized in §53601(k), 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: ➢ Maximum 30% of the portfolio; ➢ Maturities shall not exceed five years from date of purchase; ➢ Eligible notes shall be regularly quoted and traded in the marketplace; ➢ Eligible notes shall be rated in a rating category of "AA" or better by an NRSRO; and ➢ The maximum aggregate investment in each issuer shall not exceed $5 million (PAR value). Professionally Managed Account(s)- The City Treasurer may place up to 50% of the portfolio with a professional portfolio management/investment management firm (firm) The firm will be approved by the City Council based upon the City Treasurer's recommendation pursuant to completion of a public request for proposal (RFP). The firm shall have: ➢ An established professional reputation for asset or investment management; ➢ Knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds; ➢ Substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City; ➢ Professional liability (errors and omissions) insurance and fidelity bonding in such amounts as are required by the City; and 11 of 24 ➢ 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 firm shall commit to adhere to the provisions of the City's Investment Policy with the following exceptions: ➢ The firm may be granted the discretion to purchase and sell investment securities in accordance with this Investment Policy; ➢ The firm is not required to adhere to a buy-and-hold policy; and ➢ The firm does not need City Manager or City Treasurer approval to make permissible investments. Local Agency Bonds and California Local Agency Obligations - The City may invest in California local agency obligations pursuant to §53601(a) and §53601(e). 53601(a) pertains to investing in bonds issued by a local agency, or by the department, board, agency or authority of the local agency. 53601(e) pertains to investing in bonds and other defined indebtedness of any local agency, or department, board, agency or authority of the local agency within the State of California. The Agency obligations must be invested in the long-term rating category of A or better by S&P, Moody's or Fitchan NRSRO. In the case of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. In the case of secondary issues, the Treasurer will rely on the approved Broker/Dealers. INVESTMENT POOLS There are three (3) types of investment pools: ➢ State-run pools (e.g., LAIF); ➢ Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools, and Joint Powers Authorities such as the California Asset Management Program (CAMP)); and ➢ Pools that are operated for profit by third parties (e.g. money market funds). The City's Investment Policy permits investment in pools and money market funds as authorized by Government Codes §16429.1, 53601(l) and 53601(p). 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 referred to as the delivery versus payment (DVP) method for the transfer of securities. 12 of 24 INTEREST EARNING DISTRIBUTION POLICY Interest earnings are generated from pooled investments and specific investments. The following provisions apply to the calculation and distribution of interest earnings. 1. Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency, La Quinta Financing Authority, and La Quinta Housing Authority, and to allocate interest earnings as follows: 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. Payment to the General Fund of a management fee equal to 5% of the annual pooled cash fund investment earnings. Payment to each fund of an amount based on the average computed 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. INTERNAL CONTROLS AND INDEPENDENT AUDITOR The City Treasurer shall establish a system of internal controls to accomplish the following objectives: ➢ Safeguard assets; ➢ The orderly and efficient conduct of its business, including adherence to management policies; ➢ Prevention or detection of errors and fraud; ➢ The accuracy and completeness of accounting records; and ➢ Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following: ➢ Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer. ➢ 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. ➢ 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. Formatted: Indent: Left: 1.63", No bullets or numbering 13 of 24 ➢ 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. ➢ 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. ➢ Written confirmation of telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions shall be supported by written communications or electronic confirmations and approved by the appropriate person. Written communications may be via fax or email 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. ➢ 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 audi t of the City's Financial Statements. The independent auditor's letter on internal control over financial reporting and compliance as it pertains to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditor's letter. The auditor's letter, as it pertains, to cash and investment activities and the City Treasurer's response shall be provided to the City's Financial Advisory Commission for their consideration. Following the completion of each annual audit, the independent auditor shall meet with the Financial Advisory Commission and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. See Appendix C, "Segregation of Major Investment Responsibilities." REPORTING STANDARDS The City Treasurer shall submit a monthly quarterly Treasurers Report to the City Council and the Financial Advisory Commission that includes all cash and investments under the authority of the Treasurer. In addition, the City Treasurer or designee shall ensure investment transactions are reported as they occur throughout the quarter. 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; 14 of 24 ➢ Cash and Investments categorized by authorized investments, except for LAIF which will be provided quarterly and show yield and maturity; ➢ Comparison of month end actual holdings to Investment Policy limitations; ➢ Distribution of cash and investment balances by fund; ➢ A two-year list of historical interest rates. FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY The City's Investment Policy does not apply to the following: ➢ Cash and Investments raised from Conduit Debt Financing; ➢ Funds held in trust in the City's name in pension or other post- retirement benefit programs; ➢ Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; and ➢ Short or long term loans made to other entities by the City or Agency, ➢ 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. INVESTMENT OF BOND PROCEEDS The City's Investment Policy shall not 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. 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. The securities held by the City must be in compliance with this Policy at the time of purchase. Due to market conditions, some securities may no longer comply subsequent to the date of purchase, therefore an annual review of the portfolio will be conducted to identify any securities which may have fallen out of compliance. Any major incidences of noncompliance identified during such review will be reported to the Financial Advisory Commission for confirmation of staff recommendation regarding course of action. XVII FINANCIAL ADVISORY COMMISSION - CITY OF LA QUINTA The Financial Advisory Commission (FAC) is composed of seven 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 Commented [RH3]: Formatted: Body Text Formatted: Justified 15 of 24 basis, in conjunction with the Political Reform Act disclosure statutes, or at any time if a change in circumstances warrants, each commissioner 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 FAC. All commissioners shall report annually every June 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 FAC must meet at least quarterly to: ➢ Review at least annually the City's Investment Policy and recommend appropriate changes; ➢ Review at least quarterly the treasury report and note compliance with the Investment Policy as well as adequacy of cash and investments for anticipated obligations; ➢ Receive and consider other reports provided by the City Treasurer; ➢ 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; ➢ Review at least annually the revenue derived from the one percent (1%) transactions and use tax instituted by voters in November 2016 to ensure these funds are used to provide services, programs, and capital projects in the city of La Quinta ➢ Serve as a resource for the City Treasurer on matters such as proposed investments, internal controls, use of or change of financial institutions, custodians, brokers and dealers. The FAC will report to the City Council after each meeting either in person or through correspondence at a regular City Council meeting. See Appendix A: "Financial Advisory Commission Provisions." XVIII INVESTMENT POLICY ADOPTION The City's Investment Policy will be reviewed annually by the City's Financial Advisory Commission and the City Treasurer. The Financial Advisory Commission will forward the Investment Policy with any revisions to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Financial Advisory Commission, City Manager, City Attorney, and City Treasurer to review the Investment Policy and any comments prior to submission to the City Council for their consideration. The Investment Policy shall be adopted by resolution of the City Council annually before the end of June of each year. 16 of 24 Chapter 2.70 FINANCIAL ADVISORY COMMISSION Appendix A Section s: 2.70.0 10 2.70.0 20 2.70.0 30 2.70.0 40 General rules regarding the financial advisory commission. Number of members. Qualifications of members. Powers and duties. 2.70.010 General rules regarding the financial advisory commission. Except as set out below, see Chapter 2.06 for general provisions. 2.70.020 Number of members. The financial advisory commission ("FAC") shall initially consist of seven members appointed by, and serving at the will of the city council. The city council may increase or decrease the number of members from time to time but in no event shall the membership exceed nine members or be less than five members. 2.70.030 Qualifications of members. A. In addition to the qualification requirements set forth in Section 2.06.040 of this code, a minimum of three of the members shall be finance professionals and shall have a verifiable background in finance and/or securities, preferably with knowledge and/or experience in markets, financial controls and accounting for securities. B. For those applying for the professional position, background information will be requested and potential candidates must agree to a background check and verification by the city manager or designee. 2.70.040 Powers and duties. A. The principal functions of the FAC are: 1. Review at least annually the city's investment policy and recommend appropriate changes; 2. Review at least quarterly the 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; 5. Review at least annually the revenue derived from the one percent (1%) transactions and use tax instituted by voters in November 2016 to ensure these funds are used to provide services, programs and capital projects in the city of La Quinta. 17 of 24 6. Serve as a resource for the city treasurer on matters such as proposed investments, internal controls, use of or change of financial institutions, custodians, brokers and dealers. B. The FAC will report to the city council after each meeting either in person or through correspondence at a regular city council meeting. 2.70.050 References to the Investment Advisory Board. If any other chapter(s) or section(s) in this code refers to the Investment Advisory Board, that chapter(s) or section(s) shall be deemed to refer to the Financial Advisory Commission established by the ordinance amending chapter 2.70 of this code 18 of 24 Section s: City of La Quinta Municipal Code Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS Appendix B 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 California 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, which, for purposes of this chapter, is defined in Section 2.12.010 of this code. (Ord. 529 § 1, 2015; Ord. 2 § 1, 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 the city council adopted city investment policy and any provision of state law relating to the investing of general city funds, including, but not limited to, Sections 53601 and 53635 of the California Government Code, as said sections now read or may hereafter be amended, from moneys in the city treasurer's custody which are not required for the immediate necessities of the city and as he or she may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982) 3.08.030 Sales of Securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord.2 § 1 (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) 19 of 24 3.08.050 Reports. The city treasurer shall make a quarterly report to the city council of all investments made pursuant to the authority delegated in this chapter and as permitted by Section 53646(b)(1) of the Government Code. (Ord. 529 § 1, 2015; Ord. 2 § 1, 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 city council adopted investment policy and terms of any state law, including, but not limited to, Section 53608 of the Government Code, as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. (Ord. 529 § 1, 2015; Ord. 2 § 1, 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 36524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (, 1982) 20 of 24 Appendix C SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Responsible Parties 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 Financial Advisory Commission, Financial Services Analyst and City Treasurer City Manager and City Attorney City Council City Treasurer City Treasurer or Financial Services Analyst City Manager or his/her designee City Treasurer, Financial Services Analyst, or City Manager Senior Accountant or Financial Services AnalystAccountant 21 of 24 Senior Accountant or Accountant City Treasurer and Financial Services Analyst Financial Services Analyst Senior Accountant or Financial Services Analyst Senior Accountant or Management Assistant Third Party Custodian External Auditor 22 of 24 Appendix D Listing of Approved Financial Institutions Banking Services(1) Wells Fargo Bank, Government Services, Los Angeles, CA (Banking Services) Rabobank N.A., Government Banking Group, Roseville, CA (Collateralized Bank Deposits) Custodian Services The Bank of New York Mellon/Pershing LLC Deferred Compensation International City/County Management Association (ICCMA) Retirement Corporation Broker/Dealer Services(1) Bank of America Securities/Merrill Lynch Morgan Stanley CitiGroup First Empire Securities Stifel, Nicolaus, & Company, Inc.(2) Government Pool State of California Local Agency Investment Fund (LAIF) Bond Trustee US Bank (31) Other Post-Employment Benefits (OPEB) Trust California Employers' Retirement Benefits Trust (CERBT)/CalPERS (1) RFI for broker/dealer services and RFP for banking have been issued by the City in 2019. List may change during the 2019/20 fiscal year subject to FAC review and City Council approval. (2) Stifel acquired the City’s former broker, First Empire Securities, in 2019 and the name change was approved by City Council in March 2019. Formatted Table Formatted: Superscript Formatted: Superscript Formatted: Superscript Formatted: Superscript Formatted: Indent: Left: 0.14", Right: 0.9", Space Before: 6 pt, After: 18 pt Formatted: Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.14" + Indent at: 0.64" Formatted: Right: 0.9", Space Before: 6 pt, After: 6 pt, Line spacing: single, Numbered + Level: 1 + Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left + Aligned at: 0.14" + Indent at: 0.64" Formatted: Normal, Indent: Left: 0", Space Before: 0 pt, Line spacing: single 23 of 24 (31) US Bank is the fiscal agent for all of the fo Project Area 1&2; 2001 RDA Project Area 1; 2002 RDA Project Area 1; 2003 RDA Project Area 1; 2004 Local Agency Revenue; 2013 Successor Agency; and 2016 Successor Agency to the La Quinta RDA Assessment Districts. Formatted: Space Before: Auto, After: Auto 24 of 24 Appendix E 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. 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 risk is liquidity risk. Instruments with 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 additio nal 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 25 of 24 investment management. The Government Code contains specific provisions regarding the types of investments and practices permitted after considering the broad requirement of preserving principal and maintaining liquidity before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust. Chapter II. Fund Management from the Local Agency Investment Guidelines Issued by California Debt and Investment Advisory Commission 26 of 24 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 27 of 24 with an exchange of a signed receipt for the securities. DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non-interest- bearing money market instruments that are issued at discount and redeemed at maturity for full face value 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. 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. 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. FLBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi- annual coupons. Interest is calculated on a 360-day, 30-day month basis. 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- 28 of 24 day month basis. 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), and 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 3,000 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, the minimum transaction is $5,000., in multiples of $1,000 above that, with a maximum balance of $50,000,000 for any agency. and the City follows the state guidance for maximum total balance. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to Commented [RH4]: 29 of 24 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 establish 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. NRSRO (NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION): A credit rating agency recognized by the Securities and Exchange Commission (SEC). Examples include Fitch Ratings, Inc., Moody’s Investor’s Services, Inc., and S&P Global Ratings, among others. 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. 30 of 24 RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO) and REVERSE REPURCHASE AGREEMENTS (RRP or RevRepo): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use 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" 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 fol lowing the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. SSAE 16: The Statement on Standards for Attestation Engagements No. 16 (SSAE 16) is a set of auditing standards and guidance on using the standards, published by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) for redefining and updating how service companies report on compliance controls. The Service Organizational Control report (SOC-1) contains internal controls over financial reporting and is used by auditors and office controllers. 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, and 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. Formatted: Font: Bold 31 of 24 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 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 2019/20 INVESTMENT POLICY Fiscal year 2019/2020 Table of Contents Section Topic Executive Summary Page 2 I General Purpose 3 II Investment Policy 3 III Scope 3 IV Objectives 3 V Maximum Maturities 5 VI Prudence 5 VII Authority 5 VIII Ethics and Conflicts of Interest 6 IX Authorized Financial Dealers and Institutions 6 X Permissible Deposits and Investments 7 XI Investment Pools 9 XII Payment and Custody 10 XIII Interest Earning Distribution Policy 10 XIV Internal Controls and Independent Auditors 10 XV Reporting Standards 12 XVI Financial Assets and Investment Activity Not subject to this Policy 12 XVII Investment of Bond Proceeds 12 XVIII Financial Advisory Commission – City of La Quinta 12 XIX Investment Policy Adoption 13 Appendices Topic Page A City of La Quinta Municipal Code Ordinance 2.70 – Financial Advisory Commission 14 B City of La Quinta Municipal Code Ordinance 3.08 – Investment of Moneys and Funds 15 C Segregation of Major Investment Responsibilities 17 D Listing of Approved Financial Institutions 18 E Investment Management Process and Risk 19 F Glossary 20 CITY OF LA QUINTA Investment Policy Fiscal Year 2019/2020 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 (the “City”) 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, with the exception of bond proceeds and those noted in section III herein. It is the City's policy to deposit and invest public funds in a manner that shall provide safety of principal, liquidity to meet all of the City’s obligations and requirements that may be reasonably anticipated, and a risk-based market rate of return. Authority to manage the City's investment portfolio is derived from the City Municipal Code. 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 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 Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual basis, before the end of each fiscal year (June). City of La Quinta Statement of Investment Policy July 1, 2019 through June 30, 2020. Adopted by the City Council on XXXX,XX,XXXX I GENERAL PURPOSE The general purpose of this document is to provide the rules and standards that must be followed in administering the City of La Quinta's deposits and investments. II INVESTMENT POLICY It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall conform to all State and local statutes governing the investment of public funds and set forth the permissible deposits and investments of the City's funds and the limitations thereon. III SCOPE Except as further detailed in Sections XVI and XVII, this Investment Policy applies to all deposits and investments of the City of La Quinta, the Successor Agency to the 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" or the “Agency”). These funds are reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within the following fund types:  General  Special Revenue  Capital Projects  Debt Service  Enterprise  Internal Service  Trust and Agency  Any new fund types and fund(s) that may be created. Financial assets and investment activity not subject to this policy The City's Investment Policy does not apply to the following:  Cash and Investments raised from Conduit Debt Financing;  Funds held in trust in the City's name in pension or other post-retirement benefit programs;  Cash and Investments held in lieu of retention by banks or other financial institutions for construction projects; and  Short or long term loans made to other entities by the City or Agency,  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.  Investment of bond proceeds The City's Investment Policy shall not 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. 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. IV OBJECTIVES The objectives of the City's investment activity, in order of priority and importance, are: 1. Safety of Principal Safety of principal is the foremost objective of the City's investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of principal of the overall portfolio in accordance with the permissible deposits and investments. The City shall endeavor to preserve its investment principal by making only permissible deposits and investments, undertaken in a controlled manner to minimize the possibility of loss or misappropriation through malfeasance or otherwise. Investments not backed by the full faith and credit of the United States Government shall be diversified by allocating assets between different types of permissible investments, maturities, and issuers as a means to mitigate credit risk and interest rate risk. a. Credit Risk is the risk of loss from the failure of the security issuer or backer. Credit risk may be mitigated by:  Limiting investments to investment grade securities as permitted in Section X; and  Diversifying the issuers of the securities in the investment portfolio so that potential losses due to issuer failure or individual securities downgrades may be minimized. b. Interest Rate Risk is the risk that market values of securities in the portfolio will decline due to changes in general interest rates. Interest rate risk may be mitigated by:  Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and  Investing operating funds primarily in shorter-term securities. c. Liquidity Risk is the risk that a security cannot be liquidated because of its unique features or structure or because it is thinly traded. Liquidity risk is not a material issue for the City's portfolio because of the permissible deposits and investments (see Section X). A discussion of the City's investment process and risk is presented in Appendix E. 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 generally hold securities and other investments to maturity. Accordingly, securities may be sold prior to maturity under certain circumstances as follow:  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.  When a sale/repurchase is fiscally advantageous based on market conditions and fits the needs of the portfolio 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. Performance Standards: As a basis for comparison only, the Treasurer's quarterly 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. The investment portfolio shall be designed with the objective of obtaining a market rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. V MAXIMUM MATURITIES It is the City's policy to generally hold securities and other investments until maturity. This buy- and-hold policy shall not prevent the sale of a security as listed in section IV.3 The general buy-and-hold strategy 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. The City shall follow Title 5 of the California Government Code §53601 (the “State Code”) regarding maximum maturities, in that “no investment shall be made in any security…that at the time of the investment has a term remaining to maturity in excess of five years”. VI PRUDENCE and FIDUCIARY DUTY The City shall follow the State Code §53600.3 regarding fiduciary duty and the Prudent Investor Standard as follows: Except as provided in subdivision (a) of Section 27000.3, all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. VII AUTHORITY Authority to manage the City's investment portfolio is derived from section 3.08 of the City's Municipal Code. 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. VIII 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. The City will maintain compliance with the procedures set forth in the City of La Quinta Personnel Manual Section 2.2 - Conflicts of Interest and Acceptance of Gifts and other Gratuities of and the City’s Municipal Code Chapter 2.60 Conflicts of Interest. Any questionable activity or relationship shall be reported immediately, and 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, as well as, a list of approved broker/dealers. 1. Broker/Dealers who desire to become bidders for direct investment transactions must supply the City with the following:  Current audited financial statements;  Proof of Financial Industry Regulatory Authority (FINRA) Certification;  Proof of State of California registration  Resume of Financial broker; and  Completion of the City of La Quinta Broker/Dealer questionnaire, which contains a certification of having read the City's Investment Policy. The City Treasurer shall evaluate the documentation submitted by the broker/dealer and independently verify existing reports on file for any firm and individual conducting investment related business. The City Treasurer will also contact the following agencies during the verification process:  Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1-800- 289-9999).  State of California Department of Corporations (1-916-445-3062). A professional investment manager or management firm, if engaged by the City pursuant to Section X of this policy, may utilize their own list of approved broker/dealers on the condition that any such list is provided to the City upon request. All Broker/Dealers and financial institutions that provide investment services will be subject to City Council approval. An annual review of the financial condition and registrations of approved broker/dealers will be conducted by the City Treasurer or designee. Current audited financial statements and/or SSAE 16 internal control (SOC-1) reports will be maintained on file for each financial institution and broker/dealer with which the City conducts business. 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 D, "Listing of Approved Financial Institutions"):  Insurance - Public Funds shall be deposited only in financial institutions having accounts insured by the Federal Deposit Insurance Corporation (FDIC).  Disclosure - Each financial institution maintaining invested funds in excess of the FDIC insured amount shall furnish the City a copy of the most recent Call Report. The City shall not invest in excess of the FDIC insured amount in banking institutions which do not disclose to the city a current listing of securities pledged for collateralization in public monies. X PERMISSIBLE DEPOSITS AND INVESTMENTS It is the City’s policy to follow the applicable State Code in regard to allowable securities, and to be sufficiently diversified with regard to security type and issuer. Permissible deposits and investments, as allowed by Chapter 4, Part 1, Division 2, Title 5 (hereinafter cited by §), include, but are not limited to, the following: Checking. Savings. and Sweep Accounts - The City will only maintain checking and savings, accounts with state or national banks, savings associations, federal associations, and/or credit unions in accordance with §53635.2.  Collateralization: Collateral- The amount of the City's deposits or investments not insured by the FDIC shall be collateralized by securities in accordance with California code §53652. The Treasurer may invest in an interest-bearing active deposit account as approved in §53632. The deposit account must be collateralized with securities that are in accordance with §53632.5. In addition, the market value of the collateralized securities must be maintained in accordance with §53652, and be held by a custodian in accordance with the requirements of §53656. The proportion of the City's share of the deposit account shall be determined in accordance with §53658. Certificates of Deposit (Negotiable and Non-negotiable) - The City may invest in Non- Negotiable and Negotiable Certificates of Deposits (CD) up to 30% of the overall portfolio §53601(i). In no instance shall a CD or combined CD’s with a single issuer exceed the FDIC or NCUSIF insurance limit of $250,000. U.S. Treasury Bills. Notes. and Bonds - The City may invest in U.S. Treasury bills, notes, and bonds directly issued and backed by the full faith and credit of the U.S. Government. The City's Investment Policy provides for investments in U.S. Treasury issues of 100% of the portfolio §53601(b). 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) §53601(f). These securities may not be backed by the full faith and credit of the U.S. Government (with the exception of Government National Mortgage Association (GNMA) securities). Examples of GSE's include Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation (FHLMC) Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal Land Bank (FLB), Federal Intermediate Credit Bank (FICB), and GNMA securities. The City's Investment Policy allows investment only in securities of GNMA, FNMA, FHLMC, FHLB and FFCB. For Fiscal Year 2019-20, the maximum face amount per issuer is $20 million and the maximum face amount per purchase is $10 million. Prime Commercial Paper - As authorized in §53601(h), a portion of the City's portfolio may be invested in commercial paper of the highest rating as provided for by a nationally recognized statistical rating organization (NRSRO) such as Moody’s, Fitch, or Standard & Poor’s (S&P). There are a number of other qualifications regarding investments in commercial paper based on the financial strength of the corporation and the size of the investment. Per state code, "Eligible commercial paper shall have a maximum maturity of 270 days or less. Local agencies, other than counties or a city and county, may invest no more than 25 percent of their moneys in eligible commercial paper. Local agencies, other than counties or city and county, may purchase no more than 10 percent of the outstanding commercial paper of any single issuer”. Local Agency Investment Fund (LAIF) - As authorized in §16429.1 and by LAIF procedures, local government agencies are each authorized to invest a maximum of $65 million per account in this investment program administered by the California State Treasurer. The City Treasurer may not invest more than $65 million per account in LAIF. Money Market Mutual Funds - As authorized in §53601(l), 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). Corporate Notes - As authorized in §53601(k), 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:  Maximum 30% of the portfolio;  Maturities shall not exceed five years from date of purchase;  Eligible notes shall be regularly quoted and traded in the marketplace;  Eligible notes shall be in a rating category of "AA" or better by an NRSRO; and  The maximum aggregate investment in each issuer shall not exceed $5 million (PAR value). Professionally Managed Account(s)- The City Treasurer may place up to 50% of the portfolio with a professional portfolio management/investment management firm (firm) The firm will be approved by the City Council based upon the City Treasurer's recommendation pursuant to completion of a public request for proposal (RFP). The firm shall have:  An established professional reputation for asset or investment management;  Knowledge and working familiarity with State and Federal laws governing and restricting the investment of public funds;  Substantial experience providing investment management services to local public agencies whose investment policies and portfolio size are similar to those of the City;  Professional liability (errors and omissions) insurance and fidelity bonding in such amounts as are required by the City; and  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 firm shall commit to adhere to the provisions of the City's Investment Policy with the following exceptions:  The firm may be granted the discretion to purchase and sell investment securities in accordance with this Investment Policy;  The firm is not required to adhere to a buy-and-hold policy; and  The firm does not need City Manager or City Treasurer approval to make permissible investments. Local Agency Bonds and California Local Agency Obligations - The City may invest in California local agency obligations pursuant to §53601(a) and §53601(e). 53601(a) pertains to investing in bonds issued by a local agency, or by the department, board, agency or authority of the local agency. 53601(e) pertains to investing in bonds and other defined indebtedness of any local agency, or department, board, agency or authority of the local agency within the State of California. The Agency obligations must be invested in the long-term rating category of A or better by an NRSRO. In the case of an initial public offering, including refinancings, the Treasurer may purchase directly from the Bond Underwriter. In the case of secondary issues, the Treasurer will rely on the approved Broker/Dealers. XI INVESTMENT POOLS There are three (3) types of investment pools:  State-run pools (e.g., LAIF);  Pools that are operated by a political subdivision where allowed by law and the political subdivision is the trustee (e.g., County Pools, and Joint Powers Authorities such as the California Asset Management Program (CAMP)); and  Pools that are operated for profit by third parties (e.g. money market funds). The City's Investment Policy permits investment in pools and money market funds as authorized by Government Codes §16429.1, 53601(l) and 53601(p). 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 referred to 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. The following provisions apply to the calculation and distribution of interest earnings. 1. Pooled Investments - It is the general policy of the City to pool all available operating cash of the City of La Quinta, Successor Agency to the City of La Quinta Redevelopment Agency, La Quinta Financing Authority, and La Quinta Housing Authority, and to allocate interest earnings as follows: Payment to each fund of an amount based on the average computed 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 in that particular fund. XIV INTERNAL CONTROLS AND INDEPENDENT AUDITOR The City Treasurer shall establish a system of internal controls to accomplish the following objectives:  Safeguard assets;  The orderly and efficient conduct of its business, including adherence to management policies;  Prevention or detection of errors and fraud;  The accuracy and completeness of accounting records; and  Timely preparation of reliable financial information. While no internal control system, however elaborate, can guarantee absolute assurance that the City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable assurance that management of the investment function meets the City's objectives. The internal controls shall address the following:  Control of collusion. Collusion is a situation where two or more employees are working in conjunction to defraud their employer.  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.  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.  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.  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.  Written confirmation of telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions shall be supported by written communications or electronic confirmations and approved by the appropriate person. Written communications may be via fax or email 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.  Development of a wire transfer agreement with the City's bank and third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. The system of internal controls developed by the City shall be reviewed annually by the independent auditor in connection with the annual audit of the City's Financial Statements. The independent auditor's letter on internal control over financial reporting and compliance as it pertains to cash and investments, if any, shall be directed to the City Manager who will direct the City Treasurer to provide a written response to the independent auditor's letter. The auditor's letter, as it pertains, to cash and investment activities and the City Treasurer's response shall be provided to the City's Financial Advisory Commission for their consideration. Following the completion of each annual audit, the independent auditor shall meet with the Financial Advisory Commission and discuss the auditing procedures performed and the review of internal controls for cash and investment activities. See Appendix C, "Segregation of Major Investment Responsibilities." XV REPORTING STANDARDS The City Treasurer shall submit a quarterly Treasurers Report to the City Council and the Financial Advisory Commission that includes all cash and investments under the authority of the Treasurer. In addition, the City Treasurer or designee shall ensure investment transactions are reported as they occur throughout the quarter. The Treasurer's Report shall summarize cash and investment activity and changes in balances and include the following:  A certification by the City Treasurer;  A listing of purchases and sales/maturities of investments;  Cash and Investments categorized by authorized investments, except for LAIF which will be provided quarterly and show yield and maturity;  Comparison of month end actual holdings to Investment Policy limitations;  A two-year list of historical interest rates. XVI REVIEW OF INVESTMENT PORTFOLIO The securities held by the City must be in compliance with this Policy at the time of purchase. Due to market conditions, some securities may no longer comply subsequent to the date of purchase, therefore an annual review of the portfolio will be conducted to identify any securities which may have fallen out of compliance. Any major incidences of noncompliance identified during such review will be reported to the Financial Advisory Commission for confirmation of staff recommendation regarding course of action. XVII FINANCIAL ADVISORY COMMISSION - CITY OF LA QUINTA The Financial Advisory Commission (FAC) is composed of seven 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 commissioner 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 FAC. All commissioners shall report annually every June 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 FAC must meet at least quarterly to:  Review at least annually the City's Investment Policy and recommend appropriate changes;  Review at least quarterly the treasury report and note compliance with the Investment Policy as well as adequacy of cash and investments for anticipated obligations;  Receive and consider other reports provided by the City Treasurer;  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;  Review at least annually the revenue derived from the one percent (1%) transactions and use tax instituted by voters in November 2016 to ensure these funds are used to provide services, programs, and capital projects in the city of La Quinta  Serve as a resource for the City Treasurer on matters such as proposed investments, internal controls, use of or change of financial institutions, custodians, brokers and dealers. The FAC will report to the City Council after each meeting either in person or through correspondence at a regular City Council meeting. See Appendix A: "Financial Advisory Commission Provisions." XVIII INVESTMENT POLICY ADOPTION The City's Investment Policy will be reviewed annually by the City's Financial Advisory Commission and the City Treasurer. The Financial Advisory Commission will forward the Investment Policy with any revisions to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Financial Advisory Commission, City Manager, City Attorney, and City Treasurer to review the Investment Policy and any comments prior to submission to the City Council for their consideration. The Investment Policy shall be adopted by resolution of the City Council annually before the end of June of each year. City of La Quinta Municipal Code Chapter 2.70 FINANCIAL ADVISORY COMMISSION Appendix A 2.70.010 General rules regarding the financial advisory commission. Except as set out below, see Chapter 2.06 for general provisions. 2.70.020 Number of members. The financial advisory commission ("FAC") shall initially consist of seven members appointed by, and serving at the will of, the city council. The city council may increase or decrease the number of members from time to time but in no event shall the membership exceed nine members or be less than five members. 2.70.030 Qualifications of members. A. In addition to the qualification requirements set forth in Section 2.06.040 of this code, a minimum of three of the members shall be finance professionals and shall have a verifiable background in finance and/or securities, preferably with knowledge and/or experience in markets, financial controls and accounting for securities. B. For those applying for the professional position, background information will be requested, and potential candidates must agree to a background check and verification by the city manager or designee. 2.70.040 Powers and duties. A. The principal functions of the FAC are: 1. Review at least annually the city's investment policy and recommend appropriate changes; 2. Review at least quarterly the 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; 5. Review at least annually the revenue derived from the one percent (1%) transactions and use tax instituted by voters in November 2016 to ensure these funds are used to provide services, programs and capital projects in the city of La Quinta. 6. Serve as a resource for the city treasurer on matters such as proposed investments, internal controls, use of or change of financial institutions, custodians, brokers and dealers. B. The FAC will report to the city council after each meeting either in person or through correspondence at a regular city council meeting. 2.70.050 References to the Investment Advisory Board. If any other chapter(s) or section(s) in this code refers to the Investment Advisory Board, that chapter(s) or section(s) shall be deemed to refer to the Financial Advisory Commission established by the ordinance amending chapter 2.70 of this code Appendix B City of La Quinta Municipal Code Chapter 3.08 INVESTMENT OF MONEYS AND FUNDS 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 California 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, which, for purposes of this chapter, is defined in Section 2.12.010 of this code. (Ord. 529 § 1, 2015; Ord. 2 § 1, 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 the city council adopted city investment policy and any provision of state law relating to the investing of general city funds, including, but not limited to, Sections 53601 and 53635 of the California Government Code, as said sections now read or may hereafter be amended, from moneys in the city treasurer's custody which are not required for the immediate necessities of the city and as he or she may deem wise and expedient, and to sell or exchange for other eligible securities and reinvest the proceeds of the securities so purchased. (Ord. 529 § 1, 2015; Ord. 2 § 1, 1982) 3.08.030 Sales of Securities. From time to time the city treasurer shall sell the securities in which city moneys have been invested pursuant to this chapter, so that the proceeds may, as appropriate, be applied to the purchase for which the original purchase money may have been designated or placed in the city treasury. (Ord.2 § 1 (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) 3.08.050 Reports. The city treasurer shall make a quarterly report to the city council of all investments made pursuant to the authority delegated in this chapter and as permitted by Section 53646(b)(1) of the Government Code. (Ord. 529 § 1, 2015; Ord. 2 § 1, 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 city council adopted investment policy and terms of any state law, including, but not limited to, Section 53608 of the Government Code, as it now reads or may hereafter be amended. In accordance with said section, the city treasurer shall take from the institution or depository a receipt for the securities so deposited and shall not be responsible for the securities delivered to and receipted for by the institution or depository until they are withdrawn therefrom by the city treasurer. (Ord. 529 § 1, 2015; Ord. 2 § 1, 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 36524 of the Government code and any other applicable provisions of law. (Ord. 2 § 1 (, 1982) Appendix C SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES Function Responsible Parties Develop and recommend modifications to the City's formal Investment Policy City Treasurer, Financial Services Analyst, and Financial Advisory Commission Review City's Investment Policy and recommend City Council action City Manager and City Attorney Adopt formal Investment Policy City Council Implement formal Investment Policy City Treasurer Review financial institutions and select investments City Treasurer or Financial Services Analyst Acknowledge investment selections City Manager or his/her designee Execute investment transactions City Manager, City Treasurer, or Financial Services Analyst Confirm wires Senior Accountant or Accountant Record investment transactions in City's accounting records Senior Accountant or Accountant Investment certification- match broker confirmation to City's investment records City Treasurer or Financial Services Analyst Reconcile investment records to accounting records and bank statements Financial Services Analyst Reconcile investment records to treasurer's report of investments Senior Accountant or Financial Services Analyst Security of investments at City Senior Accountant or Management Assistant Security of investments outside of City Third Party Custodian Review internal control procedures External Auditor Appendix D Listing of Approved Financial Institutions Banking Services(1) Wells Fargo Bank, Government Services, Los Angeles, CA (Banking Services) Rabobank N.A., Government Banking Group, Roseville, CA (Collateralized Bank Deposits) Custodian Services The Bank of New York Mellon/Pershing LLC Deferred Compensation International City/County Management Association (ICCMA) Retirement Corporation Broker/Dealer Services(1) Bank of America Securities/Merrill Lynch Morgan Stanley CitiGroup Stifel, Nicolaus, & Company, Inc.(2) Government Pool State of California Local Agency Investment Fund (LAIF) Bond Trustee US Bank (3) Other Post-Employment Benefits (OPEB) Trust Pension Trust California Employers' Retirement Benefits Trust (CERBT)/CalPERS Public Agency Retirement Services (PARS) (1) RFI for broker/dealer services and RFP for banking services have been issued by the City in 2019. List may change during the 2019/20 fiscal year subject to FAC review City Council approval. (2) Stifel acquired the City’s former broker, First Empire Securities, in 2019 and the name change was approved by City Council in March 2019. (3) US Bank is the fiscal agent for all of the following bonds: 1998 RDA Project Area 1&2; 2001 RDA Project Area 1; 2002 RDA Project Area 1; 2003 RDA Project Area 1; 2004 Local Agency Revenue; 2013 Successor Agency; and 2016 Successor for Agency to the La Quinta RDA Assessment Districts Appendix E 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. 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 risk is liquidity risk. Instruments with 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. The Government Code contains specific provisions regarding the types of investments and practices permitted after considering the broad requirement of preserving principal and maintaining liquidity before seeking yield. These provisions are intended to promote the use of reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio worthy of public trust. Chapter II. Fund Management from the Local Agency Investment Guidelines Issued by California Debt and Investment Advisory Commission 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 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 at discount and redeemed at maturity for full face value 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. 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. 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. FLBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi- annual coupons. Interest is calculated on a 360-day, 30-day month basis. 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. 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), and Tennessee Valley Authority notes (TVA'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 3,000 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, the minimum transaction is $5,000., and the City follows the state guidance for maximum total balance. The City is restricted to a maximum of ten transactions per month. It offers high liquidity because deposits can be converted to cash in 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-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 establish 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. NRSRO (NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION): A credit rating agency recognized by the Securities and Exchange Commission (SEC). Examples include Fitch Ratings, Inc., Moody’s Investor’s Services, Inc., and S&P Global Ratings, among others. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of all cash and securities under the direction of the City Treasurer, including Bond Proceeds. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC) registered securities broker- dealers, banks and a few unregulated firms. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO) and REVERSE REPURCHASE AGREEMENTS (RRP or RevRepo): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use 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. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. SSAE 16: The Statement on Standards for Attestation Engagements No. 16 (SSAE 16) is a set of auditing standards and guidance on using the standards, published by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) for redefining and updating how service companies report on compliance controls. The Service Organizational Control report (SOC-1) contains internal controls over financial reporting and is used by auditors and office controllers. 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, and 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 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. HAND OUTS FAC Special MEETING April 10, 2019 POWER POINTS FAC Special MEETING April 10, 2019 4/10/2019 1 Financial Advisory Commission Special Meeting April 10, 2019 Financial Advisory Commission Special Meeting April 10, 2019 B1 – Approve the Proposed Uses of Measure G Sales Tax Funds within the 2019/20 Capital Improvement Program 4/10/2019 2 Measure G Summary •1% increase in revenue from 2018/19 to 2019/20 –18/19 at $10,145,000 –19/20 at $10,246,500 •8 projects underway/funded •4 projects proposed for 2019/20 –Total budget $5,580,116 •Remaining funds for police services/reserves –$4,666,384 2019/20 Project •North La Quinta Landscape Improvements –$3,859,103 –4th year of the 5 year project –Total investment to date $4,682,189 –Measure G portion of investment $3,932,189 4/10/2019 3 2019/20 Project •Corporate Yard Facility –Measure G $411,013 –Space planning for Phase II 19/20 Project •Village Art Plaza Promenade –Measure G Investment $310,000 –Total Cost $510,000 –Connect museum and lumber yard with vacant lot to the East 4/10/2019 4 19/20 Project •Highway 111 Corridor Area Improvements –Measure G $1,000,000 –75% of sales tax revenue –CV Link connectivity, opportunities –Tourism, retail planning, community identity Thank You 4/10/2019 5 Financial Advisory Commission Special Meeting April 10, 2019 B2 – Review and Approve Accounts Receivable Write-Off and Unclaimed Property Policy Accounts Receivables and Refunds ‐Receivables • Cashier/Technician • Cash Reconciliation • Deposit Verification • Bank Reconciliation ‐Refunds • Cashier/Technician • Supervisor Approval •Accounts Payable • Supervisor Approval • Bank Reconciliation •Escheatment 4/10/2019 6 Write‐Offs & Under/Over Payments ‐Write‐Offs • Not available now • Overstate A/R balances • Some debts are uncollectable • Limits based on Purchasing Policy ‐Under/Over Payments • Not available now • Under $5, write‐off • Over up to $15, keep unless refund is requested 16/17 ‐ 57 Checks, Totaling $408.57 17/18 ‐ 44 Checks, Totaling $289.20 18/19 YTD – 48 Checks, Totaling $281.33 Discussion and Questions Thank You 4/10/2019 7 Financial Advisory Commission Special Meeting April 10, 2019 B3 – 2018/19 Third Quarter Budget Report 3rd Quarter Overview Sales tax revenue State reporting resolved State mandates and revenue reductions Assessment District Bond closure Capital Improvement & Grant Adjustments Inclement weather impacting operations Year‐to‐date budget summary 4/10/2019 8 General Fund 3rd Quarter Adjustment Requests Revenue Expenses Sales Tax $400,000 Measure G Tax 800,000 Assessment District 114,250 Various Fees/Services 11,000 Legal Services 50,000 Camera Survey 30,000 CIP Projects (2) 290,000 SilverRock Operations 400,000 Gas Tax Operations 168,5000 Totals $1,325,250 $938,500 Updated revenue projections Foundation for 2019/20 Assessment District Bond closure Extensive record requests Project costs Weather impacts State revenue deferred Year‐to‐Date Summary General Fund Current Budget Revenues Original Budget 52,297,400 Capital Carryovers 4,996,815 Operational Carryovers 2,186,500 1st Quarter Adjustments, Reserves 295,000 Fire Positions, Fire Property Taxes 90,600 Measure G Reserves (SRR Park) 1,300,000 2nd Quarter Adjustments 1,997,000 Pension Trust Reserves 6,540,000 Measure G Reserves (Xpark) 860,000 3rd Quarter Adjustments 1,325,250 Total Revenues 71,888,565 Expenditures Original Budget 51,153,413 Capital Carryovers 4,996,815 Operational Carryovers 2,186,500 1st Quarter Adjustments 295,000 Fire Positions (2) 90,600 SilverRock Event Space 1,300,000 2nd Quarter Adjustments 147,213 Pension Trust 6,540,000 Xpark Enhancements 860,000 3rd Quarter Adjustments 938,500 Total Expenditures 68,508,041 Budget Surplus 3,380,524 Measure G Reserves (2,598,887) Adjusted Budget Surplus 781,637 4/10/2019 9 Other Fund Adjustments Capital Projects Grants received, total of $18,000 State pass through payment Assessment District Bond closure Supplemental pension plan Fund Revenues Expenses Gas Tax Fund (201) * - - Library and Museum Fund (202) (20,000) - Development Agreement Fund (217) 30,000 30,000 Emergency Management Program Fund (226) 12,000 12,000 State Homeland Security Programs Fund (227) 6,000 6,000 CASp Fund, AB 1379 (230) - 1,500 Capital Improvement Fund (401) 260,000 260,000 SilverRock Golf Resort (601)* - - 2000-1 Assessment District Funds (740 & 741) 144,651 PARS Supplemental Pension Trust Fund (760) 800 12,850 TOTAL ADJUSTMENTS 288,800$ 467,001$ * Revenue adjustments result in no overall increase. 2018/19 Third Quarter Adjustment Requests (Special Funds) Summary of Adjustment Requests Revenues increased by $1,614,050 $800,000 Measure G reserves Expenses increased by $1,389,001 4/10/2019 10 Additional Discussions or Questions Financial Advisory Commission Special Meeting April 10, 2019 S1 – Discuss Fiscal Year 2019/20 Investment Policy 4/10/2019 11 Annual Update •18/19 Policy certified by California Municipal Treasurers Association •Some reviewer suggestions were incorporated into the draft for 19/20 •No new regulatory changes for 19/20 Overview of Changes •Moved verbiage or added headings –Section III ‐ updated to include funds not under the scope of the policy (formerly sections XVI and XVII) –Section X ‐ updated with a new heading and information formerly in IX •Section IX (updated) and Section XVI (new) ‐ annual review of approved broker list and portfolio 4/10/2019 12 Overview of Changes •Section VIII, XI, and Appendix C ‐ updated with correct references to other codes, policies, or job titles •Section X and Glossary ‐ removed reference to Sallie Mae •Section XII – removed reference to a process that is no longer relevant •Appendix D ‐ footnoted to reflect ongoing RFP and RFIs Thank You 4/10/2019 13 Financial Advisory Commission Special Meeting April 10, 2019 D1 – Highway 111 Corridor Area Plan •Survey available online –Link on home page under “news” •Up to 3 FAC Commissioners may attend •3‐day charrette on –Location: 78920 Highway 111, La Quinta –April 24 to 26 (Wednesday – Friday) •12:00noon inspirational talks •6:00PM input from community 4/10/2019 14 Discussion and Questions Thank You Financial Advisory Commission Special Meeting April 10, 2019 D2 – Proposals for Banking & Merchant Services Update 4/10/2019 15 •6 proposals received •Wells Fargo ‐ Interviewed •Opus Bank •Bank of the West ‐ Interviewed •US Bank •Bank of America •East West Bank ‐ Interviewed •2nd Interview of top 2 banks will be in late April or early May •City Council recommendation on 5/21/19 Financial Advisory Commission Special Meeting April 10, 2019 D3 – Proposals for Broker Services Update 4/10/2019 16 Financial Advisory Commission Next Regular Quarterly Meeting is on May 15, 2019 A Special Meeting will be held on June 5, 2019