HomeMy WebLinkAbout8 Revised investment policy Agenda Item #
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Public Utility District
MEMORANDUM
To: Board of Directors
From: Mary Chapman, Administrative Services Manager/Treasurer
Date: December 14, 2007
Subject: ADOPTING A REVISED INVESTMENT POLICY
1. WHY THIS MATTER IS BEFORE THE BOARD
The Board last updated its investment policy on December 20, 2006 in resolution #2006-33. It
was the intent of the Board that the investment policy would be reviewed and adopted on an
annual basis.
2. HISTORY
The Governmental Accounting Standards Board in their GASB 40 pronouncement described the
reporting requirements for a local government's investments and also requires the disclosure of
the Board's policy for addressing specific risks relating to investing public funds. In resolution
#2006-33 the Board made significant changes to its previous investment policy to comply with
the requirements of GASB 40.
Section 53607 of the Government Code says:
"The authority of the legislative body to invest or to reinvest funds of a local agency, or to sell or
exchange securities so purchased, may be delegated for a one-year period by the legislative
body to the treasurer of the local agency, who shall thereafter assume full responsibility for
those transactions until the delegation of authority is revoked or expires, and shall make a
monthly report of those transactions to the legislative body. Subject to review, the legislative
body may renew the delegation of authority pursuant to this section each year."
Attached are the following documents for your review:
• Draft of new Investment Policy— proposed wording changes are indicated in italics
• Status of investments — 11/30/07
3. NEW INFORMATION
During the Board's discussion last year, Director Sutton indicated that she thought the policy
should include definitions of terms used in the policy. I have attempted to add definitions.
4. GOALS AND OBJECTIVES
4. Manage the District in a responsible manner.
4.3 District will develop and implement high operational standards, procedures
and codes of conduct.
6. Manage the District in an effective, efficient and fiscally responsible manner.
6.6 Develop appropriate financial procedures to assure responsible financial
management.
5. RECOMMENDATION
A. That the Board adopt the revised investment policy.
B. That the Board re-appoint Mary Chapman, District Treasurer and Financing
Corporation Treasurer, to perform the investment duties for 2008.
Mary Chapm4 Admin rative Services Manager/ rich, Brim General Manager
District Treasurer
.,U{1 ,i . . Ire
Public Utility District
Resolution No. 2007-
ADOPTING A REVISED INVESTMENT POLICY
WHEREAS, the Board of Directors of the Truckee Donner Public Utility District last updated its
investment policy in resolution #2006-33 on December20, 2006; and
WHEREAS, the Board of Directors wishes to update its investment policy (see Exhibit A attached) to
ensure the District's compliance with Government Code Sections 53600 through 53609; and
WHEREAS, Section 53607 of the Government Code states that certain investment related duties may
be delegated to the Treasurer of the District for a one-year period; and
WHEREAS, it is the intent of the Board that the investment policy be reviewed and adopted on an
annual basis;
NOW THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby adopt Exhibit A
entitled Investment Policy; and
BE IT FURTHER RESOLVED, that the Board of Directors does hereby authorize the Treasurer to
perform the duties listed in the policy for one year pursuant to Government Code Section 53607.
PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held within the District
on by the following roll call vote:
AYES:
ABSTAIN:
NOES:
ABSENT:
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By
Tim F. Taylor, President
ATTEST:
John Ulrich, Clerk of the Board
EXHIBIT A
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
INVESTMENT POLICY
I. INVESTMENT AUTHORITY
In accordance with Section 53600 et seq. of the Government Code of the State of
California, the authority to invest public funds is expressly delegated to the Board of
Directors for subsequent delegation to the Treasurer. The Treasurer of the District
receives direction and authority to invest any and all District funds from the Board of
Directors of the District.
II. STATEMENT OF OBJECTIVES
Per section 53600.5 of the California Government Code, the primary objective of the
Treasurer shall be to safeguard the principal of the funds under his/her control when
investing public funds. The secondary objective shall be to meet all liquidity
requirements and the third objective shall be to achieve a return on the funds under
his/her control.
In order of priority, three fundamental criteria shall be followed in the investment
program:
1. Safety - Safety of principal is the foremost objective of the investment program.
Investments shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. The objective will be to mitigate
credit risk and interest rate risk.
a. Credit Risk: The District will minimize credit risk, the risk of loss due to
the failure of the security issuer or backer, by:
i. Limiting investments to the safest types of securities.
ii. Pre-qualifying the financial institutions, broker/dealers,
intermediaries and advisers with which the District will do business
(custodial risk).
iii. Diversifying the investment portfolio so that potential losses on
individual securities will be minimized (concentration of risk).
b. Interest Rate Risk: The District will minimize the risk that the market value
of securities in the portfolio will fall due to changes in general interest
rates, by:
i. 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.
1 Resolution 2006-33, Investment Policy
ii. Investing operating funds primarily in shorter-term securities,
money market mutual funds, or similar investment pools.
2. Liquidity — In an effort to ensure that the District's portfolio will be sufficiently
liquid to meet current and anticipated operating requirements, periodic cash flow
analysis will be performed. Investments shall be made so that the maturity date
is compatible with cash flow needs and safety of principal.
3. Yield — Investments shall be undertaken to produce an acceptable rate of return
after first considering safety of principal and liquidity and the prudent investor
standard.
Investment Strategy — The portfolio will be managed to meet the District's cash flow
needs. The maximum maturity of any security will not exceed 5 years except as
specifically noted below. All investment activity shall be consistent with prudent investor
standard and in accordance with the authorized investments included under Section V
of this policy.
III. PRUDENT INVESTOR STANDARD
As applicable to the District, the prudent investor standard is a standard of conduct
whereby any person authorized to make investment decisions on behalf of the District
acts 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 District, that a prudent person acting in 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 meet the liquidity needs of the District.
IV. PORTFOLIO
Any reference to the portfolio shall mean the total of the District's cash and securities
under management by the Treasurer.
Except for cash in certain restricted and special funds, the District will consolidate cash
and reserve balances from all funds to maximize investment earnings and to increase
efficiencies with regard to investment pricing, safekeeping, and administration.
Investment income will be allocated to the various funds or accounts based on their
respective participation and in accordance with generally accepted accounting
principles.
The Treasurer may invest in any security authorized for investment under the California
Government Code, subject to the limitations described herein:
1. Maturity Limitations —
a. The aggregate maturity of the total portfolio must not exceed five (5) years
for the general operating funds of the District.
b. Funds which represent debt service reserve funds may be invested up to
a term of ten years, as long as the period invested does not exceed that of
the term of the debt repayment.
2 Resolution 2006-33, Investment Policy
c. Investments of restricted funds held for the Donner Lake Assessment
District that are not expected to be needed to pay debt service on the SRF
loan may be invested up to the term of the SRF loan.
d. Construction funds may be invested to mature on or before the funds are
expected to be needed for construction purposes.
2. Investment Transactions — the purchase of any investment other than those
purchased directly from the issuer shall be to the extent possible from a firm
designated as a Primary Dealer by the Federal Reserve of New York.
3. Sale of Securities — Securities may be sold to provide needed liquidity, to
restructure the portfolio to reduce risk or to increase the expected return of the
portfolio. In no instance shall a sale of securities be used for speculative
purposes. All sales are to be reported to the Board on a monthly basis.
4. Prohibited Investments — Prohibited investments include inverse floaters, range
notes, interest only strips derived from a pool of mortgages (Collateralized
Mortgage Obligations), and any security that could result in zero interest accrual
if held to maturity. (Zero interest accrual means the security has the potential to
realize zero earnings depending upon the structure of the security. Zero coupon
bonds and similar investments that start below the face value are legal because
their value does increase.)
5. Safekeeping
a. All securities transactions entered into by the District shall be conducted
on a delivery versus payment (DVP) basis.
b. Securities shall be held by an independent custodian designated by the
Treasurer and held in safekeeping pursuant to a safekeeping agreement.
c. All financial institutions which provide safekeeping services for the District
shall be required to provide reports or safekeeping receipts directly to the
Treasurer to verify securities taken into their possession.
V. AUTHORIZED INVESTMENTS
1. The District's authorized commercial banking institution in an interest bearing
checking or savings account. The Treasurer is authorized to make daily deposits
and withdrawals for purposes of the safekeeping of District monies and payments
of District financial obligations.
2. Local Agency Investment Fund (LAIF) — Deposits for the purpose of investment
in the Local Agency Investment Fund of the State of California Treasury may be
made up to the maximum amount permitted by State Treasury policy. Any LAIF
investments made by the District shall be considered to be short-term in nature
even if the LAIF has invested in individual longer-term securities. The Treasurer
is authorized to make regular transfers to and from LAIF up to the limit of
transactions established by the LAIF investment policy for purposes of meeting
the District's daily cash flow needs and earning interest on surplus funds.
3 Resolution 2006-33, Investment Policy
3. Any other investments authorized and listed in the Government Code Sections
53600-53609. The Treasurer will consult with the Board of Directors when
recommending any of the investments within these sections other than numbers
1 and 2 above. From time to time, the Board may also consult with an
investment professional pursuant to Section 1 a ii above. Each investment will
be specifically authorized by the Board of Directors.
4. Bond proceeds and reserve funds will be invested only in permitted investments
or authorized investments defined in the Trust Agreement for each particular
financing which has previously been approved by the Board of Directors
(Government Code Section 53601 1). The Treasurer will consult with the financial
advisor or Trustee on the financing for investment recommendations to bring to
the Board of Directors for approval. The Treasurer is authorized to invest
funds in a monev market fund with the Trustee pending investment of
those funds in a longer term investment which will be approved by the
Board of Directors.
VI. REPORTING
In accordance with Section 53646 of the California Government Code, the Treasurer
shall submit a quarterly report to the Board of Directors within 30 days following the
end of the quarter covered by the report. The report shall include investment
activity, including yield and earnings, and the status of cash by depository.
VII. INTERNAL CONTROLS
Annually, the Truckee Donner Public Utility District will have an independent audit by
an external auditor. This audit will provide internal control by assuring compliance
with policies and procedures.
Vill. PARTIES AUTHORIZED TO ACT IN THE EVENT OF THE ABSENCE
OF THE TREASURER
In the event of the absence of the Treasurer, the following positions are authorized
to make necessary and authorized investments pursuant to Section V of this policy:
General Manager
Assistant General Manager
Finance and Accounting Manager
IX. ANNUAL REVIEW OF INVESTMENT POLICY
The Investment Policy shall be submitted at least annually to the Board of Directors
for adoption. The policy shall be reviewed annually to ensure its consistency with
the overall objectives of preservation of principal, liquidity, yield and its relevance to
current law and financial and economic trends. The review will also include the
review of the diversification of the investments in the portfolio and the custodial risk
of the portfolio. Any modifications made thereto must be approved by the Board of
Directors.
4 Resolution 2006-33, Investment Policy
Definitions of Terms Used in the Investment Policy:
Authorized Investments—those investments permitted by the California Government
Code—Sections 53600 through 53609 which are also authorized by the Truckee Donner
Public Utility District (District) Board of Directors.
Authorized commercial banking institution—any legal commercial bank that has been
approved by the Board of Directors of the Truckee Donner Public Utility District.
Concentration of Risk— is the risk for having investments concentrated with one issuer.
The audit standard requires that if more than 5% of the District's portfolio is with one
issuer, it must be disclosed in the financial audit. The policy can allow for more. The
auditors would disclose a description of the investment policy to show that the amount
invested is in compliance with the District's investment policy.
Credit Risk—that risk that an issuer of an investment will not fulfill its obligations to the
holder of the investment.
Custodial Credit Risk for Deposits—custodial risk for deposits is that risk that, in the
event of the failure of a depository financial institution, a government will not be able to
recover its deposits or will not be able to recover collateral securities that are in the
possession of an outside party.
Custodial Risk for Investments—custodial risk for investments is the risk that, in the
event of the failure of the counterparty (e.g. broker/dealer) to a transaction, a government
will not be able to recover the value of its investment or collateral securities that are in
the possession of another party. Custodial Credit Risk generally applies only to direct
investments in marketable securities. Custodial risk does not apply to a local
government's indirect investment in securities through the use of mutual funds or
governmental investment pools (such as LAIF).
Delivery versus payment (DVP) basis is used to reduce risk in the settlement of a
financial transaction. Ideally, title to an asset and payment are exchanged simultaneously.
Financial Advisor - A financial adviser is a professional who renders investment advice
and financial planning services to individuals and businesses.
Interest Rate Risk—the risk that changes in the market interest rates will adversely
affect the fair value of an investment. Generally, the longer the maturity of an investment
the greater the sensitivity of its fair value to changes in market interest rates.
Internal Controls—at the organizational level, internal control objectives relate to the
reliability of financial reporting, timely feedback on the achievement of operational or
strategic goals, and compliance with laws and regulations. At the specific transaction
level, internal control refers to the actions taken to achieve a specific objective (e.g., how
to ensure the organization's payments to third parties are for valid services rendered.)
Internal control procedures reduce process variation, leading to more predictable
outcomes.
Liquidity - Market liquidity is a business, economics or investment term that refers to an
asset's ability to be easily converted through an act of buying or selling without causing a
significant movement in the price and with minimum loss of value.
Local Agency Investment Fund (LAIF)—LAIF is a voluntary program created by
statute in 1977 as an investment alternative for California's local governments and
special districts and continues today under the State Treasurer's administration. The
enabling legislation for the LAIF is Section 16429.1 et seq. of the California Government
Code. This program offers local agencies the opportunity to participate in a major
portfolio, which invests hundreds of millions of dollars, using the investment expertise of
the Treasurer's Office investment staff at no additional cost to the taxpayer. The Local
Investment Advisory Board (LIAB) provides oversight for LAIF. The LAIF website is
http://www.treasurer.ca.gov/pmia-laif.
SRF Loan—A loan obtained through the Department of Water Resources for the
reconstruction of the Donner Lake Water System. The loan payments are made from
Donner Lake Assessment District payments collected and a monthly surcharge on
Donner Lake customer bills. The SRF Loan has a reserve requirement which is
accumulated over time and needs to be invested until the final payment is due on the loan.
Additionally, funds collected in advance of loan payments are invested for the purpose of
reducing annual loan payments and/or the monthly surcharge collected from the Donner
Lake customers.
Treasurer—that person so appointed by resolution to perform duties authorized by the
Board of Directors of the Truckee Donner Public Utility District and the Truckee Donner
Public Utility District Financing Corporation.
Yield - yield is a percentage that measures the cash returns to the owners of a security.
Normally it does not include the price variations, at the difference of the total return.
TRUCKEE DONNER PUD
INVESTMENT BALANCES
As of Month Ended 11/30/07
LAIF FIDELITY FEDERATED FEDERAL FIDELITY FEDERAL FSA US BANK
4.96% MONEY MKT US TREASURY HOME LN MTG INSTL PRIME FARM CREDIT BONDS CHECKING CASH
Matures Daily 3%-Matures Daily 4.65% 5.50%-Matures 92011 4.95% 5.25%-Matures 3/2021 4.75%-Matures 122010 Matures Daily 0.00% Total
ELECTRIC FUNDS
General Fund $4,852,926 $0 $0 $0 $0 $0 $0 $376,878 $900 $5,230,704
Facilities Fees-Post AB1600 2,124,150 0 0 0 0 0 0 0 0 2,124,150
2003 Purchase Power Buy-Out 0 0 4,273,837 0 0 0 0 0 0 4,273,837
Storm Damage Fund 275,548 0 0 0 0 0 0 0 0 275,548
Building Fund 238,095 0 0 0 0 0 0 0 0 238,095
Electric Rate Reserve Fund 1,116,934 0 0 0 0 0 0 0 0 1,116,934
Pension Provision GASB 45 183,557 0 0 0 0 0 0 0 0 183,557
WAPA Restricted Fund 24,913
Total Electric Investments $8,816,123 $0 $4,273,837 $0 $0 $0 $0 $376,878 $900 $13,442,824
WATER FUNDS
General Fund $478,675 $0 $0 $0 $0 $0 $0 $0 $0 $478,675
Facilities Fees-Global after 5/5/97 5,119,343 0 0 0 0 0 0 0 0 5,119,343
2006 COP Funds 0 0 0 1,901,047 296,077 0 7,307,231 0 0 9,504,355
Water Capital Reserve 289,274 0 0 0 0 0 0 0 0 289,274
DSC and Operating Reserve Fund 232,230 0 0 0 0 0 0 0 0 232,230
Reserve for Future Meters 339,757 0 0 0 0 0 0 0 0 339,757
Donner Lake Refunds Fund 67,361 0 0 0 0 0 0 0 0 67,361
West River St.Assessment District 32,260 0 0 0 0 0 0 0 0 32,260
Prepaid Connection Fees 78,545 0 0 0 0 0 0 0 0 78,545
Glenshire Loan Repayment Fund 129,756 0 0 0 0 0 0 0 0 129,756
Donner Lake Assessment District Fund 799,754 0 0 0 0 0 0 13,082 0 812,836
Donner Lake Assessment District Surcharge 94,491 0 0 0 0 0 0 0 0 94,491
Donner Lake Assessment District Investment 0 0 0 0 0 1,660,000 0 0 0 1,660,000
SRF Reserve Fund 0 0 0 0 0 0 0 0 120,129 120,129
TSA SAD 11 Improvement Fund 74,674 0 0 0 0 0 0 0 0 74,674
TSA SAD V Improvement Fund 65,804 0 0 0 0 0 0 0 0 65,804
Land Sales Trust Fund 3,524,738 0 0 0 0 0 0 0 0 3,524,738
Reserve Fund-TDPUD Prop 55 310,184 0 0 0 0 0 0 0 0 310,184
Total Water Investments $11,636,847 $0 $0 $1,901,047 $296,077 $1,660,000 $7,307,231 $13,082 $120,129 $22,934,413
MELLOROOS-OLD GREENWOOD $1,241,884 $152,054 $0 $0 $0 $0 $0 $0 $0 $1,393,938
Total Mello Roos-Old Greenwood $1,241,884 $152,054 $0 $0 $0 $0 $0 $0 $0 $1,393,938
MELLOROOS-GRAY'SCROSSING $1,618,441 $0 $1,905,780 $0 $0 $0 $0 $0 $0 $3,524,221
Total Mello Roos-Gray'sCrossing $1,618,441 $0 $1,905,780 $0 $0 $0 $0 $0 $0 $3,524,221
Total Investments $23,313,295 $152,054 $6,179,617 $1,901,047 $296,077 $1,660,000 $7,307,231 $389,960 $121,029 $41,295,396
State
Investment Held By Treasurer's Office BNY BNY BNY BNY BNY FSA Capital Mgt US Bank BNY
TRUCKEE DONNER PUD
INVESTMENT BALANCES
As of Month Ended 11/30/07
LAIF FIDELITY FEDERATED FEDERAL FIDELITY FEDERAL FSA US BANK
4.96% MONEY MKT US TREASURY HOME LN MTG INSTL PRIME FARM CREDIT BONDS CHECKING CASH
Matures Daily 3%-Matum Daiy 4.65% 5.50%-Nwum W011 4.95% 525%-Matum 3/2021 4.75%-Matum 12/2010 Matures Daily 0.00% Total
ELECTRIC FUNDS
General Fund $4,852,926 $0 $0 $0 $0 $0 $0 $376,878 $900 $5,230,704
Facilities Fees-Post A81600 2,124,150 0 0 0 0 0 0 0 0 2,124,150
2003 Purchase Power Buy-Out 0 0 4,273,837 0 0 0 0 0 0 4273,837
Storm Damage Fund 275,548 0 0 0 0 0 0 0 0 275,548
Building Fund 238,095 0 0 0 0 0 0 0 0 238,095
Electric Rate Reserve Fund 1,116,934 0 0 0 0 0 0 0 0 1,116,934
Pension Provision GASB 45 183,557 0 0 0 0 0 0 0 0 183,557
WAPA Restricted Fund 24,913 0 0 0 0 0 0 0 0 24,913
Total Electric Investments $8,816,123 $0 $4,273,837 $0 $0 $0 $0 $376,878 $900 $13,467,738
WATER FUNDS
General Fund $478,675 $0 $0 $0 $0 $0 $0 $0 $0 $478,675
Facilities Fees-Global after 5/5/97 5,119,343 0 0 0 0 0 0 0 0 5,119.343
2006 COP Funds 0 0 0 1,901,047 296,077 0 7,307,231 0 0 9,504,355
Water Capital Reserve 289,274 0 0 0 0 0 0 0 0 289,274
DSC and Operating Reserve Fund 232,230 0 0 0 0 0 0 0 0 232.230
Reserve for Future Meters 339,757 0 0 0 0 0 0 0 0 339,757
Donner Lake Refunds Fund 67,361 0 0 0 0 0 0 0 0 67,361
West River St.Assessment District 32,260 0 0 0 0 0 0 0 0 32,260
Prepaid Connection Fees 78,545 0 0 0 0 0 0 0 0 78,545
Glenshire Loan Repayment Fund 129,756 0 0 0 0 0 0 0 0 129,756
Donner Lake Assessment District Fund 799,754 0 0 0 0 0 0 13,082 0 812,836
Donner Lake Assessment District Surcharge 94,491 0 0 0 0 0 0 0 0 94,491
Donner Lake Assessment District Investment 0 0 0 0 0 11660,000 0 0 0 1,660,000
SRF Reserve Fund 0 0 0 0 0 0 0 0 120,129 120,129
TSA SAD II Improvement Fund 74,674 0 0 0 0 0 0 0 0 74,674
TSA SAD V Improvement Fund 65,804 0 0 0 0 0 0 0 0 65,804
Land Sales Trust Fund 3,524,738 0 0 0 0 0 0 0 0 3,524,738
Reserve Fund-TDPUD Prop 55 310,184 0 0 0 0 0 0 0 0 310,184
Total Water investments $11,636,847 $0 $0 $1,901,047 $296,077 $1,660,000 $7,307,231 $13,082 $120,129 $22,934,413
MELLOROOS-OLD GREENWOOD $1,241,884 $152,054 $0 $0 $0 $0 $0 $0 $0 $1,393,938
Total Mello Roos-Old Greenwood $1,241,884 $152,054 $0 $0 $0 $0 $0 $0 $0 $1.393,938
MELLOROOS-GRAY'SCROSSING $1,618,441 $0 $1,905,780 $0 $0 $0 $0 $0 $0 $3,524,221
Total Mello Roos-Gray's Crossing $1,618,441 $0 $1,905,780 $0 $0 $0 $0 $0 $0 $3,524,221
Total Investments $23,313,295 $152,054 $6,179,617 $1,901,047 $296,077 $1,660,000 $7,307,231 $389,960 $121,029 $41,320,310
State
Investment Held By Treasurers Office BNY BNY BNY BNY BNY FSA Capital Mgt US Bank BNY