HomeMy WebLinkAbout17 Investment policy review
AGENDA ITEM #17
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MEETING DATE: June 2, 2021
TO: Board of Directors
FROM: Michael Salmon, CFO
SUBJECT: Investment Policy Review, Approve new Investment Broker,
and Consideration of the Delegation of Authority to the
Treasurer
APPROVED BY______________________________
Brian C. Wright, Interim General Manager/
Water Utility Director
RECOMMENDATION:
A)Review the District’s investment policy as described in District Code Title 3, Chapter
3.20.012.9 and provide direction as needed; and
B) Authorize the General Manager to execute and engagement agreement with new
investment broker, Time Value Investments; and
C) Delegate authority to Michael Salmon, Treasurer, to invest District funds for FY21
according to the District’s Investment Policy.
BACKGROUND:
The Board reviews the District’s Investment Policy annually. Attachment 1 is the current
Investment Policy section of District Code Title 3 Chapter 3.20.012.9 Staff is not
recommending changes to the investment policy.
Each year, the Board delegate’s authority to the Treasurer to perform certain duties as
described in the District’s investment policy in accordance with Section 53607 of the
California Government Code.
Section 53607 states “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.”
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New Information
As provided in monthly in the Treasurer’s Report, the majority of the District’s investments are in
California’s Local Agency Investment Fund (LAIF), Utah Public Treasurers’ Investment Fund
(UPTIF) and the Placer County Investment Fund (PCIF). The earnings rates for the last 13 months
were:
With the current low yield rates presented above, the District will not achieve Budget
amount of investment income in 2021.
Staff recommends engaging with an investment broker to open an account allowing for
investments other than state and county pool funds. These investments will be in
accordance with Investment Policy, however, will have improved yields. Staff is
recommending, at this time, investing up to $10M in non-pool funds. Staff and TVI
estimate yields to improve from approximately 0.30% in the pool funds to approximately
0.5%-0.6% range purchasing other government securities. Improving yields on $10M
invested, remaining in compliance with Investment Policy, will gain approximately $30,000
in investment income per year. TVI does not charge a fee directly to District, as they are
not managing the funds, rather TVI is providing brokerage services and earns a
commission on the transactions executed, via a small % of the yield imbedded price to
District. See attachment 2 for Time Value Investments background and investment
security sample recommendations.
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Two other California government and special district investment firms were contacted
based on research of other regional districts and Town of Truckee. Both took a
management of funds % of total investments approach, with only one of the two providing
an estimate fee of $6,500 for managing $5m, so approximately $12,000 for managing
$10m. The other firm was only interested if significantly more investment dollars managed.
This managed funds approach is not estimate to yield as well as the yield obtained from
simply going through a broker; as managed funds would be on top of brokerage services.
This item is in support of the following objectives and goals identified by the District.
1.05.020 Objectives:
1. Responsibly serve the public.
6. Manage the District in an effective, efficient and fiscally responsible manner.
1.05.030 Goals:
1.1. Conduct the District’s business in a legal, ethical, open, and transparent
manner.
6.6. Develop appropriate financial procedures to assure responsible financial
management.
FISCAL IMPACT:
Investment Income for the District:
$492,000 Budget 2021 – at current actual yields will not achieve this budget amount.
$382,000 Forecast @ current yields using only pool funds (existing investment channels),
$110,000 shortfall to Budget.
$400,000 Forecast @ current yields in pool funds and investing $10M with broker as
recommend, $92,000 shortfall in 2021 (only 5.5 months in 2021 $10M invested with
broker).
On an annual basis, utilizing new broker investment channel, generates an incremental
estimated $50,000 per year compared to only pool investment channels.
ATTACHMENTS:
1. District Code Title 3 Chapter 3.20 Investment Policy
2. Time Value Investments brokerage presentation