HomeMy WebLinkAbout15 Review of Investment Policy Agenda Item # 15
Public Utility Distric-t
WORKSHOP
To: Board of Directors
From: Mary Chapman
Date: January 07, 2009
Subject: Review of Investment Policy
1. WHY THIS MATTER IS BEFORE THE BOARD
The Board last updated its investment policy on December 19, 2007 in resolution
2007-34 with minor changes in the adoption of Title 3 of the District Code Finance and
Accounting in July, 2008. It was the Board's intent to review the investment policy
annually.
2. HISTORY
The Governmental Accounting Standards Board in the 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.
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 therafter assume
full responsibility for those transactions until the delegation of authoirity 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."
3. NEW INFORMATION
Attached are the following documents for your review:
Copy of the District's Investment Policy which complies with the requirements of
GASB 40; there are no revisions being proposed at this time.
Status of investments report through 11/30/08.
4. FISCAL IMPACT
There is no fiscal impact with this agenda item.
5. RECOMMENDATION
1) Receive investment report through November 30, 2008.
2) Review and comment on the investment policy.
Y�a
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Mary Chap n Michael D. Holley
Administrative Services Manager General Manager
CHAPTER 3.20
INVESTMENTS
Sections:
3.20.005 Local Agency Investment Fund Investments
3.20.008 Fund Transfers
3.20.010 Investment of Surplus Funds
3.20.012 Investment Policy
3.20.005 Local Agency Investment Fund Investments
3.20.005.1 Authorization has been given for the deposit and withdrawal of monies in the
Local Agency investment Fund (LAIF) in the State Treasury in accordance with the
provisions of Section 16429.1 of the Government Code for the purpose of investment as
stated therein.
3.20.005.2 Any two of the following officers or employees of the District, the President of
the Board, the General Manager or the Treasurer, may execute documents to add or
delete District accounts and authorized persons to make transfers to and from those
accounts with the LAIF.
3.20.008 Fund Transfers
3.20.008.1 The Board approved commercial bank (Bank) is requested to honor, execute
and process the District's telephonic, electronic, written or oral requests for the transfer of
funds between the accounts of the District at Bank and the Local Agency Investment Fund,
subject to such terms and conditions as may from time to time be agreed upon by the
District.
3.20.008.2 Any one of the following listed officers or employees of the District, the
President of the Board, the General Manager or the Treasurer are hereby authorized,
directed and empowered for and on behalf of and in the name of the District as follows:
3.20.008.2(A) To execute agreements with the Bank providing for such funds
transfers and to make and verify requests for such transfers, and the Bank shall be
entitled to honor and charge this District for all such requests, when given (or
purported to be given) by any one of the above.
3.20.008.2(B)To make, execute and deliver such other agreements as may be
required by the Bank; and
3.20.008.2(C) To perform or cause to be performed all further acts and execute
and deliver all further instruments which Bank may deem necessary to carry out the
purposes of this policy.
3.20.008.3 The District hereby ratifies and confirms the acts of its officers, agents or
employees in heretofore requesting transfers of funds from this District's accounts with the
Bank by wire or comparable transfer together with any acts performed in relation hereto.
3.20.008.4 That the Clerk of the District is hereby authorized and directed to execute,
acknowledge and deliver a certified copy of the Resolution related hereto to the Bank and
any other person or agency which may require copies, and that the certification of the
(Secretary) Clerk as to the signatures of the above named officers will be binding on this
District.
3.20.008.5 That the Bank is authorized to act upon this policy until written notice of the
revocation thereof by a resolution duly adopted by the Board of Directors of this District is
delivered to the Bank, such revocation in no way to affect the obligations of this District to
the Bank incurred pursuant to the terms of this policy prior to receipt by the Bank of such
notice or revocation.
3.20.010 Investment of Surplus Funds
The District Treasurer shall invest surplus funds, both restricted and general, pursuant to
the District's Investment Policy (District Code 3.20.12). A regular accounting of all fund
activities shall be presented to the Board of Directors in the monthly Treasurer's Report.
3.20.012 Investment Policy
3.20.012.1 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.
3.20.012.2 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.
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 District Code 3.20.012.5.
3.20.012.3 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.
3.20.012.4 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 Board designated, 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 the term of
the debt repayment.
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 date 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.
3.20.012.5 Authorized Investments
1. The District's authorized commercial bank 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. 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 subsections
1 and 2 above. From time to time, the Board may also consult with an investment
professional pursuant to Title 3.20.012.2 Section 1 a ii. 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 submit to the Board of Directors
for approval. The Treasurer is authorized to invest funds in a money market fund or
LAIF with the Trustee pending investment of those funds in a longer-term
investment, which will be approved by the Board of Directors.
3.20.012.6 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.
3.20.012.7 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.
3.20.012.9 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.
TRUCKEE DONNER PUD
INVESTMENT BALANCES
As of Month Ended 11/30/08
LAIF FIDELITY FEDERATED FEDERAL FIDELITY FEDERAL FSA-GUARANTEED US BANK
2.57% MONEY MKT US TREASURY HOME LN MTG INSTL PRIME FARM CREDIT INVESTMENT CHECKING CASH
Matures Daily 3%-Matures Daily 4.65% 5.50/-Matures 92011 4.95% 5.25%-Matures 3=1 4.75%-Matures 122010 Matures Daily 0.00% Total
ELECTRIC FUNDS
General Fund $4,024,289 $0 $0 $0 $0 $0 $0 $160,571 $1,200 18 ,
Facilities Fees-Post AB1600 1,942,951 0 0 0 0 0 0 0 0 1,942,951
2003 Purchase Power Buy-Out 0 0 4,615,799 0 0 0 0 0 0 4,615,799
0 0 0 0 0 0 0 286,116
286,116 0
Storm Damage Fund 0 0 0 0 238,967
Building Fund 238,967 0 0 0 0 0 0 0 1,544,152
Electric Rate Reserve Fund 1,544,152 0 0 0 0 0
Total Electric Investments $8,036,476 $0 $4,615,799 $0 $0 $0 $0 $160,571 $1,200 $12,814,046
WATER FUNDS
General Fund $951,792 $0 $0 $0 $0 $0 $0 $0 $0 951,7
Facilities Fees-Global after 5/5/97 3,602,903 0 0 0 0 0 0 0 0 3,602,903
2006 COP Funds 0 0 0 1,993,050 422,195 0 4,788,448 0 0 7,203,693
Water Capital Reserve 446,408 0 0 0 0 0 0 0 0 446,408
DSC and Operating Reserve Fund 748,085 0 0 0 0 0 0 0 0 748,085
Reserve for Future Meters 434,544 0 0 0 0 0 0 0 0 43 ,5,630
Donner Lake Refunds Fund 35,630 0 0 0 0 0 0 0 0 33,50
West River St.Assessment District 33,500 0 0 0 0 0 0 0 0 80,382
Prepaid Connection Fees 80,382 0 0 0 0 0 0 0 0 56616
836,353
Glenshire Loan Repayment Fund 156,616 0 0 0 0 0 0 0 0 ,
Donner Lake Assessment District Fund 825,779 0 0 0 0 0 0 10,574 0 53
Donner Lake Assessment District Surcharge 105,370 0 0 0 0 0 0 0 0 105,370
Donner Lake Assessment District Investment 0 0 0 0 0 1,743,519 0 0 0 1,743,519
SRF Reserve Fund 202,500 0 0 0 0 0 0 0 0 202,500
TSA SAD 11 Improvement Fund 77,521 0 0 0 0 0 0 0 0 77,521
TSA SAD V Improvement Fund 68,336 0 0 0 0 0 0 0 0 68,336
Land Sales Trust Fund 3,714,372 0 0 0 0 0 0 0 0 3,714,372
Reserve Fund-TDPUD Prop 55 311,871 0 0 0 0 0 0 0 0 311,871
Total Water Investments $11,795,608 $0 $0 $1,993,050 $422,195 $1,743,519 $4,788,448 $10,574 $0 $209753,393
MELLO ROOS-OLD GREENWOOD $1,273,524 $180,082 $0 $0 $0 $0 $0 $0 $0 $1,453,606
Total Mello Roos-Old Greenwood $1,273,524 $180,082 $0 $0 $0 $0 $0 $0 $0 $1,453,606
' MELLO ROOS-GRAY'S CROSSING $1,702,043 $0 $1,986,477 $0 $0 $0 $0 $0 $0 $3,688,520
Total Mello Roos-Gray's Crossing $1,702,043 $0 $1,986,477 $0 $0 $0 $0 $0 $0 $3,688,520
Total Investments $22,807,651 $180,082 $6,602,275 $1,993,050 $422,195 $1,743,519 $4,788,448 $171,145 $1,200 $38,709,565
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