HomeMy WebLinkAbout13 Investment Policy and Delegation of TreasurerACTION
To: Board of Directors
From: Jeremy Popov
Date: December 09, 2015
Subject: Review of the District's Investment Policy and Consideration of the
Delegation of Authority to the Treasurer
1. WHY THIS MATTER IS BEFORE THE BOARD
Only the Board can modify the District's investment policy and delegate authority to
the Treasurer to perform the duties as described in the District's investment policy.
2. HISTORY
The Board reviews the District's investment policy annually. The investment policy was
last reviewed on December 3, 2014 and it was not revised. The District has however
had some changes, on July 15, 2015 Tricia Phillips was appointed Interim Treasurer
upon notification that Robert Mescher was leaving the District. The District now has a
permanent recommendation for the District's Treasurer.
Each year, the Board delegates authority to the Treasurer to perform the 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."
3. NEW INFORMATION
Attachment 1 is Section 3.20.012 of the District Code describing the District's
investment policy. Based upon a review by the District's Interim Treasurer, the policy
continues to meet the needs of the District. No revisions to the policy are proposed.
Attachment 2 provides a brief summary of the District's investments. The majority of
the District's investments are in California's Local Agency Investment Fund (LAIF),
Placer County Treasurer's Investment Portfolio (PCTIP), and Utah's Public Treasurers'
Investment Fund (UPTIF). LAIF has yielded 0.3% annually, PCTIP has yielded just
under 1 % annually, and UPTIF yielded 0.5% annually. The District continues optimize
on investment returns while also maintaining the limit of $10,000,000 to each fund per
the Board's direction. Maintaining safety of the principal is the foremost objective
which is being achieved with the District's current investments.
4. FISCAL IMPACT
There is no fiscal impact associated with this item.
5. RECOMMENDATION
A) Review the District's investment policy as described in Section 3.20.012 and
provide comment.
B) Delegate authority to Regina Wise, District Treasurer, to invest District funds for
FY16 according to the District's investment policy.
Jeremy Popov Michael D. Holley
Administrative Services Manager General Manager
Attachment 1
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 an
acceptable 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:
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
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 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.
ELECTRIC FUNDS
General Fund
Facilities Fees
Electric Rate Reserve
Capital Replacement Fund
Pension Obligation Funds
Electric Vehicle Reserve
AB 32 Fund
Total Electric Investments
WATER FUNDS
General Fund
Facilities Fees
2006 COP Funds
Capital Replacement Fund
DSC and Operating Reserve Fund
Reserve for Future Meters
West River St. Assessment District
Prepaid Connection Fees
Glenshire Loan Repayment Fund
Donner Lake Assessment District Fund
Donner Lake Assessment District Surcharge
Donner Lake Assessment District Investment
SRF Funds
TSA SAD II Improvement Fund
Water Vehicle Reserve
Prop 55 Reserve Fund
Total Water Investments
MELLO ROOS - OLD GREENWOOD
TRUCKEE DONNER PUD
INVESTMENT BALANCES
As of Quarter Ended 913012015
Utah Public
LAIF Placer County Investment Fund GOLDMAN FEDERATED FIDELITY FEDERAL US BANK
0.34% 1,36% 0.63% SACHS FIN'L SO US TREASURY INSTL PRIME FARM CREDIT CHECKING CASH
Matures Daily Matures Daily Matures Daily o.o6%-Matures Daity 0.o0%-Matures Daily 0.07%-Matures Daily 5.25%-Matures 312021 Matures Daily 0.00 % Total
$3,713,478
$915,835
$514,402
$0
$0
$0
$0
$283,423
$2,400
$5,429,537
0
0
0
0
0
0
0
0
0
0
0
2,888,000
1,044,698
0
0
0
0
0
0
3,932,698
0
1,214,878
2,067,545
0
0
0
0
0
0
3,282,423
0
0
0
227,864
0
0
0
0
0
227,864
0
0
346,489
0
0
0
0
0
0
346,489
684,707
0
0
0
0
0
0
0
0
684,707
$4,398,185
$5,018,712
$3,973,134
$227,864
$0
$0
$0
$283,423
$2,400
$13,903,718
$780,282
$939,962
$558,127
$0
$0
$0
$0
$0
$0
$2,278,370.29
0
0
926,776
0
0
0
0
0
0
926,776
0
0
0
0
0
1,027,327
0
0
0
1,027,327
0
0
0
0
0
0
0
0
0
0
0
3,377,870
0
0
0
0
0
0
0
3,377,870
0
0
646,475
0
0
0
0
0
0
646,475
0
0
34,869
0
0
0
0
0
0
34,869
0
0
79,738
0
0
0
0
0
0
79,738
0
0
195,432
0
0
0
0
0
0
195,432
0
0
982,866
0
0
0
0
86,318
0
1,069,184
0
0
151,344
0
0
0
0
0
0
151,344
0
0
0
0
0
0
1,698,880
0
0
1,698,880
761,396
0
0
0
0
0
0
0
761,396
0
0
16,822
0
0
0
0
0
0
16,822
0
0
261,954
0
0
0
0
0
0
261,954
0
0
312,157
0
0
0
0
0
0
312,157
$1,541,677
$4,317,832
$4,166,560
$0
$0
$1,027,327
$1,698,880
$86,318
$0
$12,838,594
$0 $0 $0 $486,349 $0 $0 $0 $0 $0 $486,349
Total Mello Roos - Old Greenwood $0 $0 $0 $486,349 $0 $0 $0 $0 $0 $486,349
MELLO ROOS-GRAY'S CROSSING $1,767,931 $0 $0 $0 $1,251,143 $0 $0 $0 $0 $3,019,074
Total Mello Roos - Gray's Crossing $1,767,931 $0 $0 $0 $1,251,143 $0 $0 $0 $0 $3,019,074
Total Investments $7,707,793 $9,336,544 $8,139,694 $714,213 $1,251,143 $1,027,327 $1,698,880 $369,741 $2,400 $30,247,735
MARKET ADJUSTMENTS
Prior Year Market Adjustment $3,845 ($58,903) $0 $0 $0 $0 $191,478 $0 $0 $137,135
Current Year Market Adjustment (4,100) 47,591 0 0 0 0 54,847 0 0 97,623
Cumulative Market Adjustment ($255) ($11,312) $0 $0 $0 $0 $246,325 $0 $0 $234,758
Total Investments at Market Value $7,707,538 $9,325,233 $8,139,694 $714,213 $1,251,143 $1,027,327 $1,945,205 $369,741 $2,400 $30,482,493
'included in 2006 COP refinancing
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