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HomeMy WebLinkAbout7 Investment Policy Agenda Item ## 7 TRUCKEE DONNER Public Utility District CONSENT To: Board of Directors From: Robert Mescher Date: December 07, 2011 Subject: Consideration of: a) Review of the Investment Policy b) 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 15, 2010 and it was not revised. 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. On December 15, 2010, the Board delegated authority to Robert Mescher, District Treasurer, to invest District funds for FY11 according to the District's investment policy. 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 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. 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 Robert Mescher, District Treasurer, to invest District funds for FY12 according to the District's investment policy. a Robert Mescher 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: 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 checkingor 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 b State Treasury Y Y ry 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 earninginterest on surplus f p 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 b an y g compliance with external auditor. This audit will provide internal control b assuring y 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 ATTACHMENT 2 INVESTMENT BALANCES As of Month Ended 9/30/11 LAIF FIDELITY FEDERATED FIDELITY FEDERAL US BANK 0.38% MONEY MKT US TREASURY INSTL PRIME FARM CREDIT CHECKING CASH ELECTRIC FUNDS Matures Daily 0.00%-Matures Daily 0.00%-Matures Daily 0.00%-Matures Daily 5.25%-Matures 3/2021 Matures Daily 0.00% Total General Fund $4,757,068 $0 $0 $0 Facilities Fees 668,044 p p p p p $0 $259,032 $1,200 $5,017,300 2003 Purchase Power Buy-Out p 0 668,044 0 4,224,428 0 0 0 0 4,224,428 Electric Rate Reserve 2,370,068 p p 0 p p Capital Replacement Fund 223,442 0 2, , 0 0 0 0 p 0 22323,44242 Electric Vehicle Reserve 461,445 0 0 0 0 0 0 461,445 Total Electric Investments $8,480,068 $0 $4,224,428 $0 $0 $259,032 $1,200 $12,964,728 WATER FUNDS General Fund $492,219 $p $p $0 $0 $0 Facilities Fees 1,017,512 0 0 0 0 0 0 1,017,512$0 $492,219.44 2006 COP Funds 0 0 0 3,399,631 0 0 Capital Replacement Fund 3,346,070 0 3,399,631 0 0 0 0 0 0 3,346,070 DSC and Operating Reserve Fund 2,808 833 0 0 0 0 0 0 2,808,833 Reserve for Future Meters 713,419 p 0 0 0 0 0 713,419 West River St.Assessment District 34,418 p p p p p Prepaid Connection Fees 81,404 0 34,418 0 0 0 0 0 0 81,404 Glenshire Loan Repayment Fund 518,873 0 0 0 0 0 0 518,873 Donner Lake Assessment District Fund 975,198 0 0 Donner Lake Assessment District Surcharge 113,413 p 0 0 12,31 0 1987 13,41 0 0 0 0 0 133 0 , 13 Donner Lake Assessment District Investment 0 0 0 0 1,698,880 0 SRF Reserve Fund 441,707 0 1,698,880 0 0 0 0 0 0 441,707 TSA SAD II Improvement Fund 16,604 0 0 0 0 0 0 16,604 TSA SAD V Improvement Fund 70,207 0 0 0 0 0 0 70,207 Water Vehicle Reserve 317,630 p p p p p Prop 55 Reserve Fund 308,051 p 0 3 , 0 0 0 0 0 308,051051 Pipeline Replacement Fund 42,980 0 0 0 0 0 0 42,980 Total Water Investments $11,298,537 $0 $0 $3,399,631 $1,698,880 $12,314 $0 $16,409,362 > c-l- MELLO ROOS-OLD GREENWOOD $1,260,902 $421,687 $p $0 $0 $0 $0 $1 rt ,682,588 0) Total Mello Roos-Old Greenwood $1,260,902 n $421,687 $0 $0 $0 $0 $0 $1,682,588 El fD MELLO ROOS-GRAY'S CROSSING $1,747,263 $0 $2,026,729 $0 $0 $0 $0 $3,773,99215 rt Total Mello Roos-Gray's Crossing $1,747,263 $0 $2,026,729 $0 $0 $0 $0 $3,773,992 N Total Investments $22,786,769 $421,687 $6,251,157 $3,399,631 $1,698,880 $271,346 $1,200 $34 830 670 MARKET ADJUSTMENTS Prior Year Market Adjustment $25,638 $0 $0 $0 $185,303 $p Current Year Market Adjustment p p $0 $210,941 0 0 119,852 0 0 119,852 Cumulative Market Adjustment $25,638 $0 $0 $0 $305,155 $0 $0 $330,793 Total Investments at Market Value $22,812,407 $421,687 $6,251,157 $3,399,631 $2,004,035 $271,346 $1,200 $35,161,463