Loading...
HomeMy WebLinkAbout2008-17 Code Amendment Investment Policy• • ORDINANCE 2008-17 AN ORDINANCE OF THE VILLAGE COUNCIL OF THE VILLAGE OF NORTH PALM BEACH, FLORIDA, AMENDING ARTICLE I, "IN GENERAL," OF CHAPTER 2, "ADMINISTRATION," OF THE VILLAGE CODE OF ORDINANCES BY AMENDING SECTION 2-4, "INVESTMENT POLICY OF THE VILLAGE," TO UPDATE THE LIST OF VILLAGE FUNDS, ESTABLISH A MINIMUM STANDARD FOR LOCAL LIQUIDITY, INCORPORATE NATIONAL BENCHMARKS TO ASSIST IN PORTFOLIO EVALUATION, ESTABLISH PRE -QUALIFICATION PARAMETERS FOR SPECIFIC TYPES OF INSTITUTIONS, REVISE THE PORTFOLIO COMPOSITION, REMOVE THE ABILITY TO RECEIVE BANK TRUST RECEIPTS IN RETURN FOR INVESTMENT OF SURPLUS FUNDS IN SECURITIES, AND PROVIDE FOR QUARTERLY REPORTING; PROVIDING FOR CODIFICATION; PROVIDING FOR SEVERABILITY; PROVIDING FOR CONFLICTS; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, Section 218.415, Florida Statutes, requires that a municipality's investment activity be consistent with a written investment plan adopted by the governing body and that the plan be consistent with the criteria enumerated in Section 218.415, Florida Statutes; and WHEREAS, the Village has adopted a written investment policy, as codified in Section 2-4 of the Village Code of Ordinances, placing the highest priority on the safety and liquidity of funds; and WHEREAS, through the adoption of Resolution 2008-49, the Village Council authorized a temporary override of the Village's investment policy as it related to the composition of the Village's investment portfolio pending the adoption of revisions to Section 2-4 of the Village Code; and WHEREAS, the Village Administration and the Village Audit Committee have recommended a number of revisions to Section 2-4 of the Village Code and the Village Council wishes to formally adopt and incorporate such revisions into the Village's written investment policy; and WHEREAS, the Village Council has determined that the adoption of this Ordinance is in the best interests of the health, safety and welfare of the Village and its residents. NOW, THEREFORE, BE IT ORDAINED BY THE VILLAGE COUNCIL OF THE VILLAGE OF NORTH PALM BEACH, FLORIDA as follows: Section 1. The foregoing recitals are ratified as true and correct and are incorporated herein. Section 2. The Village Council hereby amends Chapter 2, "Administration," Article I, "In General," of the Village Code of Ordinances by amending Section 2-4, "Investment Policy of the Village," to read as follows (additional language is underlined and deleted language is stricken through): Page 1 of 10 Sec. 2-4. Investment policy of the village. (a) Purpose. The purpose of this statement is to set forth the policy and objectives governing the investment management of public funds of the village that are in excess of the amounts needed to meet current expenses. This investment policy places the highest priority on the safety and liquidity of funds. (b) Scope. This investment policy applies to all the investment activity of the village, except for its employees' pension funds, which are organized and administered separately, or for funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds. Funds included: (1) (2) (3) (4) (5) (c) investment maximizing (1) • General fund. Special revenue funds. Enterprise funds. Debt service Capital proiects funds. Any new funds created by the governing body unless specifically exempt. Objectives. The primary objectives, in priority of order of activities,_ shall be safety of principal, liquidity of funds and investment income. Safety. Safety of principal is the foremost objective of investment activities. Investments shall be undertaken in a manner that seeks to insure preservation of capital in the overall portfolio. All other investment objectives are secondary to the safety of principal. The objective will be to mitigate credit risk and interest rate risk. a. Credit risk Credit risk, the risk of loss due to the failure of the security issuer or backer, will be minimized by: 1. Limiting investments to the safest types of securities. 2. Pre -qualifying the financial institutions, broker dealers, intermediaries, and advisers with which the village will do business. 3. Diversifying the investment portfolio so that potential losses on individual securities will not place an undue financial burden on the village, and 4. Monitoring all of the village's investments to anticipate and respond appropriately to changing market conditions. 5. Quarterly reporting. in comparative format. of all market values of invested funds and instruments. Page 2 of 10 • • b. Interest Rate Risk The Village will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates, by: 1. Structuring the investment portfolio so that the securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; and 2. Investing operating funds primarily in short-term securities, money market mutual funds, or similar investments pools unless it is anticipated that long- term securities can be held to maturity without jeopardizing the liquidity requirements. (2) Liquidity. (3) a. General liquidity: The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that the securities mature concurrent with cash needs to meet anticipated demands. Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets. Portions of the portfolio may be placed in interest -bearing checking/savings accounts with qualified public depositories, Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency, or local government investment pools which offer same - day liquidity for short-term funds. b. Local liquidity: The chief financial officer of the village shall establish and maintain a local. liquid fund in an amount equal to, as a minimum. one -twelfth (1/12) of the designated operating funds in the annual village budget. Investment Income. Without compromising safety and liquidity, the highest possible total return should be obtained on the Village's funds. Income will include interest/dividend received as well as any realized or unrealized gains and losses of principal of the underlying security. Page 3 of 10 (d) Performance Measurements. The i tment ob a t' to regularly cxceed the average rate of return on threc month U.U. Treasury s, eonsidered—benehmeric for risk -free investment transactions and therefore prQgfam ma.. seek to ,gment. b th• th 1, ld •th k � vva� �v u.wbaai au a viauia i uc�v ry �ru , In order to assist in the evaluation of the nortfolio's performance. the village shall use nationally recognized benchmarks for the short term and long term portfolios. Performance calculations will not include any balances invested in overnight sweep accounts. Short term portfolio: A nationally recognized Money Market Fund Index. such as Standard and Poor's Government Investment Pool Index/Government will be used as a benchmark. Long term portfolio: Investment performance of the village portfolio will be compared to the 1-3 year United States Treasury index or the equivalent composed of U.S. Treasury or Government securities. with duration and asset mix that approximates the village portfolio. (e) Prudence and ethical standards. (1) Prudence. The standard of prudence to be used shall be the "prudent person rule", which states that: Investments should be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, nor for speculation, but for the investment, considering the probable safety of their capital as well as the probable income to be derived from the investment. The chief financial officer, or other persons performing the investment functions, acting in accordance with written policies and procedures, and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviation from expectations are reported immediately and that appropriate action is taken to control adverse developments. (2) Ethical standards. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interest in financial institutions with which they conduct business. They shall further disclose any personal financiallinvestment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the village. Page 4 of 10 (f) Authorized investments and ore-aualification. The village may invest and reinvest, in accordance with the objectives stated in subsection Ill (c), in the following financial instruments noted in the table inset below. When considering such investments. the village shall use the following pre-aualification parameters for specific institutions: • • (-6) () • Interest bearing ch 1 ,,.tom alif ed „bl; depasitor es as def„ea i.. >; e t 280 02 Interest be„g time, deposits 11 qK4l fV ,1 ublic de sito defined in F.S. section 280.02. The local government surplus funds trust fund or any in F.S. section 163.01. Securities and Exchange Con fission registered money marl at funds with the highest credit quality rating from a nationally ea t•„ rv:,.,glllizv e Direct ebl gatio„s o f the Un ted Gates T LUVV{, VVll£,KY1Vl1 Federal - gene e nd str. nta1_t; Securities of or interest in, any open end or closed end or invest-nient----tfust urd the In. ,- C n , f i 940, 15 U.S. � �+ Y.�Vl l,11V 111 Y VJ4111V114�VIi1 _ ✓ sections 80a 1 ct seq., as amended-from4ime-te-timerprovidecl-that the portfolio of :such inv limited —to —obligations --of the United Stat vemment--or—any agency a nstrumenta ty thereef—and—to repurchase agreements fully col ateralized by s el United States Govemment ehl g..t' a..ia' VV11ax�.V1 {A114V11 lJ,' JYl�LV11�111LVA-/� , armed --tat was investment company or investment trust takes delivery of such collateral either directly or through an Banks: The Village shall select a bank from the most current top- 10 listed "Qualified Public Depositories" with a CAEL (Capital Adeauacv. Asset Quality. Earnings. Liauiditv) score of 3 or better. Bank eligibility: CAEL Score 1-3 Consolidated Asset Value Ton 10 asset rated Elieibility U.S. Public Funds Depository Institutions Page 5 of 10 SEC registered monev/market mutual funds: S&P: AAA Minimum: Moody's: AAA Minimum Insurance comvanies: A.M. Best Rating: Minimum aaa. Corporate interest notes: S&P: AAA Minimum: Moody's: AAA Minimum Local government investment vools: All components in each pool must satisfy the appropriate pre -qualification parameters noted for that institution. (g) Maturity and liquidity requirements. The Village's investment portfolio shall be structured to provide sufficient liquidity to pay obligations as they come due. Furthermore, to the extent possible, an attempt will be made to match investment maturities with known cash needs and anticipated cash flow requirements. Unless matched to a specific cash flow, the Village will not directly invest in securities maturing more than three years from the date of purchase. (h) Portfolio Composition. The following are the limits for investments and limits on security issues, and maturities in the portfolio. The chief financial officer has the option to further restrict investment in selected instruments, to conform to the present market conditions. Autzi-crc orizcd Matt. ity Maximum Investments Range °zo_ merest faring ^ N/A 100% 3 years 20% Scarp u„ Funds -Trust N/A 100% Securitie3 and Ema N/A 50% funds — Direct obligations of the United States Treasury 5 years 5 years 80% 8w°_ 5 years 20% Page 6 of 10 Note: The table inset noted below defines two types of villas a investments: "Operating" and "Core": Operating: Those liquid funds necessary to conduct routine village activity. in addition to an amount determined by the village council and administration sufficient to cover emergency situations and unforeseen capital expenditures. Core: All funds not included in operating funds. In general. these funds can be invested in issues with longer -term maturities. These terms shall be defined and the amounts will be designated at least once a Year during the village budget discussions. Changes during a year shall only be made by resolution of the village council. These changes will apply to the end of the current fiscal year and must be reconfirmed or changed as needed during the next annual budget process. Table Inset: Authorized Investments Type of Funds Maturity Minimum % Maximum % Range 8.33% 100 Interest -bearing Operating N/A (1/12 of annual (no more than 50% with checking or savings Village operating any one depository budget) institution) accounts 100 Core NA 0% (no more than 50% with any one depository institution Interest —bearing time Operating 30 days 0 91.67 deposits (11/12th of annual Village operating budget) (no more than 33.33% with any one issuer) Core 3 years 0 100 (no more than 33.33% with any one issuer) The Local Government Operating NA 0 25 Surplus Funds Trust Fund/intergovernmental Core NA 0 25 investment pool Securities and Operating NA 0 50 Exchange Commission (no more than 33.33% registered money with any one issuer.) market funds Core NA 0 50 (no more than 33.33% with any one issuer.) Direct obligations of Operating 30 days 0 50 the United States Treasury Core 5 years 0 100 Federal Agencies Operating NA 0 0 Core 5 years 0 50 (no more than 10% with any one issuer) Corporate Notes Operating NA 0 0 Core 3 years 0 25 (no more than 33.33% with any one issuer) Page 7 of 10 (i) Risk and diversification. Assets held shall be diversified to control the risk loss resulting from the over -concentration of assets in a specific maturity, issuer, instrument, dealer, or bank through which these instruments are bought and sold. Diversification strategies shall be reviewed and revised periodically as deemed necessary by the Chief Financial Officer. (j) Authorized investment institutions and dealers. A list will be maintained of financial institutions authorized to provide investment services. In addition, a list will be maintained of approved security brokers/dealers selected by creditworthiness. (k) Third -party custodial agreements. All securities purchased by the Village shall be properly designated as an asset of the Village and shall be held in safekeeping with a third -party custodial institution. The third -party custodian will be required to designate all securities held as assets of the Village. No withdrawal of securities, in whole or in part, shall be made from safekeeping, except by the Chief Financial Officer, and his/her respective designees. Securities' transactions between a broker -dealer and the custodian involving purchaser sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis, if applicable, to . ensure that the custodian will have the security or money, as appropriate, in hand at the conclusion of the transaction. (1) Master repurchase agreement. All approved institutions and dealers transacting repurchase agreements shall execute and perform as stated in the master repurchase agreement. All repurchase agreement transactions shall adhere to the requirements of the master repurchase agreement. (m) Bid requirement. An appropriate maturity date will be determined for each investment based on cash -flow needs and market conditions. Based on these considerations, the Chief Financial Officer will analyze and select one or more optimal types of investments and competitively bid the security in question when feasible and appropriate. Except as otherwise required by law, the bid deemed to best meet the investment objectives specified in subsection III must be selected. (n) Internal Controls. Lfl The chief fmancial officer shall establish and maintain a written system of internal controls made a part of the village's operational procedures. The internal controls shall be designed to prevent losses of funds, which might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the village. d ;hall be fmancial audits as may be required of the village. No person shall engage in an investment transaction except as authorized in this policy. j Independent auditors, as a normal part of the annual financial audit to the village, shall conduct a review of the system of internal controls to ensure compliance with policies and procedures as may be required by the village. Page 8 of 10 (o) Continuing education. The chief fmancial officer shall complete eight (8) hours of continuing education annually in subjects or courses related to investment practices and products. (p) Reporting. The chief fmancial officer shall prepare an ain:al a quarterly investment report, which shall include securities in the portfolio by class and type, bye, acquisition cost. income earned, yield. maturity date and market value as of the report date. The report will be provided to the legislative and governing body of the village and shall be available to the public. (q) Securities; disposition. (4) Every security purchased on behalf of the Village must be properly earmarked and: (afl (ha) (ea) If registered with the issuer or agents, must be immediately placed for safekeeping in a location that protects the Village's interest in the security; If in book entry form, must be held for the credit of the governing body by a depository chartered by the federal government, the state, or any other state or territory of the United States which has a branch or principal place of business in the state as defined in Florida Statute Section 658.12, or by national association organized and existing under the laws of the United States which is authorized to accept and exercise trusts and which is doing business in the state, and must be kept in the depository in an account separate and apart from the assets of the financial institution, or If physically issued to the holder but not registered with the issuer or its agents, must be immediately placed for safekeeping in a secured vault. The village may also receive bank trust receipts in return for investment —of surplus funds in securities. Any trust receipts the specific number of each security held. The actual securities on which the trust reeeipts-are-issued-ma a held by . ban depositerch� -b" ernel*--tho state, er y other stato defied it F.S. section 658.12, or by a national asseeiatiens-erganized-and-axisting-under-the-laws-af-the-United States --which is authorized t„ „ opt and o o „te trusts and which is-daing-business-in-the-state, (r) Sale of securities. When invested funds are needed in whole or in part for the purposes originally intended or for more optimal investments, the chief financial officer may sell such investments at the then -prevailing market price, placing the proceeds into the proper account or fund. Page 9 of 10 • (s) Policy Considerations. (1) Exemptions. Any investment held prior to the adoption of this policy that does not meet the guidelines of this policy shall be exempted from the requirements of this policy. At maturity or liquidation, such monies shall be reinvested only as provided by this policy. (2) Amendments. This policy shall be reviewed on an annual basis by the village council at the "setting of council goals and obiectives" session of the annual budget. The village council must approve any changes; (t) Delegation of authority. The finance director is the chief financial officer of the village and is responsible for investment decisions and activities. The village-may-retairi-a-registered-investment-advisory-fiffir to -assist -in -the -investment No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established hereunder. Nothing set forth herein shall preclude the Village from utilizing a Chartered Financial Analyst or anv other individual or agency subiect to formal oversight by the United States Securities and Exchange Commission to invest funds on behalf of the Village in accordance with the mandates of paragraph (h) of this investment policy. Authorized signatories are the chief financial officer, the village manager and the village mayor. These individuals are also authorized to initiate wire transfers for the village. All investment transactions require approval by two (2) of the depository signatories. Section 3. The provisions of this Ordinance shall become and be made a part of the Code of the Village of North Palm Beach, Florida. Section 4. If any section, paragraph, sentence, clause, phrase or word of this Ordinance is for any reason held by a court of competent jurisdiction to be unconstitutional, inoperative or void, such holding shall not affect the remainder of this Ordinance. Section 5. All ordinances or parts of ordinances and resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of such conflict. Section 6. This Ordinance shall take effect immediately upon adoption. PLACED ON FIRST READING THIS 23rd DAY OF OCTOBER. 2008. PLACED ON SECOND, FINAL READING AND PASSED THIS 13th DAY OF NOVEMBER 2008. '�.�kEriicr�fttel•�. ``� • °�'�':•1 Sri. ATTEST: • „„,„,,,VILLAGE CLERK APPROVED AS TO FORM AN GAL SUFFICIENCY: VILLAGE ATTORNEY MAY Y Page l0 of 10