2001-15 Allowable Investments for Village FundsORDINANCE NO. 15-2001
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AN OKDINANCE OF THE VILLAGE COUNCIL OF THE VILLAGE OF NORTH PALM
BlsACI 1, FLORIDA, REPEALING SECTION 2-4, ALLOWABLE INVESTMENT ACTIVITY
FOR VILLAGE FUNDS, OF ARTICLE I OF CHAPTER 2, ADMINISTRATION, OF THE CODE
OI ORDINANCES OF THE VILLAGE AND CREATING A NEW SECTION 2-4, INVESTMENT
POLICY OF THE VILLAGE, OF THE CODE OF ORDINANCES OF THE VILLAGE;
I'ROV1llING FOR SEVERABII,]TY; PROVIDING FOR THE REPEAL OF ALL ORDINANCES
OR PAKTS OF ORDINANCES IN CONFLICT HEREWITH; AND, PROVIDING FOR AN
1;PFECI7VE DATE.
BE 1T ORDAINED BY THE VILLAGE COUNCIL OF NORTH PALM BEACH, FLORIDA:
Section 1. The Village Council of the Village of North Palm Beach, Florida, does hereby
repeal Section 2-4, Allowable Investment Activities for Village Funds, of Article I, Chapter 2,
Administration, of the Code of Ordinances of the Village.
Section 2. The Village Council of the Village of North Palm Beach, Florida, does hereby
create a new Section 2-4, Investment Policy of the Village, of the Code of Ordinances of the Village,
and to read as follows:
"Section 2-4. Investment Policy of the Village
(A) Purpose
7'he purpose of this statement is to set forth the policy and objectives
governing the investment management of public funds of the Village
of North Palm Beach, Florida (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.
Fundslncluded:
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(a) General Fund
(b) Special Revenue Funds
(c) Enterprise Funds
(d) Debt Service Funds
(e) Any new funds created by the governing body unless specifically exempt.
(C) Objectives
The primary objectives, in priority of order, of investment activities
• shall be safety of principal, liquidity of funds, and maximizing
investment income.
(1) 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:
(i) limiting investments to the safest types of securities,
(ii) pre-qualifying the financial institutions, broker/dealers,
intermediaries, and advisers with which the Village will do
business,
(iii) diversifying the investment portfolio so that potential losses
on individual securities will not place an undue financial
burden on the Village, and
(iv) monitoring all of the Village's investments to anticipate and
respond appropriately to changing market conditions.
(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:
(i) 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
(ii) investing operating funds primarily in short-term securities,
money market mutual funds, or similar investment pools
unless it is anticipated that long-term securities can be held to
maturity without jeopardizing the liquidity requirements.
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(2) 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.
(3) Investment Income
Without compromising safety and liquidity, the highest possible total return
should be obtained on the Village's funds. Income will include
interest/dividends received as well as any realized or unrealized gains and
losses of principal of the underlying security.
(D) PERFORMANCE MEASUREMENTS
The investment income objective is to regularly exceed the average rate of return on
three month U. S. Treasury Bills, or the average rate on Federal Funds, whichever is
higher. These indices are considered benchmarks for risk-free investment
transactions and therefore comprise a minimum standard for the portfolio's rate of
return. 7'he investment program may seek to augment returns above this threshold,
consistent with risk limitations identified herein and prudent investment principles.
(F.) PRUDENCE AND ETHICAL STANDARDS
(l) 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, not
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 deviations
from expectations are reported immediately and that appropriate action is
taken to control adverse developments.
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(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 financial/investment
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.
(F) AUTHORIZED INVESTMENTS
7'he Village ntay invest and reinvest, in accordance within the objectives stated in
subsection III, in the following:
(a) Interest-bearing checking or savings accounts in qualified public
depositories as defined in Florida State Statute 280.02
(b) Interest-bearing time deposits in qualified public depositories as
defined in Florida State Statute 280.02.
(c) The Local Govemment Surplus Funds Trust Fund or any
intergovernmental investment pool authorized pursuant to the Florida
Interlocal Cooperation Act as provided in Florida State Statute
163.01.
(d) Securities and Exchange Commission registered money market funds
with the highest credit quality rating from a nationally recognized
rating agency.
(e) Direct obligations of the United States Treasury.
(f) Federal agencies and instrumentalities.
(g) Securities of, or interest in, any open-end or closed-end management-
type investment company or investment trust registered under the
Investment Company Act of 1940, I S U.S.C. sections 80a-1 et seq.,
as amended from time to time, provided that the portfolio of such
investment company or investment trust is limited to obligations of
the United States Government or any agency or instrumentality
thereof and to repurchase agreements fully collateralized by such
United States Government obligations, and provided that such
investment company or investment trust takes delivery of such
• collateral either directly or through an authorized custodian.
(h) Other investments authorized by law or by ordinance by the Village.
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(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.
(II) PORTFOLIO COMPOSITION
7'he 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.
Authorized Investments Maturity Range Maximum
Interest-bearing checking
or savings accounts N/A 100%
Interest-bearing time deposits 3 years 20%
The Local Government Surplus
Funds Trust Fund /intergovernmental
investment pool N/A 100%
Securities and Exchange Commission
registered money market funds N/A 50%
Direct obligations of the
lJnited States Treasury 5 years 80%
Federal agencies and instrumentalities 5 years 80%
Open-end or closed-end management-
type investments/trusts 5 years 20%
(I) RISK AND DIVERSIFICATION
Assets held shall be diversified to control the risk of 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 strategics 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 also will be maintained of approved security
brokers/dealers selected by creditworthiness.
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(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 athird-party custodial institution. "I'he
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, or his/her respective designees.
Securities transactions between abroker-dealer and the custodian involving purchase
or 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.
(I.) 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-
11ow 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
The Chief Financial Officer shall establish a system of internal controls designed to
prevent losses of funds, which might arise from fraud, employee error,
misrepresentation by third parties, or impmdent actions by employees of the Village.
Such internal controls shall be in writing and made a pari of the Village's operating
procedures and shall be reviewed by independent auditors during the course of
periodic financial audits as may be required of the Village.
(O) CONT1Nl11NG EDUCATION
The Chief Financial Officer shall complete eight (8) hours of continuing education
annually in subjects or courses related to investment practices and products.
(I') REPORTING
The Chief Financial Officer shall prepare an annual investment report, which shall
include securities in the portfolio by class and type, book value, income earned, and
• market value as of the report date. The report will be provided to the legislative and
governing body of the Village. The report shall be available to the public.
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(Q) SF,CUKITIES; DISPOSITION
• (1) Every security purchased on behalf of the Village must be properly earmarked
and:
(a) If registered with the issuer or its agents, must be immediately placed
for safekeeping in a location that protects the Village's interest in the
security;
(b) 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
of Florida, or any other state or territory of the United States which
has a branch or principal place of business in the State of Florida as
defined in Florida Statute Section 658.12, or by a 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 of Florida, and must be kept in the depository in an
account separate and apart from the assets of the financial institution; or
(c) 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.
(2) The Village may also receive bank trust receipts in return for investment of
surplus funds in securities. Any trust receipts received must enumerate the
various securities held, together with the specific number of each security
held. The actual securities on which the trust receipts are issued may be held
by any bank depository chartered by the Federal Government, the State of
Florida, or any other state as defined in Florida State Statute 658.12, or by a
national association organized and existing under the laws of the United
States which is authorized to accept and execute trusts and which is doing
business in the State of Florida.
(R) SALE OF SECURITIF,S
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 and place the proceeds into the proper
account or fund.
(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. The Village Council must
approve any changes, as well as the individual(s) charged with maintaining
internal controls.
(T) DELF,GATION OF AUTHORITY
The Finance Director is the Chief Financial Officer of the Village and is responsible
for investment decisions and activities. The Village may retain a Registered
Investment Advisory Firm to assist in the investment management process. No
person may engage in an investment transaction except as provided under the terms
of this policy and the procedures established hereunder.
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 of the depository
signatories."
Section 3. ]f any section, paragraph, sentence, clause, phrase or word of this Ordinance is
for any reason held by a Court to be unconstitutional, inoperative or void, such holding shall not
affect the remainder of this Ordinance.
Section 4. All Ordinances or parts of Ordinances in conflict herewith are hereby repealed.
Section 5. This Ordinance shall take effect immediately upon passage.
PI,AC1iD ON FIRST READING THIS 14th DAY OF JUNE, 2001.
1'I,ACI:D ON SECOND, FINAL READING AND PASSED THIS ~ D~1~C~F JUNE, 2001.
(VILLAGE SEAL)
A7"1'IiST:
VII,I.AGE CI.F,RK
MAYOR
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