2008-17 Code Amendment Investment PolicyORDINANCE 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 ofthis Ordinance is in the best
interests ofthe health, safety and welfaze ofthe 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 aze ratified as true and correct and aze incorporated herein.
Section 2. The Village Council hereby amends Chapter 2, "Administration," Article I, "In
General," ofthe Village Code ofOrdinances by amending Section 2-4, "Investment Policy ofthe
Village," to read as follows (additional language is underlined and deleted language is
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 aze 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 aze other existing policies or indentures in effect for such funds.
Funds included:
(1) General fund.
(2) Special revenue funds.
(3) Enterprise funds.
(4) n°'n~;ee Ca ip tal proiects funds.
(5) 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 ofprincipal. 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 ofsecurities.
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
mazket conditions.
•
5. Quarterly reportine. 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; a~
2. Investing operating funds primazily in short-term
securities, money mazket mutual funds, or similaz
investments pools unless it is anticipated that long-
term securities can be held to maturity without
jeopardizing the liquidity requirements.
(2) Liquidity.
a. General liauidity: The investment portfolio shall remain
sufficiently liquid to meet all operating requirements that
may be reasonably anticipated. This is acwmplished 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 mazket 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 (1/121 of the
desi nag ted operating funds in the annual village budget.
(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/dividend received as well as
any realized or unrealized gains and losses of principal of the
underlying security.
C J
Page 3 of 10
(d) Performance Measurements. T~'° ....,,ct ::ea .....,.... °L' '
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rnn^:a^-^a L° °1.«. A. C 1. G a L c
rAln'InYi^ A ..A F .. fL° «,. «fF 1:,. ~n rnf.. ,.F ....f...~. TL.. .
Y
nrwernm TY ^^l~ f° n f f 1... L~ H 1. la ~ 1. ~ T
O' J ~~b e
1:«.:f..4:..«n :il e...4: Fi°a La°:.. ..«a a f 1 In order to assist in
r r r
the evaluation of the portfolio's performance the village shall use nationally
recognized benchmazks 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 Mazket Fund
Index, such as Standard and Poor's Government Investment Pool
Index/Government will be used as a benchmark.
Lon tg erm portfolio• Investment performance ofthe villag~rtfolio
will be compared to the 1-3 yeaz United States Treasury index or the
equivalent composed of U.S. Treasury or Government securities
with duration and asset mix that approximates the villageportfolio
(e) Prudence and ethical standards.
(1) Prudence. The standazd 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 ofpersonal responsibility
for an individual security's credit risk or market price changes,
provided deviation from expectations aze 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 financiaUinvestment 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 behalfofthe village.
Page4of10
(f) Authorized investments and pre-guatifzcation. The village may
• invest and reinvest, in accordance with the objectives stated in subsection l11 ~,
in the fellew-iag financial instruments noted in the table inset below. When
considerine such investments the village shall use the followine pre-qualification
parameters for specific institutions:
p a o
,t ., a a..va :.. c c o,..;~~4n m
a ~ -..a c c .:,.., won rn
~aczaac~a.-iv. Scocaoirrw.ot.
~7
f~~ r ,7 1 ..,i :....a.....,,~,..,1:.~..
C°7 b
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(~ Banks' The Villaee shall select a bank from the most current top-
10 listed "Qualified Public Depositories" with a CAEL (Capital
Adequacy Asset Quality Earnings Liquidity) scare of 3 or better.
Bank eltpibitity:
•
CAEL Consolidated Asset Value Eli ibili
Score
1 - 3 ~ 10 asset rated U.S. Public Funds D osito Institutions
Page 5 of 10
SEC reeistered money/market mutual funds:
C
S&P: AAA Minimum;
Moodv's: AAA Minimum
Insurance companies: A.M. Best Rating: Minimum aaa.
Corporate interest notes:
S&P: AAA Minimum•
Moodv's: AAA Minimum
(~ Local Qovernment investment pools• 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 ofpurehase.
(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.
I~ I_
*_..~ .teeb-
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Page 6 of 10
Note: The table inset noted below defines two types of village investments:
• "Operating" and "Core":
O~eratinQ: 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 c~3a ital 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 veaz shall only be
made by resolution of the village council. These changes will apply to the end of
the current fiscal veaz and must be reconfirmed or changed as needed during the
next annual budget con cess.
Table Inset:
•
Authortzedlnvestments TypeofFunds Maturi Minimum % Maximum
Rance
Interest-beazing
eia[in
NSA 8.33%
(1/12 of annual 100
Lno more than 50%with
checking of SaVi11
S Village ooeratine any one deoositorv
~
aCCOUntS bud t institution
Core
NA
0°/ 100
(no more [flan 50% with
a any one deoositorv
institution
Interest-bearing time gratin 30 days 0 91.67
depOSitS (11/12m ofannual Village
ooaatine budeen
(no mme than 33.33%
with anyone issuer)
Core 3 ears 0 100
(no more than 33.33%
with any one issuer)
The Local Government gratin NA 0 25
Surplus Funds Trust
Fund intergovernmental Core NA 0 25
investment Wool - -
Securities and
Exchange Commission gratin NA 0 50
(no more than 33.33%
registered money
with any one issuer.l
market funds Core NA 0 50
Lno more than 33.33
with any one issuer.)
Duect obligations of gratin 30 days 0 50
the United States
Treasury Core 5 years 0 100
Federal Agencies gratin NA 0 0
Core 5 ears 0 50
Lno more than 10 % with
any one issuer)
Corporate Notes gratin NA 0 0
Core 3 veers 0 25
(no more than 33.33%
with env 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) Authorised investment institutions arul 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 athird-party custodial institution. The third-party custodian will
be requved to designate all securities held as assets ofthe 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 abroker-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 meek the investment objectives specified in subsection III must be selected.
(n) Internal Controls
The chief financial 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 ofthe village. ~'~~",~
-~~ W_J_ _ ~-~ .L.L .11 _t ~ - ~ ~ _J ~ _L_11 L_
. No person shall
engage in an investment transaction except as authorized in this policy.
• ~ 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 bythe 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-aI a
quarterly investment report, which shall include securities in the portfolio by class
and type, beslF~elue, acquisition cost, income earned, yield, maturity date and
mazket 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.
(-I) Every security purchased on behalf of the Village must be properly
earmazked and:
(a~ 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;
(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,
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 sepazate and apart
from the assets ofthe financial institution, or
(e, 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.
• (r) Sale of securities. When invested funds aze 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 mazket
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 ofthis 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 objectives" session
of the annual budeet. The village council must approve any changes;
(t) Delegation of authority. The finance duector is the chief financial
officer ofthe village and is responsible for investment decisions and activities. The
~n4n u nto~ N entme~t n6. • F.rw. 4n n~ .a 4~.. ~ n !
'o ~ ..... w .b.u .a ua.w aa..aa u ra
L 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 any other individual or agencv subject to formal oversight by the
United States Securities and Exchange Commission to invest funds on behalf of the
Village in accordance with the mandates ofpazag~~h (h) ofthis investment polio
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) ofthe depository signatories.
Section 3. The provisions of this Ordinance shall become and be made a part of the Code of
the Village ofNorth 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 wnflict.
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.
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MAY
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• APPROVED AS TO FORM AN9-LEGAL SUFFICIENCY:
VILLAGE ATTORNEY
Page 10 of 10