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Res 1249 - Invest Policy .- COUNCXL BXLL NO. 1560 RESOLUTXON NO. 1249 A RESOLUTXON ADOPTXNG AN XNVESTMENT POLXCY, SELECTXON CRXTERXA FOR QUALrFIED FrNANCIAL INSTITUTrONS AND BROKERS/DEALERS, AND AUTHORXZXNG THE FXNANCE DXRECTOR TO ESTABLXSH AN XNSTXTUTXONAL CUSTODY AGREEMENT. WHEREAS, the City of Woodburn manages its financial resources in order to meet services needs, comply with statutory requirements for budget and financial services, and protect the pUblic's interest and welfare; and WHEREAS, Woodburn are an investment capital the investment guidelines of important tool in preserving as a financial resource; and the and City of enhancing WHEREAS, the prudent observance of sound investment guidelines concerning internal control, diversification, collateralization, performance, and other factors will maximize earnings with protection of principal; NOW THEREFORE, THE CXTY OF WOODBURN RESOLVES AS FOLLOWS: section 1. That the "Investment Policy" and "Selection criteria for Qualified Financial xnstitutions" be adopted, copies of which are attached, and the Finance Director be authorized to establish an Institutional custody Agreement. section 2. Passed by the council That Re~~~n _NO.^:~.y~rebY to form~ rt.rrr-~ 2J '7Lf city Attorney APPROVED: ~ K~ June 27, 1994 Approved as Submitted to the Mayor June 28, 1994 Approved by the Mayor June 28, 1994 Filed in the Office of the Recorder June 28, 1994 ATTEST: rr7~ ~~~ Mary T nant, City Recorder city of Woodburn, Oregon Page 1 - COUNCIL BILL NO. 1560 RESOLUTION NO. 1249 "-~"-""""""'---- _, ._....m. _._,,"_ '^ . ,,,.,..<-_.",,,,,._~-.-~ -- CXTY OF WOODBURN XNVESTMENT POLXCY AND PORTFOLXO GUXDELXNES SCOPE: These investment policies apply to all cash-related assets included within the scope of the city's audited financial statements and held directly by the city. Funds will be invested in compliance with ORS 294.035 through 294.048; ORS 294.125 through 294.155; ORS 294.810; other applicable statutes, these policies and written administrative procedures. Investment of any tax exempt borrowing proceeds and any debt service funds will comply with state and Federal law. AUTHORXTY: The Finance Director shall be the investment officer of the city and shall be responsible for investment decisions and activities, under the direction of the city Administrator. Administrative procedures for the operation of the investment program, consistent with this investment policy, shall be established by the Finance Director. The Finance Director has the responsibility to have cash available to meet day-to-day demands; and invest all cash, including bond proceeds and equipment replacement reserves, while adhering to applicable statutes, regulations, and this policy governing investments. XNVESTMENT OBJECTXVES: In order to secure a safe and reasonable return on investments, the City's investment objectives are: SAFETY The primary objective activities is the Preservation of of investment principal. of Woodburn's investment capital and the protection The city will diversity its unreasonable risks inherent security types, individual maturities. investments to avoid incurring in overinvesting in specific financial institutions, or LEGALITY - Funds will be deposited and invested in accordance with federal, state, and other legal requirements. LIQUIDITY - The city's investment portfolio will remain sufficiently liquid to meet operating requirements which might reasonable be anticipated such as payroll, accounts payable, and debt service. PIIC 1 - Ci1;y of Woodbum Investmc:ot Policy ,..... YXELD- The city will attain a market rate of return throughout budgetary and economic cycles. The city will not assume unreasonable investment risk to obtain investment income. PRUDENCE: The standard of prudence to be applied shall be the "prudent person" rule, which states: "Investments shall be made with judgement 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 investment, considering the probable safety of their capital as well as the probable income to be derived". The prudent person rule shall be applied in the context of managing the overall portfolio. Investment officers acting in accordance with written procedures and exerc1s1ng 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 in a timely fashion and appropriate action is taken to control adverse developments. INTERNAL CONTROLS: The Finance Director shall establish a system of internal controls which shall be reviewed annually by the independent auditor. The controls shall be designed to prevent loss of public funds due to fraud, error, misrepresentation, unanticipated market changes, or imprudent actions. INVESTMENT MATURXTY All funds will be considered short term except those reserved for capital projects (i.e. bond sale proceeds) and special assessment prepayments being held for debt retirement. Except for special situations, as directed by the investment officer, investments will be limited to maturities not exceeding 18 months. The following schedules are guidelines for investment of operating funds: MATURITY SCHEDULING Under Under Under Under Under 30 days 90 days 180 days 360 days 18 months 10% Minimum 25% Minimum 75% Minimum 90% Minimum 100% Minimum P.go 2 - city of Woodburn Invelbncot Policy ...-- .-..1------ "-~," .,- COMPETITIVE SELECTION OF INVESTMENT INSTRUMENTS Before the City invests any surplus funds, competitive quotes will be obtained by telephone. If a specific maturity date is required, either for cash flow purposes or for conformance to maturity guidelines, quotes will be requested for instruments which meet the maturity requirement. If no specific maturity is required a market trend (yield curve) analysis will be conducted to determine which maturities would be most advantageous. Quotes will be requested from financial institutions for various options with regards to term and instrument. The city will accept the quote which provides the highest rate of return within the maturity required and within the perimeters of these policies. Authorized Financial Institutions and Dealers The Financial Director will maintain a list of financial institutions and securities dealers which have met the City's selection criteria and are authorized to provide investment services. The City will limit all investment activities to the institutions on this list. Written procedures and criteria for selection of financial institutions and securities dealers will be maintained by the Finance Director. SECURXTY SELECTXON Maximum percentages of securities listed below have been set based on the assumed risk factors for each security, All securities are also included in the list of "U.S. Government and Agency Securities for Local Government Investments under ORS 294.035 and 294.040." U.S. Treasury Bills, Notes, Bonds, Strips 100% Maximum U.S.Government Agency Securities and Instrumentalities of Government Sponsored corporations 100% Maximum Oregon Local Government Investment Pool 100% Maximum 40% Maximum Banker's Acceptances, Oregon-Issued Repurchase Agreements 25% Maximum Certificates of Deposit (Commercial Banks in Oregon insured by FDIC) 25% Maximum Commercial Paper Financial institution, holding company or business enterprise headquartered in Oregon; A-I and P-l only; maximum 60 days maturity Certificates of Deposit (Savings and Loan Associations in Oregon which meet Federal capital requirements and are insured by FSLIC) 25% Maximum 10% Maximum Ptac 3 . City of Woodburn Invcatmcat Policy .....- -r'. state of Oregon and Local Government Securities with AA ratings or better 25% Maxinv.nn DXVERSXFXCATXON BY FXNANCXAL XNSTXTUTXONS The combination of CD's, BA's Repo's and CP may not exceed 25% of the total portfolio with anyone financial institution. Banker's Acceptances (BA's) Not more than 25% of the total portfolio with anyone institution. commercial Paper (CP) -Businesses in Oregon No more than 10% of the total portfolio with anyone corporate entity. certificates of Deposit No more than 15% institution. (CD's) - Commercial Banks of total portfolio with any one financial certificates of Deposit (CD's) - Savings & Loan Associations No more than 5% of the total portfolio with anyone institution. Repurchase Agreements (REPO's) No more than 10% of the total portfolio with anyone institution, state and Local Government Securities No more than 15% of the total portfolio in anyone entity. State of Oregon Investment Pool Not to exceed $20 million ($10 million per account) with the exception of pass-through funds (in and out within 10 days). U. S. Government Agencies No more than 40% of total portfolio in anyone agency. SAFEKEEPING AND COLLATERALIZATXON: Investment securities will be delivered by either book entry or physical delivery, and held in third party safekeeping by a bank designated as primary agent. The trust department of the bank designated as primary agent will be considered to be a third party for the purposes of safekeeping of securities purchased from the bank. The purchase and sale of all securities will be on a payment versus delivery basis. The primary agent shall issue a safekeeping receipt to the City listing the specific instrument, rate, maturity and other pertinent information. Repurchase safekeeping. agreement. Deposit-type securities (i.e., certificates of deposit) shall be collaterized through the State collateral pool as required by ORS for any amount exceeding FDIC or FSLIC coverage. Other investments shall be collaterized by the actual security held in safekeeping by the primary agent. agreements longer than three days require third party All repurchase agreements require a master repurchase Page 4 - City of Woodburn Inveatmmt Policy ...-.. '--'.'''''--''-~---'''-< ,- Time certificates of deposits will be protected by third party custodial safekeeping. Bearer securities shall be protected by third party custodial safekeeping. Treasuries, agency discount notes and bonds, and bankers acceptances shall be secured through third party custody and safekeeping procedures. REPORTXNG REOUXREMENTS: The Finance Director will generate monthly reports for management purposes. This report will detail monthly investment activity including type of investment, rate of return, settlement date, and maturity date, and broker. INDEMNXTY CLAUSE: The city will indemnify staff from personal liability for losses that might occur pursuant to administering and while acting in accordance with the investment policy. PERFORMANCE EVALUATXON: The performance of the city's portfolio shall be measured against the performance of the state of Oregon Local Government Investment Pool. POLICY REVXEW: This policy shall be reviewed and modified, if appropriate, on an annual basis by the Woodburn city Council unless market conditions or operations warrant an earlier review. Paee 5 - City of Woodburn IDvellmcllt Policy ...-- r ~" Time certificate~ of ueposits will be protected bz third party custodial safekeeping. Bearer securities shall be protected by third party custodial safekeeping. Treasuries, agency discount notes and bonds, and bankers acceptances shall be secured through third party custody and safekeeping procedures. REPORTXNG REOUXREMENTS: The Finance Director will generate a monthly report for management purposes. This report will detail monthly investment activity including type of investment, rate of return, settlement date, and maturity date, and broker. XNDEMNXTY CLAUSE: The City will indemnify staff from personal liability for losses that might occur pursuant to administering and while acting in accordance with the investment policy. PERFORMANCE EVALUATION: The performance of the City'S portfolio shall be measured against the performance of the state of Oregon Local Government Investment Pool. POLXCY REVIEW: This policy shall be reviewed and modified, if appropriate, on an annual basis by the Woodburn City Council unless market conditions or operations warrant an earlier review. Pace 5 - City of Woodbum InvCltmcat Policy ..-- " T" ,- CXTY OF WOODBURN SELECTXON CRXTERXA FOR QUALXFXED FXNANCXAL XNSTXTUTXONS AND BROKERS/DEALERS The Finance Director shall maintain an approved list of financial institutions and broker/dealers with which the City does investment transactions. Firms on the qualified list for investment must meet the minimum criteria defined below. Firms failing to meet the minimum criteria or which, in the judgement of the city, fail to offer adequate safety to the city, will be removed from the list. Banks and Saving and Loans Institutions are required to pledge collateral on all investments pursuant to City and state law. A completed Financial Institution and Broker/Dealer questionnaire and certification must be on file with the city before conducting investment business with the City. I. Selection criteria for Banks A. Must be a qualified public depository as prescribed by Oregon state law (ORS 295.005 (4) and 295.025), and must meet or exceed the requirements outlined therein. B. Must be insured by the Federal Deposit Insurance Corporation (FDIC). C. Short term ratings must be P2 or better. Long term ratings must be A or better from Moody'S Investors Service, or it's equivalent rating by one of the recognized rating agencies such as Stand & Poor's, Fitch Investors Service or Duff & Phelps. II. Selection criteria for Saving and Loan Associations A. Must be a qualified public depository as prescribed by Oregon State law (ORS 295.005 (4) and 295.025), and must meet or exceed the requirements outlined therein. B. Must be insured by the Federal Savings and Loan Insurance Corporation (FSLIC). C. Must maintain regulatory capital (excluding reserves) of at least $2 million, and as a percent of total assets of at least 3 percent. III. Selection Criteria for BrOkers/Dealers. A. Must be regulated by the Securities and Exchange commission (SEC). B. Must be a member in good standing with the National Association of Securities Dealers, Inc. (NASD). Must be licensed by the State of Oregon. Oregon. All sales personnel dealing with of the Oregon office. D. Must maintain continuous compliance with the Federal Reserve capital adequacy guidelines, and agree to immediately notify the City whenever the firm's capital position falls short of the capital adequacy standard. C. Must be located in the city must work out ...- -T' ,'.....~ CXTY OF WOODBURN FXNANCXAL XNSTXTUTXON AND BROKERS/DEALERS QUESTXONNAXRB AND CERTXFXCATXON 1. Name of Firm: 2. Address: (Local) (National offices) 3. Telephone Number: (Local) ( (National Offices) ( ) (Local Fax) ( ) 4. Primary representative/manager/partner-in-charge: Name and Title: Name and Title: 5. Identify all personnel who will be trading with or quoting securities. Name Title Teleohone ( ) ( ( ( ) 6. Please indicate which agents of your firm's local offices are licensed, certified or registered, and by whom: Broker/Oealer/Aoent Licensed or Reoistered bv Page 2 - Financial iDItitutioo. QueItioanaire ~. -r 7. Which of the above personnel have read the city's investment policies? 8. Which instruments are offered regularly by your local desk? ( ) U.S. Treasury Securities ( ) Bankers' Acceptances ( ) Bills ( ) Domestic ( ) Foreign ( ) Bonds ( ) Certificate of Deposit ( ) strips ( ) other (Specify) ( ) Federal Agency Securities ( ) Commercial Paper ( ) Repurchase Agreements 9. Please identify your public sector clients in our geographical area. Entitv contact Person Telephone Client since ( 1 ( 1 ( 1 ( ( 10. Have any of your public securities transaction misrepresentation of the so, explain. sector clients ever arising from a risk characteristics sustained a loss on a misunderstanding or of the instrument? If 11. Has your firm ever been subject to a regulatory or state or federal agency investigation for alleged improper, fraudulent, disreputable or unfair activities related to the sale of government securities or money market instruments? Explain. Have any of your employees ever been so investigated? Explain. Pace 3 - Finmcial institucioo Ql'Cl'Mnn.ire ~." "--.......- 12. Has your firm consistently complied with the Federal Reserve Bank's capital adequacy guidelines? () Yes () No As of this date, does your firm'S capital position ( ) Comply with the guidelines ( ) Exceed the guidelines ( ) fall below guidelines (if so, by what factor?) 13. Do you participate in the securities Xnvestor Protection corporation (SIPC) insurance program? 14. What portfolio information do you require from your clients? 15. What reports, transactions, confirmations and paper trail will we receive? Please include current financial statements and samples of reports that your firm regularly provides to public-sector clients. Page 4 - Financial inalitutioo Qo.....tinnn.ire ...-' ....