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Title:
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RESOLUTIONS OF THE CITY COUNCIL OF THE CITY OF SAN PABLO AND THE SAN PABLO LOCAL SUCCESSOR AGENCY BOARD ADOPTING AN INVESTMENT POLICY FOR FISCAL YEAR 2017/18
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PREPARED BY: J. KELLY SESSIONS DATE OF MEETING: 06/05/17
SUBJECT:
TITLE
RESOLUTIONS OF THE CITY COUNCIL OF THE CITY OF SAN PABLO AND THE SAN PABLO LOCAL SUCCESSOR AGENCY BOARD ADOPTING AN INVESTMENT POLICY FOR FISCAL YEAR 2017/18
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolutions
BODY
COMPLIANCE STATEMENTS
Council Priority Workplan Compliance Statement:
General Fund Reserves Protection/Fund Balance (City Council, City Manager) and Develop/Update City Financial Policies (Finance) are policy items under the adopted FY 2015-17 City Council Priority Workplan, effective October 1, 2016.
CEQA Compliance Statement
This is not a project as defined by CEQA.
BACKGROUND
Government Code Section 53646 allows the Treasurer or Chief Financial Officer to render annually to the City Council and the Local Successor Agency (LSA) Board of Directors a statement of investment policy, and requires that any change in the policy be considered at a public meeting. The Investment Policy was last considered and approved by the City Council and LSA Directors on June 6, 2016 (Resolutions 2016-198 and LSA2016-004).
In compliance with this Government Code section and following the recommendations from Insight Investment (formerly known as Cutwater), the City's/LSA's investment advisor, Staff proposes approval of the FY 2017/18 Investment Policy including the following update:
* Remove the reference to having authority to invest only in securities and obligations authorized in the applicable California statutes, and replace it with the authority to invest only in United States Treasury securities, United States Agency securities and United States Instrumentality securities.
The reason for this change is that the Securities and Exchange Commission (SEC) increased restrictions for Money Market funds that claim to have a stable net asset value (NAV). In the last recession, some money market funds that had corporate exposure had the NAV's drop below one dollar per share because of some losses in commercial paper. Therefore, the SEC decided that if money market managers were going to claim a stable net asset value of one dollar per share, then they could only use government securities. The government securities are not subject to large changes in value, which helps ensure their stability. Most governments only invest in stable value funds now, but the California Government Code has not caught up with the change, leading to the recommendation of the City's investment advisor and staff to include the more restrictive language in the policy.
Insight Investment has opined that the proposed revisions to the City's/LSA's Investment Policy are consistent with the restrictions in the California Government Code and the City's/LSA's overall investment objectives of:
1. Preservation of capital and protection of investment principal.
2. Maintenance of sufficient liquidity to meet anticipated cash flows.
3. Attainment of a market rate of return.
4. Diversification to avoid incurring unreasonable market risks.
Budget, Fiscal & Legislative Standing (Standing) Committee
On May 24, 2017, the Standing Committee (Kinney/Valdez) reviewed the changes to the Investment Policy as proposed by Staff, and recommended these changes to be approved by the City Council and the Local Successor Agency Directors.
FISCAL IMPACT
There is no direct fiscal impact as a result of this action, although the City Council / LSA Directors can assume that these changes will enhance each entity's fiscal stability.
Attachment: FY 2017/18 Investment Policy (Proposed)