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Portfolio Management <br /> Under the Council-adopted Fiscal Policies, it shall be the City's procedure to restrict investments to only <br /> Repurchase Agreements with national or state chartered banks, U.S. Treasury and U.S. Government <br /> Agencies, Guaranteed Investment Contracts, and Bankers Acceptances. All investments shall carry a <br /> minimum credit rating of `AA'. An exception to these restrictions is permitted with regard to the <br /> investment of proceeds received from the 2011 and 2012 bonds due to extenuating economic <br /> circumstances and their effect on financial institutions.Repurchase Agreements associated with the bonds <br /> can be placed with any bank,bank holding company, savings and loan association,trust company or other <br /> financial institution including the trustee or any of its affiliates. The financial institution shall carry a <br /> credit rating of`A' or better, and is required to pledge collateral from national or state chartered banks. <br /> The procedures shall consist of yield curve analysis and implemented with the appropriate purchase of <br /> the above investments. <br /> Maturity scheduling shall be within those investments and in a manner that will maximize yield and <br /> liquidity and minimize interest rate risk. <br /> Competitive Selection of Investment Instruments <br /> Before the City invests any surplus funds, a competitive "bid" process shall be conducted. If a specific <br /> maturity date is required, either for cash flow purposes or for conformance to maturity guidelines, bids <br /> will be requested for instruments that meet the maturity requirement. If no specific maturity is required, <br /> a market trend (yield curve) analysis will be conducted to determine which maturities would be most <br /> advantageous. Bids will be requested from financial institutions for various options with regards to term <br /> and instrument. The City will accept the bid that provides the highest rate of return within the maturity <br /> required and within the parameters of these procedures. <br /> Bids for purchases through the treasury auctions are not required. <br /> Records will be kept of the bids offered, the bids accepted and a brief explanation of the decision that <br /> was made regarding the investment. <br /> Settlement <br /> All settlements of investments shall be on a "Delivery vs. Payment" (DVP)basis. Physical delivery shall <br /> be avoided if at all possible, with book entry being the preferred method of safekeeping. <br /> Safekeeping and Collateralization <br /> All investment securities purchased by the City shall be held in third-party safekeeping by an institution <br /> designated as primary agent. The primary agent shall issue a safekeeping receipt to the City listing the <br /> specific instrument,rate, maturity and other pertinent information. <br /> Reporting Requirements <br /> The investment officer shall generate daily and monthly reports for management purposes. The annual <br /> investment report shall be completed on a time weighted basis and shall be included as part of the <br /> Comprehensive Annual Financial Report to the City Council. The target portfolio shall be the U.S. <br /> Government Bond Yield Index for the comparable period. <br /> Page 15 of 15 <br />