HomeMy WebLinkAbout2008-040 - Adopting sections 145.010-145.060
BILL N0.2008-40
ORDINANCE N0.2008-40
AN ORDINANCE AMENDING TITLE I, GOVERNMENT CODE OF
THE MUNICIPAL CODE OF THE CITY OF RIVERSIDE, MISSOURI,
BY REPEALING SECTIONS 145.010 THROUGH 145.120, REGARDING FINANCING
AND ADOPTING NEW SECTIONS 145.010 THROUGH 145.060
WHEREAS, the City of Riverside, Missouri (the "City") has in place regulations
addressing investment and fmancing, including the objectives, policies, procedures, and
limitations thereof; and
WHEREAS, the City and its staff have reviewed of the City's Municipal Code (the
"Code") sections regarding investment and financing, and have determined that the provisions
must be revised and clarified so as to allow fox positive investment advantages with greater
security, uniformity, and clarity; and
WHEREAS, the City staff and the Board of Aldermen have reviewed, examined and
deemed adoption of the amended and restated Code provision regarding investment and
financing to be advisable and in the City's best interests for the promotion of the health, safety
and welfare of the residents of the City;
NOW, THEREFORE, be it ordained by the Board of Aldermen of the City of Riverside,
Missouri, as follows:
Section 1. Title I, Government Code, Chapter 145: Financing, Sections 145.010 through
145.120, inclusive, of the Municipal Code of the City of Riverside, Missouri are hereby repealed
in their entirety and replaced to read as follows:
SECTION 145.010: OBJECTIVE-PURPOSE
To obtain maximum investment income through prudent and conservative investments of the
City's temporarily idle funds while maintaining sufficient fund balances to meet approved
expenditures. The City will utilize those financing alternatives and techniques which produce
positive financial advantages and security for its citizens. The primary objectives, in priority
order, of investment activities shall be safety, liquidity, and yield:
1. Safety. Safety of principal is the foremost objective of the investment program.
Investments shall be undertaken in a manner that seeks to ensure the preservation of
capital in the overall portfolio. The objective will be to mitigate credit risk and interest
rate risk.
a. Credit Risk. The City of Riverside will minimize credit risk, the risk of loss due
to the failure of the security issuer or backer, by:
(i) The fmancial institutions, broker/dealers, intermediaries, and advisors with
which the City of Riverside will do business will bepre-qualified; and
(ii) The portfolio will be diversified so that potential losses on individual
securities will be minirnized.
b. Interest Rate Risk. The City of Riverside will minimize the risk that the market
value of securities in the portfolio will fall due to changes in general interest rates,
by:
(i) The investment portfolio will be structured so that 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 shorter-term securities
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 securities mature concm~ent with cash needs to meet anticipated
demands (static liquidity). Furthermore, since all possible cash demands cannot be
anticipated, the portfolio should consist largely of securities with active secondary or
resale markets (dynamic liquidity). A portion of the portfolio also may be placed in bank
deposits or repurchase agreements that offer same-day liquidity for short-term funds.
3. Yield. The investment portfolio shall be designed with the objective of attaining a market
rate of return throughout budgetary and economic cycles, taking into account the
investment risk constraints and liquidity needs. Return on investment is of secondary
importance compared to the safety and liquidity objectives described above. The
investments axe limited to relatively low risk securities in anticipation of earning a fair
return relative to the risk being assumed. Securities shall not be sold prior to maturity
with the following exceptions:
a. A security with declining credit maybe sold early to minimize loss of pr7ncipal.
b. A security swap would improve the quality, yield, or target duration in the
portfolio.
c. Liquidity needs of the portfolio require that the security be sold.
SECTION 145.020: GENERAL POLICY OF INVESTMENT LIMITATIONS
It is the policy of the city to only invest in those instruments eligible to be purchased by a City of
the Fourth Class organized pursuant to the laws of the State of Missouri.
Investment Types. In accordance with and
statutes, the following list represents the
Riverside, Missouri will consider and which
funds by the City of Riverside, Missouri.
subject to restrictions imposed by current
entire range of investments that City of
shall be authorized for the investments of
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a. United States Treasury Securities. The City of Riverside, Missouri may invest in
obligations of the United States government for which the full faith and credit of
the United States are pledged for the payment of principal and interest.
b. United States Agency Securities. The City of Riverside, Missouri may invest in
obligations issued or guaranteed by any agency of the United States Government
as described in V. (B).
c. Repurchase Agreements. The City of Riverside, Missouri may invest in
contractual agreements between the City of Riverside, Missouri and commercial
banks or primary government securities dealers. The purchaser in a repurchase
agreement enters into a contractual agreement to purchase U.S. Treasury and
government agency securities while simultaneously agreeing to resell the
securities at predetermined dates and prices.
d. Collateralized Public Deposits (Certificates of Deposit). Instruments issued by
financial institutions which state that specified sums have been deposited for
specified periods of time and at specified rates of interest. The certificates of
deposit are required to be backed by acceptable collateral securities as dictated by
State statute.
2. Security Selection. The following list represents the entire range of United States Agency
Securities that the City of Riverside will consider and which shall be authorized for the
investment of funds. Additionally, the following definitions and guidelines should be
used in purchasing the instruments:
a. U.S. Govt. Agency Coupon and Zero Coupon Securities. (Bullet coupon bonds
with no embedded options)
b. U.S. Govt. Agency Discount Notes. (Purchased at a discount with maximum
maturities of one (1) year)
c. U.S. Govt. Agency Callable Securities. (Restricted to securities callable at par
only with final maturities of two (2) years)
d. U.S. Govt. Mortgage Backed Securities. Restricted to securities with final
maturities of two (2) years.
3. Investment Restrictions and Prohibited Transactions. To provide for the safety and
liquidity of the City of Riverside's funds, the investment portfolio will be subject to the
following restrictions:
a. Borrowing for investment purposes ("Leverage") is prohibited.
b. Instruments known as Structured Notes (e.g. inverse floaters, leveraged floaters,
and equity-linked securities) are not permitted. Investment in any instrument,
which is commonly considered a "derivative" instrument (e.g. options, futures,
swaps, caps, floors, and collars), is prohibited.
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c. Contracting to sell securities not yet acquired in order to purchase other securities
for purposes of speculating on developments or trends in the market is prohibited.
4. Collateralization. Collateralization will be required on two types of investments:
certificates of deposit and repurchase agreements. The market value (including accrued
interest) of the collateral should beat least 100%.
a. For certificates of deposit, the market value of collateral must be at least 100% or
greater of the amount of certificates of deposits plus demand deposits with the
depository, less the amount, if any, which is insured by the Federal Deposit
Insurance Corporation, or the National Credit Unions Share Insurance Fund.
b. All securities, which serve as collateral against the deposits of a depository
institution, must be safekept at anon-affiliated custodial facility. Depository
institutions pledging collateral against deposits must, in conjunction with the
custodial agent, furnish the necessary custodial receipts within five business days
from the settlement date.
c. The City of Riverside, Missouri shall have a depositary contract and pledge
agreement with each safekeeping bank that will comply with the Financial
Institutions, Reform, Recovery, and Enforcement Act of 1989 (FIRREA). This
will ensure that the City of Riverside's security interest in collateral pledged to
secure deposits is enforceable against the receiver of a failed financial institution.
d. The Finance Office shall maintain a list of the securities designated by the Board
of Aldermen as acceptable collateral for the deposit of City funds. The listing is
not intended to serve as, and should not be considered as a listing of legally
authorized investment instruments. The City of Riverside reserves the right to
refuse to accept as collateral any security or securities on this list, or to request the
submission of an alternate acceptable security or securities, if, in the sole
discretion of the Finance Officer determines that such action will provide greater
security for the deposit of city funds
5. Repw•chase Agreements. The securities for which repurchase agreements will be
transacted will be limited to U.S. Treasury and government agency securities that are
eligible to be delivered via the Federal Reserve's Fedwire book entry system. Securities
will be delivered to the City of Riverside's designated Custodial Agent. Funds and
securities will be transferred on a delivery vs. payment basis.
6. Pooling of Funds. Except for cash in certain restricted and special funds, the City of
Riverside, Missouri will consolidate cash balances from all funds to maximize investment
earnings. Investment income will be allocated to the various funds based on their
respective participation and in accordance with generally accepted accounting principles.
7. External Management of Funds. Investment through external programs, facilities and
professionals operating in a manner consistent with this policy will constitute
compliance.
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SECTION 145.030: INVESTMENT PARAMETERS
1. Diversification.
a. The investments shall be diversified to minimize the risk of loss resulting from
over concentration of assets in specific mahuity, specific issuer, or specific class
of securities. Diversification strategies shall be established and periodically
reviewed.
b. At a minimum, diversification standards by security type and issuer shall be:
Investment Type Maximum % of Maximum in
Total Portfolio Any One
Instrument
U.S. Treasuries & Securities having principal 100% 50%
and/or interest guaranteed by the U.S. government
Collateralized Time and Demand Deposits 75% 20% Per Bank
U.S. Government Agencies & Government 100% 50%
Sponsored Enterprises
Collateralized Repurchase Agreements 50% 50%
U.S. Government Agency Callable Securities 20% 20%
2. Maximum Maturities.
a. To the extent possible, the City of Riverside, Missouri shall attempt to match its
investments with anticipated cash flow requirements. Investments in bankers'
acceptances and commercial paper shall mature and become payable not more
than one hundred eighty days (180) from the date of purchase. All other
investments shall mature and become payable not more than two (2) years from
the date of purchase. However, no more than 20% of the portfolio should have a
maturity greater than one (1) year from the date of purchase.
b. Because of inherent difficulties in accurately forecasting cash flow requirements,
a portion of the portfolio should be continuously invested in readily available
funds such as in bank deposits or overnight repurchase agreements. to ensure that
appropriate liquidity is maintained to meet ongoing obligations.
SECTION 145.040: INVESTMENT TRANSACTIONS
1. Authorized Financial Dealers and Institutions.
a. A list will be maintained of financial institutions authorized to provide investment
transactions. In addition, a list also will be maintained of approved security
broker/dealers selected by creditworthiness as determined by the Finance Officer
and approved by the governing body. These may include "primary" dealers or
regional dealers that qualify under Securities and Exchange Commission (SEC)
Rule I SC3-1 (uniform net capital rule).
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b. All financial institutions and broker/dealers who desire to become qualified for
investment transactions must annually supply the following as appropriate:
(i) Audited financial statements.
(ii) Proof of National Association of Securities Dealers (NASD) certification.
(iii) Proof of state registration.
(iv) Completed broker/dealer questionnaire.
(v) Certification of having read and understood and agreeing to comply with
the City of Riverside's investment policy.
c. An annual review of the financial condition and registration of qualified financial
institutions and broker/dealers will be conducted by the Finance Officer.
2. Internal Controls. The Finance Officer is responsible for establishing and maintaining an
internal control structure that will be reviewed annually with the City of Riverside's
independent auditor. The internal control structure shall be designed to ensure that the
assets of the City of Riverside are protected fiom loss, theft or misuse and to provide
reasonable assurance that these objectives are met. The concept of reasonable assurance
recognizes that (1) the cost of control should not exceed the benefits likely to be derived
and (2) the valuation of costs and benefits require estimates and judgments by
management.
3. Delivery vs. Payment. All trades where applicable will be executed by delivery vs.
payment (DVP) to ensure that securities are deposited in eligible financial institutions
prior to the release of funds. All securities shall be perfected in the name or for the
account of the City of Riverside, Missouri and shall be held by a third-party custodian as
evidenced by safekeeping receipts.
4. Investment Review Committee. The Investment Review Committee will meet quarterly to
discuss investment reports, investment shategy and investments. Members of the
Investment Review Committee shall include a member of the Board of Aldermen, the
City Administrator and the Finance Officer.
SECTION 145.050: STANDARDS OF CARE
1. Prudence. The standard of care to be used by investment officials shall be the "prudent
person" standard and shall be applied in the context of managing an overall portfolio.
Finance Officers acting in accordance with written procedures and this investment policy
and exercising due diligence shall be relieved of personal liability for an individual
security's credit risk or market price changes, provided deviations from expectations are
reported in a timely fashion to the governing body and the liquidity and the sale of
securities are carried out in accordance with the terms of this policy. Investments shall 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
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for speculation, but for investment, considering the probable safety of their capital as well
as the probable income to be derived.
2. Ethics and Conflicts of Interest. 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 interests in financial institutions with which they conduct business. They shall
further disclose any personal fmanciaUinvestment 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 which
business is conducted on behalf of the City of Riverside.
3. Delegation of Authority. Responsibility for the operation of the investment program is
hereby delegated to the Finance Officer, who shall act in accordance with the established
written procedures and internal controls for the operation of the investment program
consistent with this investment policy. Procedures should include references to:
safekeeping, delivery vs. payment, investment accounting, repurchase agreements, wire
transfer agreements, and collateraUdepositoty agreements. No person may engage in an
investment transaction except as provided under the terms of this policy and the
procedures established by the Finance Officer. The Finance Officer shall be responsible
for all transactions undertaken and shall establish a system of controls to regulate the
activities of subordinate officials.
SECTION 145.060: RECORDS -REPORT
1. Methods. The Finance Officer shall prepare an investment report at least quarterly,
including a management summary that provides an analysis of the status of the current
investment portfolio and transactions made over the last quarter. This management
summary will be prepared in a manner that will allow the City of Riverside, Missouri to
ascertain whether investment activities dw•ing the reporting period have conformed to the
investment policy. The report shall be provided to the governing body of the City of
Riverside, Missouri on a quarterly basis unless otherwise requested. The report will
include the following:
a. Listing of individual securities held at the end of the reporting period; and
b. Realized and unrealized gains or losses resulting from appreciation or
depreoiation by listing the cost and market value of securities over one-year
duration (in accordance with Government Accounting Standards Board (GASB)
31 requirements and only required annually); and
c. Average weighted yield to maturity of portfolio on investments as compared to
applicable benchmarks; and
d. Listing of investment by maturity date; and
e. Percentage of the total portfolio which each type of investment represents.
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2. Performance Standards. The investment portfolio will be managed in accordance with
the parameters specified within this policy. The portfolio should obtain a market average
rate of return during amarket/economic environment of stable interest rates. A series of
appropriate benchmarks may be established against which portfolio performance shall be
compared on a regular basis. Commercial paper and bankers' acceptances must be
reviewed monthly to determine if the rating level has changed. The commercial paper and
bankers' acceptances should be reviewed for possible sale if the securities are
downgraded below the minimum acceptable rating levels.
Marking to Market. The market value of the portfolio shall be calculated at least
quarterly and a statement of the market value of the portfolio shall be issued at least
annually to the governing body of the City of Riverside, Missouri. This will ensure that
review of the investment portfolio, in terms of value and price volatility, has been
performed.
Section 2. Any investment currently held that does not meet the requirements of this
Ordinance on the effective date shall be exempt. At maturity or liquidation, such monies shall be
reinvested only as provided in this ordinance.
Section 3. The provisions of the Municipal Code of the City of Riverside, Missouri
revised herein shall not be construed to revive any former ordinance, clause or provision of the
Municipal Code of the City of Riverside, Missouri.
Section 4. The sections, paragraphs, clauses, and phrases of the Ordinance are
severable and if any portion of the Ordinance is declared unlawful by the valid judgment, decree,
or injunction order of a court of competent jurisdiction, such ruling shall not affect any of the
remaining plu•ases, clauses, sentences, paragraphs, and sections of the Ordinance and all
provisions of the Ordinance not specifically declared to be unlawful shall remain in full force
and effect.
Section 5. This Ordinance overrides any conflicting provision or regulation within
the Municipal Code of the City of Riverside, Missouri.
Section 6. This ordinance shall take effect immediately.
Passed this ~ day of~vl'2008.
Mayor Kathleen L. Rose
ATTEST:
L~
City Clerk
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