HomeMy WebLinkAboutR-97-0212F
J-97-213
3/26/97
RESOLUTION NO.
97- 212
A RESOLUTION, WITH ATTACHMENT, APPROVING THE
ESTABLISHMENT OF AN INVESTMENT POLICY FOR THE CITY
OF MIAMI, FLORIDA, RELATING TO THE INVESTMENT OF
PUBLIC FUNDS, THEREBY PROVIDING FOR AN INVESTMENT
OBJECTIVE, PERFORMANCE MEASURES, PRUDENT AND
ETHICAL STANDARDS, PORTFOLIO COMPOSITION,
REPORTING REQUIREMENTS, AND OTHER STIPULATIONS AS
CONTAINED THEREIN.
WHEREAS, it is in the best interest of the City to adopt a written investment policy
consistent with the requirements of Section 218.415, Florida Statutes; and
WHEREAS, the City Commission desires to accomplish the purposes outlined in the
attached City of Miami Investment Policy and Procedure manual, a copy of which is
attached hereto; and
WHEREAS, the City Manager recommends adoption of said investment policy;
NOW, THEREFORE, BE IT RESOLVED BY THE COMMISSION OF THE CITY OF
MIAMI, FLORIDA:
Section 1. The recitals and findings contained in the Preamble to this Resolution
are hereby adopted by reference thereto and incorporated herein as if fully set forth in this
Section.
Section 2. The establishment of an Investment Policy for the City of Miami,
Florida, relating to the investment of public funds, thereby providing for an investment
objective, performance measures, prudent and ethical standards, portfolio composition,
C W' U A NI E
CITY
MCOMMISSION
EETING OF
MAR 2 7 1997
Resolution No.
977- 212
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reporting requirements, and other stipulations as attached hereto and contained therein,
are hereby approved.
Section 3. This Resolution shall become effective immediately upon its adoption.
PASSED AND ADOPTED this 27th day of March 1997.
CAROLLO, MAYOR
ATTEST:
WALTER J. OEMAN
CITY CLERK
PREPARED AND APPROVED BY:
RAFAEL 0. DIAZ
DEPUTY CITY ATTORNEY
APPROVED AS TO FORM AND CORRECTNESS:
A% INDIFS,IIl
CiT ATTY
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97- 212
CITY OF MIAMI
INVESTMENT POLICY
AND PROCEDURE
CITY OF MIAMI
INVESTMENT POLICY AND PROCEDURE
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97- 212
CITY OF MIAMI
INVESTMENT POLICY AND PROCEDURE
TABLE OF CONTENTS
SUBJECT
PAGE
Background.....................................................................................................................
1
GeneralOverview...........................................................................................................
1
InvestmentObjectives.....................................................................................................
1
InvestmentEthics............................................................................................................
2
InvestmentProcess.........................................................................................................
2
AuthorizedInvestments..................................................................................................
3
Prohibited Investments....................................................................................................
6
Maturity & Liquidity Requirements...............................................................................
6
PortfolioComposition.....................................................................................................
7
CustodialAccount...........................................................................................................
7
Master Repurchase..........................................................................................................
7
Investment Transaction Authority..................................................................................
7
InternalControls.............................................................................................................
8
Investment Reporting......................................................................................................
9
Recordkeeping and Performance Measurement.............................................................
9
PensionInvestments.......................................................................................................
10
BondFunds.....................................................................................................................
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F.
I. Background
The Florida Legislature passed CS/SB 2090 (CS/HB 1795) on May 4, 1995. Among other
provisions of this legislature each local government entity is required to create, adopt and
maintain comprehensive investment policies, incorporating fourteen required elements. The
investment policy is required to be adopted by the governing body of the jurisdiction.
II. General Overview
The City of Miami has established policies relating to the investment of excess funds. Excess
funds are defined as funds not required to meet short term expenditures of the City. The
policy governing investments is set forth below.
III. Investment Policy
Short term expenditures are defined as all daily operating expenditures excluding payroll and
debt service. For short term expenditures, the City maintains an overnight funds sweep
program collateralized by Full Faith and credit instruments of the U.S. Government and its
Agencies with the City designated as collateral beneficiary. The City complies with State of
Florida "Public Deposits Law" Chapter 280 Florida Statutes. Chapter 280 insures the City
against investment principal loss on certificates of deposit and demand deposits in excess of
$100,000 per institution. FDIC insurance covers demand deposits up to $100,000 per
institution. The City will utilize only financial institutions qualified under Chapter 280, a
listing of which is received by the City and reviewed on a quarterly basis. The City also
complies with Chapter 280 by filing all required reports annually with the State.
A. Investment Objectives
The City of Miami's investment objectives are set forth below in order of
importance:
Safety of capital
2. Return of capital
3. Liquidity of capital
Investment returns are important and can make a significant contribution to
the City's operations and capital projects. Therefore, every effort is made to
select the most advantageous investment vehicle and term of investment to
maximize earnings. However, safety and liquidity, in that order, take
precedence over the return.
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B. Investment Ethics
The City of Miami selects all investments by means of a competitive process.
In no case does the City invest funds or place idle funds in financial
institutions as compensating or courtesy balances. The standard of prudence
to be applied by the investment officer shall be the "prudent person" rule,
which states: "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 for
speculation, but for investment, considering the probable safety of their
capital as well as the probable income derived.: The "prudent person" rule
shall be applied in the context of managing the overall portfolio.
The investment officer and staff, acting in accordance with the written
procedures and exercising due diligence, shall not be held responsible for a
specific security's credit risk or market price changes, provided that the
security is from the list of approved investments, these deviations are
reported immediately and that appropriate action is taken to control adverse
developments.
C. Investment Process
The formal bidding process for investment instruments consists of the
following procedures:
1. Maintain a bid list of approximately five major financial
institutions qualified under Chapter 280 and two major
brokerage firms. This bid list is adjusted periodically to delete
bidders who are non -responsive or non-competitive over a
period of time, replacing such institution(s) with other qualified
institutions which have expressed an interest to bid on City
fiends. Qualified institutions are defined as financial institutions
governed by Chapter 280 of the Florida Statutes with a branch
location in The City of Miami, Florida.
Brokerage houses must maintain an office in The City of Miami
and are selected based on the amount of equity in the firm,
number of years the firm has been in operation and reputation.
2. Place telephone calls requesting a bid from each institution on
the bid list either on the day of the transaction or the afternoon
immediately preceding the transaction date.
Receive and note all bids on a standard form designed for this
purpose and retain on file for each transaction.
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4. Select the highest winning bid.
5. Transfer funds in exchange for evidentiary receipt from winning
bidder.
This process should prevent influence being experienced by either City
personnel or the financial institution in the selection of the institution chosen
for the purchase of City investments.
D. Authorized Investments
The City has established a list of authorized types of investments. The
authorized cash management investment and the allowable percentage of
those investments of the total portfolio are as follows:
1. Time Deposits
Duration N/A
Maximum % of Portfolio 100%
Maximum % of Combined Asset Group 100%
2. Certificates of Deposit
Duration 0-3 yrs.
Maximum % of Portfolio 100%
Maximum % of Combined Asset Group 100%
3. U.S. Treasury Bills
Duration N/A
Maximum % of Portfolio 100%
Maximum % of Combined Asset Group 100%
4. U.S. Treasury Notes
Duration 0-7 yrs.
Maximum % of Portfolio 100%
Maximum % of Combined Asset Group 100%
5. U.S. Government Agency Securities
Duration 0-3 yrs.
Maximum % of Portfolio 50%
Maximum % of Combined Asset Group 50%
6. Obligations issued by any state or territory of the United States,
which are fully insured or rated in one of the two highest rating
categories by Moody's Investors Service, Inc. or Standard and
Poors Corporation or their successors.
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Duration 7-10 yrs.
Maximum % of Portfolio 50%
Maximum % of Combined Asset Group 50%
7. Fixed Term Repurchase Agreement
Duration 0-3 yrs.
Maximum % of Portfolio 20%
Maximum % of Combined Asset Group 100%
8. Overnight Repurchase Agreements
Duration N/A
Maximum % of Portfolio 100%
Maximum % of Combined Asset Group N/A
9. Bankers Acceptance
Duration NIA
Maximum % of Portfolio 20%
Maximum % of Combined Asset Group 30%
10. Commercial Paper with a rating of A-1 or P-1 only, rated by
Moody's or Standard and Poors
Duration N/A
Maximum % of Portfolio 20%
Maximum % of Combined Asset Group 30%
11. Corporate notes, corporate bonds, medium term notes, Yankee
notes, and Yankee bonds with terms of one year or less rated by
2 or 3 designated rating agencies in one of the two highest rating
categories.
Maturity 0-2 yrs.
Maximum % of Portfolio 20%
Maximum % of Combined Asset Group 30%
12. Corporate notes, corporate bonds, medium term notes, Yankee
notes, and Yankee bonds, with terms of in excess of one with a
maximum of 5.0 years rated by 2 of 3 designated rating agencies
in one of the two highest rating categories.
Maximum Maturity 3-7 yrs.
Maximum % of Portfolio 20%
Maximum % of Combined Asset Group 30%
13. Money market mutual/trust funds which substantially conform
with this policy as follows:
Duration N/A
Maximum % of Portfolio 100%
Maximum % of Combined Asset Group 100%
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a. State of Florida Local Government Surplus Funds
Trust Fund
Mutual/trust funds sponsored by the Florida League
of Cities
C. Private money market mutual funds backed entirely
by "Full Faith and Credit" U.S. Government
Securities not to exceed 25%.
14. Fixed income mutual funds sponsored by the Florida League of
Cities which substantially conform with this policy as,follows:
Duration N/A
Maximum % of Portfolio 25%
Maximum % of Combined Asset Group 25%
15. Externally managed funds requiring specific approval by
Commission with investment limited to City policy and rating
criteria.
Duration 3-7 yrs.
Maximum % of Portfolio 20%
Maximum % of Combined Asset Group 20%
16. Interest rate Swap agreements between the City and a counter
party to pay/receive a fixed interest rate payment in exchange for
a variable rate payment over a specified term with the
requirement that all "Swap" agreements be approved by City
Commission prior to execution.
Duration N/A
Maximum % of Portfolio 10%
Maximum % of Combined Asset Group 20%
All repurchase agreements are fully collateralized and the collateral is held in
the City's name by a third party custodian.
Derivatives (defined as a financial instrument the value of which depends on,
or is derived from, the value of one or more underlying assets or index of
asset values) shall be utilized only if specifically authorized as part of the
investment plan and the Finance Director or his designee has sufficient
understanding/expertise to invest in derivatives. All proposed derivative
investments (including "SWAPS") will be analyzed by the City's Financial
Advisor and will be presented to the City Commission for approval.
Repurchase Agreements (an agreement between an investor and a security
dealer whereby dealer agrees to buy back the security at a specified price in
the future) will be limited to transactions in which the proceeds will be used
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to provide liquidity. Any investment which is not issued in "Book Entry
Only" form is physically held by the City in a secure vaulted area and
surrendered only when invested funds and earnings are received by the City
at maturity.
E. Prohibited Investment
Finds to be invested in cash management investments may not be invested in
the following:
Common Stock
Preferred Stock
Convertible Bonds
Venture Capital
Options and Futures
Warrants
Commodities
Short Selling
Real Estate
Private Placements
Unregistered or Restricted Stock
Margin Trading
Limited Partnerships
Oil and Gas Wells
IO or PO strips or inverse floater
mortgage backed securities
Foreign Exchange
Any Inverse Floating Rate Securities
F. Maturity and Liquidity Requirements
The City selects investments whose terns compliment the need to makethe
major expenditures set forth below.
Biweekly Payrolls
2. Periodic Debt Service Payments
Capital Project Needs
For each expenditure event, investments are selected whose maturities occur
at a date close to the date that funds will be needed. Investments also are
selected based on the highest yield for the particular type of investment. In
the case of capital projects, in which the exact date that expenditures will
need to be made is unknown, the City selects several investments with
varying maturities so that monies are available each month to cover all
capital expenditures. Any unused capital investment funds are then placed in
investments of one year or more to maximize return potential.
As mentioned earlier, the City maintains an overnight investment program of
approximately $10,000,000, which provides funds needed to cover daily operating
expenses, excluding item #'s 1-3 above. Interest yields on these investments are
competitive though somewhat lower than longer term instruments.
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G. Portfolio Composition
Diversity of investment types is highly desirable. Sucli diversity is necessary
in cases where securities are traded frequently and not held to maturity and
where volatile securities are traded.
H. Custodial Account
All City investments, except for swap agreements, must be held in an
independent custodial account within the trust department of a major
financial institution with a branch located in Dade County, Florida. The
custodian will not be utilized to buy or sell investments for the City. All City
investments must be registered in the City's name in book entry form
evidenced by transaction tickets maintained by the custodian with a copy
provided to the City. Physical possession of securities by the City should be
avoided. The investment held by the custodian must be reconciled monthly
to the City's general ledger. The City will carry investments at cost but will
maintain a record of portfolio market value each month.
I. Master Repurchase Agreement
A "Master Repurchase Agreement" has been developed, reviewed and
accepted by the City and is part of the contract established with the City's
main depository bank. This agreement is a standard Public Securities
Association ("PSA") form agreement offering all recommended protection to
the City. This agreement is scheduled to be in effect for the duration of the
contract with the City's main depository.
J. Investment 'Transaction Authoritv
The Finance Director has designated the Treasury Manager as the individual
responsible for managing the City's investments. The Treasury Manager
discusses investments with upcoming maturities with the Assistant Finance
Director and the Finance Director if there is a question as to new maturity
target dates or type of investment vehicle to be used. Based on these
discussions, the Treasury Manager executes the transaction and completes an
"Investment Transaction Report" for each investment transaction. The
Assistant Finance Director and the Finance Director then review and approve
the Investment Transaction Report. The fully executed Investment
Transaction Report contains all information pertinent to the investment and
contains the approval signatures of the Finance Director, Assistant Finance
Director and Treasury Manager. Funds related to each investment are
transferred according to authorized funds transfer procedures and limits
established under the provisions of the City's contract with its main
depository bank.
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K. Internal Controls
The City has established a number of internal controls to prevent loss of
funds by fraud, employee error, misrepresentation by third parties, or
imprudent actions by employees of the City. The internal controls are as
follows:
1, Investment transactions authority is limited to specific persons
within the Finance Department.
2. Wire transfer of finds authority is restricted to specific
individuals with specific dollar limits within the Finance
Department. All non -repeat type wire transfers require
confirmation authorization by a second individual specified in
wire authority documents executed with the City's main
depository.
3. All investment transactions require the approval of the Finance
Director and Assistant Finance Director on the Investment
Transactions Report for each investment.
4. A monthly report titled "Investments by Banks/Funds" is
prepared by the Assistant Finance Director and distributed to the
Finance Director early in the subsequent month for review. In
addition, a Financial Analyst in the Finance Department receives
a copy of this report and reconciles these investments with the
City's general ledger on a monthly basis.
5. A clerk in the Finance Department reconciles the City's general
depository account on a monthly basis by comparing the City's
general ledger with the applicable bank account statements. The
reconciliation of the general depository account would reveal
any difference in investment transaction recording and the
actual movement of funds.
6. Each month, the Assistant Finance Director reconciles
investments reflected in the custodial statements with the City's
records.
7. Each year both internal auditors and the City's external auditors
review existing internal controls as well as investment
transactions by examining data on a random basis.
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L. Investment Reporting
As discussed previously, the Finance Department mai►itains several types of
information and reports on investments. The records relating to investments
are as follows:
1. Investment Transaction Report - A recording/approval form for
each investment transaction, regarding both active and matured
investments. This form also indicates all bids obtained where
applicable.
2. Investment bid sheet, where applicable, for each investment
3. Investment Log - a document listing, in chronological maturity
order, pertinent information on each investment
4. Investments by Banks/Funds report generated monthly and
reconciled with the City's general ledger
Annual summary of average investment returns which is
subjected to external audit for* reasonableness of average stated
yield for the fiscal year.
M. Recorlceeping and Performance Measurement
Comprehensive records of each investment transaction are maintained in the
Finance Department. These records include bid sheets where applicable,
investment transaction reports, investment bank advises, the annual
investment log, and a quarterly compilation of total returns for the preceding
fiscal quarter by City fund type (e.g., General Fund, Capital Projects,
Enterprise, Internal Service). Annually, the City's external auditors review
the calculation of investment yields prepared by the Finance Department for
comparison to indices and comparative data maintained by the external
auditors. They then determine the reasonableness of the average yield
calculated by the Finance Department. If no problem is indicated, the Finance
Department then compares its average annual yield to yields of surrounding
local governments when such information becomes available. While yield is
not the primary concern of th4e City's investment manager, it should be noted
that the City has consistently enjoyed an average yield competitive with other
major local governmental entities while assuming lower risk.
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V. Pension Investments
The City does not manage the cash or investments of the City's pension systems. Each
pension system has elected or appointed members to its pension Board of Trustees who
exercise oversight over money mangers engaged to manage pension fund investments in
accordance with policies and guidelines established by each pension system. The Boards,
therefore, have oversight authority over investments for pension systems and the City does not
actively participate in the process.
VI. Bond Funds
Notwithstanding anything to the contrary contained in these investment guidelines, the
provisions pertaining to investment of monies under all ordinances, resolutions, trust
indentures and agreements adopted or entered into by the City in connection with bonds issued
by the City or other debt incurred by the City will control and supersede the provisions herein
contained with respect to the investment of such monies.
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CITY OF MIAMI, FLORIDA
INTER -OFFICE MEMORANDUM
To : The Honorable Mayor and Members
of the City Commission
FROM
Edward r z
City Manag -
Recommendation:
DATE : March 26, 1997 0 FILE .
SUBJECT .
Resolution Adopting
Investment Policy for
REFERENCES: City of Miami funds
ENCLOSURES:
It is recommended that the City Commission approve the attached Resolution providing a
written investment policy which applies to all City funds in excess of the amounts needed
to meet current expenses.
Background:
The Florida Legislature passed Senate Bill 2090 creating Florida Statutes 218.415; an act
relating to investment of public funds. This legislation requires a written investment
policy be adopted by the local governing body on or before October 1, 1995. The
investment policy may be modified by the City Commission as it deems appropriate to
meet the needs of the City.
The investment policy follows the current investment procedures and incorporates the
investment instruments authorized under City Ordinance No. 10121. The investment
objectives of "Safety, Liquidity of Funds and the Maximization of Investment Income"
are stressed. The safety of principal and liquidity of funds is given a priority
consideration, with investment income as secondary consideration. The policy defines
the "prudent person" standard, and defines the portfolio composition.
The policy requires monthly performance reports to be presented to the Finance Director,
quarterly performance reports to be submitted to the Manager and annual report to be
presented to the City Commission within 90 days of the fiscal year.
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