SR-204-001 (3)
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FD:CMD:RB:mp/sr121686
City Council Meeting: 1/27/87
Santa Monica, California
TO:
Mayor and City Council
FROM:
City staff
SUBJECT:
Resolution to Authorize the Investment of city Funds
in the state "Local Agency Investment Fund"
Introduction
This report recommends that City Council adopt the attached
resolution authorizing the City Revenue Manager/Treasurer to
invest up to $5.0 million of City funds not required for
immediate cash needs in the state "Local Agency Investment Fund".
This action will enable the City to increase its annual interest
yield by $62,500 to $112,500 at no additional risk to the City.
Background
The state "Local Agency Investment Fundll (LAIF) was created as a
special short-term investment fund in the state Treasury in 1976
for the benefit of local governments.
Under provisions of
Government
Code
section
16429.1,
the
City
Revenue
Manager/Treasurer , with the approval of the City Council, can
authorize the placement of up to $5.0 million (the currently
allowed maximum investment per local government), with the state
Treasurer for investment in the LAIF. Under the provisions of
state law, the City would have its own account as part of this
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fund.
state law also specifies that the state Treasurer is
responsible for investing and safekeeping of such monies in
accordance with all legal guidelines and restrictions applicable
to local agencies. For this service, the state Treasurer charges
one-quarter of one percent of earnings on such funds.
Reason For Investing in the state LAIF
As part of staff's on-going efforts to improve the City's
financial operations, the LAIF has been identified as an
excellent investment opportunity for the city.
AS shown below, yield differences for calendar years 1985 and
1986 between the LAIF and the City's short-term investment
alternatives have been between 1.5% to 2.5% points.
Calendar Year
LAIF
i;ield
City Short-
Term Yield
1985
1986
9.8%
7.7%
7.3%
6.2%
In light of these yield differences and even deducting for the
State Treasurer I s fee, staff believes that under current and
projected interest rate market conditions the City could realize
an additional 1.25% to 2.25% yield.
This additional yield
represents from $62,500 to $112,500 in additional annual income
for a $5 million placement with the LAIF.
This increase in
investment yield would result from greater investment staff
resources being available in the state Treasurer's office to
actively manage such an investment, and the ability of the state
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Treasurer to pool larger amounts of cash to obtain more lucrative
investments than are available to a city the size of Santa
Monica. The LAIF is currently a $5.3 billion fund and is used by
over 1250 local governments (cities, counties, school districts,
and special districts).
The LAIF is used by such local governments as:
cities
Anaheim
Beverly Hills
Culver City
Davis
Inglewood
Long Beach
Los Angeles
San Francisco (City and CQunty)
Santa Barbara
Counties
contra Costa
Fresno
Imperial
Los Angeles
Marin
Riverside
San Bernardino
Ventura
The LAIF is managed by a team of investment professionals, trust
officers, and credit analysts who rigorously research all
potential investments.
All investment recommendations must be
approved by the state's senior investment officers and, finally,
the state Pooled Money Investment Board. This board is comprised
of the state Treasurer, the Chief Investment Officer, and other
senior finance and investment officers.
It is due to this care
and scrutiny that the LAIF has never had a credit loss.
Finally, in accordance with state law, the City determines the
length of investment in the LAIF. Monies can be placed in the
fund for one day, one week, or any other length of time,
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depending on the city1s needs. The funds can be withdrawn within
twenty-four hours after notifying the state Treasurer's Office.
Transfers of monies can take place within the same bank, thus
allowing quick, efficient movements of monies between the City
and the LAIF.
South African Investment Restrictions
Recently, the state legislature passed, and the governor signed
into law AB 134, the State's South African investment policy.
This action brought the LAIF's investment policy, effective
January 1, 1987, into line with the city's own South African
investment pOlicy.
BUdqet/Financial Impact
If a yield difference continues to exist between the LAIF and the
City's short-term investment alternatives, there would be an
increase in the City's interest income. staff will monitor the
investment yield difference, and will calculate and report the
interest increase to the Council within one year of approval of
the attached resolution.
Recommendation
It is recommended that the Council:
1)
Adopt the attached resolution authorizing
Revenue Manager/Treasurer to invest city
the
funds
City
not
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required for immediate cash needs in the state "Local
Agency Investment Fundll.
2) Direct staff to monitor yield differences between the
LAIF
and
the
City's
other
overnight
investment
alternatives and to report yield differences and
additional investment earnings to the Council within one
year of adoption of the attached resolution.
Attachment
Prepared by: Mike Dennis, Director of Finance
Bill Ramsey, Assistant Director of Finance
Ralph E. Bursey, City Revenue Manager/Treasurer
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Agenda Item It
BEFORE DISTRIBUTION CHECK CONTENT OF
DISTRIBUTION OF RESOLUTION # ;?;?b /'
,07//7
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ALL FOR CITY CkERK'S ACTION
ORDINANCE It
Ccuncil Meeting Date
Introduced:
Was it amended?
Adopted:
All^lAYS PUBLISH A!X)p rill ORDINANCES *
*Cross out Attorney's aP'flroval
VOTE: Affirmative:
Negative:
Abstain.
Absent:
..:::; _P_R_O_O_F__\!:9-.::tE)':: _ WI THuA_JIJ9_1!1.~R PE~SON BEFORE ANvTHIJ\G
Ul~lKl~U11U~; VKlul~AL ~o oe signed, sealed and
filed in Vault.
NEWSPAPER PUBLICATION (Date:
)
Department origlnating staff report ( * )
*City Attorney does not want copl.es of his ordi'r}.al1ces or resolutl.ons.
!4anagement SerV:~fe? Lynne Bar,rette urdlnances only ~
Agency mentioned in document or staff report
(certified?)
SubJect file (agenda packet)
1
Counter file
I
Others: (Review for depad..u.:mts who need to know).
Airport
Parking Auth.
Audltorum
Personnel
Building Dept.
Planning
wlllLU.Tlity and Econaro..c Dev.
Finance
Police (en-
forcement?)
Purchasing
.
Fire
Recr/Parks
General Servo
Transportatlon
Library
Treasurer
I
Manager
SE~D FOU~ COPIES OF ALL ORDINANCES. TO:
COD~D SYSTEMS, At~h Peter Maciearie
1. :.0 ~!ain- r~r"'et
Av0~7 y~w Jersey.OZ717 _
SEND FOUR COPIES OF AU. ORflTNANrFS 3'0:
"Debzp. '1yrick
SANTA MO~ICA MU~ICTPAL COURT
" 725 MAIN STREE~ Room 118
SANTA MONICA, CA 90401
*Check Code SectJ..ons before sending.
TOTAL COPIES
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FD CMD REB lh/res12l37 Santa Monica, Cal1fornla
City Council Meeting 1/27/87
RESOLUTION NUMBER 7367 (CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA MONICA AUTHORIZING THE CITY
REVENUE MANAGER/TREASURER TO INVEST
CITY FUNDS IN THE STATE LOCAL AGENCY I~~ESTMENT FUND
WHEREAS, pursuant to Chapter 730 of the Statutes of 1976 Section
16429 1 ~as added to the California Government Code to create a Local Agency
Investment Fund in the State Treasury for the deposit of money of a local
agency for purposes of investment by the State Treasurer, and
h~EREAS, the City Council of the City of Santa Monica does hereby find
that the deposit and withdrawal of money, not requlred for irnmedlate City cash
needs, in the Local Agency Investment Fund in accordance ~ith the provislons
of Section 16429 1 of the Government Code for the purposes of investment as
stated therein are in the best interests of the City of Santa Monica,
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF S~~TA MOKICA DOES
RESOLVE AS FOLLOWS
SECTION 1. The deposit and withdrawal of City of Santa Monica monles,
not required for immediate cash needs, in the Local Agency Investment Fund in
the State Treasury in accordance with the provisions of Section 16429 1 of the
Government code for the purpose of investment as stated therein is authorized
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SECTION 2. The City Revenue Manager/Treasurer, Mr Ralph E Bursey, or
his successors in office shall be authorized to order the depos~t or
withdrawal of City of Santa Monica monies in the Local Agency Investment Fund
SECTION 3.
The C1ty Clerk shall certify to the adoption of this
Resolution, and thenceforth and thereafter the same shall be in full force and
effect
APPROVED AS TO FOR}l
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Robert M Myers
City Attorney
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I hereby certify tha
day of January, 1987.
Adopted and appro
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Resolution No. 7367(CCS)
was duly adopted by the City Council of the City of Santa Monica
at a meeting thereof held on January 27, 1987 by the following
council vote:
Ayes: Councilmernbers:
Finkel, Jennings, A. Katz, H.
Katz, Reed, Zane and Mayor Conn
Noes: Councilmernbers:
None
Abstain: Councilmernbers:
None
Absent: Councilmernbers:
None
ATTEST:
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City Clerk