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SR-021208-1H~J acyoe City Council Report Santa Monica City Council Meeting: February 12, 2008 Agenda Item: 1 '~ To: Mayor and City Council From: Carol Swindell, Director of Finance Subject: Annual Update on City Investment Policy Recommended Action Staff recommends that the City Council approve a revised City Investment Policy; extend the delegation of investment authority to the Director of Finance, as City Treasurer, from March 1, 2008, through February 28, 2009; and adopt the resolution updating the list of persons authorized to conduct transactions with the State Local Agency Investment Fund (LAIF). Executive Summary State law requires that the City adopt an investment policy (Attachment 1) and that the City Council annually consider the policy at a public meeting. The Santa Monica City Charter delegates the authority for investing City funds to the Director of Finance as the City Treasurer. State law requires that the Council delegate investment authority to the City Treasurer for aone-year period, renewable annually. The current delegation of authority carries through February 29, 2008. Resolution No. 10198 (CCS), approved February 27, 2007, designates the City position titles as well as the specific individuals authorized to conduct investment transactions with LAIF. Council authorization to add the recently created second Principal Budget Analyst-Investments position to the list of authorized individuals is required at this time. Discussion City investments are made only in those instruments specifically authorized by California State laws, primarily Sections 53601, 16429.1, and 53684 et seq. of the Government Code. Within these legal guidelines, the three primary objectives of the City's Investment Policy, in priority-order are: Safety -Safety of principal is the foremost objective of the City's investment program. City investments shall be undertaken in a manner that seeks to ensure 1 the preservation of capital in the overall portfolio by diversifying its investments among a variety of securities offering independent returns. • Liquidity -City investments are kept sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated by structuring the portfolio so that securities mature concurrently with anticipated cash needs to the extent possible. Investments are primarily made in securities with active secondary or resale markets. Additionally, an adequate liquidity buffer is maintained for extraordinary circumstances. • Rate of Return -The City's investment portfolio is designed with the objective of attaining a benchmark rate of return throughout budgetary and economic cycles taking into account safety and liquidity requirements. The benchmark may vary from time to time depending on the economic and budgetary conditions present. The City continues to abide by the highest professional standards in the management of public funds. The proposed changes are redlined and are for the most part minor wording changes. In addition, Section 8.3, which discusses funds held and/or managed by fiscal agents, has been revised to specifically include funds held by the City for legally restricted purposes, an example of which is Charnock settlement. Attachment 1- Awas updated to reflect the current City fund structure, and a definitions for "liquidity" and "Fed Funds" were slightly revised in Attachment 1-C (Glossary). The City's Investment Policy has been certified by the Association of Public Treasurers United States and Canada (APT) and is periodically submitted for recertification per APT guidelines. Previous Council Actions Per State law, City Council annually considers and approves the City's Investment Policy (Attachment 1) and delegates investment authority to the City Treasurer for a one-year period, renewable annually. The current delegation of authority carries through February 29, 2008. Also, Santa Monica City Charter Section 711 delegates the authority to invest City funds to the City Treasurer. 2 Financial Impacts & Budget Actions Interest earnings from the City's pooled investment portfolio are allocated to the various City funds based upon each fund's share of total City cash and investments. The projected revenues for each fund are already included in the FY2007/08 budget, so no budget action is required by this report. Prepared by: David Carr, Principal Budget Analyst-Investments Approved: Forwarded to Council: Carol Swindell . L ~ t Ewell Director of Finance Cit anager Attachments: 1 -Updated City Investment Policy 2 -Resolution 3 Reference Resolution No. 10271 (CCS).