SR - RES-10796 - ANNUAL REVIEW STATEMENT OF INVESTMENT POLICY 2014-15OP o�
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AGENDA ITEM
Date: June 10, 2014
TO: Honorable Mayor and
Members of the City Council
FROM: Investment Oversight Committee
John W. Sibley, City Mana
Eric H. Woolery, City Treater
Richard Jacobs, Finance ctor
1. SUBJECT
ReviewedNeri fed By:
City Manager
Finance Direc r
To Be Presen d
Cons Calendar
City Mgr Rpts
Council Reports _
Legal Affairs
Boards /Crates _
Public Hrgs
Admin Reports
Plan /Environ
Annual review and approval of the Statement of Investment Policy (SIP) for Fiscal Year 2014-
15.
2. SUMMARY
Per recommendation from the Investment Advisory Committee, the Investment Oversight
Committee, and staff, it is proposed that the following two changes be made to the City's
Statement of Investment Policy:
a) Revise the rating requirements on medium -term notes from "AA" or better to
"AA -" or better as authorized investments
b) Clean up language to update the dollar limit insured by Federal Deposit Insurance
Corporation (FDIC) from $100,000 to $250,000 per deposit account according to
legislation
3. RECOMMENDATION /ACTION
Adopt Resolution No. 10796.
4. FISCAL IMPACT
No fiscal impact.
1 5. STRATEGIC PLAN GOAL(S)
2d. Be a Fiscally Healthy Community — Effectively manage and develop City assets.
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G. GENERAL PLAN IMPLEMENTATION
N/A
7. DISCUSSION and BACKGROUND
The California Government Code Section 53646 requires that the Statement of Investment Policy
be reviewed and approved by the legislative body on an annual basis. The City's Investment
Policy is one of the most conservative policies in the State and it is proposed that the very
conservative features of the policy be maintained. Many of the allowable investments under the
State Code are not permitted in the City's policy. Also, our policy puts additional specific limits
on U.S. Government Agency investments and the Local Agency Investment Fund (LAIF).
The proposed revisions to the Statement of Investment Policy have been the result of a review
and recommendations from staff, the Investment Advisory Committee, and the Investment
Oversight Committee. A joint meeting of both Committees was held on February 19, 2014 to
discuss the proposed investment policy changes. These proposed changes to the investment
policy are listed as follows:
Change # I Revise the required ratings on medium -term notes from "AA" or better to "AA -"
or better as authorized investments. Currently 14 companies have a "AA" or
better rating on their corporate bonds and 13 corporations are rated "AA - ". A
medium -term note with a "AA -" rating is considered an investment in superior
investment grade, same grade as a "AA" rated investment. Adjusting the required
rating from "AA" to "AA -" will expand the list of companies that are eligible for
the City to invest in to 27 total.
Section 3.1 Investments Authorized : (See p.7 of SIP attached)
(9) Medium -term notes issued by corporations organized and operating within
the United States or by depository institutions licensed by the United
States or any state and operating within the United States. (Limits:
Maximum maturity at purchase 5 years; must be rated "4A" "AA -" or
better by a nationally recognized rating agency; maximum concentration
20% of portfolio at time of purchase.)
Change # 2 Clean up language to update the maximum insurance amount protected by FDIC
from $100,000 to $250,000 for a deposit account. Congress approved a
temporary increase in the deposit insurance limit from $100,000 to $250,000
effective from October 2008 through December 2010. In May 2009, the
temporary increase was extended through December 2013. In July 2010, a law
was signed to make the $250,000 insurance limit permanent.
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Glossary (See p.12 of SIP attached)
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A Federal agency
that insures bank deposits, currently up to $100,000 $250,000 per deposit.
8. ATTACHMENTS
Resolution No. 10796
Statement of Investment Policy (Redlined Version)
Statement of Investment Policy (Clean Version)
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RESOLUTION NO. 10796
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF ORANGE APPROVING AND
ADOPTING A STATEMENT OF INVESTMENT
POLICY FOR FISCAL YEAR 2014 -15
WHEREAS, California Government Code Sections 53600 et seq. set forth detailed
provisions regarding permitted and prohibited investments by cities and accountability
therefor; and
WHEREAS, the City Council adopted Resolution No. 10711 on May 14, 2013
adopting the City's Statement of Investment Policy for Fiscal Year 2013 -14 (herein referred
to as the "FY 2013 -14 SIP "); and
WHEREAS, the FY 2013 -14 SIP requires that the City Council annually review its
Statement of Investment Policy and adopt a policy annually within 120 days following the
end of each fiscal year by a resolution and vote of the City Council at a public meeting; and
WHEREAS, the City's Investment Advisory Committee and Investment Oversight
Committee have reviewed the proposed Statement of Investment Policy for Fiscal Year
2014 -15 (herein referred to as the "FY 2014 -15 SIP ") in the form attached to this Resolution,
and has recommended that the City Council adopt the FY 2014 -15 SIP; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Orange that the FY 2014 -15 SIP, in the form attached, is the City's Statement of Investment
Policy for Fiscal Year 2014 -15 and is duly adopted in accordance with State law and Chapter
2.49 of Title 2 of the Orange Municipal Code.
ADOPTED this day of , 2014.
Teresa E. Smith
Mayor of the City of Orange
ATTEST:
Mary E. Murphy
City Clerk of the City of Orange
I, MARY E. MURPHY, City Clerk of the City of Orange, California, do hereby
certify that the foregoing Resolution was duly and regularly adopted by the City Council of