SR - RES-10945 - STATEMENT OF INVESTMENT POLICY FOR FY 2016-171. SUBJECT
Annual review and approval of the Statement of Investment Policy (SIP) for Fiscal Year 2016-
17.
2. SUMMARY
Per recommendation from the Investment Advisory Committee, the Investment Oversight
Committee, and staff, it is proposed that the following changes be made to the City's Statement
of Investment Policy:
a) Adjust the 1 year or less investment category from at least 25% to 15% of the
portfolio and no more than 50% in this maturity sector.
b) Add a sunset provision per the California Government Code to allow the use of
CD placement services (CDARS) up till January 1, 2021.
3. RECOMMENDATION /ACTION
Adopt Resolution No. 10945.
4. FISCAL IMPACT
No fiscal impact.
15. STRATEGIC PLAN GOADS)
2d. Be a Fiscally Healthy Community — Effectively manage and develop City assets.
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6. 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 May 12, 2016 to discuss
the proposed investment policy changes. These proposed changes to the investment policy are
listed as follows:
Change # 1 Revise the 1 year or less investment category from at least 25% to 15% of the
portfolio and no more than 50% in this maturity sector.
The City is required to meet its expenditure obligations for the next six months
required by the California Government Code. Based on the projected cash flow
needs, staff has determined that having at least 15% of the portfolio in the 1 year
or less maturity is sufficient to meet the State Code requirement. Reducing the
allocation percentage from at least 25% to 15% of the portfolio for the 1 year or
less investment category will allow us to invest more surplus cash in maturity
longer than one year at a higher interest rate.
Section 3.3 Mitigating Risk in the Portfolio : (See p.8 of SIP attached)
b) Market Risk:
(2) Portfolio maturities shall be managed to avoid undue concentration at
time of purchase in any specific maturity sector with at least
15% of the portfolio must be invested from one to 365 days and no
more than 50% in this maturity sector, no more than 50% of the
portfolio be invested from 366 days to 730 days, no more than 35% of
the portfolio be invested from 731 days to 1095 days, no more than
30% of the portfolio be invested from 1096 days to 1460 days, and no
more than 30% of the portfolio be invested from 1461 days to 1825
days.
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Change # 2 Add a sunset provision on the use of CD placement services up till January 1,
2021 based on changes in the California Government Code.
Section 3.1 Investments Authorized (See p.7 of SIP attached)
(7) Certificates of Deposit approved by the California AB 2011 are
permitted. (Limits: The bill allows investment up to January 1, 2021; a
maximum concentration 30% of total portfolio.)
8. ATTACHMENTS
Resolution No. 10945
Statement of Investment Policy (Redlined Version)
Statement of Investment Policy (Clean Version)
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RESOLUTION NO. 10945
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF ORANGE APPROVING AND
ADOPTING A STATEMENT OF INVESTMENT
POLICY FOR FISCAL YEAR 2016 -17
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. 10866 on June 9, 2015
adopting the City's Statement of Investment Policy for Fiscal Year 2015 -16 (herein referred
to as the "FY 2015 -16 SIP "); and
WHEREAS, the FY 2015 -16 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 2016-
17 (herein referred to as the "FY 2016 -17 SIP ") in the form attached to this Resolution, and
has recommended that the City Council adopt the FY 2016 -17 SIP; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Orange that the FY 2016 -17 SIP, in the form attached, is the City's Statement of Investment
Policy for Fiscal Year 2016 -17 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 1 2016.
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