Westminster City Council/Successor Agency to the Westminster Redevelopment Agency
SUBJECT
Title
Resolution Amending the Statement of Investment Policy.
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From: Erin Backs, Finance Director
Requested by: Administration
Prepared by: Erin Backs, Finance Director
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RECOMMENDED ACTION
Recommendation
Adopt a Resolution entitled, "A RESOLUTION OF THE MAYOR AND CITY COUNCIL OF THE CITY OF WESTMINSTER, CALIFORNIA, AMENDING THE STATEMENT OF INVESTMENT POLICY."
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BACKGROUND
Staff has recently undertaken a review of the City' s Investment Policy. The current policy, approved by the City Council on November 11, 2020 and reviewed by the City Council on October 27, 2021, October 26, 2022, and October 25, 2023, calls for an annual review of the policy by the staff Investment Committee to ensure its consistency with the global objective of preservation of investment principal, sufficient liquidity, rate of return and relevance to current laws and financial trends, and a review by the City Council as needed to comply with changes in State law or other regulations and/ or laws governing investment of public funds.
The City's Investment Policy guides the investment of over $130 million in City and Successor Agency funds. California Government Code Section 53600 et. seq. sets specific rules for how public agencies can invest their idle cash and limits the types of investment vehicles public agencies can utilize.
The policy was reviewed by the City' s external investment advisor, Chandler Asset Management, who recommended the City adopt the following changes to more clearly align the City policy with state code:
Updates to Section VIII. Selection of Broker/Dealers:
The updated text below more clearly defines the requirements for financial institutions who work with the City, as well as expands the scope beyond just broker/dealers to include all financial institutions, including depositories.
VIII. Authorized Financial Institutions, Depositories, and Broker/Dealers
The Investment Committee shall maintain procedures for establishing a list of authorized broker/dealers and financial institutions which are approved for investment purposes that are selected through a process of due diligence as determined by the City. Due inquiry shall determine whether such authorized broker/dealers, and the individuals covering the City are reputable and trustworthy, knowledgeable and experienced in Public Agency investing and able to meet all of their financial obligations. These institutions may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15c3-1 (uniform net capital rule).
In accordance with Section 53601.5, institutions eligible to transact investment business with the City include:
• Institutions licensed by the state and proof of FINRA certification as a broker-dealer, as defined in Section 25004 of the Corporations Code.
• Institutions that are members of a federally regulated securities exchange.
• Primary government dealers as designated by the Federal Reserve Bank and non-primary government dealers.
• Nationally or state-chartered banks.
• Savings association or federal association (as defined in Section 5102 of the Financial Code).
• The Federal Reserve Bank.
• Direct issuers of securities eligible for purchase.
Selection of financial institutions and broker/dealers authorized to engage in transactions will be at the sole discretion of the City, except where the City utilizes an external investment adviser in which case the City may rely on the adviser for selection.
All financial institutions which desire to become qualified bidders for investment transactions (and which are not dealing only with the investment adviser) must supply the Investment Committee with audited financials and a statement certifying that the institution has reviewed the California Government Code, Section 53600 et seq. and the City’s investment policy. The Investment Committee will conduct an annual review of the financial condition and registrations of such qualified bidders.
To the extent practicable, the Investment Committee shall endeavor to complete investment transactions using a competitive bid process whenever possible. The City’s Investment Committee will determine which financial institutions are authorized to provide investment services to the City. It shall be the City’s policy to purchase securities only from authorized institutions and firms.
Selection of broker/dealers used by an external investment adviser retained by the City will be at the sole discretion of the adviser. Where possible, transactions with broker/dealers shall be selected on a competitive basis and their bid or offering prices shall be recorded. If there is no other readily available competitive offering, best efforts will be made to document quotations for comparable or alternative securities. When purchasing original issue instrumentality securities, no competitive offerings will be required as all dealers in the selling group offer those securities at the same original issue price.
Public deposits will be made only in qualified public depositories as established by State law. Deposits will be insured by the Federal Deposit Insurance Corporation, or, to the extent the amount exceeds the insured maximum, will be collateralized in accordance with State law.
Update to X. Permitted Investments, Local Government Investment Pools
The percentage limitation of investments in Local Government Investment Pools is too restrictive. The proposed update provides more flexibility to invest in shorter term liquid vehicles while still ensuring diversification across multiple Local Government Investment Pools.
Update second bullet from:
No more than15% of the portfolio is invested in local government investment pools and the City’s investment in any pool shall comprise no more than 5% of the market value of the total assets of the investment pool, measured at month-end.
To:
No more than 25% of the total portfolio is invested in any single local government investment pool and the City’s investment in any pool shall comprise no more than 5% of the market value of the total assets of the investment pool, measured at month-end.
Update to XII. Portfolio Risk Management, Prohibited investment vehicles and practices
Added the following bullet:
• The purchase of a security with a forward settlement date exceeding 45 days from the time of the investment is prohibited.
Update to Summary Table of Permitted Investments
Removed the permitted investments table. All permitted investments are detailed under the VIII. Permitted Investments section of the policy. The duplication of the information in a table at the end of the policy introduces the potential for conflicting rules if updates in one section are not replicated in the table.
Staff has made these changes to the investment policy, and they are noted in the redline document attached.
FISCAL IMPACT
The recommended changes to the investment policy result in no fiscal impact.
LEGAL REVIEW
The City Attorney’s Office has reviewed as to form.
CONCLUSION
The City investment policy requires an annual review. The recommend changes more clearly align the city policy with state code.
ATTACHMENTS
1. Resolution Updating the City' s Investment Policy
2. Proposed Investment Policy
3. Redline version of the proposed Investment Policy, showing changes from 2020 policy.
REVIEWED BY
Erin Backs, Finance Director
Christian Bettenhausen, City Attorney
Christine Cordon, City Manager