HomeMy WebLinkAboutMINUTES - 01162007 - C.43 (2) TO: BOARD OF SUPERVISORS ............�=.f�_.'_L__==G�:. Contra
CostaFROM: William J. Pollacek, Treasurer-Tax Collector
DATE: January 16, 2007 County
SUBJECT: Treasurer's Investment Policy September 30 2006 -
s y as of Se p �( 3
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
Accept the Treasurer's Investment Policy as of September 30, 2006, with changes
effective January 1 , 2007.
FISCAL IMPACT: None
BACKGROUND/REASON (S) FOR RECOMMENDATION (S):
Pursuant to Government Code Section 27133, at the Nov. 21 , 2006 Treasury
Oversight Committee meeting, the Committee reviewed and recommended the
acceptance of the attached updated policy which incorporates recent legal changes
and mandates.
Copies of the Treasurer's Investment Policy dated September 30, 2006 are submitted
to the Board of Supervisors for review and acceptance.
WJP:mb
CONTINUED ON ATTACHMENT: YES SIGNATURE: Gtr
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDA O7 BOARD COMMITTEE
—i APPROVE OTHER
SIGNATURE(S): I _�
ACTION OF BOA N �[L-» wotiYt7 l4 ! .90W X APPROVED AS RECOMMENDED OTHER
VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT
COPY OF AN ACTION TAKEN AND ENTERED ON MINUTES OF
UNANIMOUS(ABSENT THE BOARD OF SUPERVISORS ON THE DATE SHOWN.
/V�'Y!(i )
AYES: NOES:
ABSENT: ABSTAIN:
Contact:
Cc: Treasurer-Tax Collector's Office ATTESTED �-
JOHN CULLEN,CLERK—OF THE BOARD OFSUPERVISORS
AND COUNT DMINISTRATOR
BY: DEPUTY
CONTRA COSTA COUNTY
TREASURER-TAX COLLECTOR
625 COURT STREET, ROOM 102
MARTINEZ, CA 94553
Date: 11/6/2006
To: Treasury Oversight Committee
From: Brice E. Bins
Subject: Fiscal year 2006/07 Investment Policy
The following information summarizes amendments to the Investment Policy during
the fiscal year 2006/07. The amendments are the result of Assembly Bill 1794 and
Assembly Bill 2011 which will become effective on January 1, 2007.
Section Page Comment
1. Instruments Authorized 3 Amend language pursuant to
for Investment Assembly Bill 1794
2. Instruments Authorized N/A Recognize the addition of
for Investment Assembly Bill 2011
Attached is the revised section in the content of the current investment policy. The
changes or additions are ,underlined. Deletion of existing text is notated by a
strikethrough and follows the deleted text. Outside Boarder marks indicate any type
of change.
CONTRA COSTA COUNTY
INVESTMENT POLICY
JUNE, 2006
(C) Has debt other than commercial paper, if any, that is rated "A" or higher by a
nationally recognized statistical-rating organization (NRSRO).
(2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose corporation, trust,
or limited liability company.
(B) Has programwide credit enhancements including, but not limited to,
overcollateralization, letters of credit, or surety bond.
(C) Has commercial paper that is rated "A-1" or higher, or the equivalent, by a
nationally recognized statistical-rating organization (NRSRO).
Eligible commercial paper shall have a maximum maturity of 270 days or less.
Local agencies, other than counties or a city and county, may invest no more than
25 percent of their money in eligible commercial paper. LOGal agonc-ics- etherr�
outstanding ^ommerGiar paper of-any S+Rgle issuer. Countiesor a city and county
may invest in commercial paper pursuant to the concentration limits in subdivision
(a) of Section 53635. Following are the concentration limits (Government Code
Section 53635, subdivision (a)):
1. Not more than 40 percent of the local agency's money may be invested in
eligible commercial paper.
2. Not more than 10 percent of the total assets of the investments held by a
local agency's MORey may be invested in any one issuer's commercial paper.
pursuant te this Fnay be invested the eUtstanding pemmerGial paper of aR
ainnln ioc„ar
3.Ne mare than 10 peFGent of the eutstandin- al paper of ar+y
SIR& GerpeF to issueF mw be n,,rnhased by the Innnl agenGy.
H. Negotiable certificates of deposit issued by a nationally- or state-chartered bank
or a savings association or federal association (as defined by Section 5102 of the
Financial Code), a state or federal credit union, or by a state-licensed branch of a
foreign bank. Purchases of negotiable certificates of deposit may not exceed 30
percent of the agency's money that may be invested pursuant to this section. For
purposes of this section, negotiable certificates of deposits do not come within
Article 2 (commencing with Section 53630), except that the amount so invested shall
be subject to the limitations of Section 53638. The legislative body of a local agency
and the treasurer or other official of the local agency having legal custody of the
money are prohibited from investing local agency funds, or funds in the custody of
the local agency, in negotiable certificates of deposit issued by a state or federal
credit union if a member of the legislative body of the local agency, or any person
with investment decision making authority in the administrative office manager's
office, budget office, auditor-controller's office, or treasurer's office of the local
agency also serves on the board of directors, or any committee appointed by the
board of directors, or the credit committee or the supervisory committee of the state
or federal credit union issuing the negotiable certificates of deposit.
3
Statutes of Interest to County Tax Collectors
Local Agency Investments
Assembly Bill 1794, Chapter 164 -
Effective 1/1/07
Section 53601.7 of the Government Code is amended to read:
53601.7. Notwithstanding the investment parameters of Sections 53601 and 53635, a local
agency that is a county or a city and county may invest any portion of the funds that it deems
wise.or expedient, using the following criteria:
(a)No investment shall be made in any security, other than a security underlying a repurchase
agreement,reverse repurchase agreement, or a securities lending agreement, that, at the time of
purchase, has a term remaining to maturity in excess of 397 days, and that would cause the
dollar-weighted average maturity of the funds in the investment pool to exceed 90 days.
. (b) All corporate and depository institution investments shall meet or exceed the following
credit rating criteria at time of purchase:
(1) Short-term debt shall be rated at least"A-1"by Standard &Poor's Corporation,"P-1" by
Moody's Investors Service, Inc., or"F-1"by Fitch Ratings. If the issuer of short-term debt has
also issued long-term debt, this long-term debt rating shall be rated at least"A,"without regard
to +/- or 1, 2, 3 modifiers, by Standard&Poor's Corporation, Moody's Investors Service, Inc., or
Fitch Ratings.
(2) Long-term debt shall be rated at least"A," without regard to +/- or 1, 2, 3 modifiers, by
Standard &Poor's Corporation, Moody's Investors Service, Inc., or Fitch Ratings.
(c) (1)No more than 5 percent of the total assets of the investments held by a local agency may
be invested in the securities f any one issuer, except the obligations of the United States
government, United States government agencies, and United States government-sponsored
enterprises.
(2) Up to 25 percent of the total assets of the investments held by a local agency may be
invested in the first tier securities of a single issuer for a period of up to three business days after
acquisition. The securities of no more than one issuer may be invested pursuant to this paragraph
at a time.
(3)No more than 10 percent of the total assets of the investments held by a local agency may
be invested in any one mutual fund.
(d) Where this section specifies a percentage limitation for a particular category of investment,
that percentage is applicable only at the date of purchase. A later increase or decrease in a
percentage resulting from a change in values or assets shall not constitute a violation of that .
restriction. If subsequent to purchase, securities are downgraded below the minimum acceptable
rating level, the securities shall be reviewed for possible sale within a reasonable amount of time
after the downgrade.
(e) Within the limitations set forth in this section, a local agency electing to invest its funds
pursuant to this section may invest in the following securities:
(1) Direct obligations of the United States Treasury or any other obligation guaranteed as to
principal and interest by the United States government.
(2) Bonds, notes, debentures, or any other obligations of, or securities issued by, any federal
government agency, instrumentality, or government-sponsored enterprise.
6 Steve Westly•California State Controller
Government Code
(3) Registered state warrants or treasury notes or bonds of this state, including bonds payable
solely out of the revenues from a revenue-producing property owned, controlled, or operated by
the state or by a department,board, agency, or other entity of the state.
(4) Bonds, notes, warrants, or other indebtedness of the local agency, or any local agency
within this state, including'bonds payable solely out of the revenues from a revenue-producing
property owned, controlled, or operated by the local agency, or by a department, board, agency,
or authority of the local agency.
(5) Bankers acceptance, otherwise known as bills of exchange or time drafts drawn on and
accepted by a commercial bank,primarily used to finance international trade. Purchases of
bankers acceptances may not exceed 180 days to maturity.
(6) Short-term unsecured promissory notes issued by corporations for maturities of 270 days or
less. Eligible commercial paper is further limited to the following:
(A) Issuing corporations that are organized and operating within the United States,having total
assets in excess of five hundred million dollars ($500,000,000).
(B)Maturities for eligible commercial paper that may not exceed 270 days and may net.
represent mere that 10 per-cent of the outstanding paper of a isq—i ation.
(7)A certificate representing a deposit of funds at a commercial bank for a specified period of
time and for a specified return at maturity. Eligible certificates of deposit shall be issued by a
nationally or state-chartered bank or a state or federal association, as defined in Section 5102 of
the Financial Code, or by a state-licensed branch of a foreign bank. For purposes of this
subdivision, certificates of deposits shall not come within Article 2 (commencing with Section
53630), except that the amount so invested shall be subject to the limitations of Section 53638.
The legislative body of a local agency and the treasurer or other official of the local agency
having legal custody of the money may not invest local agency funds, or funds in the custody of
the local agency, in negotiable certificates of deposit issued by a state or federal credit union if a
member of the legislative body of the local agency, or any person with investment decision
making authority.in the administrative office, manager's office, budget office, auditor-controller's
office, or treasurer's office of the local agency also serves on the board of directors, or any
committee appointed by the board of directors, other credit.committee or the supervisory
committee of the state or federal credit union issuing the negotiable certificate of deposit.
(8) Repurchase agreements, reverse repurchase agreements, or securities lending agreements of
any securities authorized by this section, if the agreements meet the requirements of this
paragraph and the delivery requirements specified in Section 53601. Investments in repurchase
agreements may be made, on any investment authorized by this section, when the term of the
agreement does not exceed one year. The market value of the securities that underlay a
repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against
those securities, and the value shall be adjusted no less than quarterly. Because the market value
of the underlying securities is subject to daily market fluctuations, the investments in repurchase
agreements shall be in compliance with this section if the value of the underlying securities is
brought back to 102 percent no later than the next business day. Reverse repurchase agreements
may be utilized only when all of the following criteria are met:
(A) The security being sold on reverse repurchase agreement or securities lending agreement
has been owned and fully paid for by the local agency for a minimum of 30 days prior to the
sale.
Steve{f�estly•California State Controller 7
Statutes of Interest to County Tax Collectors
(B) The total of all reverse repurchase agreements on investments owned by the local agency
not purchased or committed to purchase does not exceed 20 percent of the market value of the
portfolio.
(C) The agreement does not exceed a term of 92 days,unless the agreement includes a written
codicil guaranteeing a minimum earning or spread for the entire period between the sale of a
security using a reverse repurchase agreement and the final maturity date of the same security.
(D) Funds obtained or funds within the pool of an equivalent amount to that obtained from
selling a security to a counterparty by way of a reverse repurchase agreement or securities
lending agreement, may not be.used to purchase another security with a maturity longer than 92
days from the initial settlement date of the reverse repurchase agreement or securities lending
agreement, unless the agreement includes a written codicil guaranteeing a minimum earning or
spread for the entire period between the sale of a security using a reverse repurchase agreement
or securities lending agreement and the final maturity date of the same security.
(E) Investments in reverse repurchase agreements or similar investments in which the local
agency sells securities prior to purchase with a simultaneous agreement to repurchase the
security, shall only be made with prior approval of the governing body of the local agency and
shall only be made with primary dealers of the Federal Reserve Bank of New York or with a
nationally or state-chartered bank that has or has had a significant banking relationship with a
local agency. .
"Securities," for purposes of this paragraph, means securities of the same issuer, description,
issue date, and maturity.
(9) All debt securities issued by a corporation or depository institution with a remaining
maturity of not more than 397 days, including securities specified as "medium-term notes," as
well as other debt instruments originally issued with maturities longer than 397 days, but which,
at time of purchase, have a final maturity of 397 days or less. Eligible medium-term notes shall
be 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.
(10) (A) Shares of beneficial interest issued by diversified management companies that invest
in the securities and obligations described in this subdivision and that comply with the
investment restrictions of this section. However, notwithstanding these restrictions, a
counterparty to a reverse repurchase agreement shall not be required to be a primary dealer of the
Federal Reserve Bank of New York if the company's board of directors finds that the
counterparty presents a minimal risk of default. The value of the securities underlying a
repurchase agreement may be 100 percent of the sales price if the securities are marked to market
daily. .
(B) Shares of beneficial interest issued by diversified management companies that are money
market funds registered with the Securities and Exchange Commission under the federal
Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.).
(C) All shares of beneficial interest described in this paragraph shall have met either of the
following criteria:
(i) Attained the highest ranking or the highest letter and numerical rating provided by not less
than two nationally recognized statistical rating organizations.
(ii) Retained an investment adviser registered or exempt from registration with the Securities
and Exchange Commission and who has not less than five years' experience investing in money
8 Steve Westly•California State Controller
Government Code
market instruments and with assets under management in excess of five hundred million dollars
($500,000,000).
(11) Any mortgage passthrough security, collateralized mortgage obligation, mortgage-backed
or other paythrough bond,.equipment lease-backed certificate, consumer receivable passthrough
certificate, or consumer receivable-backed bond.
Securities eligible for investment under this paragraph shall be issued by an issuer having an
"A" or higher rating from the issuer's debt as provided by a nationally recognized rating service
and rated in a rating category of "AA" or its equivalent or better by a nationally recognized
rating.
(12) Contracts•issued by insurance companies that provide the policyholder with the right to
receive a fixed or variable rate of interest and the full return of principal at the maturity date.
(13) Any investments that would qualify under SEC Rule 2a-7 of the Investment Company Act
of 1940 guidelines. These investments shall also meet the limitations detailed in this section.
(f) For purposes of this section, all of the following definitions shall apply:
(1) "Repurchase agreement"means a purchase of securities pursuant to an agreement by which
the counterparty seller will repurchase the securities on or before a specified date and for a
specified amount and the counterparty will deliver the underlying securities to the local agency
by book entry, physical delivery, or by third-party custodial agreement.
(2) "Significant banking relationship"means any of the following activities of a bank:
(A) Involvement in the creation, sale, purchase, or retirement of a local agency's bonds,
warrants, notes, or other evidence of indebtedness.
(B) Financing of a local agency's securities or funds as deposits.
(C) Acceptance of a local agency's securities or funds as deposits.
(3) "Reverse repurchase agreement"means a sale of securities by the local agency pursuant to
an agreement by which the local agency will repurchase the securities on or before a specified
date and includes other comparable agreements.
(4) "Securities lending agreement"means an agreement with a local agency that agrees to
transfer securities to a borrower who, in turn, agrees to provide collateral to the local agency.
During the term of the agreement, both the securities and the collateral are held by a third party.
At the conclusion of the agreement,the securities are transferred back to the local agency in
return for the collateral.
(5)"First tier security" has the same meaning as that phrase is defined by SEC Rule 2a-7 of the
Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq).
(6)"Local agency"means a county or a city and county.
(g) For purposes of this section,the base value of the local agency's pool portfolio shall be that
dollar amount obtained by totaling all cash balances placed in the pool by all pool participants,
excluding any amounts obtained through selling securities by way of reverse repurchase
agreements, or other similar borrowing methods.
(h) For purposes of this section; the spread is the difference between the cost of funds obtained
using the reverse repurchase agreement and the earnings obtained on the reinvestment of the
funds.
(i) This section shall remain in effect only until January 1, 2-OW 2011, and as of that date is
repealed, unless a later enacted statute, that is enacted before January 1, 2-OW 2011, deletes or
extends that date.
Steve Westly•California State Controller 9
Statutes of Interest to County Tax Collectors
Local Agency Investments
Assembly Bill 2011, Chapter 459
Effective 1/1/07
Section 53601.8 is added to the Government Code, to read:
53601.8. Notwithstanding Section 53601 or any other provision of this code, a local agency, at
its discretion, may invest a portion of its surplus funds in certificates of deposit at a commercial
bank, savings bank, savings and loan association, or credit union that uses aprivate sector entity
that assists in the placement of certificates of deposit, provided that the purchases of certificates
of deposit pursuant to this section, Section 53635.8, and subdivision(h) of Section 53601 do not,
in total, exceed 30 percent of the agency's funds that may be invested for this purpose. The
following conditions shall apply_
(a) The local agency shall choose a nationally or state chartered commercial bank, savings
bank, savings and loan association, or credit union in this state to invest the funds, which shall be
known as the "selected" depository institution.
(b) The selected depository institution may submit the funds to a private sector entity that
assists in the placement of certificates of deposit with one or more commercial banks, savings
banks, savings and loan associations, or credit unions that are located in the United States, for the
local agency's account.
(c) The full amount of the principal and the interest that may be accrued during the maximum
term of each certificate of deposit shall at all times be insured by the Federal Deposit Insurance
Corporation or the National Credit Union Administration.
(d) The selected depository institution shall serve as a custodian for each certificate of deposit
that is issued with the placement service for the local agency's account.
(e) At the same time the local agency's funds are deposited and the certificates of deposit are
issued, the selected depository institution shall receive an amount of deposits from other
commercial banks, savings banks, savings and loan associations, or credit unions that, in total,
are equal to, or greater than,the full amount of the principal that the local agency initially
deposited through the selected depository institution for investment.
(f)A local agency may not invest surplus funds with a selected depository institution for
placement as certificates of deposit pursuant to this section on or after January 1, 2012. A local
agent ' s surplus funds, invested pursuant to this section before January 1, 2012, may remain
invested in certificates of deposit issued through a private sector entity for the full term of each
certificate of deposit.
(g) Notwithstanding subdivisions (a) to (fl, inclusive, no credit union may act as a selected
depository institution under this section or Section 53635.8 unless both of the following
conditions are satisfied:
(1) The credit union offers federal depository insurance through the National Credit Union
Administration.
(2) The credit union is in possession of written guidance or other written communication from
the National Credit Union Administration authorizing participation of federally-insured credit
unions in one or more certificate of deposit placement services and affirming that the moneys
10 Steve Westly•California State Controller
Government Code
held by those credit unions while participatingin'n a deposit placement service will at all times be
insured by the federal government.
(h) It is the intent of the Legislature that nothing in this section shall restrict competition
among private sector entities that provide placement services pursuant to this section.
Local Agency Investments
Assembly Bill 1794, Chapter 164
Effective 1/1/07
Section 53635 of the Government Code is amended to read:
53635. (a) This section shall apply to a local agency that is a county, a.city and county, or other
local agency that pools money in deposits or investments with other local agencies, including
local agencies that have the same governing body. However,Section 53601 shall apply to all
local agencies that pool money in deposits or investments exclusively with local agencies that
have the same governing body.
This section shall be interpreted in a manner that recognizes the distinct characteristics of
investment pools and the distinct administrative burdens on managing and investing funds on a
pooled basis pursuant to Article 6 (commencing with Section 27130) of Chapter 5 of Division 2
of Title 3.
A local agency that is a county, a city and county, or other local agency that pools money in
deposits or investments with other agencies may invest in commercial paper pursuant to
subdivision(g) of Section 53601, except that the local agency shall be subject to the following
concentration limits:
(1)No more than 40 percent of the local agency's money may be invested in eligible
commercial paper.
(2)No more than 10 percent of the total assets of the investments held by a local agery's
moneythat agency may be invested in any one is commercial paper of any single issuer.
(3)Ne mefe than 10 per-eent of the eutstandin- 4 paper-of any single issuer-
(b)Notwithstanding Section 53601, the City of Los Angeles shall be subject to the
concentration limits of this section for counties and for cities and counties with regard to the
investment of money in eligible commercial paper.
Local Agency Investments
Assembly Bill 2011, Chapter 459
Effective 1/1/07
Section 53635.8 is added to the Government Code, to read:
53635.8. Notwithstanding Section 53601 or any other provision of this code, a local agency, at
its discretion, may invest a portion of its surplus funds in certificates of deposit at a commercial
bank, savings bank, savings and loan association, or credit union that uses a private sector entity
that assists in the placement of certificates of deposit, provided that the purchases of certificates-
Steve Wesdji•California State Controller. 11
Statutes of Interest to County Tax Collectors
of deposit pursuant to this section, Section 53601.8, and subdivision (h) of Section 53601 do not,
in total, exceed 30 percent of the agency's funds that maybe invested for this purpose. The
following conditions shall apply:
(a) The local agency shall choose a nationally or state chartered commercial bank, savings
bank, savings and loan association, or credit union in this state to invest the funds, which shall be
known as the"selected" depository institution.
(b) The selected depository institution may submit the funds to a private sector entity that
assists in the placement of certificates of deposit with one or more commercial banks, savings
banks (savings and loan associations), or credit unions that are located in the United States, for
the local agency's account.
(c) The full amount of the principal and the interest that may be accrued during the maximum
term of each certificate of deposit shall at all times be insured by the Federal Deposit Insurance
Corporation or the National Credit Union Administration.
(d) The selected depository institution shall serve as a custodian for each certificate of deposit
that is issued with the placement service for the local agency's account.
(e) At the same time the local agency's funds are deposited and the certificates of deposit are
issued,the selected depository institution shall receive an amount of deposits from other
commercial banks, savings banks, savings and loan associations, or credit unions that, in total,
are equal to, or greater than,the full amount of the principal that the local agency initially
deposited through the selected depository institution for investment.
(f) A local agency not invest surplus funds with a selected depository institution for
placement as certificates of deposit pursuant to this section on or after JanuM 1, 2012. A local
agency's surplus funds, invested pursuant to this section before January 1, 2012, may remain
invested in certificates of deposit issued through a private sector entity for the full term of each
certificate of deposit.
(g)Notwithstanding subdivisions (a) to (finclusive, no credit union may act as a selected
depository institution under this section or Section 53601.8 unless both of the following
conditions are satisfied:
(1) The credit union offers federal depository insurance through the National Credit Union
Administration.
(2) The credit union is in possession of written guidance or other written communication from
the National Credit Union Administration authorizing participation of federally-insured credit
unions in one or more certificate of deposit placement services and affirming that the moneys
held by those credit unions while.participating in a deposit placement service will at all times be
insured by the federal government.
�h) It is the intent of the Legislature that nothing iri this section shall restrict competition
among private sector entities that provide placement services pursuant to this section.
12 Steve Westly•California State Controller