HomeMy WebLinkAbout2016-24 Amending 2-2-1 through 2-2-9 to Update the Investment Policy for TOVORDINANCE NO. 24
SERIES 2016
AN ORDINANCE AMENDING SECTIONS 2-2-1, 2-2-2, 2-2-3, 2-2-4, 2-2-
5, 2-2-6, 2-2-7, 2-2-8 AND 2-2-9 OF THE VAIL TOWN CODE TO
UPDATE THE INVESTMENT POLICY FOR THE TOWN OF VAIL
WHEREAS, the Town Code is currently outdated regarding FDIC insurance
limits and organizational titles and
WHEREAS, the Town Council would like to expand the definition of suitable and
authorized investments and
WHEREAS, in an effort to clarify the Town's investment purpose and objective
statements, the Town Council desires to amend the Town Code effective October 1,
2016 to include the revisions stated below
NOW, THEREFORE, BE IT ORDAINED BY THE TOWN COUNCIL OF THE
TOWN OF VAIL, COLORADO, THAT:
Section 1. The "Statement of Purpose" as outlined in Section 2-2-1 of the Vail
Town Code is hereby amended to read as follows:
2-2-1: STATEMENT OF PURPOSE:
The purpose of this Investment Policy is to establish the investment scope, objectives,
delegation of authority, standards of prudence, reporting requirements, internal controls,
eligible investments and transactions, diversification requirements, risk tolerance, and
safekeeping and custodial procedures for the investment of the funds of the Town of
Vail, Colorado (hereby referred to as the "Town"). The investment policy of the Vail Town
Council for the Town of Vail represents the financial boundaries within which its cash
management process will operate. (Ord. 3(1997) § 1)
Section 2. The "Scope" as outlined in Section 2-2-2 of the Vail Town Code is
hereby amended to read as follows:
2-2-2: SCOPE:
The investment policy applies to all financial funds of the Town, except the Pension
Trust Fund. (Ord. 3(1997) § 1)
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Ordinance 24, 2016
Section 3. Subpart (A, B and C) of Section 2-2-3 of the Vail Town Code is
hereby amended to read as follows:
2-2-3: OBJECTIVE:
The primary objectives, in priority of order, of investment activities shall be:
A. Safety: Safety of principal is the foremost objective of the investment program. Investments
shall be undertaken in a manner that seeks to ensure the preservation of capital in the
overall portfolio. The objective will be to mitigate credit risk and interest rate risk.
1. Credit Risk: Credit risk is the risk of Toss due to the failure of the security issuer or
backer. Credit risk may be mitigated by restricting the types of securities which may be
purchased, their credit ratings, and through diversification to reduce exposure to any one
security type or issuer.
2. Interest Rate Risk: Interest rate risk is the risk that the market value of securities in the
portfolio will fall due to changes in general interest rates. Interest rate risk may be
mitigated by holding most investments to their maturity date, by limiting the types and
maturities of permitted securities and, when feasible, by selecting maturities of
investments to coincide with large cash outflows.
B. Liquidity: The investment portfolio shall remain sufficiently liquid to meet all operating
requirements that may be reasonably anticipated. This is accomplished by structuring the
portfolio so that securities mature concurrent with cash needs to meet anticipated demands
(static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the
portfolio should consist largely of securities with active secondary or resale markets
(dynamic liquidity).
C. Yield: After the objectives of safety and liquidity are met, the investment portfolio shall be
managed with the objective of attaining a market rate of return throughout interest rate
cycles.
1. The core of investments are limited to relatively low risk securities in anticipation of
earning a fair return relative to the risk being assumed.
2. Speculative investments will not be allowed. Speculative investments are those attempting to
gain market premium appreciation through short term market volatility resulting in increased risk
and loss exposure. The Town will not purchase a security which cannot be held to maturity. This
does not mean an investment cannot be sold prior to maturity. (Ord. 3(1997) § 1)
Section 4. Subpart (C.2 and C.3) of Section 2-2-4 of the Town Code is hereby
amended to clarify organizational titles to read as follows:
2-2-4: STANDARDS OF CARE:
C. Delegation Of Authority:
2 Ordinance 24, 2016
2. There is hereby created an Investment Committee, consisting of the Town Manager,
Finance Director, and the Finance Controller or such comparable positions as may exist
from time to time. Members of the Committee will meet at least quarterly to determine
general strategies and to monitor results. Minutes of the decisions made by the
Investment Committee shall be kept on file in the Town Clerk's office. The Committee
shall include in its review and deliberations such topics as: potential risks, authorized
depositories, rate of return, maturity structure and investment transactions.
3. It shall be the duty of the Finance Director or his/her appointed designee to manage the
day-to-day operations of the portfolio, and place actual purchase/sell orders with institutions.
In the absence of the Finance Director, an appointed designee shall assume these duties.
The Finance Director or his/her appointed designee shall maintain internal procedures for
investing which provide appropriate investment and accounting controls and which shall be
available for review annually by the independent auditor.
Section 5. Subsection (A) of Section 2-2-5 of the Town Code is hereby
amended to read as follows:
2-2-5: SAFEKEEPING AND CUSTODY:
A. Authorized Financial Dealer And Institution:
1. Qualified banks can only be commercial banks and the Town's investment with the bank may be in
excess of two hundred and fifty thousand dollars ($250,000.00) or whatever amount is currently
insured by the FDIC. The Town's Finance Director or his/her appointed designee shall obtain and
review whatever documents are necessary to verify the bank's continued stability including the
monthly listing of securities pledged for collateralization to monitor the bank's collateralization of
Town deposits.
2. Nonqualified banks can be either commercial banks or savings and loans or savings banks and the
Town's investment with the bank will not be in excess of two hundred and fifty thousand dollars
($250,000.00) or whatever amount is currently insured by the FDIC. The Finance Director or his/her
appointed designee shall inquire with bank officials and/or review an independent bank evaluation to
determine the bank meets the standard selection criteria established by the Investment Committee.
3. The Town has selected a primary bank, which bank the Town uses to process daily deposits and
checks. It is the responsibility of the Investment Committee to determine that the bank continues to
meet the Committee's standard selection criteria. At the discretion of the Investment Committee,
whether the bank continues to meet the criteria or not, a new bank may be selected as the primary
bank. A formal request for proposal should be used in the selection process.
4. The Town shall maintain a list of banks and securities dealers approved for securities transactions
initiated by the town, and it shall be the policy of the town to purchase securities only from those
authorized firms. Securities dealers not affiliated with a bank shall be required to be classified as
reporting dealers affiliated with the New York Federal Reserve Bank, as primary dealers.
Broker/dealers which are not primary dealers may be used if they have been approved by the
Investment Committee. The Investment committee shall develop and document the methodology for
qualifying non -primary broker/dealers.
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Ordinance 24, 2016
Section 6. Subsection (B) of Section 2-2-5 of the Town Code is hereby
amended to read as follows:
2-2-5: SAFEKEEPING AND CUSTODY:
B. Internal Controls:
1. The Finance Director is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the entity are protected from Toss, theft, or misuse. The internal
control structure shall be designed to provide reasonable assurance that these objectives are met.
The concept of reasonable assurance recognizes that: a) the cost of a control should not exceed the
benefits likely to be derived; and b) the valuation of costs and benefits requires estimates and
judgments by management.
2. Accordingly, the Finance Director shall establish a process for annual independent review by an
external auditor to assure compliance with policies and procedures. The internal controls shall
address the following points:
a. Control Of Collusion: Collusion is a situation where two (2) or more employees are working in
conjunction to defraud their employer.
b. Separation Of Transaction Authority From Accounting And Record Keeping: By separating the
person who authorizes or performs the transaction from the people who record or otherwise account
for the transaction, a separation of duties is achieved.
c. Custodial Safekeeping: Securities purchased from any bank or dealer shall be placed with an
independent third party designated as primary agent for custodial safekeeping. The primary agent
shall issue a safekeeping receipt to the Town listing the specific instrument, rate, maturity, and other
information. Securities may be purchased from the primary agents brokerage department and
safekept by the same bank's trust department.
d. Avoidance Of Physical Delivery Securities: Book entry securities are much easier to transfer and
account for since actual delivery of a document never takes place. Delivered securities must be
properly safeguarded against loss or destruction. The potential for fraud and loss increases with
physically delivered securities.
e. Clear Designation Of Authority To Subordinate Staff Members: Subordinate staff members must
have a clear understanding of their authority and responsibilities to avoid improper actions. Clear
delegation of authority also preserves the internal control structure that is contingent on the various
staff positions and their respective responsibilities.
f. Written Confirmation Of Telephone Transactions For Investments And Wire Transfers: Due to the
potential for error and improprieties arising from telephone transactions, all telephone transactions
should be supported by written communications and approved by the appropriate person. Written
communications may be via email, fax if on letterhead and the safekeeping institution has a list of
authorized signatures.
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Section 7. Subsection (A) of Section 2-2-6 of the Town Code is hereby
amended to read as follows:
2-2-6: SUITABLE AND AUTHORIZED INVESTMENTS:
A. Types Of Accounts Or Securities: The Town shall invest in the following accounts, or securities:
1. Fully collateralized or insured interest bearing checking accounts, savings accounts, and certificates
of deposit at commercial banks with amount not to exceed two hundred and fifty thousand dollars
($250,000.00) or the current FDIC limit if the bank is not designated as a qualified institution by the
Investment Committee.
A commercial bank may use any securities authorized by the Public Deposit Protection Act as
collateral.
2. Certificates of deposit at savings and loan associations insured by the FDIC or other agency of the
Federal government with amount not to exceed two hundred fifty thousand dollars ($250,000.00) or
the current FDIC limit.
Deposits with savings banks insured by the FDIC with amount not to exceed two hundred fifty
thousand dollars ($250,000.00) or the current FDIC limit.
8. Taxable Municipal Securities: Taxable obligations of political and governmental subdivisions may
be purchased. The issue must be rated at least 'AA' by a nationally recognized security rating
organization.
Section 8. Subsection (B.4) of Section 2-2-6 of the Town Code is hereby
amended to read as follows:
2-2-6: SUITABLE AND AUTHORIZED INVESTMENTS:
B. Criteria For Choice:
4. It is the responsibility of the Finance Director to demonstrate compliance with this Section. A
"local institution" is defined as a bank or savings and loan association doing business inside the
corporate limits of the Town of Vail and/or Eagle County.
Section 9. Subsection (C) of Section 2-2-6 of the Town Code is hereby
amended to read as follows:
2-2-6: SUITABLE AND AUTHORIZED INVESTMENTS:
C. Interest Allocation Method: All investments will be in the name of the Town and in most
cases it will be a general policy of the Town to pool all available operating cash into a treasury
cash management investment portfolio. However, a specific investment purchased by a specific
5 Ordinance 24, 2016
fund shall incur all earnings and expenses to that particular fund. Interest earnings from pooled
funds shall be allocated to all participating funds based on the average monthly cash balance of
each fund included in the common portfolio for the earning period.
Section 10. Subsection (A) of Section 2-2-7 of the Town Code is hereby
amended to read as follows:
2-2-7: INVESTMENT PARAMETERS:
A. Portfolio Diversification:
1. The Town will diversify use of investment instruments to avoid incurring unreasonable risks inherent
in overinvesting in specific instruments, and individual financial institutions.
Maximum
Percent of,
Portfolio
Diversification BY Instrument:
Money market and interest 50%
bearing checking accounts
with commercial banks
Money market funds 50%
U.S. Treasury obligations 100%
(Bills, notes and bonds)
U.S. government agency 100%
securities
(per subsection 2-2-6A3a)
U.S. government agency 25%
securities
(per subsection 2-2-6A3b(1))
Taxable Municipal Securities 20%
Repurchase agreements 75%
Certificate of deposit 100%
commercial banks or
savings banks
Certificate of deposit savings 25%
and loan association
Local government investment 100%
pool
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Ordinance 24, 2016
Diversification By Financial Institution:
Repurchase agreements
No more than 50% of the total investment
portfolio shall be secured in repos with
any one institution.
Certificates of deposit _ commercial banks
No more than 20% of the total investment
portfolio shall be secured in any one
commercial bank's CDs.
Section11. Subsection (A) of Section 2-2-8 of the Town Code is hereby
amended to read as follows:
2-2-8: REPORTING:
A. Methods: The Finance Director or his/her appointed designee will submit a quarterly investment
report which discloses investments on the last day of the quarter. This report will be distributed to
the Town Manager and Town Council members. The Finance Director or designee will present at
least annually the investment report to the Town Council.
Sectionl2. Subsection (D) of Section 2-2-8 of the Town Code is hereby
amended to read as follows:
2-2-8: REPORTING:
D. Monitoring And Adjusting Portfolio: The Finance Director or his/her appointed designee will
routinely monitor the contents of the portfolio, the available markets and the relative values of
competing instruments, and will adjust the portfolio accordingly. (Ord. 3(1997) § 1)
Section 13. Subsection (B) of Section 2-2-9 of the Town Code is hereby
amended to read as follows:
2-2-9: POLICY:
B. Policy Review: The investment policy shall be reviewed annually by the Investment Committee. A
recommendation will be made periodically to the Town Council for any proposed changes to the
investment policy. (Ord. 3(1997) § 1)
Section 14. If any part, section, subsection, sentence, clause or phrase of this
ordinance is for any reason held to be invalid, such decision shall not effect the validity
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Ordinance 24, 2016
of the remaining portions of this ordinance; and the Town Council hereby declares it
would have passed this ordinance, and each part, section, subsection, sentence, clause
or phrase thereof, regardless of the fact that any one or more parts, sections,
subsections, sentences, clauses or phrases be declared invalid.
Section 15. The Town Council hereby finds, determines and declares that this
ordinance is necessary and proper for the health, safety and welfare of the Town of Vail
and the inhabitants thereof.
Section 16. The amendment of any provision of the Town Code as provided in
this ordinance shall not affect any right which has accrued, any duty imposed, any
violation that occurred prior to the effective date hereof, any prosecution commenced,
nor any other action or proceeding as commenced under or by virtue of the provision
amended. The amendment of any provision hereby shall not revive any provision or
any ordinance previously repealed or superseded unless expressly stated herein.
Section 17. All bylaws, orders, resolutions and ordinances, or parts thereof,
inconsistent herewith are repealed to the extent only of such inconsistency. This
repealer shall not be construed to revise any bylaw, order, resolution or ordinance, or
part thereof, theretofore repealed.
INTRODUCED, READ ON FIRST READING, APPROVED, AND ORDERED
PUBLISHED ONCE IN FULL ON FIRST READING this 6th day of September, 2016
and a public hearing for second reading of this Ordinance set for the 20th day of
September, 2016, in the Council Chambers of the V. it Munici al Building, Vail,
Colorado.
Dave Chap , M.yrr
READ AND APPROVED ON SECOND READING AND OERED PUBLISHED IN
FULL this 20th day of September 2016.
Dave : pin, Mayor
Ordinance 24, 2016