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HomeMy WebLinkAbout1987-17 Adopting an Investment Policy for the Town of VailY ~ • • ORDINANCE NO. 17 Series of 1987 AN ORDINANCE ADgPTING AN INVESTMENT POLICY FOR THE TOWN OF UAII.. WHEREAS, the Town Council deems the investment policy of the Town of Vail a matter of local concern; and WFlEREAS, the Town Council wishes to adopt an investment policy for the Totivr7 which sets forth appropriate guidelines for the investment of Towr~ of Vail (~unds. NOW, THEREFORE, be it ordained by the Town Council of the Town of Vail, Colorado, as follows: 1. The Town Council of the Town of Vail, Colorado hereby adopts Vai~i Town Council Policy Statement 87-1 Investment Policy attached hereto and incorporated in this Ordinance by reference. 2. If any part, section, subsection, sentence, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the rerraaining 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 ar phrases be declared invalid. 3. The Town Council hereby finds, determines and declares that this Ordinance is necessary and proper far the health, safety and welfare of the Town of ail and the inhabitants thereof. 4. The repeal or the repeal and reenactment of any prov~isian of the Vail Municipal Code as provided in this Ordinance shall riot 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hereof, any prosecution commenced, nor any other action ar proceedings as commenced under or by virtue of the provision repealed or repealed and reenacted. The repeal of any provision hereby shal] not revive any provision or any ordinance previously repealed or superseded unless expressly stated herein. INTRODl1CED, READ AND APPROVED ON FIRST READING T(~IS 18i;h day of Aua~ast , 1987, and a public hearing shall be held on this ordinance on the 18th day of August 1987, at 7:30 p.m. in the Council Chambers of the Vaii Municipal Building, Vail, Colorado. • • M Ordered published in full this l~t}L day of u4u.. 1987. ~. .~, Paul R. Johnsto~,( Mayor ATTEST: ~/ ~` ~, ~~ . ~~~J Pamela A. Brandmeyer, Town Clerk INTROpE1CED, REAP AND APPROUE.p ON SECOiVp REAPING AiVD ORDEREp PUBLISHEp by title only this 1st day of September 1987. Al'TEST: Pamela A. Brandmeyer, Tod w~~k Pau1-`R: Johnsto. , Mayor--~ -~- .~ M~ • • VAIL TOWN COUNCIL COUNCIL POLICY STATEMENT 87-1 M INVESTMENT POLICY SECTION I. STATEMENT OF PURPOSE 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. Areas covered by this policy include: II. Scope of Financial Funds to be Invested III. Investment Objectives IV. Delegation of Authority far Investment Decisions V. Investment Prudence VI. Investment Instruments in which the Town May Invest, Diversification of the Investment Portfolio, and Minimum Maturity Portfolio Schedules VII. Financial Institutions in Which the Town May Invest VIII. Establishment of an Investment Committee IX. Provisions for Interim and Annual Reporting Cash management goals shall be developed within the constraints of this policy statement. Goals shall include: A. A total percentage of cash to be invested. The Town shall have 100% of Town funds invested. B. Percentage of Return (Yield). A target yield should be stated as a goal. This target yield goal shall be presented in the annual operating budget. • • • C C. Total Dollar Return Gaa1. Combines the goals of percentage of cash available and the percentage of yield to obtain a total dollar return goal. SECTION TT. SCOPE This investment policy applies to all financial funds of the Town of Vail (hereby referred to as the "Town") These funds are accounted for in the Towns comprehensive Annual Financial Report and currently include the: General Fund Capital Projects Fund Construction Funds Special Revenue Funds: Real Estate Transfer Tax Parking Fee Fund Conservation Trust Fund Enterprise Funds: Internal Service - Fleet Maintenance Fund Internal Service - Health Insurance Debt Service Fund Special Assessment Funds Monies held by the Colorado State Treasurer and Eagle County Treasurer during tax collection periods shall be governed by State of Calarado and Eagle County investment policies and are not subject to the provisions of this policy. 2 - ~ ~ r SECTION III. INVESTMENT OBJECTIVES The format objectives of the Town is to ensure the safety of principal. Each investment transaction shall first seek to ensure capital losses are avoided, whether they are from default of securities or erosion of market value. The Town, as its second major objective, seeks to attain market rates of return on its investments. Market rate objectives must be consistent with constraints imposed by the primary objective of the safety of principal, internal cash flow considerations and any Town of Vail ordinance, restricting the placement of public monies. Speculative investments will not be allowed. Speculative investments are those attempting to gain market premium appreciation thraugh 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. SECTION IV. DELEGATION OF AUTHORITY Management responsibility for the investment program is held by the Town Manager and appointed designees. Na employee may engage in an investment transaction except as provided under the terms of this policy and any procedures which may be established by the Tawn Manager. The Town Manager shall approve investments made through investment documentation. Tt shall be the duty of the Controller to manage the day-to-day operations of the portfolio, and place actual purchase/sell orders with institutions. Tn the absence of the Controller, the Administrative Services Director shall assume these duties. 3 - • • M The authority for the investment philosophy and selection of investment managers far the Town of Vail Employee Pension Plan and the Town of Vail Police and Fire Employees Pension Plan shall be the responsibility of the Pension Plan Trustee as defined in the pension plan document. SECTION V. PRUDENCE Investments shall be made with reasonable financial judgement and care, under circumstances than prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the primary objective of safety of principal as well as the secondary objective of the obtainment of market rates of return. Investment officers acting in accordance with written procedures and exercising due prudence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectation are reported in an timely fashion, and appropriate action is taken to control adverse developments. SECTION VT. INVESTMENT INSTRUMENTS As a unit of local government in the State of Colorado the Town of Vail is restricting itself to the following type of securities: 1. Savings accounts, certificate of deposit and other time accounts of commercial banks insured by the Federal Deposit Insurance Corporation. • • w 2, Securities of savings and loan associations' share or investment certificate of which are insured by the Federal Savings and Loan insurance Corporation. 3. Treasury Bills, Treasury Notes, Treasury Bonds and Federal. agencies securities which are guaranteed by the full faith and credit of the United States of America. Other securities, such as Fannie Maes, which are not backed by the full faith and credit of the United States, may be purchased on a full delivery vs payment basis where the securities are used as collateral and are delivered at the time the Town releases funds for their purchase. 4. Commercial paper issued by corporations organized in the United States with assets exceeding $500,OOd,00Q, 5. Colorado Public Investment Pools. The Town may participate in a Colorado Public Investment Pool, the Colorado Local Government Liquid Asset Trust or other similar local government pools organized in conformity with Part 7 of Article 75 of Title 2~4, CRS, which provides specific authority for pooling of local government funds. 6. Money Market funds or short intermediate term bond funds investing in U.S. Agency Securities guaranteed by the U.S. Government. In addition, the Town may participate in repurchase agreements provided the securities for the agreement are included in 1 through ~ above. As a matter of policy, the Town must take delivery of the securities purchased through a repurchase 5 • • M agreement or have required collateralized securities in a restricted account located at the Federal Reserve Bank if the terms of the agreement is greater than ~.4 days. Repurchase agreements with terms less than 14 days shall be held in safekeeping by a banker or broker in a designated trust department. Repurchase agreements involving non--deliverable securities shall only be held by the Federal Reserve Bank or by another commercial banking institution's trust department which is not owed or controlled by the borrowing institution. Pledged securities under repurchase agreements must be based on market value, not face value. When entering a repurchase agreement where delivery is not required, the Town shall obtain a safekeeping receipt for the specific security(ies) purchased. Repurchase agreements involving pooled collateral shall be avoided. Repurchase agreements shall only be purchased from banking institutions or primary brokerage firms. Primary brokerage firms shall only be used nn a full delivery vs payment basis for repurchase agreements. It is the general. policy of the Town to concentrate its investment efforts in, but not to be limited to, U.S. Treasury obligations, Certificates of Deposit and Super Now Accounts issued by financial institutions located in the Town or Eagle County. Investments will be selected on the following basis: 1. The institution offering the investment must meet all the criteria as stated in, the "Financial Institutions", Section VII of this policy statement. 6 _ • 2. The duration of the investment must coincide with cash requirements determined by the Controller of the Tawn to meet short term or long term needs. 3. The rate of interest on the investment must be at least equivalent to the average rate of return available in the market place. Certificate of Deposit Investments in excess of $100,000 sha11 use an informal bidding procedure where rates will be received from at least two institutions with the investment placed with the highest bidder provided the institution meets the Town's investment criteria as stated in Section V. Certificate of Deposit investments in the amount of $1a0,aa0 or less shall have a yield analysis performed in comparing the selected investment to others similar in nature. The Town may place an investment with a local institution that is not the highest bidder, provided the bid is not more than 25 basis points below the highest bidder. U.S. Agency and Corporate Commercial Paper investments shall use a formal bidding procedure where rates will be received from at least two institutions with the investment placed with the highest yielding bidder provided the institution meets the Town's investment criteria. Short Term (1 year or less) U.S. Treasury- bills or notes which do not exceed $250,000 are not required to use the aforementioned bidding process due to the limited variation of yields for such instruments. However, bid comparisons are to be chosen randomly, to ensure that quality pricing is being obtained by the Town on instruments not requiring a bid process. It is the responsibility of the Controller to demonstrate compliance with this section. A local institution is 7 • ! M defined as a bank ox savings and loan association doing business inside the corporate limits of the Town of Vail and/or Eagle County. All investments will be in the name of the Town of Vail and in mast 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 fund shall incur all earnings and expenses to that particular fund. Interest earnings from pooled funds shall be allocated to all participating funds in the following order: A. Payment of interest earnings shall be allocated to designated funds from its specific investments. B, Payment to the General Fund of an amount equal to the total annual bank service charges as incurred by the general fund far all operating funds as included in the annual operating budget. C. Payment to the General Fund of a management fee equal to 5a of the annual pooled cash fund investment earnings. D. Payment to each fund of an amount based on the average monthly cash balance included in the common portfolio for the earning period. All money market investment securities will be held in safekeeping at financial institutions or in shares with mutual funds. Safekeeping account receipts will be held by the Tawn's Finance Division. 8 ~ ~ M PORTFOLIO DIVERSIFICATION The Town will diversify use of investment instruments to avoid incurring unreasonable risks inherent in overinvesting in specific instruments, individual financial institutions or investment maturities. Maximum Percent Diversification by Instrument: of Portfolio Money Market & Super Now Accounts with Commercial Banks 1000 Money Market Funds and Mutual Funds of U.S. Government Guaranteed Securities 50% U.S. Treasury Obligations (Bills, Notes & Bonds) 1000 U.S. Government Agency Securities and Instruments of Government Sponsored Corporations 500 Repurchase Agreements (Repos) 500 Certificate of Deposit (CDs) Commercial Banks 1000 Certificate of Deposit (CDs) Savings & Loan Association 150 Local Government Investment Pool 50% Corporate Commercial Paper 20% Diversification by Financial Institution: Repurchase Agreements {Repos} No more than 20% of the total investment portfolio shall be secured in Repos with any one institution. Certificates of Deposit (CDs) - Commercial Banks No more than 330 of the total investment portfolio shall be secured in any one commercial bank's CDs. The Colorado Public Deposit Protection Act (P.D.P.A.) provides collateralization of public monies accounts in excess of 9 • • • $1gq,00q with U.5. Treasury, U.S. Agency, Colorado Municipal Bond or 65% of Real Estate Mortgage face value investments. Certificates of Deposit (CDs} and Passbook Savings Accounts -Savings & Loan Associations No more than $100,000 in CDs shall be secured in any one Savings and Loan institution. Local Government Guaranteed Securities or Money Market accounts backed by U.S. Government Securities No more than $2,000,000 shall be secured in a local government investment pool. Corporate Commercial Paper No mare than $500,000 may be secured in any one Triple A (AAA) Corporate Security. MATURITY SCHEDULING Investment maturities for operating funds shall be scheduled to coincide with projected cash flow needs, taking into account large routine expenditures (payroll, bond payments) as well as considering sizeable blocks of anticipated revenue (sales tax, property tax). Maturities in this category shall be timed to comply with the following guidelines: MATURITY SCHEDULE PORTFOLIO MINIMUMS Under 12 months Under 24 months 75d 850 xa • ~ ~ ~ The average maturity of the portfolio shall never exceed 2 years. SECTION VIZ. FINANCIAL INSTITUTIONS As stated in Section V, it is the general policy of the Town to purchase Money Market accounts, certificates of deposit and other time accounts primarily from financial institutions located in the Town of Vail and/or Eagle County. United States government securities are to be purchased through the facilities of commercial banks or a securities institution as designated by the Securities Exchange Commission {S.E.C.). Financial institutions will be required to meet the following criteria in order to receive Town funds for investment: 1. Insurance Public Funds shall be deposited only in financial institutions insured by the Federal Deposit Insurance Corporation or Federal Savings & Loan insurance Corporation. 2. Collateral The amount of Town of Vail deposits or investments not insured by agency of the federal government shall be collateralized by securities or mortgages in an amount equal to the market value of that amount of invested funds plus unpaid interest earnings. 3. Size The amount of Town of Vail deposits or investments not collateralized or insured by an agency of the federal government shall not exceed 3~% of the net worth or capital stock and surplus of the institution. 1.1 • ~ ~ ~ 4. Disclosure A) Each financial institution maintaining .invested funds in excess of $100,000 shall furnish corporate authorities a copy of all statements of resources and liabilities which it is required to furnish to the State Commission of Banks and Trust Companies or the Controller of Currency. The Town shall not invest in excess of $100,000 in banking institutions which do not disclose to the Town a current listing of securities pledged for collateralization of public monies. B) Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.s. Treasury Department regulations. Each mutual fund sha11 provide a prospectus and statement of additional information. SECTION VIII. INVESTMENT COMMITTEE There is hereby created an investment committee, consisting of the Town Manager, Administrative Services Director, and the Finance Controller. 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 depositaries, rate of return, maturity structure and investment transactions. The committee's authority shall not apply to investments of the Town of Vail Employee's Pension Fund. 12 s .~ ~ fi • r M SECTION IX. REPORTING-INTERIM AND ANNUAL The Finance Controller will submit a quarterly investment report which discloses all quarterly transactions. The report will be reviewed in detail by the investment committee and the committee shall expand or alter the contents of the report as deemed necessary. This information will be included in the letter of transmittal written by the Controller. A quarterly or semi-annual investment report shall be given to the Tnwn Council. 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