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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2-2-9 OF THE VAIL TOWN CODE TO UPDATE THE INVESTMENT POLICY FOR THE TOWN OF VAIL WHEREAS, the Town Code is currently outdated regarding FDIC insurance limits and organizational titles and WHEREAS, the Town Council would like to expand the definition of suitable and authorized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) 1 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. 3 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. 4 Ordinance 24, 2016 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 6 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 7 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