HomeMy WebLinkAboutOrdinance 82-13RECORD OF ORDINANCES
Dayton Legal Blank, Inc.
ince No.
82 -13
Form No. 30043
Passed . 20 .
AN ORDINANCE AUTHORIZING THE MODIFICATION
OF THE CITY'S INVESTMENT POLICY
WHEREAS, the City of Dublin (°Dublin'l has an Investment Policy that has
been adopted by City Council; and
WHEREAS, the Investment Policy establishes the policies and guidelines to
be followed for the investment of interim and inactive monies of the City; and
WHEREAS, it is recommended that the Investment Policy be modified to
update language and terms, which are consistent with today's market, modify
collateralization limits, adjust credit rating criteria for certain types of
investments, allow for the purchase of bonds and other obligations of the
State of Ohio or other Ohio political subdivisions, and stipulate that all
investment assets of the City be held in safekeeping by a custodian bank; and
WHEREASE, it is recommended that the modified Investment Policy, once
approved by City Council, be effective January 1, 2014 in order to allow ample
time for the changes to be implemented.
NOW, THEREFORE, BE IT ORDAINED by the Council of the City of Dublin,
State of Ohio, �_ of the elected members concurring that:
Sectionl The attached Investment Policy is hereby adopted and replaces
and previous policies approved by City Council.
Section2 The Director of Finance remains relieved from any liability for the
loss of public monies deposited or invested pursuant to and in compliance
with the City's Investment Policy.
Section 3. This Ordinance shall take effect on January 1, 2014.
Passed this 1 day of ✓V6 U 2013.
• - Officer
ATTEST:
Clerk of Council
Office of the City Manager
5200 Emerald Parkway ■ Dublin, OH 43017 -1090
City of Dublin Phone: 614 - 410 -4400 • Fax: 614 - 410 -4490
To: Members of Dublin City Council
From: Marsha I. Grigsby, City Manager\NN4r-
Date: October 24, 2013
Initiated By: Angel L. Mumma, Director of Finance
Memo
Re: Ordinance 82 -13 — Authorizing Modifications to the City's Investment Policy
Summary
At the October 14, 2013 Finance Committee meeting, staff, along with Mr. Dennis Yacobozzi,
President of United American Capital Corporation (UACC), the City's investment advisor, presented
proposed modifications to the City's Investment Policy.
The majority of the changes are within Section V. Authorized Investments (Itemized). A
summarization of the changes is as follows:
■ Updates language and terms so that it is consistent in today's market. The statement that "All
federal agency obligations shall be direct issuances of federal government agencies or
instrumentalities" is deemed unnecessary based on other language in this section.
■ Student Loan Marketing Association (SLMA) is struck as this agency no longer issues
securities on its own.
■ Modifies the amount that certificates of deposit in excess of the amount insured by the
Federal Deposit Insurance Corporate must be collateralized with from 10% to a minimum
of 5% with the caveat that the City may elect to require a higher percentage of excess
market value in pledged collateral to secure all deposits.
■ Provides for investment in commercial paper offered by companies rated in the highest
category by two nationally recognized rating agencies. This modification is more restrictive
than the City's current policy, which permits investment in companies rated Al +, Al or A2
by Standard & Poor's and P1 or P2 by Moody's.
■ Although bankers acceptances are generally not available today, the proposed change
indicates that the bank must have a long -term credit rating of A, or the equivalent, by a
nationally recognized rating agency. This is more restrictive than the City's current policy,
which does not stipulate a rating.
■ Language is struck that limits the investment in commercial paper to 10% of the average
portfolio and 10% in bankers acceptances of the average portfolio. However, language
was added that provides that the combined total of commercial paper and bankers
acceptances shall not exceed 25% of the average portfolio. This is consistent with current
ORC law and provides more flexibility based on market conditions.
Memo re: Ordinance 82 -13 — Authorizing Modifications to the City's Investment Policy
October 24, 2013
Page 2 of 2
■ Changes to language regarding the amount of the portfolio that can be invested in corporate
medium term notes are made so that there cannot be any critique from outside parties on
the calculation of the 15% limit.
• Provides that no more than 5% of the total average portfolio can be invested in a single
issuer. This is a change from the $1 million stated in the current policy. It is believed that
5% is more appropriate in today's environment.
• Adds language that permits the City to invest in other programs offered to Ohio political
subdivisions by the Treasurer of the State of Ohio. Furthermore, it allows the City to
purchase bonds and other obligations of the State of Ohio and other Ohio political
subdivisions, including the City of Dublin, provided they have a minimum credit rating of
AA, or the equivalent, by a nationally recognized rating agency at the time of the purchase.
• Expands the determination of eligibility in determining derivatives.
• Provides that assets of the City will be held in safekeeping by a custodian bank where the
custodian bank and the City have entered into a custodian agreement. This prevents
Broker /dealer firms used by the City from holding onto City assets.
• Clarifies that any brokers or broker /dealer firms will not act as an investment advisor or a
similar capacity if they are participating in transaction business (the purchase or sale of
securities). This prevents any conflict of interest that might exist.
Other modifications are made to provide further clarity to the policy and reflect changes that are
appropriate in today's market.
Staff has included language in Ordinance 82 -13 that would provide for this modified Investment
Policy to be effective on January 1, 2014. This will allow ample time for the changes to be
implemented.
Recommendation
Staff recommends approval of Ordinance 82 -13 at the second reading /public hearing on November
4, 2013, with an effective date of January 1, 2014.
CITY OF DUBLIN, OHIO
INVESTMENT POLICY
I. Introduction
The purpose of this investment policy is to establish the definition(s) of eligible investments of
the City of Dublin, Ohio (hereinafter referred to as the "City "), including guidelines and parameters
regarding the investment management of the City's investment funds [hereinafter referred to as the
"Portfolio "]. This investment policy, as approved by City Council, shall serve to define authorized
investments and eligible investment transactions of the City. Such eligible investments may be
derived from, or based upon Chapter 135.14 ORC, and /or include certain other investments not
authorized or defined under 135.14 ORC. Investments not defined under 135.14 ORC, but
authorized pursuant to this investment policy, are considered as authorized investments of the City.
That this Ordinance shall take effect and be in force in accordance with Section 4.04 (b) of the
Dublin City Charter. This policy includes [totally or partially] sections of the statute in order to
describe certain eligible investments. In some sections, the policy places further limits upon the use
eligible investments or investment transactions.
II. Scope
This policy applies to all financial assets of the City of Dublin. Such funds are accounted for in
the City's Comprehensive Annual Financial Report (CAFR), and includes all funds of the reporting
entity.
III. INVESTMENT OBJECTIVES
The investment objectives of the City, in priority order, include:
A. Safety of principal
Safety of principal is the foremost objective of the investment program. The investment of City
funds shall be conducted in a manner that seeks to ensure the preservation of capital within the
context of the following criteria:
o Market risk (interest rate risk)
The market value of securities in the City's portfolio will increase or decrease
based upon changes in the general level of interest rates. The effects of market
value fluctuations will be minimized by (1) maintaining adequate liquidity so that
current obligations can be met without a sale of securities;(2) diversification of
maturities; (3) diversification of assets.
Credit Risk
Credit risk is the risk of loss due to the failure of a security issuer to pay
principal or interest, or the failure of the issuer to make timely payments
of principal or interest. Eligible investments affected by credit risk include
certificates of deposit, commercial paper, bankers acceptances, and corporate
medium term notes. Credit risk will be minimized by (1) diversifying
assets by issuer; (2) ensuring that required, minimum credit quality ratings
exist prior to the purchase of commercial paper, bankers acceptances, and
corporate medium term notes; and (3) maintaining adequate collateralization
of certificates of deposit.
B. Liquidity
The portfolio shall remain sufficiently liquid to meet all current obligations of
the City. Minimum liquidity levels [as a percentage of average investable
funds] may be established in order to meet all current obligations. The portfolio may
also be structured so that securities mature concurrently with cash needs.
C. Yie /d /Return
The portfolio shall be managed to consistently attain a market rate of return
throughout budgetary and economic cycles. Whenever possible, and consistent
with risk limitations and prudent investment management, the City will seek
to augment returns above the market average rate of return through the
implementation of active portfolio management strategies.
IV. Standards of Care
A. Prudence
Investments shall be made with the exercise of that degree of judgment and care, under
circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the
management of their own affairs, not for speculation but for investment, considering the probable
safety of their capital as well as the probable income to be derived.
The standard of prudence to be used by investments officials shall be the "prudent person"
standard and shall be applied within the context of managing an overall portfolio. Investment
officers or registered investment advisors, acting in accordance with established procedures and the
approved investment policy, and exercising due diligence, shall be relieved of responsibility for an
individual security's credit risk or market price changes, provided deviations from expectations are
reported in a timely fashion and appropriate action is taken to control adverse developments.
B. Delegation ofAuthority
Management responsibility for the investment program is hereby delegated to the Director
of Finance pursuant to the City Charter. The Director of Finance shall establish written procedures
for the operation of the investment program consistent with this investment policy. Such
procedures shall include explicit delegation of authority to persons responsible for investment
transactions. No person may engage in an investment transaction except as provided under the
terms of this policy and the procedures established by the Director of Finance. The Director of
Finance shall be responsible for all transactions undertaken and shall establish a system of internal
controls to regulate the activities of subordinate officials.
C. Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from personal business
activity that could conflict with the proper execution of the investment program, or which could
impair their ability to make impartial investment decisions. Employees and investment officials shall
disclose to the City Manager any material financial interests in financial institutions with which they
conduct business. They shall further disclose any personal financial or investment positions that
could be related to the performance of the investment portfolio. Employees and officers shall
refrain from undertaking personal investment transactions with the same individual with whom
business is conducted on behalf of the City.
V. Authorized Investments (itemized)
-U.S. Treasury Bills, Notes, and Bonds; various federal agency obligations including, but not
limited it, obligations of Federal National Mortgage Association (FNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB),
Government National Mortgage Association (GNMA), and other agencies or instrumentalities of the
United States. GNMA mortgage- backed, pass- through securities are considered as eligible
investments of the City and are not subject to the definition of derivative securities, as defined
under various sections of the Ohio Revised Code (ORC). Collateralized mortgage obligations
(CMOs) of any kind are expressly prohibited. Eligible investments include securities that may be
"called" by the issuer prior to the final maturity date. Any eligible investment may be purchased at
a premium or a discount.
- Interim deposits in the eligible institutions applying for interim moneys as provided in Section
135.08 and 135.12 of the ORC. Certificates of deposit in excess of the amount insured by the
Federal Deposit Insurance Corporation (FDIC) must be collateralized with at least a five percent
excess market value amount to secure such certificates of deposit. The City may elect to use either
135.18 of the ORC (individual assignment method) or 135.181 of the ORC (pooling method) when
requiring the pledge of eligible collateral to secure certificates of deposit or other deposits of the
City. The City may elect to require a higher percentage of excess market value in pledged collateral
to secure all deposits. -No -load money market mutual funds, as defined in 135.14(B)(5), rated in
the highest category by at least one nationally recognized rating agency, investing exclusively in the
same types of eligible securities as defined in Division B(1) or B(2) under 135.14 ORC, and
repurchase agreements secured by such obligations. Eligible money market funds shall comply with
135.01 ORC, regarding limitations and restrictions.
3
- Commercial paper issues of companies incorporated under the laws of the United States, rated
in the highest category by two nationally recognized rating agencies. The maximum maturity of
commercial paper shall be 270 days from the date of purchase.
- Bankers acceptances issued by any bank domiciled in the State of Ohio or bankers acceptances
issued by any domestic bank, provided that such bank has a long term credit rating of A, or the
equivalent, by a nationally recognized rating agency at the time of purchase.
=The combined total of commercial paper and bankers acceptances shall not exceed 25% of
the average portfolio, based upon the calculation methodology approved by the Finance Director.
- Repurchase agreements with any eligible institution mentioned in section 135.03 ORC, or any
eligible securities dealer pursuant to (M) of 135.14 ORC of this section, except that such eligible
securities dealers shall be restricted to primary government securities dealers. Repurchase
agreements will settle on a delivery vs. payment basis with collateral held at a qualified custodian or
agent, designated by the City. Eligible repo collateral is restricted to securities listed in division
(B)(1) or (B)(2) under 135.14 ORC. The market value of securities subject to an overnight written
repurchase agreement must exceed the principal value of the overnight repurchase agreement by
at least two per cent. A written repurchase agreement shall not exceed thirty days and the market
value of securities subject to a written repurchase agreement must exceed the principal value of the
written repurchase agreement by at least two percent and be market to market daily. Prior to the
execution of any repo transaction, a master repurchase agreement will be signed by the City and
the eligible parties.
- Medium term notes issued by a domestic corporation having assets in excess of $500 million,
provided that such medium term notes have a maximum maturity of five years and are rated [at
the time of purchase] by Standard & Poor's or Moody's under the following limitations:
Standard & Poor's
A+ (2 -yr max maturity)
A (2 -yr max maturity)
A- (2 -yr max maturity)
AA+ (3 -yr max maturity)
AA (3 -yr max maturity)
AA- (3 -yr max maturity)
AAA (maturities > 3 years)
Moody's
Al (2 -yr max maturity)
A2 (2 -yr max maturity)
A3 (2 -yr max maturity)
Aal
(3 -yr max maturity)
Aa2
(3 -yr max maturity)
Aa3
(3 -yr max maturity)
Aaa (maturities > 3 years)
If a security has a split rating, the higher of the two ratings shall be used to determine the
eligibility for investment purposes. In no event shall a corporate security [at the time of purchase]
be rated less than A- by Standard & Poor's or less than an A3 by Moody's.
The aggregate total of all corporate medium term notes shall not exceed 15% of the total
average portfolio, as determined and calculated by the Director of Finance. Commercial paper and
111
bankers acceptances shall not be included when calculating the fifteen percent maximum limit. No
more than five percent of the total average portfolio shall be invested in a single issuer.
Commercial paper and bankers acceptances shall be considered when calculating the maximum
holdings in any single issuer.
-The state treasurer's investment pool [STAR OHIO], pursuant to Section 135.45 ORC, or any
other investment option offered to Ohio political subdivisions by the Treasurer of the State of Ohio.
-Bonds and other obligations of the State of Ohio, various issuances of the agencies of the State
of Ohio, and obligations or debt issuances of any Ohio political subdivision, including the City of
Dublin, Ohio. Except for obligations of the City of Dublin, Ohio, all such debt issuances will have a
minimum credit rating of AA, or the equivalent, by a nationally recognized rating agency, at the
time of purchase. Except for obligations of the City, obligations of the State of Ohio or obligations
of any agency of the State of Ohio, or obligations of any Ohio political subdivision may not be
purchased as private placements.
-The use of derivative securities, as defined in 135.14 (C), is expressly prohibited except where
certain exemptions to the definition of derivative securities is defined in this investment policy.
Such exemptions to the definition of derivative securities include stripped principal or interest
obligations of the United States Treasury or stripped principal or interest obligations of any federal
agency, obligations of the Government National Mortgage Association (GNMA) mortgage- backed
securities, or asset - backed commercial paper shall not be considered as derivative investments..
-All eligible investments will mature within five years from the date of settlement, unless the
investment is matched to a specific obligation or debt of the City, and the investment is specifically
approved by the Director of Finance.
VI. Safekeeping and Custody
Securities purchased for the City will be held in safekeeping by a qualified trustee [hereinafter
referred to as the "Custodian "), as provided in Section 135.37 ORC. Securities held in safekeeping
by the custodian will be evidenced by a monthly statement describing such securities. The
custodian may safekeep the City's securities in (1) Federal Reserve Bank book entry form; (2)
Depository Trust Company (DTC) book entry form in the account of the custodian or the custodian's
correspondent bank; or (3) Non -book entry (physical) securities held by the custodian or the
custodian's correspondent bank. All securities transactions will settle using standard delivery-vs-
payment (DVP) procedures. The records of the custodian shall identify such securities in the name
of the City. Broker /dealer firms used by the City or broker /dealer firms used by the City's
designated investment advisor to purchase or sell investment assets shall not hold any such
investment assets in safekeeping. All investment assets of the City will be held in safekeeping by a
custodian bank where such custodian bank and the City have entered into a custodian agreement.
VII. Director of Finance and an Investment Advisory Committee
The City may establish an investment advisory committee which shall meet quarterly to review
the investment portfolio of the City. Specific areas of review include the investment inventory,
transactions for the period, and realized income.
5
Any amended policy that has been approved by the City Council shall be filed with the Auditor of
State.
VIII. Internal Controls
The Director of Finance is responsible for establishing and maintaining an internal control
structure designed to reasonably ensure that the investment assets of the City are protected from
loss, theft or misuse. The internal control structure shall be designed to provide reasonable
assurances that these objectives are met. The concept of reasonable assurance recognizes that
(1) the cost of a control should not exceed the benefits likely to be derived and, (2) the valuation of
costs and benefits requires estimates and judgments by management.
The Director of Finance shall establish a process for annual independent review by an external
auditor. This review will provide internal control by assuring compliance with policies and
procedures.
IX. Pooling of Funds
The Director of Finance is authorized to pool cash balances from the several different funds of
the City for investment purposes. Interest and other portfolio income will be credited to the fund
proportionate to the amount invested.
X. Investment Accounting and Portfolio Reporting
The City shall maintain an inventory of all portfolio assets. A description of each security will
include security type, issue /issuer, cost [original purchase cost or current book value], par value
[maturity value], maturity date, settlement date [delivery versus payment date of purchased or sold
securities], and any coupon [interest] rate. The investment report will also include a record of all
security purchases and sales. Regularly issued reports will include a monthly portfolio report and a
quarterly portfolio report to the Director of Finance, detailing the current inventory of all securities,
all investment transactions, any income received [maturities, interest payments, and sales], and any
expenses paid. The report will also include the purchase yield of each security, the average -
weighted yield and average- weighted maturity of the portfolio. The portfolio report shall state the
name(s) of any persons or entity effecting transactions on behalf of the City. Any premium paid
over par may be amortized equally during the life of the investment as a deduction from semi-
annual or annual interest payment(s) received each year, or such premium paid may be amortized
at the final maturity date of the investment. Any discount from par will be recognized at the final
maturity date of the investment.
XI. Investment Advisors, Oualified Dealers and Financial Institutions
The City may retain the services of a registered investment advisor. The investment advisor will
manage the City's portfolio, or a portion thereof, and will be responsible for the investment and
It
reinvestment of City's investment assets, including the execution of investment transactions. Upon
the request of the Director of Finance, the investment advisor will attend meetings and /or City
Council meetings to discuss all aspects of the City's portfolio, including market conditions affecting
the value of the City's investments. The investment advisor will be required to issue monthly and
quarterly portfolio reports as defined under section VIII of this investment policy [ "Portfolio
Reporting "].
The investment advisor may transact business (execute the purchase and /or sale of securities)
with eligible Ohio financial institutions, primary securities dealers regularly reporting to the New
York Federal Reserve Bank, and regional securities firms or broker dealers licensed with the Ohio
Department of Commerce, Division of Securities, to transact business in the State of Ohio.
Broker /dealers and financial institutions transacting investment business with the City are
required to sign the approved investment policy as an acknowledgment and understanding of the
contents of said policy.
Under no circumstance will brokers or broker /dealer firms act as an investment advisor or in a
similar capacity as an investment advisor, either directly or indirectly, if such broker /dealers
participate in transaction business (purchase and sale of securities) with the City of the City's
designated investment advisor.
XII. Sale of Securities Prior to Maturity
Portfolio assets may be liquidated or sold prior to maturity under the following conditions:
(1) To meet additional liquidity needs
(2) To purchase another security to increase yield or current income
(3) To lengthen or shorten the portfolio's average maturity
(4) To realize any capital gains and /or income
(5) To adjust the portfolio's asset allocation
Such transactions may be referred to as a "sale and purchase" or a "bond swap ". For purposes
of this section, redeemed shall also mean "called" in the case of a callable security.
XIII. Procedures for the Purchase and Sale of Securities
Securities will be purchased or sold through approved broker /dealers on a "best price and
execution" basis. All such investment transactions, executed by the City's designated investment
advisor, will be communicated electronically or by facsimile transmission to the Director of Finance
or to an authorized representative, designated by the Director of Finance. A purchase or sale of
securities will be represented by transaction advices issued by the City's investment advisor which
will describe the transaction, including par value, coupon (if any), maturity date, and cost. A
facsimile transmission or electronic advice will also be sent to the City's designated custodian bank
and will serve as an authorization to such custodian to receive or deliver securities versus payment.
Confirmation advices, representing the purchase or sale of securities, will be issued by the eligible
broker /dealer and sent to the investing authority. Copies of such advices will be sent to the City's
investment advisor.
7
XIV. Statements of Compliance
This investment policy has been approved by the investing authority and the governing board
and filed with the Auditor of State, pursuant to 135.14 (N)(1) ORC.
The investment portfolio will be managed in accordance with the parameters specified within
this policy. Performance of the portfolio will be periodically monitored and compared to an
appropriate benchmark.
All brokers, dealers, and financial institutions executing transactions initiated by the City or the
City's investment advisor have signed the approved investment policy. Investment policies [signed
by such brokers, dealers, and financial institutions] have been filed with the City. The City's
investment advisor is registered with the Securities and Exchange Commission and possesses public
funds investment management experience, specifically in the area of state and local government
investment portfolios. The investment advisor has additionally signed the approved investment
policy and the signed policy is filed with the Director of Finance.
The Director of Finance will be responsible for providing regular reports to City Council. Such
reports will accurately describe all portfolio assets, including transaction activity for the period. The
City's investment policy shall be adopted by Ordinance and modifications must be approved by City
Council.
Any amendments to this policy will be filed with the Auditor of State [Attn: Clerk of the Bureau,
P.O. Box 1140, Columbus, OH, 43216 -1140] within fifteen days of the effective date of the
amendment.
The following broker /dealer [or financial institution] has signed, herein, this approved
investment policy, having read the policy's contents thereby acknowledging comprehension and
receipt:
Name of Registered Representative Date
Financial Institution Representative
Registered Investment Advisor
For:
(Name of Organization)
E
CITY OF DUBLIN, OHIO
INVESTMENT POLICY
I. Introduction
The purpose of this investment policy is to establish the definition(s) of eligible investments of
the City of Dublin, Ohio (hereinafter referred to as the "City "), including guidelines and parameters
regarding the investment management of the City's investment funds [hereinafter referred to as the
"Portfolio "]. This investment policy, as approved by City Council, shall serve to define authorized
investments and eligible investment transactions of the City. Such eligible investments may be
derived from, or based upon Chapter 135.14 ORC, and /or include certain other investments not
authorized or defined under 135.14 ORC. Investments not defined under 135.14 ORC, but
authorized pursuant to this investment policy, are considered as authorized investments of the City.
That this Ordinance shall take effect and be in force in accordance with Section 4.04 (b) of the
Dublin City Charter. This policy includes [totally or partially] sections of the statute in order to
describe certain eligible investments. In some sections, the policy places further limits upon the use
eligible investments or investment transactions.
II. Scope
This policy applies to all financial assets of the City of Dublin. Such funds are accounted for in
the City's Comprehensive Annual Financial Report (CAFR), and includes all funds of the reporting
entity.
III. INVESTMENT OBJECTIVES
The investment objectives of the City, in priority order, include:
A. Safety of principal
Safety of principal is the foremost objective of the investment program. The investment of City
funds shall be conducted in a manner that seeks to ensure the preservation of capital within the
context of the following criteria:
o Market risk (interest rate risk)
The market value of securities in the City's portfolio will increase or decrease
based upon changes in the general level of interest rates. The effects of market
value fluctuations will be minimized by (1) maintaining adequate liquidity so that
current obligations can be met without a sale of securities;(2) diversification of
maturities; (3) diversification of assets.
Credit Risk
Credit risk is the risk of loss due to the failure of a security issuer to pay
principal or interest, or the failure of the issuer to make timely payments
of principal or interest. Eligible investments affected by credit risk include
certificates of deposit, commercial paper, bankers acceptances, and corporate
medium term notes. Credit risk will be minimized by (1) diversifying
assets by issuer; (2) ensuring that required, minimum credit quality ratings
exist prior to the purchase of commercial paper, bankers acceptances, and
corporate medium term notes; and (3) maintaining adequate collateralization
of certificates of deposit.
B. Liquidity
The portfolio shall remain sufficiently liquid to meet all current obligations of
the City. Minimum liquidity levels [as a percentage of average investable
funds] may be established in order to meet all current obligations. The portfolio may
also be structured so that securities mature concurrently with cash needs.
C. Yie /d /Return
The portfolio shall be managed to consistently attain a market rate of return
throughout budgetary and economic cycles. Whenever possible, and consistent
with risk limitations and prudent investment management, the City will seek
to augment returns above the market average rate of return through the
implementation of active portfolio management strategies.
IV. Standards of Care
A. Prudence
Investments shall be made with the exercise of that degree of judgemenqudgment and
care, under circumstances then prevailing, which persons of prudence, discretion and intelligence
exercise in the management of their own affairs, not for speculation but for investment, considering
the probable safety of their capital as well as the probable income to be derived.
The standard of prudence to be used by investments officials shall be the "prudent person"
standard and shall be applied within the context of managing an overall portfolio. Investment
officers or registered investment advisors, acting in accordance with established procedures and the
approved investment policy, and exercising due diligence, shall be relieved of responsibility for an
individual security's credit risk or market price changes, provided deviations from expectations are
reported in a timely fashion and appropriate action is taken to control adverse developments.
B. Delegation ofAuthority
Management responsibility for the investment program is hereby delegated to the Director
of Finance pursuant to the City Charter. The Director of Finance shall establish written procedures
for the operation of the investment program consistent with this investment policy. Such
procedures shall include explicit delegation of authority to persons responsible for investment
transactions. No person may engage in an investment transaction except as provided under the
terms of this policy and the procedures established by the Director of Finance. The Director of
Finance shall be responsible for all transactions undertaken and shall establish a system of internal
controls to regulate the activities of subordinate officials.
C. Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from personal business
activity that could conflict with the proper execution of the investment program, or which could
impair their ability to make impartial investment decisions. Employees and investment officials shall
disclose to the City Manager any material financial interests in financial institutions with which they
conduct business. They shall further disclose any personal financial or investment positions that
could be related to the performance of the investment portfolio. Employees and officers shall
refrain from undertaking personal investment transactions with the same individual with whom
business is conducted on behalf of the City.
V. Authorized Investments (itemized)
-U.S. Treasury Bills, Notes, and Bonds; various federal agency obligations seecmities including,,
but not limited it, issues-obligations of Federal National Mortgage Assrr. Association (FNMA), Federal
Home Loan Mortgage Eer}r. Corporation (FHLMC), Federal Home Loan Bank (FHLB), Federal Farm
Credit Ban FFCB), _____.._ ___.. .._..___...g ..__... (__....,, Government National Mortgage
Association (GNMA), and other agencies or instrumentalities of the United States. GNMA mortgage -
backed, pass- through securities are considered as eligible investments of the City and are not
subiect to the definition of derivative securities, as defined under various sections of the Ohio
Revised Code (ORC)433:4:4(G) Collateralized mortgage obligations (CMOs) of any kind are
expressly prohibited. Eligible investments include securities that may be "called" {by the issuer}
prior to the final maturity date. Any eligible investment may be purchased at a premium or a
discount. _...___._. _ ___ _.:ties sha .. be _:.___.____..___ _..___._. g _._......_..____.._.__ _.
�T
- Interim deposits in the eligible institutions applying for interim moneys as provided in Section
135.08 and 135.12 of the ORC. Certificates of deposit in excess of the amount insured by the
Federal Deposit Insurance Corporation (FDIC) must be collateralized with a t least a five percent
excess market value amount to secure such certificates of deposit. 10% - -__L_t .._L._ _ ._h:__
The City may elect to use C'L � ither 135.18 of the ORC (individual assignment method) or
135.181 of the ORC (pooling method) when reguiring the pledge of eligible collateral to secure
certificates of deposit or other deposits of the City. Shall apply FegaFdoigg the eellateFalizatien ef GO
depesits.- City may elect to reguire a higher percentage of excess market value in pledged
collateral to secure all deposits.
-No -load money market mutual funds, as defined in 135.14(B)(5), rated in the highest category
by at least one nationally recognized rating agency, investing exclusively in the same types of
eligible securities as defined in Division B(1) or B(2) under 135.14 ORC, and repurchase agreements
secured by such obligations. Eligible money market funds shall comply with 135.01 ORC, regarding
limitations and restrictions.
- Commercial paper issues of companies incorporated under the laws of the United States, rated
in the highest category by two nationally recognized rating agencie
PeeF's and P! eF P2 by 1 The maximum maturity of commercial paper shall be 270 days
from the date of purchase. '_19v__`_19-__x_ :_ __._.____:_0 _____ _hall __� _,.___d 1 9 _f LL_ _.._____
0_00__0.. __0000.. _. _._. �_�_. _00_00 00___00____ __,_ _. _..__. _. _�_
- Bankers acceptances issued by any bank domiciled in the State of Ohio or bankers acceptances
issued by any domestic bank provided that such bank has a long term credit rating of A, or the
equivalent, by a nationally recognized rating agency at the time of purchase. --`_ =c' 0 019 the highest
____ g _.,_,_..__._.._..__._.._ ..,.___ _...___. .._..__...__...__._____
by the F-migaigee DiFeeteF.
=The combined total of commercial paper and bankers acceptances shall not exceed 25% of
the average portfolio, based upon the calculation methodology approved by the Finance Director.
- Repurchase agreements with any eligible institution mentioned in section 135.03 ORC, or any
eligible securities dealer pursuant to (M) of 135.14 ORC of this section, except that such eligible
securities dealers shall be restricted to primary government securities dealers. Repurchase
agreements will settle on a delivery vs. payment basis with Fepe collateral held at a qualified
custodian or agent, designated by the City. Eligible repo collateral is restricted to securities listed in
division (B)(1) or (B)(2) under 135.14 ORC. The market value of securities subject to a overnight
written repurchase agreement must exceed the principal value of the overnight repurchase
agreement by at least two per cent. A written repurchase agreement shall not exceed thirty days
and the market value of securities subiect to a written repurchase agreement must exceed the
principal value of the written repurchase agreement by at least two percent and be market to
market daily. . Prior to the execution of any repo transaction, a
master repurchase agreement will be signed by the City and the eligible parties.
- Medium term notes issued by a domestic corporation having assets in excess of $500 million,
provided that such medium term notes have a maximum maturity of five years and are rated [at
the time of purchase] by Standard & Poor's or Moody's under the following limitations:
Standard & Poor's Moody's
A+
(2 -yr max maturity)
Al
(2 -yr max maturity)
A
(2 -yr max maturity)
A2
(2 -yr max maturity)
A-
(2 -yr max maturity)
A3
(2 -yr max maturity)
AA+
(3 -yr max maturity)
Aal
(3 -yr max maturity)
AA
(3 -yr max maturity)
Aa2
(3 -yr max maturity)
0
AA-
(3 -yr max maturity)
Aa3
(3 -yr max maturity)
AAA
(maturities > 3 years)
Aaa
(maturities > 3 years)
If a security has a split rating, the higher of the two ratings shall be used to determine the
eligibility for investment purposes. In no event shall a corporate security [at the time of purchase]
be rated less than A- by Standard & Poor's or less than an A3 by Moody's.
The aggregate total of all corporate medium term notes shall not exceed 15% of the total
average portfolio, as determined and calculated by the Director of Finance ` z =_c' upeig hale ___`_
erbeek Ye6e.
€;na„ee. Commercial paper and bankers acceptances shall not be included when calculating the
fifteen percent maximum limit. No more than five percent of the total average
portfolio shall be invested in a single issuer. Commercial paper and bankers acceptances shall get
be considered when calculating the maximum holdings in any single issuer.
-The state treasurer's investment pool [STAR OHIO], pursuant to Section 135.45 ORC o, r any
other investment option offered to Ohio political subdivisions by the Treasurer of the State of Ohio.
-Bonds and other obligations of the State of Ohio, various issuances of the agencies of the State
of Ohio, and obligations or debt issuances of any Ohio political subdivision, including the City of
Dublin, Ohio. Except for obligations of the City of Dublin, Ohio, all such debt issuances will have a
minimum credit rating of AA, or the equivalent, by a nationally recognized rating agency, at the
time of purchase. Except for obligations of the City, obligations of the State of Ohio or obligations
of any agency of the State of Ohio, or obligations of any Ohio political subdivision may not be
purchased as private placements.
-The use of derivative securities, as defined in 135.14 (C), is expressly prohibited except where
certain exemptions to the definition of derivative securities is defined in this investment policy.
Such exemptions to the definition of derivative securities include stripped principal or interest
obligations of the United States Treasury or stripped principal or interest obligations of any federal
agency, obligations of the Government National Mortgage Association (GNMA) mortgage- backed
securities, or asset - backed commercial paper shall not be considered as derivative investments.
-All eligible investments will mature within five years from the date of settlement, unless the
investment is matched to a specific obligation or debt of the City, and the investment is specifically
approved by the Director of Finance.
VI. Safekeeping and Custody
Securities purchased for the City will be held in safekeeping by a qualified trustee [hereinafter
referred to as the "Custodian "), as provided in Section 135.37 ORC. Securities held in safekeeping
by the custodian will be evidenced by a monthly statement describing such securities. The
custodian may safekeep the City's securities in (1) Federal Reserve Bank book entry form; (2)
Depository Trust Company (DTC) book entry form in the account of the custodian or the custodian's
correspondent bank; or (3) Non -book entry (physical) securities held by the custodian or the
custodian's correspondent bank. All securities transactions will settle using standard delivery-vs-
payment (DVP) procedures. The records of the custodian shall identify such securities in the name
of the City. Broker /dealer firms used by the City or broker /dealer firms used by the City's
designated investment advisor to purchase or sell investment assets shall not hold any such
investment assets in safekeeping. All investment assets of the City will be held in safekeeping by a
custodian bank where such custodian bank and the City have entered into a custodian agreement.
VII. Director of Finance and an Investment Advisory Committee
The City may establish an investment advisory committee which shall meet quarterly to review
the investment portfolio of the City. Specific areas of review include the investment inventory,
transactions for the period, and realized income.
Any amended policy that has been approved by the City Council shall be filed with the Auditor of
State.
VIII. Internal Controls
The Director of Finance is responsible for establishing and maintaining an internal control
structure designed to reasonably ensure that the investment assets of the City are protected from
loss, theft or misuse. The internal control structure shall be designed to provide reasonable
assurances that these objectives are met. The concept of reasonable assurance recognizes that
(1) the cost of a control should not exceed teh — the benefits likely to be derived and, (2) the
valuation of costs and benefits requires estimates and dgemeF =judgments by management.
The Director of Finance shall establish a process for annual independent review by an external
auditor. This review will provide internal control by assuring compliance with policies and
procedures.
IX. Poolina of Funds
The Director of Finance is authorized to pool cash balances from the several different funds of
the City for investment purposes. Interest and other portfolio income will be credited to the fund
proportionate to the amount invested.
X. Investment Accounting and Portfolio Reporting
The City shall maintain an inventory of all portfolio assets. A description of each security will
include security type, issue /issuer, cost [original purchase cost or current book value], par value
[maturity value], maturity date, settlement date [delivery versus payment date of purchased or sold
It
securities], and any coupon [interest] rate. The investment report will also include a record of all
security purchases and sales. Regularly issued reports will include a monthly portfolio report and a
quarterly portfolio report to the Director of Finance, detailing the current inventory of all securities,
all investment transactions, any income received [maturities, interest payments, and sales], and any
expenses paid. The report will also include the purchase yield of each security, the average -
weighted yield and average- weighted maturity of the portfolio. The portfolio report shall state the
name(s) of any persons or entity effecting transactions on behalf of the City. Any premium paid
over par may be amortized equally during the life of the investment as a deduction from semi-
annual or annual interest Payment(s) received each year, or such premium paid may be amortized
at the final maturity date of the investment. Any discount from par will be recognized at the final
maturity date of the investment.
XI. INVESTMENT ADVISORS, QUALIFIED DEALERS AND FINANCIAL INSTITUTIONS
The City may retain the services of a registered investment advisor. The investment advisor will
manage the City's portfolio, or a portion thereof, and will be responsible for the investment and
reinvestment of City's investment assets, including the execution of investment transactions. Upon
the request of the Director of Finance, the investment advisor will attend meetings and /or City
Council meetings to discuss all aspects of the City's portfolio, including market conditions affecting
the value of the City's investments. The investment advisor will be required to issue monthly and
quarterly portfolio reports as defined under section VIII of this investment policy [ "Portfolio
Reporting "].
The investment advisor may transact business (execute the purchase and /or sale of securities)
with eligible Ohio financial institutions, primary securities dealers regularly reporting to the New
York Federal Reserve Bank, and regional securities firms or broker dealers licensed with the Ohio
Department of Commerce, Division of Securities, to transact business in the State of Ohio.
_d..:___ _.._h b__ .__ Broker dealers and financial institutions transacting investment business
with the City are required to sign the approved investment policy as an acknowledgment and
understanding of the contents of said policy.
Under no circumstance will brokers or broker /dealer firms act as an investment advisor or in a
similar capacity as an investment advisor, either directly or indirectly, if such broker /dealers
participate in transaction business (purchase and sale of securities) with the City of the City's
designated investment advisor.
XII. Sale of Securities Prior to Maturity
Portfolio assets may be liquidated or sold prior to maturity under the following conditions:
(1) To meet additional liquidity needs
(2) To purchase another security to increase yield or current income
(3) To p_-_.`.z_= z-= `_.`._- ___ti-'.`_y `_= lengthen or shorten the portfolio's average maturity
(4) To realize any capital gains and /or income
(5) To adjust the portfolio's asset allocation +rgeFease investmentEial+ty
Such transactions may be referred to as a "sale and purchase" or a "bond swap ". For purposes
of this section, redeemed shall also mean "called" in the case of a callable security.
XIII. Procedures for the Purchase and Sale of Securities
Securities will be purchased or sold through approved broker /dealers on a "best price and
execution" basis. All such investment transactions executed by the City's designated investment
advisor, will be communicated electronically or by facsimile transmission to the Director of Finance
or to an authorized representative, designated by the Director of Finance. A purchase or sale of
securities will be represented by transaction advices issued by the City's investment advisor which
will describe the transaction, including par value, coupon (if any), maturity date, and -cost. A
facsimile transmission or electronic advice will also be sent to the City's designated custodian bank
and will serve as an authorization to said - such custodian to receive or deliver securities versus
payment. Confirmation advices, representing the purchase or sale of securities, will be issued by the
eligible broker /dealer and sent to the investing authority. Copies of such advices will be sent to the
City's investment advisor.
XIV. Statements of Compliance
This investment policy has been approved by the investing authority and the governing board
and filed with the Auditor of State, pursuant to 135.14 (N)(1) ORC.
The investment portfolio will be managed in accordance with the parameters specified within
this policy. Performance of the portfolio will be periodically monitored and compared to an
appropriate benchmark.
All brokers, dealers, and financial institutions executing transactions initiated by the City or the
City's investment advisor have signed the approved investment policy. Investment policies [signed
by such brokers, dealers, and financial institutions] have been filed with the City. The City's
investment advisor is registered with the Securities and Exchange Commission and possesses public
funds investment management experience, specifically in the area of state and local government
investment portfolios. The investment advisor has additionally signed the approved investment
policy and the signed policy is filed with the Director of Finance.
The Director of Finance will be responsible for providing regular reports to City Council. Such
reports will accurately describe all portfolio assets, including transaction activity for the period. The
City's investment policy shall be adopted by Ordinance and modifications must be approved by City
Council.
e
Any amendments to this policy will be filed with the Auditor of State [Attn: Clerk of the Bureau,
P.O. Box 1140, Columbus, OH, 43216 -1140] within fifteen days of the effective date of the
amendment.
The following broker /dealer [or financial institution] has signed, herein, this approved
investment policy, having read the policy's contents thereby acknowledging comprehension and
receipt:
Name of Registered Representative Date
Financial Institution Representative
Registered Investment Advisor
For:
(Name of Organization)
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