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Ordinance 58-23RECORD OF ORDINANCES Dayton Legal Blank, Inc. Form No. 30043 Ordinance No. 58-23 Passed , 20 AUTHORIZING THE MODIFICATION OF THE CITY’S INVESTMENT POLICY WHEREAS, the City of Dublin (“Dublin”) 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 provide clarification on certain investments, adopt a standard calculation for the percentage of the City’s portfolio, and clarify the calculation of interim monies in the portfolio; and WHEREASE, it is recommended that the modified Investment Policy, once approved by City Council, be placed into effect January 1, 2024. 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 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. That this Ordinance shall take effect and be in force from and after the earliest date provided by law. Passed this JT day of Nove wbey , 2023. To: Members of Dublin City Council From: Megan O’Callaghan, City Manager Date: November 7, 2023 Initiated By: Matthew L. Stiffler, Chief Financial Officer/Director of Finance Jaime Hoffman, Director of Finance Operations Re: Ordinance 58-23 Modifications to the Investment Policy Background Last year Council adopted Ordinance 63-22 modifying the City’s investment policy. That ordinance made significant changes to the policy following meetings with the Finance Committee on September 21, 2021, June 23, 2022 and September 13, 2022. The policy modifications made last year included: • Updating terms and processes to be more consistent with today’s investment market • Providing additional flexibility for certain types of investment assets with regard to issuer, duration and credit rating • Dissolution of the investment committee and instead requiring an annual review with the Finance Committee to include: o Investment policy compliance o Reporting compliance o Internal control compliance o Sale of any security prior to the maturity date o Liquidity concerns and investment inventory o Transactions for the period o Realized income The Finance Committee met on April 11, 2023 to perform the annual review as required under the newly modified investment policy. This review was performed by a contracted investment consultant Redtree Investment Group. Following the annual review, the committee directed staff to make several clarifying modifications to the investment policy as well as to consider the addition of a benchmark to the policy. The Finance Committee, Redtree Investment Group and staff met again to discuss the investment policy and benchmarking on September 12, 2023. At that time, it was determined that Redtree Investment Group would provide benchmarking metrics to the committee for review and awareness, but that the benchmark would not become a component of the investment policy. Ordinance 58-23 makes modifications to the investment policy that are generally clarifying in nature. These modifications are further detailed in the Redtree Investment Group document attached to this memo. Additionally, a clean version as well as a redlined version of the investment policy are attached. Recommendation Staff recommend adoption of this ordinance at the second hearing on November 27, 2023. The investment policy modifications will take effect on January 1, 2024. Office of the City Manager 5555 Perimeter Drive • Dublin, OH 43017 Phone: 614.410.4400 Memo City of Dublin Investment Policy Recommended Modifications June 2023 Section 35.99 Authorized Investments Discovery ORC Reference Modifications A/K Agency Mortgage- Backed Pass Through Securities (GNMA) and non-Agency Mortgage Backed Pass Throughs Language not consistent with (K). Language states Agency MBS securities may have remaining maturities greater than five years, but not greater than 10 years. The remaining life of any agency mortgage-backed pass through will be determined by the weighted average life of the security. Language in (K) states maximum remaining maturity is five years or less and a 5% limitation of the City’s portfolio for mortgage-backed pass through securities. No reference to Agency or non- Agency Mortgage-Backed Securities in ORC 135.14 or 135.35. Clean up language to better identify agency and non-agency MBS. A non-agency MBS would carry a higher degree of perceived risk. Thus, the stricter guidelines. Remain consistent on the % limitation calculation is based on the City’s portfolio. F Commercial Paper and Bankers Acceptances Language states the limit of both combined shall not exceed 40% of the average portfolio. ORC 135.14 allows up to 40% of interim funds for combined allocation of commercial paper and bankers acceptances. ORC 135.35 allows up to 40% of total average portfolio to be allocated to commercial paper and bankers acceptances. ORC 135.01(F) defines Interim moneys including the statement “that such moneys will not be needed for immediate use but will be needed before the end of the period of designation.” Therefore, this calculation while subject to various acceptable interpretations is best calculated using the cash balance less encumbrances expected to be immediately used. Suggest adopting standard % calculations to be based on City portfolio. Removes uncertainty for how interim funds or average portfolio is determined. City of Dublin Investment Policy Recommended Modifications June 2023 J Municipal Bonds Language states City not to exceed 20% of interim monies. ORC 135.14 refers to interim monies for the % calculation. ORC 135.35 does not require any limitations Change interim monies to City Portfolio. L International Finance Corporations Language states limitation is 10% of City’s portfolio. No specific ORC reference. Leave % calculation methodology unchanged. H Corporate Bonds Language states limitation is 30% of the portfolio with five years or less maturity. Language states no more than 5% of the total average portfolio shall be invested in a single issuer. ORC 135 allows for up to 15% of total average portfolio in corporate bonds with three-year maturity limit. Adjust language to read City portfolio for both the 30% allocation and 5% per issuer. Maturity limit is acceptable. Define what is the City’s portfolio: - Does it include all funds of City? - Limited to the investment accounts only? INVESTMENT POLICY § 35.95 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 R.C. § 135.14, and/or include certain other investments not authorized or defined under R.C. § 135.14. Investments not defined under R.C. § 135.14, but authorized pursuant to this investment policy, are considered as authorized investments of the city. This subchapter 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 to describe certain eligible investments. In some sections, the policy places further limits upon the use eligible investments or investment transactions. Should the city elect to use investment advisor(s), the advisor(s) will consider their respective funds managed as the total portfolio for any calculation methodologies. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.96 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.97 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: (1) 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 maintaining adequate liquidity so that current obligations can be met without a sale of securities; diversification of maturities; diversification of assets. (2) 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. Credit risk will be minimized by diversifying assets by issuer; ensuring that required, minimum credit quality ratings exist and 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 to meet all current obligations. The portfolio may also be structured so that securities mature concurrently with cash needs. (C) Yield 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.98 STANDARDS OF CARE. (A) Prudence. (1) Investments shall be made with the exercise of that degree of judgement 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. (2) 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 of authority. 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.99 AUTHORIZED INVESTMENTS. (A) 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. Agency mortgage-backed, pass-through securities are considered as eligible investments of the city. Individual mortgage-backed, pass-through securities may have remaining maturities greater than five years, but in any event not greater than ten years from the date of purchase. The remaining life of any agency mortgage- backed, pass through security will be determined by the weighted-average life of the security. 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. (B) Interim deposits in the eligible institutions applying for interim moneys as provided in R.C. § 135.08 and 135.12. Certificates of deposit in excess of the amount insured by the Federal Deposit Insurance Corporation (FDIC) must be collateralized with at least a 5% excess market value amount to secure such certificates of deposit. The city may elect to use either R.C. § 135.18 (individual assignment method) or R.C. § 135.181 (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. (C) No-load money market mutual funds, as defined in R.C. § 135.14(8)(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 R.C. § 135.14(8)(1) or (8)(2), and repurchase agreements secured by such obligations. Eligible money market funds shall comply with R.C. § 135.01, regarding limitations and restrictions. (D) Commercial paper issues of companies incorporated under the laws of the United States, rated in the highest category by two nationally recognized rating agencies. (E) 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. (F) The combined total of commercial paper and bankers acceptances shall not exceed 40% of the City’s total portfolio available for investment at time of purchase. (G) Repurchase agreements with any eligible institution mentioned in R.C. § 135.03, or any eligible securities dealer pursuant to R.C. § 135.14(M) 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 R.C. § 135.14(B)(1) or (8)(2). 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 2%. A written repurchase agreement shall not exceed 30 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 2% 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. (H) Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment under this subdivision shall be rated in a rating category of "A" or its equivalent or better by an NRSRO. Purchases of medium-term notes shall not exceed 30 percent of the City’s total portfolio available for investment at the time of purchase No more than 5% of the City’s total portfolio shall be invested in a single issuer available for investment at time of purchase. Commercial paper and bankers acceptances shall be considered when calculating the maximum holdings in any single issuer. (I) The state treasurer's investment pool [STAR OHIO], pursuant to R.C. § 135.45, or any other investment option offered to Ohio political subdivisions by the Treasurer of the State of Ohio. (J) Bonds and other obligations of the State of Ohio or any of the other 49 states, various issuances of the agencies of the State of Ohio or agencies of any of the other 49 states, and obligations or debt issuances of any Ohio political subdivision or political subdivision of any of the other 49 states, 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. Unrated securities are acceptable if the underlying issuer meets the "AA" credit rating criteria. - Obligations of the City of Dublin may be purchased as private placements. The aggregate value of the bonds or other obligations does not exceed 20 percent of the City’s total portfolio available for investment at the time of purchase. The bonds or other obligations mature within ten years from the date of settlement. (K) A non-agency mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond. Securities eligible for investment under this section shall be rated in a rating category of "AA" or its equivalent or better by an NRSRO and have a maximum remaining maturity of five years or less. Purchase of securities authorized by this subdivision shall not exceed 5 percent of the City's total portfolio available for investment at the time of purchase (L) United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of "AA" or its equivalent or better by an NRSRO and shall not exceed 10 percent of the City's total portfolio available for investment at the time of purchase. (M) Except as otherwise defined in this policy, 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.100 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 R.C. § 135.37. 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 Federal Reserve Bank book entry form; Depository Trust Company (OTC) book entry form in the account of the custodian or the custodian's correspondent bank; or 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.101 DIRECTOR OF FINANCE AND FINANCE COMMITTEE. (A) The Director of Finance shall meet at least annually with the Finance Committee to review the investment portfolio of the city. Specific areas of review include investment policy compliance, reporting compliance, internal control compliance, sale of any security prior to the maturity date, liquidity concerns, investment inventory, transactions for the period, and realized income. (B) The Director of Finance may seek additional investment advisory portfolio review services to support the Finance Committee or City Council review process. (C) Any amended policy that has been approved by the City Council shall be filed with the Auditor of State. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.102 INTERNAL CONTROLS. (A) 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 the cost of a control should not exceed the benefits likely to be derived and, the valuation of costs and benefits requires estimates and judgments by management. (B) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.103 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.104 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 semiannual 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.105 INVESTMENT ADVISORS, QUALIFIED DEALERS AND FINANCIAL INSTITUTIONS. (A) 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 § 35.102 of this subchapter. (B) 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. (C) 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. (D) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.106 SALE OF SECURITIES PRIOR TO MATURITY. (A) 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 maturity; (4) To realize any capital gains and/or income; or (5) To adjust the portfolio's asset allocation. (B) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.107 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.108 STATEMENTS OF COMPLIANCE. (A) This investment policy has been approved by City Council and filed with the Auditor of State, pursuant to R.C. § 135.14(N)(l). Any amendments to this policy will be filed with the Auditor of State within 15 days of the effective date of the amendment. (B) 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. (C) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) INVESTMENT POLICY § 35.95 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 R.C. § 135.14, and/or include certain other investments not authorized or defined under R.C. § 135.14. Investments not defined under R.C. § 135.14, but authorized pursuant to this investment policy, are considered as authorized investments of the city. This subchapter 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 to describe certain eligible investments. In some sections, the policy places further limits upon the use eligible investments or investment transactio ns. Should the city elect to use investment advisor(s), the advisor(s) will consider their respective funds managed as the total portfolio for any calculation methodologies. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.96 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.97 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: (1) 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 maintaining adequate liquidity so that current obligations can be met without a sale of securities; diversification of maturities; diversification of assets. (2) 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. Credit risk will be minimized by diversifying assets by issuer; ensuring that required, minimum credit quality ratings exist and 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 to meet all current obligations . The portfolio may also be structured so that securities mature concurrently with cash needs. (C) Yield 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.98 STANDARDS OF CARE. (A) Prudence. (1) Investments shall be made with the exercise of that degree of judgement 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. (2) 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 re lieved 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 of authority. 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.99 AUTHORIZED INVESTMENTS. (A) 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. Agency mortgage-backed, pass-through securities are considered as eligible investments of the city. Individual mortgage-backed, pass-through securities may have remaining maturities greater than five years, but in any event not greater than ten years from the date of purchase. The remaining life of any agency mortgage- backed, pass through security will be determined by the weighted -average life of the security. 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. (B) Interim deposits in the eligible institutions applying for interim moneys as provided in R.C. § 135.08 and 135.12. Certificates of deposit in excess of the amount insured by the Federal Deposit Insurance Corporation (FDIC) must be collateralized with at least a 5% excess market value amount to secure such certificates of deposit. The city may elect to use either R.C. § 135.18 (individual assignment method) or R.C. § 135.181 (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. (C) No-load money market mutual funds, as defined in R.C. § 135.14(8)(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 R.C. § 135.14(8)(1) or (8)(2), and repurchase agreements secured by such obligations. Eligible money market funds shall comply with R.C. § 135.01, regarding limitations and restrictions. (D) Commercial paper issues of companies incorporated under the laws of the United States, rated in the highest category by two nationally recognized rating agencies. (E) 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. (F) The combined total of commercial paper and bankers acceptances shall not exceed 40% of the City’s total portfolio available for investment at time of purchase.average portfolio, based upon the calculation methodology approved by the Finance Director. (G) Repurchase agreements with any eligible institution mentioned in R.C. § 135 .03, or any eligible securities dealer pursuant to R.C. § 135.14(M) 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 R.C. § 135.14(B)(1) or (8)(2). 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 2%. A written repurchase agreement shall not exceed 30 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 2% 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. (H) Medium-term notes, defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less, issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States. Notes eligible for investment under this subdivision shall be rated in a rating category of "A" or its equivalent or better by an NRSRO. Purchases of medium-term notes shall not exceed 30 percent of the City’s total portfolio available for investment at the time of purchase . No more than 5% of the City’s total average portfolio shall be invested in a single issuer available for investment at time of purchase . Commercial paper and bankers acceptances shall be considered when calculating the maximum hol dings in any single issuer. (I) The state treasurer's investment pool [STAR OHIO], pursuant to R.C. § 135.45, or any other investment option offered to Ohio political subdivisions by the Treasurer of the State of Ohio. (J) Bonds and other obligations of the State of Ohio or any of the other 49 states, various issuances of the agencies of the State of Ohio or agencies of any of the other 49 states, and obligations or debt issuances of any Ohio political subdivision or political subdivision of any of the other 49 states, 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. Unrated securities are acceptable if the underlying issuer meets the "AA" credit rating criteria. - Obligations of the City of Dublin may be purchased as private placements. The aggregate value of the bonds or other obligations does not exceed 20 percent of the City’s total portfolio interim moneys available for investment at the time of purchase. The bonds or other obligations mature within ten years from the date of settlement. (K) A non -agency mortgage passthrough security, collateralized mortgage obligation, mortgage-backed or other pay-through bond, equipment lease-backed certificate, consumer receivable passthrough certificate, or consumer receivable-backed bond. Securities eligible for investment under this section shall be rated in a rating category of "AA" or its equivalent or better by an NRSRO and have a maximum remaining maturity of five years or less. Purchase of securities authorized by this subdivision shall not exceed 5 percent of the City's total portfolio available for investment at the time of purchase. (L) United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of "AA" or its equivalent or better by an NRSRO and shall not exceed 10 percent of the City's total portfolio available for investment at the time of purchase.o. (M) Except as otherwise defined in this policy, 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.100 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 R.C. § 135.37. 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 Federal Reserve Bank book entry form; Depository Trust Company (OTC) book entry form in the account of the custodian or the custodian's correspondent bank; or 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.101 DIRECTOR OF FINANCE AND FINANCE COMMITTEE. (A) The Director of Finance shall meet at least annually with the Finance Committee to review the investment portfolio of the city. Specific areas of review include investment policy compliance, reporting compliance, internal control compliance, sale of any security prior to the maturity date, liquidity concerns, investment inventory, transactions for the period, and realized income. (B) The Director of Finance may seek additional investment advisory portfolio review services to support the Finance Committee or City Council review process. (C) Any amended policy that has been approved by the City Council shall be filed with the Auditor of State. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.102 INTERNAL CONTROLS. (A) 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 the cost of a control should not exceed the benefits likely to be derived and, the valuation of costs and benefits requires estimates and judgments by management. (B) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.103 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99) § 35.104 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 semiannual 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.105 INVESTMENT ADVISORS, QUALIFIED DEALERS AND FINANCIAL INSTITUTIONS. (A) 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 § 35.102 of this subchapter. (B) 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. (C) 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. (D) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.106 SALE OF SECURITIES PRIOR TO MATURITY. (A) 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 maturity; (4) To realize any capital gains and/or income; or (5) To adjust the portfolio's asset allocation. (B) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.107 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99; Am. Ord. 82-13, passed 11-4-13) § 35.108 STATEMENTS OF COMPLIANCE. (A) This investment policy has been approved by City Council and filed with the Auditor of State, pursuant to R.C. § 135.14(N)(l). Any amendments to this policy will be filed with the Auditor of State within 15 days of the effective date of the amendment. (B) 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. (C) 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. (Ord. 85-94, passed 10-3-94; Am. Ord. 89-96, passed 10-7-96; Am. Ord. 10-99, passed 2-16- 99)