Title
Recommendation to Approve the City of Alameda Investment Policy. (Finance 2410)
Body
To: Honorable Mayor and Members of the City Council
From: Kevin Kennedy, City Treasurer
Re: Recommendation to Approve the City of Alameda Investment Policy
BACKGROUND
Section 5-2 of the Alameda City Charter requires the City Treasurer to annually recommend to the City Council, at a public meeting, an Investment Policy for the Council’s approval. Staff is proposing updates to the Policy as described below. The Investment Advisory Committee (the City Treasurer, Finance Director, as the City Manager’s representative, and the Financial Services Manager) has reviewed and recommends these proposed changes to the City’s Investment Policy.
DISCUSSION
The City’s Investment Policy affirms the fiduciary responsibility to safeguard public assets and identify the opportunities for a systematic investment process. Priority is placed first on securing the safety of principal and the liquidity needed for payroll and other City obligations, then on yield of the investment.
The City’s Investment Policy is reviewed annually by the City Treasurer and Finance Director and is attached to this report (Exhibit 1). The policy has been developed in accordance with standards and policies established by the California Debt and Investment Advisory Commission (CDIAC) and the Association of Public Treasurers of the United States and Canada (APTUSC). The City’s Investment Policy received a Certification of Excellence from APTUSC in August 2012. Staff plans to resubmit the revised investment policy to APTUSC for recertification this year. Investment reports provide quarterly summaries and include the market value of securities and a statement confirming that current liquidity is adequate to meet expenditures for the next six months, as required by the California Government Code.
Staff is proposing certain changes, as listed below, to the Policy to reflect actual practice, to implement changes as directed by the City Council, and to provide further clarity.
• Based on the feedback from the City Council, investment objectives were updated to prevent investments in Wells Fargo Bank issued securities, where Wells Fargo is the issuer.
• A section on Performance Standards was added to the Policy that identifies three benchmarks that the City and its asset managers are utilizing to measure performance. Those benchmarks are: Local Agency Investment Fund (LAIF), Bank of America Merrill Lynch (BAML) 1-3 year US Treasury/Agency Index and BAML 1-5 year US Treasury/Agency Index.
• Added a Mutual Funds investment option to the Policy to allow for greater diversification options for the portfolio.
• Increased Asset-Backed Securities allocation from 10% to 15% to allow for greater diversification options for the portfolio. This revised allocation is still below the maximum allowed under the California Government Code of 20%.
• Updated language to reflect current Charter language and business practices.
The Investment Advisory Committee continues to review the portfolio and its performance on a regular basis. It is through these discussions that the Committee has developed these recommendations, which are reflected in the attached Investment Policy.
FINANCIAL IMPACT
There is no financial impact as a result of the approval of the Investment Policy.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This activity complies with Section 5-2 of the Alameda City Charter, which provides that the Treasurer shall annually recommend to Council an investment policy.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378 (b)(4) of the CEQA Guidelines, because it involves governmental fiscal activities (approval of the investment policy), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Approve the City of Alameda Investment Policy.
Respectfully submitted,
Kevin Kennedy, City Treasurer
Elena Adair, Finance Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Investment Policy