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. The City Treasurer and Finance Director have reviewed and recommend 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 California Municipal Treasurers Association in September 2017. Finance Department staff submitted the revised investment policy to APTUSC for recertification this year as well.
The Investment Policy provides for staff to submit quarterly Investment Reports to the City Council. Investment Reports include investment summaries with 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.
The City Treasurer and Finance Director are 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.
• Increased Supranationals 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%;
• For the Supranationals category, added a 10% limit to invest with any one issuer to minimize concentration risk;
• Increased Asset-Backed Securities allocation from 15% to 20% to allow for greater diversification options for the portfolio. This revised allocation is at the maximum allowed under the California Government Code of 20%;
• For the Asset-Backed Securities category, added a 5% limit to invest with any one issuer to minimize concentration risk;
• Specified that concentration limits and credit criteria to be applied at the time of securities purchase. The concentration limits may change after the purchase date due to withdrawal of cash for the City operations, which may shift percentage allocation in a given investment category. Investments credit rating may change after the purchase date too; however, the Investment Policy already provides for a process to handle rating downgrades occurring after purchase; and
• Updated language to reflect current business practices.
The City Treasurer and Finance Director continue to review the portfolio and its performance on a quarterly 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