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RESOLUTION NO. 2010- 02 A RESOLUTION OF THE CITY OF MOSCOW, IDAHO, A MUNICIPAL CORPORATION OF THE STATE OF IDAHO, ADOPTING AN INVESTMENT POLICY; PROVIDING THIS RESOLUTION TO BE EFFECTIVE UPON ITS PASSAGE, APPROVAL, AND PUBLICATION ACCORDING TO LAW. WHEREAS, City of Moscow, Idaho invests its accumulated funds in accordance with law and pursuant to accepted practices; and WHEREAS, since 2005, City of Moscow Finance Director has consistently utilized a written investment policy in directing City's investments; and WHEREAS, in order to standardize investment practices, staff has requested that the Council to formally adopt said investment policy by Resolution; and WHEREAS, the Council wishes to promote an investment policy that allows flexibility and appropriate delegation of responsibility to address the demands of modem financial markets and practices and shifting and changing economic trends, while maintaining sufficient control and transparency of action to insure that the stewardship of the City's financial resources reflects moderation and forethought; and WHEREAS, this investment policy will allow the Financial Director/Treasurer to authorize action and/or delegate responsibility to those City employees and to those advisors who exercise judgment in the same or similar manner as is generally accepted in the public investment industry and pursuant to Idaho law, including but not limited to the City Supervisor on under the same or similar conditions and standards (for example, when the City Supervisor is a co-signator on a City Corporate Resolution Certification); and WHEREAS, Council has reviewed the policy contained herein and finds it to be sound and reflective of good financial management practices and wishes to adopt such policy as City's investment policy, to be followed by City staff; NOW, THEREFORE, BE IT RESOLVED by the Mayor and City Council of the City of Moscow as follows: City of Moscow Investment Policy 1. Statement of Policy The purpose of this investment policy is to present the guidelines by which City of Moscow invests funds, in order to maximize the efficiency and effectiveness of City's funds available for investment. The Finance Director, whose responsibilities include performing the duties of the Treasurer, is responsible to the citizens of Moscow for the investment of available funds. The Finance Director/Treasurer shall prioritize investments based on safety, liquidity, and yield. The primary responsibility of the Finance Director/Treasurer is to maintain the safety of City's cash and investments entrusted to him/her by the citizens of Moscow. Secondarily, the liquidity of investments is important in order to maintain a sufficient amount in short term loans that can be converted to cash if necessary to cover cash disbursement requirements. The final priority of investments, after safety and liquidity, is yield. The Finance Director/Treasurer's actions will be within the constraints that are in confom1ity with state statutes, local laws, and City Code. RESOLUTION 20 I 0-02 CORPORATE RESOLUTION INVESTMENT POLICY 1-19-10 PAGE I OF6 ---PAGE BREAK--- 2. Scope This investment policy applies to all who act as agents for City through making investment decisions. Those involved would include the Finance Director!freasurer and those who the Finance Director/Treasurer has delegated responsibility too, hereafter investment officers. On occasion and, where possible, in consultation with or at the direction of the Finance Director, the City Supervisor may participate in or transact financial matters in behalf of the City, subject to this Investment Policy and only where he/she exercises judgment in the same or similar manner as is generally accepted in the public investment industry and pursuant to Idaho law. This investment policy applies to all financial assets of City of Moscow and applies to the following funds, which are accounted for in City's comprehensive financial reports: General Fund; Special Revenue Fund(s); Capital Project Fund(s); Internal Service Fund(s); Debt Service Fund(s); Proprietary Fund(s); and Any new fund(s) created by the Council unless specifically exempt The policy does not apply to those investments that are made in accordance with pre-ex1stmg stipulations covered in a separate policy pertaining to endowments, foundations, or certain bond issues, such as: Contributions to City employee's retirement fund which are made to the Public Employee Retirement System of Idaho (PERSI), and is independent of City and maintains its own investment policy. Monies from funds can be pooled in order to facilitate the efficient investment of monies. All monies shall be invested by the Finance Director/Treasurer in accordance with Idaho Code Section 50-1013. 3. General Objectives Safety: It is the first objective of City, requiring the Finance Director/Treasurer to make prudent investment decisions in order to maintain the safety of monies entrusted to City by the citizens of Moscow. Investments are not to be made as speculation, and they are to be made in accordance with the Prudent Investor Rule (see section 4 of this policy). Credit Risk: City shall mitigate Credit Risk 1isk of loss due to the failure of the security issuer or backer) through: Only investing in securities listed in section 7 of this policy; Only using pre-qualifying Financial Institutions, Depositories, and Broker/Dealers who qualify according to section 5 of this policy; and Diversification (see section 8 of this policy) of investments in order to minimize the impact of potential losses from any one type of security or one issuer. Interest Rate Risk: City will minimize interest rate risk risk that the market value of securities will fall due to changes in market interest rates) through: R!'SOI.lJTION 20 l 0-02 CORPORATE RESOLUTION INVESTMENT POLICY 1-19-10 PAGE2 or6 ---PAGE BREAK--- Structuring the investment pm1folio so that secunhes mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity; Investing operating funds primarily in shorter-tenn securities and limiting the average maturity of the pm1folio. Liquidity: The investment portfolio shall remain sufficiently liquid so that when necessary, investments can and will be liquidated in order to cover current operating requirements which may be reasonably anticipated. No investment, unless specifically matched with an anticipated cash flow requirement or purpose, shall be made in securities that exceed an estimated or effective length of fifteen (15) years or more unless the Finance Director/ Treasurer is specifically granted authority to do so by the Moscow City Council. Yield: Yield should only be considered after safety and liquidity requirements have been satisfied. In order to maintain the required rate of risk, investments should be made in securities that carry a relatively low rate of risk; however, the goal of City is to achieve a market rate of retum on these investments. Securities are expected to be held until maturity except: When a security has declining credit and its sale before maturity will minimize Joss of principal; When a security swap would improve the quality, yield, or target duration in the portfolio; When liquidity needs of the portfolio require that the security be sold prematurely Local Considerations: City will evaluate, on an individual basis, proposals for investments that will better the Moscow community. If these proposals include a lower than market rate of retum, they will require the approval of City Council. City participates in a Community Development Block Grant Program, which makes funds available as low interest loans for approved home rehabilitation. 4. Standards of Care Prudence: The Prudent Investor Rule states: All that is required of a trustee to invest is that he shall conduct himse(f faitl!fully and exercise sound discretion. He is to observe how men of prudence, discretion and intelligence manage their ow11 affairs, not in regard to :c,peculation, but in regard to the permanent disposition of their fimds, consideri11g the probable income, as lvell as, the probable sa.feSy (?(the capital to be invested. (Pruden/Investor Rule, 1992) Investment officers who follow the Prudent Investor Rule, written procedures, and this investment policy will not be held personally responsible for an individual security's credit risk or market price variations provided that deviations from expectations are reported in a timely manner and the sale of the security is carried out in accordance with the terms of this policy. Ethics and Conflicts of Interest: All those involved in making investments for City shall refrain from personal business activities that could impair their investment decisions. Any material interest in a financial institution that City conducts business with, as well as, any personal investments that may be related to the pe1formance of City's portfolio shall be disclosed by the Finance Directorrrreasurer and investment officers. RESOLUTION 20 I 0- 02 CORPORATE RESOLUTION INVESTMENT POLICY 1-19-10 PAGE 3 OF6 ---PAGE BREAK--- Delegation of Authority: The Finance Directorrrreasurer is ultimately responsible for the performance of City's portfolio. He/she has the authority to delegate responsibilities to others. The system of intemal controls and standard operating procedures has been developed to help facilitate and re!,TUlate the actions of all involved in making investments for City. 5. Authorized Financial Institutions, Depositories, and Broker/Dealers The Finance Directorrrreasurer shall maintain a list of financial institutions that are authmized to provide investment services and qualified to do business in the State of Idaho. The Finance Director/Treasurer shall keep this current list based on reviews of credit worthiness, financial statements, and dealing history with City. All securities dealers must qualify under Securities & Exchange Commission Rule 15C3-l . No investments or deposits will be made with a financial institution except in those that are approved. 6. Internal Controls City's independent auditor shall audit the controls set forth by City to control fraud, employee error, misrepresentation of third parties, unanticipated changes in financial markets, and careless actions by City employees. The audit will be a test of internal controls by assuring compliance with policies and procedures and the adequacy of those policies and procedures. City investment controls include: Control against collusion; Separation of transaction authority from accounting and recordkeeping; Custodial safekeeping; A voidance of physical delivery securities; Clear delegation of authority to subordinate staff members; Dual authorizations of wire transfers; and Development of a wire transfer agreement with the lead bank and third party custodian. 7. Suitable and Authorized Investments All monies shall be invested only in securities that are allowed by Idaho Code Section 50-1 0 13. These provisions are as follows: Revenue bonds issued by the revenue bond act. City coupon bonds provided for under Section 50-1 019, Idaho Code. Local improvement district bonds provided for under Chapter 17, Title 50, Idaho Code. Time deposit accounts with public depositories. Bonds, treasury bills, interest-bearing notes, or other obligations of the United States, or those for which the faith and credit of the United States are pledged for the payment of p1incipal and interest. General obligation bonds of this state, or those for which the faith and credit of this state are pledged for the payment of principal and interest. General obligation bonds of any county, city, metropolitan water district, municipal utility district, school district or other taxing district of this state. Notes, bonds, debentures, or other similar obligations issued by the farm credit system or institutions forming a pa1t thereof under the farm credit act of 1971 (12 U.S.C. Sections 2001- 2259) and all acts of congress amendatory thereof or supplementary thereto; in bonds or debentures of the federal home loan bank board established under the federal home loan bank act (12 U.S.C. Sections 1421-1449); in bonds, debentures and other obligations of the federal RESOLUTION 20 I 0-02 CORPORATE RESOLUTION INVESTMENT POLIC'Y 1-19-10 PAGE40F6 ---PAGE BREAK--- national mortgage assoctatton established under the national housing act (12 U.S.C. Sections 170 l -1750g) as amended, and in the bonds of any federal home loan bank established under said act and in other obligations of agencies and instrumentalities of the government of the state of Idaho or of the United States. Bonds, notes or other similar obligations issued by public corporations of the state of Idaho including, but not limited to, the Idaho state building authority, the Idaho housing authority and the Idaho water resource board, but such investment shall not extend beyond seven days. Repurchase agreements and reverse repurchase agreements covered by any legal investment for the state of Idaho or as otherwise allowed by this section, provided that reverse repurchase agreements shall only be used for the purpose of liquidity and not for leverage or speculation. Tax anticipation bonds or notes, income and revenue anticipation bonds or notes and registered warrants of the state of Idaho or of taxing districts of the state of Idaho. Savings accounts including, but not limited to, accounts on which interest or dividends are paid and upon which negotiable orders of withdrawal may be drawn, and similar transaction accounts. Time deposit accounts and other savings accounts of state or federal savings and loan associations located within the geographical boundaries of the state in amounts not to exceed the insurance provided by the federal savings and loan corporation, including, but not limited to, accounts on which interest or dividends are paid and upon which negotiable orders of withdrawal may be drawn, and similar transaction accounts. Share, savings and deposit accounts of state and federal credit unions located within the geographical boundaries of the state in amounts not to exceed the insurance provided by the national credit union share insurance fund and/or any other authorized share guaranty corporation, including, but not limited to, accounts on which interest or dividends are paid and upon which negotiable orders of withdrawal may be drawn, and similar transaction accounts. Prime banker's acceptances. Prime commercial paper. Money market funds, mutual funds, or any other similar funds whose portfolios consist of any allowed investment as specified in this section. Bonds, debentures or notes of any corporation organized, controlled and operating within the United States which have, at the time of their purchase, an A rating or higher by a commonly known rating service. 8. Investment Parameters Diversification: City's investments shall be diversified by: Limiting investments to avoid over concentration in securities from a specific issuer or business sector; Limiting investment in securities that have higher credit risks; Investing in securities with varying maturities, and Continuously investing a portion of the portfolio in readily available funds such as local government investment pools, money market funds or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations. Maximum Maturities: City shall endeavor to match maturities of investments with liquidity requirements and cash flow needs. Competitive Bids: The investment officer shall seek competitive bids from at least two brokers/financial institutions on purchases of investment instruments purchased on the secondary market. RESOLUTION 20 I 0-02 CORPORATE RESOLUTION INVESTMENT POLICY 1-19-10 PAGE 5 OF6 ---PAGE BREAK--- 9. Reporting Summarization of the investments will be included in City's Comprehensive Annual Financial Report. There shall also be quarterly reviews that allow for comparison of the portfolio against benchmarks that closely represent the same mix of investments. 10. Policy Considerations Exemption: Any investment that is cunently held prior to the enactment of this policy shall be exempt from the te1ms of this policy. Any investment that is made after the date of enactment shall be held to this policy. 11 . Approval and Amendments of Investment Policy This policy shall be adopted by the Moscow City Council. It shall be reviewed annually by the Finance Directorffreasurer and City Supervisor, and if changes are desired they shall need to be approved by City Council. 12. Other Documentation Cash Management & Investment Handbook by Leslie Masonson and Leonard Matz is a reference book that is kept on hand in the Finance office which provides more detailed explanations pertaining to investments and investment language. That this Resolution shall become effective as of the 20th day of January, 2010. PASSED AND APPROVED by the Mayor of the City of Moscow, Idaho, this 19th day of January, 2010. RESOLUTION 20 I 0-02 CORPOR E RESOLUTION INVES.I M ENT POI.ICY 1-19-10 PAGE60F 6