HomeMy WebLinkAboutResolution No. 365-09 f
• RESOLUTION
BE IT RESOLVED by the Common Council of the City of Rochester that the City adopt a
revised investment policy. A copy of the policy is attached.
PASSED AND ADOPTED BY THE COMMON COUNCIL OF THE CITY OF
ROCHESTER, MINNESOTA, THIS / DAY OF T 12009.
(J
PRESIDENT OF SAID COMMON COUNCIL
ATTEST:
ITY CLERK
APPROVED THIS /ftf4 DAY OF �7' , 2009.
• MAYOR OF SAID CITY
(Seal of the City of
Rochester, Minnesota)
Res05\Adopt.InvestPo1icy3
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City of Rochester Minnesota
Investment Policy
• Adopted by Common Council March 18, 1996
Amended by Common Council December 18, 2000
Amended by Common Council November 7, 2005
Amended by Common Council November 5, 2007
Amended by Common Council 92009
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LISTING OF CONTENTS •
I. Scope ....................................................................................... 1
II. Objectives ................................................................................. 1
III. Standards of Care ....................................................................... 1
1. Prudence
2. Ethics and Conflicts of Interest
3. Delegation of Authority
IV. Authorized Broker/Dealers ......................................................... ... 2
V. Procedures and Controls ................................................................ 3
VI. Authorized Depositories ................................................................ 3
VII. Safekeeping and Custody ................................................ 3
VIII. Suitable and Authorized Investments................................................. 4
IX. Investment Diversification............................................................... 5 •
X. Maximum Maturities..................................................................... 6
XI. Reporting .................................................................................... 6
XII. Performance Standards................................................................... 6
XIII. Policy.......................................................................................... 6
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I. Scope
• This investment policy applies to investment of operating and reserve funds of the City of Rochester
(the "City") which are pooled from various departments and funds. The investment income derived
from the pooled funds shall be allocated to the contributing funds based upon the proportion of the
respective average balances relative to the total pooled balance.
Separate investment policies or agreements may exist to address proceeds from certain bond issues or
debt service funds in accordance with arbitrage rebate requirements.
H. Objectives
The primary objectives, in priority order, of investment activities shall be:
• Preservation of capital and protection of investment principal.
• Maintenance of sufficient liquidity to meet anticipated cash flows.
• Diversification to avoid incurring unreasonable market risks.
• Attainment of a market rate of return.
• Conformance with all applicable City ordinances, state statutes and federal regulations.
• III. Standards of Care
1. Prudence
The standard to be applied in the context of managing the City's investment portfolio shall be the
"prudent person" standard which states that investments shall be made with 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.
Investment officers acting in accordance with written procedures and this investment policy and
exercising due diligence shall be relieved of personal responsibility for an individual security's
credit risk or market price changes, provided deviations from expectations are reported in a timely
fashion and the purchase and the sale of securities are carried out in accordance with the terms of
this investment policy.
The City will minimize deposit custodial credit risk, which is the loss or failure of the
depository bank by obtaining collateral or bond for all uninsured amounts of deposit, and by
obtaining necessary documentation to show compliance with state law and a peffected security
interest under federal law.
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2. Ethics and Conflicts of Interest
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Officers and employees involved in the investment process shall refrain from personal business
activity that could conflict with the proper execution and management of the investment program,
or that could impair their ability to make impartial decisions. Employees and investment officials
shall disclose any material interests in financial institutions with which they conduct business and
any personal financial/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.
Furthermore, the City of Rochester and all of its investment management personal shall follow the
Code of Ethics recommended by The Government Finance Officers Association of the United
States and Canada. The Code addresses personal standards, the responsibility of public officials,
professional development, professional integrity as it pertains to both information and
relationships, and conflicts of interest. The Code is outlined in Annex I of this Policy.
3. Delegation of Authority
Full authority to manage the financial affairs of the City is granted to the City Council as
established in chapter XI, section 11.01 of Rochester, Minnesota's Home Rule Charter,"Authority
of Council." Responsibility for the operation of the investment program is hereby delegated to the
Director of Finance, who may delegate the authority to conduct investment transactions and to
manage the operation of the investment portfolio to other specifically authorized staff members. •
The Director of Finance shall maintain a list of persons authorized to transact securities business
for the City. No person may engage in an investment transaction except as expressly provided in
this investment policy or in procedures established by the Director of Finance.
The City Council may authorize the use of support services provided by outside investment
advisors in regard to its investment program, if it is in the best interest of the City to use such
services.
IV. Authorized Broker/Dealers
The Director of Finance shall maintain a list of broker/dealers that are approved for investment
purposes, and it shall be the policy of the City to purchase securities only from those authorized firms.
To be eligible, a firm must have minimum capital of$10,000,000 and at least five years of operation.
These may include "primary" dealers, financial firms that have a primary dealer within their holding
company structure or regional dealers. All must qualify under Securities and Exchange Commission
Rule 150-1 (Uniform Net Capital Rule).
Annually the Director of Finance shall provide to each approved broker/dealer a copy of this
investment policy and a written statement of investment restrictions that shall include a provision that
all future investments are to be made in accordance with Minnesota Statutes 118A.04, 118A.05 and •
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118A.06.
• All approved broker/dealers shall supply the following as appropriate:
• audited financial statements
• proof of National Association of Securities Dealers (NASD) certification
• proof of state registration
• completed broker/dealer questionnaire
• written receipt of the statement of investment restrictions referred to above and written agreement
to conduct investment transactions with the City in accordance with those investment restrictions, in
accordance with this investment policy and in accordance with Minnesota Statutes 118A.04,
118A.05 and 118A.06.
An annual review of the financial condition and registration of qualified bidders will be conducted by
the Director of Finance or designee.
The City may purchase commercial paper from direct issuers even though they are not on the approved
broker/dealer list as long as they meet the criteria outlined in Item 6 of the Suitable and Authorized
Investments section of this investment policy.
V. Procedures and Controls
The Director of Finance shall develop written administrative procedures and internal controls,
consistent with this investment policy, for the operation of the City's investment program. Such
procedures shall be designed to prevent losses of public funds arising from fraud, employee error,
misrepresentation by third parties, or imprudent actions by employees of the City. Such procedures
shall include references to: delegation and separation of authority, written confirmation of verbal
actions, investment accounting, repurchase agreements, wire transfers, collateral/depository agreements
and banking services contracts.
VI. Authorized Depositories
Pursuant to Minnesota Statues, Section 118A.002, the City Council shall designate one or more
depositories eligible to receive city funds. A list of such depositories will be maintained by the Finance
Department. To be eligible, a depository must be a member of the Federal Deposit Insurance
Corporation and shall collateralize deposits in excess of FDIC coverage in accordance with Minnesota
Statutes, Section 118A.03.
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VII. Safekeeping and Custody •
In order to eliminate custodial credit risk, the Director of Finance shall select one or more financial
institutions to provide safekeeping and custodial services for the City, in accordance with the provisions
of Minnesota Statues, Section 118A.006. A Safekeeping Agreement approved by the City shall be
executed with each custodian bank prior to utilizing that bank's safekeeping services. Custodian banks
will be selected on the basis of their ability to provide services for the City's account and the
competitive pricing of their safekeeping related services.
The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery
versus payment basis. All securities shall be perfected in the name of the City. Sufficient evidence to
title shall be consistent with modern investment, banking and commercial practices.
All investment securities, except certificates of deposit, money market mutual funds and shares of a
Minnesota joint powers investment trust, will be delivered by either book entry or physical delivery and
will be held in third-party safekeeping by a City approved custodian bank, its correspondent bank or its
Depository Trust Company (DTC) participant account.
All Fed wireable book entry securities shall be held in the Federal Reserve System in a customer
account for the custodian bank which will name the City as "customer."
All DTC eligible securities shall be held in the custodian bank's DTC participant account and the
custodian bank shall provide evidence that the securities are held for the City as "customer."
VIII.Suitable and Authorized Investments
The following investments are permitted by this investment policy and are defined by Minnesota
Statues 118A.04 and 118A.05:
1. United States Treasury bills, notes and bonds with a final maturity not exceeding five years from
the date of trade settlement.
2. Federal Agency debentures and mortgage-backed securities with a final maturity not exceeding five
years from the date of trade settlement, issued by the Government National Mortgage Association
(GNMA).
3. Federal Instrumentality debentures, discount notes, callable and step-up securities, with a final
maturity not exceeding five years from the date of trade settlement, issued by the following only:
Federal Home Loan Banks (FHLB), Federal National Mortgage Association (FNMA), Federal
Farm Credit Banks (FFCB) and Federal Home Loan Mortgage Corporation (FHLMC). Federal
Instrumentality Securities shall be rated in the highest rating category by at least two Nationally
Recognized Statistical Rating Organizations (NRSROs), and shall be rated not less by any NRSRO
that rates the debt.
4. Certificates of Deposit in eligible depositories pursuant to Section VI of this investment policy. •
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Certificate of Deposit balances in excess of FDIC coverage shall be collateralized in accordance
with Minnesota Statutes, Section 118A.03.
5. Eligible Bankers Acceptances with a maturity not exceeding 180 days from the date of purchase,
issued by a state or national bank whose deposits are insured by the FDIC. Bankers Acceptances
shall be rated at the time of purchase at least A-1 or the equivalent by each NRSRO that rates them.
If the issuing bank has senior long-term debt, it shall be rated at the time of purchase at least A or
the equivalent by each NRSRO that publishes a rating on the issuer.
6. Prime Commercial Paper issued by domestic corporations with a maturity not exceeding 270 days
from the date of trade settlement and rated at the time of purchase at least A-1 or the equivalent by
at least two NRSROs. If the commercial paper issuer has senior debt outstanding, the senior debt
must be rated at the time of purchase at least A or the equivalent by each NRSRO that publishes a
rating on the issuer.
7. Repurchase Agreements with a final termination date not exceeding one year collateralized by U.S.
Treasury obligations, Federal Agency securities, or Federal Instrumentality securities listed in items
1, 2 and 3 above with the maturity of the collateral not exceeding ten years. For the purpose of this
section, the term collateral shall mean purchased securities under the terms of the City's approved
Master Repurchase Agreement. The purchased securities shall have a minimum market value
including accrued interest of 102% of the dollar value of the transaction. Collateral shall be held in
the City's custodian bank, as safekeeping agent, and the market value of the collateral securities
shall be marked-to-the-market daily.
Repurchase Agreements shall be entered into only with broker/dealers recognized as a primary
dealer by the Federal Reserve Bank of New York, or with financial firms that have a primary dealer
within their holding company structure. Broker/dealers approved as Repurchase Agreement
counterparties shall have a short-term credit rating of at least A-1 or the equivalent by a NRSRO
and a long-term credit rating of at least A or the equivalent by a NRSRO. Repurchase agreement
counterparties shall execute a City approved Master Repurchase Agreement with the City. The
Director of Finance shall maintain a copy of the City's approved Master Repurchase Agreement
along with a list of the broker/dealers who have executed same.
8. Obligations of state and local governments and public authorities with a final maturity not
exceeding five years from the date of trade settlement and rated at the time of purchase at least A
or the equivalent by a NRSRO.
9. Money Market Mutual Funds registered under the Investment Company Act of 1940 that (1) are
"no-load" (meaning no commission or fee shall be charged on purchases or sales of shares); (2)
have a constant daily net asset value per share of $1.00; (3) invest only in the securities and
obligations authorized in this investment policy and (4) have a rating of at least AAA or the
equivalent by a NRSRO.
10. Shares of a Minnesota joint powers investment trust whose investments are restricted to securities
• described in section 118A.04 and 118A.05 of Minnesota Statutes.
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11. Guaranteed investment contracts issued or guaranteed by United States commercial banks,
domestic branches of foreign banks, United States insurance companies, or their Canadian •
subsidies. The credit quality of the issuer's or guarantor's short- and long-term unsecured debt
must be rated in one of the two highest categories by a NRSRO. Should the issuer's or guarantor's
credit quality be downgraded below"A",the City must have withdrawal rights.
In addition, the City may invest in other investments as specifically directed by the City Council when
legally permissible under the laws and regulations of Minnesota and Federal rules and regulations.
It is the intent of the City that the foregoing list of authorized investments be strictly interpreted. Any
deviation from this list must be pre-approved by resolution of the City Council.
IX. Investment Diversification
The City will diversify the investments within the portfolio to avoid incurring unreasonable risks
inherent in over investing in specific instruments, individual financial institutions or maturities.
Nonetheless, the portfolio's asset allocation should be flexible depending upon the outlook for the
economy, the securities markets and the City's anticipated cash flow needs. Diversification strategies
and guidelines shall be reviewed periodically by the Director of Finance.
X. Maximum Maturities •
To the extent possible the City will attempt to match its investments with anticipated cash flow
requirements. Unless matched to a specific cash flow requirement, the City will not directly invest in
securities maturing more than five years from the date of trade settlement. The average weighted
maturity of the portfolio should not exceed three years.
Reserve funds may be invested in securities exceeding five years if the maturity of such investments are
made to coincide as nearly as practicable with the expected use of funds. Complete details of such
investments shall be disclosed to the City Council in a timely manner.
XI. Reporting
Quarterly, the Director of Finance or designee shall prepare an investment report listing the securities
owned by the City and including a summary of investment earnings and performance results during the
period. This report shall be provided to the City Administrator and the City Council and will include
the following:
a. A listing by maturity date of individual securities held at the end of the reporting period,
including the percentage of the total portfolio which each type of investment represents.
b. Current market value of portfolio along with amortized cost value, book value and unrealized •
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• gains and losses.
c. Weighted average yield to maturity of portfolio and applicable benchmarks, along with effective
and final maturity of portfolio.
XH. Performance Standards
The investment portfolio will be managed in accordance with the parameters specified within this
investment policy. The portfolio should obtain a market average rate of return during a
market/economic environment of stable interest rates. Portfolio performance will be compared to
appropriate benchmarks on a regular basis.
xM. Policy
This investment policy shall be reviewed annually by the Director of Finance. It may be amended by
the City Council as conditions warrant.
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Annex I •
Code Of Ethics
The Government Finance Officers Association of the United States and Canada is a professional
organization of public officials united to enhance and promote the professional management of
governmental financial resources by identifying, developing and advancing fiscal strategies, policies,
and practices for the public benefit.
To fulfill these objectives, all government finance officers are enjoined to adhere to legal, moral and
professional standards of conduct in the fulfillment of their professional responsibilities. Standards of
professional conduct as set forth in this code are promulgated in order to enhance the performance of all
persons engaged in public finance, and all City of Rochester investment management personal shall
follow this Code.
I. Personal Standards
Government finance officers shall demonstrate and be dedicated to the highest ideals of honor and
integrity in all public and personal relationships to merit respect, trust, and confidence of governing
officials, other public officials, and the public.
• They shall devote their time, skill, and energies to their office both independently and in
cooperation with other professionals. •
• They shall abide by approved professional practices and recommended standards.
II. Responsibility as Public Officials
Government finance officers shall recognize and be accountable for their responsibilities as officials in
the public sector.
• They shall be sensitive and responsive to the rights of the public and its changing needs.
• They shall strive to provide the highest quality of performance and counsel.
• They shall exercise prudence and integrity in the management of funds in their custody and in
all financial transactions.
• They shall uphold both the letter and the spirit of the constitution, legislation and regulations
governing their actions and report violations of the law to the appropriate authorities.
III. Professional Development
Government finance officers shall be responsible for maintaining their own competence, for enhancing
competence of their colleagues, and for providing encouragement to those seeking to enter the field of
government finance. Finance officers shall promote excellence in the public service.
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• IV. Professional Integrity—Information
Government finance officers shall demonstrate professional integrity in the issuance and
management of information.
• They shall not knowingly sign, subscribe to, or permit the issuance of any statement or report
which contains any misstatement or which omits any material fact.
• They shall prepare and present statements and financial information pursuant to applicable law
and generally accepted practices and guidelines.
• They shall respect and protect privileged information to which they have access by virtue of
their office.
• They shall be sensitive and responsive to inquiries from the public and the media, within the
framework of government policy.
V. Professional Integrity—Relationships
Government finance officers shall act with honor, integrity, and virtue in all professional relationships.
• They shall exhibit loyalty and trust in the affairs and interests of the government they serve,
within the confines of this Code of Ethics.
• They shall not knowingly be a party to or condone any illegal or improper activity.
• They shall respect the rights,responsibilities, and integrity of their colleagues and other
• public officials with whom they work and associate.
• They shall manage all matters of personnel within the scope of their authority so that fairness
and impartiality govern their decisions.
• They shall promote equal employment opportunities and, in doing so, oppose any
discrimination, harassment, or other unfair practices.
VI. Conflict of Interest
Government finance officers shall actively avoid the appearance of or the fact of conflicting interests.
• They shall discharge their duties without favor and shall refrain from engaging in any outside
matters of financial or personal interest incompatible with the impartial and objective
performance of their duties.
• They shall not, directly or indirectly, seek or accept personal gain which could influence, or
appear to influence, the conduct of their official duties.
• They shall not use property or resources for personal or political gain.
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