REPORT TO COUNCIL
SUBJECT
Title
Action on the Investment Policy: Annual Statement and Annual Investment Policy Review and Approval
Report
BACKGROUND
Council Policy 017 Investment Policy: Annual Statement provides the framework and guidance for managing the City’s investment portfolio. The City’s Investment Policy expands on the Council Policy framework by providing further guidance and processes.
As part of the Annual Investment Policy (Investment Policy) review, staff reviewed Council Policy 017 Investment Policy: Annual Statement (Attachment 1). Although the City's Investment Policy had historically been updated and approved annually by Council, Council Policy 017 had not been updated for over 14 years, and reflected the City's Investment Policy dated January 2005.
Section 904 of the City Charter states that the Director of Finance is required to have custody of all investments and invested funds of the City government, or in possession of such government in a fiduciary capacity, and have the safe-keeping of all bonds and notes of the City and the receipt and delivery of City bonds and notes for transfer, registration or exchange. In accordance with Government Code §53646, City Council adopted an investment policy and the Director of Finance brings that policy to Council on an annual basis, particularly highlighting any changes to the policy, for consideration and approval by Council. In addition, the Investment Policy itself (Section P) requires annual approval by Council.
The Investment Policy is a written document that governs the selection of investments and provides staff with guidance for consistent, informed investment decision making. The policy is reviewed and updated regularly in order to encourage prudent investment decisions and to stay compliant with State and Federal laws.
DISCUSSION
Council Policy 017 Investment Policy: Annual Statement
Based on review of Council Policy 017, staff recommends to fully replace Council Policy 017 (Attachment 2) to incorporate updated Investment Policy language and to formally establish a process on investment management in accordance with the newly established Council Policy Manual format. If the new Council Policy 017, as recommended, is approved through approval of the attached resolution (Attachment 3), the Policy will be published on the City’s website. Staff will continue to review the Investment Policy annually and present to Council for approval as an attachment to Council Policy 017.
Investment Policy
The City’s Investment Policy is continually monitored to determine if periodic updates are necessary. As part of this review, staff is recommending four substantive changes to the Investment Policy. These changes are shown in the attached redline version of the policy and summarized below:
• Reduce the maximum allowable callable government agency securities from 60% of the portfolio to 50%. This change will reduce investment rate risk to the portfolio.
• Added clarifying language in Mutual Funds and Investment Pools description to include Money Market Funds since it is an allowable investment under the Investment Policy. The previous language did not explicitly identify Money Market Funds even though it is a Mutual Fund and an allowable investment.
• Revised the Annual Audit language as recommended by the City's external auditor to remove the language that states that the City’s external auditor reviews cash management accounting and operational practices. The City’s external auditor will perform an annual compliance review of the Investment Policy.
• Updated the investment reporting requirements under the Reporting section to include a comparison of the rate of return on the City’s unrestricted investment portfolio to the 24-month moving average yield of 2-year Treasury Notes. The current comparison uses the 12-month moving average of 2-Year Treasury Notes. The revised benchmark will provide for a better measurement of the portfolio's performance by more closely aligning the benchmark with the portfolio's target weighted average maturity of less than three years.
The amended Investment Policy (Attachment 4 - redline and Attachment 5) as submitted is in compliance with the City Charter and the California Government Code relevant to the investment of public funds by local agencies.
The approved Investment Policy will be updated in the City of Santa Clara Council Policy Manual as Council Policy 017 and published on the City’s website.
ENVIRONMENTAL REVIEW
Not a project per 14 CCR §15378(b)(4) in that it is a government fiscal activity, which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
FISCAL IMPACT
There is no cost to the City other than administrative staff time and expense.
COORDINATION
This report has been coordinated with the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Adopt a resolution to amend Council Policy 017 Investment Policy: Annual Statement; and
2. Approve the Investment Policy for the City of Santa Clara, its agencies and corporations.
Staff
Reviewed by: Angela Kraetsch, Director of Finance
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Investment Policy: Annual Statement (2005)
2. Council Policy 017 Investment Policy: Annual Statement
3. Resolution to Amend Council Policy 017 Investment Policy: Annual Statement
4. Investment Policy 2019 (redline)
5. Investment Policy 2019