The purpose of this statement of investment policy is to establish guidelines
for the safeguarding and efficient management of all short-term investment
balances for the Town of Snow Hill, Maryland. This investment policy applies
to all short-term, operating and reserve funds as accounted for in the town's
audited financial statement as well as any new funds as provided for by ordinance
or resolution. This policy does not cover the financial assets of any retirement
plan(s) the town may participate in.
The primary investment objectives for all funds covered by this investment
policy shall be, in order of priority, as follows:
A. Safety. The safeguarding of principal shall be the foremost
objective of the investment program, and other objectives shall be subordinated
to the attainment of this objective.
B. Liquidity. The investment portfolio shall be managed
at all times with sufficient liquidity to meet all daily and seasonal needs,
as well as special projects and other operational requirements either known
or which might be reasonably anticipated.
C. Return on investment. The investment portfolio shall
be managed with the objective of obtaining no less than a market rate of return
over the course of budgetary and economic cycles, taking into account the
constraints contained herein and the cash flow patterns of the town.
The following investment types and quality levels are approved for use
by the town in the investment of public fund. The listed order of investments
types does not necessarily indicate the importance of the investment nor the
order in which investments are chosen by the Director of Finance.
A. Obligations for which the United States has pledged its
faith and credit, including United States treasury bills, notes, bonds and
other direct obligations of the United States Government.
B. Obligations that a federal agency or a federal instrumentality
has issued in accordance with an act of Congress, including but not limited
to the Federal Farm Credit Bank, Federal Home Loan Bank, Federal National
Mortgage Association, Government National Mortgage Association, Federal Home
Loan Mortgage Corporation and Student Loan Marketing Association.
C. Repurchase agreements collateralized in an amount not
less than 102% of the principal amount of the obligation of the United States
or its agencies or instrumentalities if the collateral is held by a custodian
other than the seller designated by the buyer.
D. Banker's acceptances guaranteed by a financial institution
with a short-term debt rating in the highest letter and numerical rating by
at least one nationally recognized statistical rating organization as designated
by either the SEC or the Treasurer.
E. Deposits.
(1) Certificates of deposit or other interest-bearing time
deposits or savings accounts in any bank in the State of Maryland with an
emphasis on banks located in the Town of Snow Hill, provided that such deposits
are insured or the bank has collateralized the deposit by:
(a) Depositing a like amount of bonds in escrow covering
the deposits; or
(b) Given as security for the deposits any of the following
collateral:
[1] Obligations of or guaranteed by the United States or
any of its agencies;
[2] An obligation of the United States; or
[3] Obligations of other governmental agencies approved by
the State of Maryland as acceptable forms of collateral at that time.
(2) Commercial banks must have a short-term rating of at
least investment grade from the appropriate bank rating agency. All banks
shall provide their most recent Consolidated Report of Condition at the request
of the town.
F. Commercial paper that has received the highest letter
and numerical rating by at least one nationally recognized statistical rating
organization as designated by the SEC. Not more than 50% of the total funds
available for investment may be invested in commercial paper.
G. Money market mutual funds registered under the Investment
Company Act of 1940, operated in accordance with Rule 2A-7 and having the
highest possible rating from at least one statistical rating organization
designated by the SEC. The management company of the fund must take delivery
of the collateral either directly or through an authorized custodian.
H. An obligation or security of, or other interest in, any
open-end or closed-end management-type investment company or investment trust
registered under the Investment Company Act of 1940 if the portfolio thereof
is limited to direct obligations of the United States government and repurchase
agreements fully collateralized thereby and the investment company or trust
or its custodian holds the collateral.
I. Any investment portfolio created under the Maryland Local
Government Investment Pool defined under Article 95, § 22G of the
Code that is administered by the Office of the State Treasurer.
It is recognized that, prior to maturity date, the market value of securities
in the town's portfolio may fluctuate due to changes in market conditions.
In view of this and the town's primary investment objectives of preservation
of principal and liquidity, every effort shall be made to manage investment
maturities so that they precede or coincide with the expected need for funds.
Accordingly, the requirements established by the Code of Maryland and the
State Treasury guidelines are further restricted as follows:
A. Funds shall be invested at all times in keeping with
the daily and seasonal pattern of the town's cash balances, as well as
any other special factors or needs, in order to assure the availability of
funds on a timely and liquid basis. Cash flow projections will be monitored
and updated on an ongoing basis by the town and communicated regularly to
the Mayor and Council by the Director of Finance.
B. Unless matched to a specific cash flow, the town will
not invest in securities maturing more than three years from the date of purchase.
C. Reserve funds may be invested in securities exceeding
three years if the maturity of such instruments are made to precede or coincide
with the expected need for funds and only with the prior approval of the Mayor
and Council.
The town will diversify its holdings by security type and institution
to avoid incurring unreasonable risks due to excessive concentration in specific
instruments, financial institutions or issuers. If total balance of cash assets
is less than $500,000, no investment in instruments other than interest-bearing
accounts and certificates of deposit is authorized. This determination is
made on the current budget totals and can be amended by the Mayor and Council.
Diversification standards are as follows:
Diversification by Instrument
|
Maximum Percent of Investable Portfolio
|
---|
United States government obligations
|
100%
|
United States government agencies and instrumentalities
|
90%
|
Repurchase agreements (primary dealers only)
|
90%
|
Bankers acceptances
|
50%
|
Certificates of deposit
|
100%
|
Money market mutual funds
|
50%
|
Maryland Local Government Investment Pool
|
50%
|
Commercial paper
|
5%
|
Diversificaiton by Institution/Issuer
|
Maximum Percent of Investable Portfolio
|
---|
Primary government dealers (repurchase agreements)
|
50%
|
Commercial banks (certificate of deposit)
|
50%
|
Money market treasury funds
|
25%
|
Bankers acceptances, by institution
|
25%
|
The town's investment policy shall be adopted by the Mayor and
Council, effective January 9, 1996. It shall be the practice of the Mayor
and Council to review the policy on at least twice a year, beginning six months
from the date of adoption of the policy.