City of Middletown, NY Chapter 65 Investment Policy

[HISTORY: Adopted by the Common Council of the City of Middletown 1-3-2022 by Res. No. 3-22[1]. Amendments noted where applicable.]

[1] Editor's Note: This resolution superseded former Ch. 65, Investment Policy, adopted 1-2-2020.

§ 65-1 Scope.

This investment policy applies to all monies and other financial resources available for investment on its own behalf or on behalf of any other entity or individual.

§ 65-2 Objectives.

The primary objectives of the City of Middletown's investment activities are, in priority order:

A. Legal: to conform with all applicable federal, state and other local requirements;

B. Safety: to adequately safeguard principal;

C. Liquidity: to provide sufficient liquidity to meet all operating requirements; and

D. Yield: to obtain reasonable rate of return.

§ 65-3 Delegation of authority.

The governing board's responsibility for administration of the investment program is delegated to the Treasurer who shall establish written procedures for the operation of the investment program consistent with these investment guidelines. Such procedures shall include an adequate internal control structure to provide a satisfactory level of accountability based on data base or records incorporating description and amounts of investments, transaction dates, and other relevant information and regulate the activities of subordinate employees.

§ 65-4 Prudence.

A. All participants in the investment process shall seek to act responsibly as custodians of the public trust and shall avoid any transaction that might impair public confidence in the City of Middletown to govern effectively.

B. 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 safety of the principal as well as the probable income to be derived.

C. All participants involved in the investment process shall refrain from personal business activity that could conflict with the proper execution of the investment program, or which could impair their ability to make impartial investment decisions.

§ 65-5 Diversification.

It is the policy of the City of Middletown to diversify its deposits and investments by financial institutions, by investment, and by maturity scheduling.

§ 65-6 Internal controls.

A. It is the policy of the City of Middletown for all monies collected by any officer or employee of the government to transfer those funds to the Treasurer within one day of deposit, or within the time specified in law, whichever is shorter.

B. The Treasurer is responsible for establishing and maintaining an internal control structure to provide reasonable, but not absolute, assurance that deposits and investments are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly, and are managed in compliance with applicable laws and regulations.

§ 65-7 Designation of depositories.

The bank and trust companies authorized for the deposit of monies up to the maximum amounts are:

Depository Name	Maximum Amount
JP Morgan Chase	$18,000,000
TD Bank	$18,000,000
Sterling National Bank	$18,000,000
Orange Trust Bank	$12,500,000
Key Bank	$5,250,000

§ 65-8 Collateralizing of deposits.

In accordance with the provisions of General Municipal Law § 10, all deposits of the City of Middletown, including certificates of deposits and special time deposits, in excess of the amount insured under the provisions of the Federal Deposit Insurance Act shall be secured:

A. By a pledge of eligible securities with an aggregate market value as provided by GML § 10, equal to the aggregate amount of deposits from the categories designated in Appendix A[1] to the policy.

[1] Editor's Note: Appendix A is included as an attachment to this chapter.

B. By an eligible irrevocable letter of credit issued by a qualified bank other than the bank with the deposits in favor of the government for a term not to exceed 90 days with an aggregate value equal to 140% of the aggregate amount of the deposits and the agreed upon interest, if any, or 100% in the case of an irrevocable letter of credit issued in favor of the local government by certain federal home loan banks. A qualified bank is one whose commercial paper and other unsecured short-term debt obligations are rated in one of the three highest rating categories by at least one nationally recognized statistical rating organization or by a bank that is in compliance with applicable federal minimum risk-based capital requirements.

C. By an eligible surety bond payable to the government for an amount at least equal to 100% of the aggregate amount of the deposits and the agreed upon interest, if any, executed by an insurance company authorized to do business in New York State, whose claims-paying ability is rated in the highest rating category by at least two nationally recognized statistical rating organizations.

§ 65-9 Safekeeping and collateralization.

A. Eligible securities used for collateralizing deposits shall be held by a third party or trust company subject to security and custodial agreements.

B. The security agreement shall provide that eligible securities are being pledged to secure local government deposits together with agreed upon interest, if any, and any costs or expenses rising out of collection of such deposits upon default. It shall also provide the conditions under which the securities may be sold, presented for payment, substituted or released and the events which will enable the local government to exercise its rights against the pledged securities. In the event that the securities are not registered or inscribed in the name of the local government, such securities shall be delivered in a form suitable for transfer or with the City of Middletown, or its custodial bank.

C. The custodial agreement shall provide that securities held by the bank or trust company, or agent of and custodian for the local government, will be kept separate and apart from the general assets of the custodial bank or trust company and will not, in any circumstances, be commingled with or become part of the backing for any other deposit or other liabilities. The agreement shall also describe that the custodian shall confirm the receipt, substitution or release of the securities. The agreement shall provide for the frequency of revaluation of eligible securities and for the substitution or release of securities when a change in the rating of a security may cause ineligibility. Such agreement shall include all provisions necessary to provide the local government a perfected interest in the securities.

§ 65-10 Permitted investments.

A. As authorized by General Municipal Law § 11, the City of Middletown authorizes the Treasurer to invest monies not required for immediate expenditure for terms not to exceed its projected cash flow needs in the following types of investments:

(1) Special time deposit accounts authorized to do business in New York State;

(2) Certificates of deposit;

(3) Obligations of the United States of America;

(4) Obligations guaranteed by the agencies of the United States of America where the payment of principal and interest are guaranteed by the United States of America;

(5) Obligations of the State of New York;

(6) Obligations issued pursuant to LFL § 24.00 or 25.00 (with the approval of the State Comptroller) by any municipality, school district or district corporation other than the City of Middletown;

(7) Obligations of public authorities, public housing authorities, urban renewal agencies and industrial development agencies where the general state statutes governing such entities or whose specific enabling legislation authorizes such investments;

(8) Certificates of participation (COPs) issued pursuant to GML § 109-b;

(9) Obligations of this local government, but only with any monies in a reserve fund established pursuant to GML § 6-c, 6-d, 6-g, 6-h, g-j, 6-k, 6-l, 6-m, or 6-n.

B. All investment obligations shall be payable or redeemable at the option of the City of Middletown within such times as the proceeds will be needed to meet expenditures for purposes for which the monies were provided and, in the case of obligations purchased with the proceeds of bonds or notes, shall be payable or redeemable at the option of the City of Middletown within two years of the date of purchase. The designated depository will confirm all purchases and transactions in writing to the City of Middletown.

§ 65-11 Authorized financial institutions and dealers.

The City of Middletown shall maintain a list of financial institutions and dealers approved for investment purposes and establish appropriate limits to the amount of investments, which can be made with each financial institution or dealer. All financial institutions with which the local government conducts business must be credited worthy. Banks shall provide their most recent consolidated report of condition (call report) at the request of the City of Middletown. Security dealers not affiliated with a bank shall be required to be classified as reporting dealers affiliated with the New York Federal Reserve Bank as primary dealers. The Treasurer is responsible for evaluating the financial position and maintaining a listing of proposed depositaries, trading partners and custodians. Such listing shall be evaluated at least annually.

§ 65-12 Purchase of investments.

A. The Treasurer is authorized to contract for the purchase of investments:

(1) Directly, including through a repurchase agreement, from an authorized trading partner.

(2) By participation in a cooperative program with another authorized governmental entity pursuant to Article 5G of the General Municipal Law where such program meets all the requirements set forth in the Office of the State Comptroller Opinion No. 88-46, and the specific program has been authorized by the governing board.

(3) By utilizing an ongoing investment program with an authorized trading partner pursuant to a contract authorized by the governing board.

B. All purchased obligations, unless registered or inscribed in the name of the local government, shall be purchased through, delivered to and held in the custody of a bank or trust company. Such obligations shall be purchased, sold or presented for redemption or payment by such bank or trust company only in accordance with prior written authorization from the officer authorized to make the investment. All such transactions shall be confirmed, in writing, to the City of Middletown by the bank or trust company. Any obligations held in the custody of a bank or trust company shall be held pursuant to a written custodial agreement as described in General Municipal Law § 10.10.

C. The custodial agreement shall provide the securities held by the bank or trust company, as agent and of custodian for the City of Middletown, will be kept separate and apart from the general assets of the custodial bank or trust company and will not, in any circumstances, be commingled with or become part of the backing for any other deposit or other liabilities. The agreement shall describe how the custodian shall confirm the receipt and release of the securities. Such agreement shall include all provisions necessary to provide the City of Middletown a perfected interest in the securities.

§ 65-13 Repurchase agreements.

Repurchase agreements are authorized subject to the following restrictions:

A. All repurchase agreements must be entered into subject to a master repurchase agreement.

B. Trading partners are limited to banks or trust companies authorized to do business in New York and primary reporting dealers.

C. Obligations shall be limited to obligations of the United States of America and obligations guaranteed by agencies of the United States of America.

D. No substitution of security will be allowed.

E. The custodian shall be a party other than the trading partner.

§ 65-14 Operations, audit and reporting.

A. The Treasurer, having custody of money, shall authorize the purchase and sale of all securities and execute contracts on behalf of the City of Middletown. Oral directions concerning the purchase, transaction, or sale of securities shall be confirmed in writing. The City of Middletown shall pay for purchased securities upon delivery.

B. The City of Middletown will encourage the purchase and sale of securities through a competitive or negotiated process involving solicitations of at least three bids for each transaction.

C. At the time independent auditors conduct the annual financial audit of the accounts and affairs of the City of Middletown, the auditors shall audit compliance with the investment guidelines.

D. The legislative body of the City of Middletown shall review and approve the annual investment report at its annual reorganization meeting.

E. The provisions of these investment guidelines, and any amendments hereto, shall take effect prospectively and shall not invalidate the prior selection of any custodial bank or prior investment.