[Amended 12-7-2010]
A.
It is the policy of the Town of Barnstable that, giving due regard
to the safety and risk of investment, all available funds shall be
invested in conformance with legal and administrative guidelines and
maximize yields with the minimum of risk and utilization of collateralization
when requested.
B.
Effective cash management is recognized as essential to good fiscal
management. An aggressive cash management and investment policy will
be pursued to take advantage of investment interest as a viable revenue
source. The Town's portfolio shall be designed and managed in a manner
responsive to the public trust and consistent with state and local
law. Investments shall be made with the primary objectives of:
C.
Massachusetts General Laws, Chapter 44, Section 55B, requires the
municipal treasurer to invest all public funds except those required
to be kept uninvested for purposes of immediate distribution. The
state law further requires that invested funds are to be placed at
the highest possible rate of interest reasonably available, taking
into account the acceptable levels of safety, liquidity and yield.
Therefore, these guidelines are intended to further the objective
of securing the highest reasonable return available that is consistent
with safety of principal while meeting the daily cash requirements
for the operation of the entity's business.
A.
Many public investments in Massachusetts are not protected by federal
or state law and many investments are uncollateralized. It is the
policy of the Town to retain the option to require full collateralization
of all Town investments other than obligations of the United States
government and its agencies. Certificates of deposit plus accrued
interest up to the amount covered by FDIC insurance do not need to
be collateralized pursuant to this policy. Collateralization should
be held by a third party where possible.
B.
The Treasurer may invest in the following instruments:
(1)
The Massachusetts Municipal Depository Trust (MMDT), an investment
pool for state, local and other independent governmental authorities,
is under the auspices of the State Treasurer and currently managed
by Fidelity Investments. It invests in bankers acceptances, commercial
paper of high quality, bank certificates of deposit, repurchase agreements
and United States Treasury Obligations.
(2)
United States Treasury notes and bonds: obligations of the United
States government issued with a fixed coupon rate and original maturities.
(3)
United States agency obligations, provided that such United States
agency obligations are backed by the full faith and credit of the
federal government.
(4)
Bank accounts or certificates of deposit which are fully collateralized
through a third party agreement.
(5)
Bank accounts and certificates of deposit (CDs) insured by FDIC up
to the coverage limit, including CDAR eligible CDs. All bank accounts
and CDs in one institution are considered in the aggregate for the
insurance coverage limit. In some cases banking institutions carry
additional insurance, Depository Insurance Fund (DIF).
(6)
Unsecured bank deposits of any kind such as other checking, savings,
money market or certificates of deposit accounts at banks that do
not fit the above categories. These investments are subject to the
following limitations: No more than 5% of an institution's assets
and no more than 25% of a municipality's cash may be comprised of
unsecured bank deposits. This percentage may be increased for not
more than 30 days during times of heavy collection or in anticipation
of large payments that will be made by the Town in the near future.
These payments may be for items such as debt service payments, assessments
or other large authorized expenditures. The institution's creditworthiness
will be tracked by Veribanc, or other bank creditworthiness reporting
systems. They will be diversified as much as possible and consistent
with this policy.
(7)
Money market mutual funds that are registered with the Securities
and Exchange Commission and referenced in MGL c. 44, § 55.
(8)
Common and preferred stock that are listed in the List of Legal Investments
pursuant to MGL c. 167, § 15A, and MGL c. 167F, § 3.
(9)
Investment grade corporate bonds, with a minimum investment risk
rating of A/A2 Standard & Poor's/Moody's at the time of purchase.
(10)
Investment funds that are listed in the List of Legal Investments.
(11)
Mutual funds that are registered under the Investment Company
Act of 1940.
(12)
All other items not separately identified here that are listed
in the List of Legal Investments.
A.
Credit risk.
(1)
"Credit risk" is the risk that an issuer or other counterparty to
an investment will not fulfill its obligations.
(2)
There will be no limit to the amount of United States Treasury and
United States Government agency obligations, as they carry "AAA" ratings.
(3)
In regards to other investments, the Town will only purchase investment
grade securities with a high concentration in securities rated "A"
or better.
B.
Custodial risk.
(1)
The "custodial credit risk" for deposits is the risk that, in the
event of the failure of a depository financial institution, a municipality
will not be able to recover deposits or will not be able to recover
collateral securities that are in possession of an outside party.
The custodial risk for investments is the risk that, in the event
of the failure of the counterparty to a transaction, a municipality
will not be able to recover the value of investment or collateral
securities that are in the possession of an outside party. For securities
not covered by FDIC insurance, the institution should maintain Securities
Investor Protection Corporation (SIPC) coverage and sufficient additional
insurance to cover the amount of the Town's deposits with that institution.
(2)
The Town will review the financial institution's financial statements
and the background of the advisor. The institution should have at
least $100 million in asset management. The intent of this qualification
is to limit the Town's exposure to only those institutions with a
proven financial strength, capital adequacy of the firm and overall
affirmative reputation in the municipal industry.
(3)
Further, all securities not held directly by the Town, will be held
in the Town's name and tax identification number by a third-party
custodian approved by the Treasurer and evidenced by safekeeping receipts
showing individual CUSIP numbers for each security.
C.
Concentration of credit risk.
(1)
"Concentration of credit risk" is the risk of loss attributed to
the magnitude of a government's investment in a single issuer.
(2)
The Town will minimize concentration of credit risk by diversifying the investment portfolio so that the impact of potential losses from any one type of security or issuer will be minimized. In terms of the total amount of Town investments at any point in time, there shall be 10% or less exposure for any one type of security or issuer with the exception of instruments backed by the full faith and credit of the United States Government or bank instruments or investment vehicles fully insured by FDIC or DIF. For more specific information relating to diversification percentages, refer to § 401-56, below.
D.
Interest rate risk.
(1)
"Interest rate risk" is the risk that changes in interest rates will
adversely affect the fair value of an investment.
(2)
The Treasurer will manage interest rate risk by managing the duration
in the account. For general Town funds, the weighted average days
to maturity for the overall Town portfolio should be 365 days or less.
E.
Foreign currency risk. "Foreign currency risk" is the risk that changes
in foreign monetary exchange rates will adversely affect the fair
value of an investment or a deposit.
A.
Diversification should be interpreted in two ways: in terms of maturity
as well as instrument type and issuer. The diversification concept
should include prohibition against over-concentration of maturities,
as well as concentration in a specific issuer. With the exception
of United States Treasury obligations or investments fully collateralized
by United States Treasuries or agencies and state pools (MMDT), no
more than 10% of the Town's investments or an amount equal to the
maximum amount of FDIC and DIF insurance coverage, whichever is greater,
shall be invested in a single security issuer.
B.
In order to enhance total yield and fulfill the objectives of this
policy, the investment management style will be directed towards an
active rather than passive portfolio. The following maximum limits
are established for the Town's total portfolio:
C.
In the Town's attempt to obtain its yield objectives, the policies
set forth in this section shall be exercised in such a manner as to
maintain the liquidity necessary to ensure that the next projected
disbursement date and payroll dates are covered.
D.
In the event of the creation of a new or previously unavailable type
of investment vehicle, upon the recommendation of the Treasurer and
upon the written approval of the Town Manager and Finance Director,
the Treasurer may invest in such an instrument to the extent permitted
by this policy.
A.
The Town will establish a system of internal controls over the investment
activities of the Town and document such controls in writing.
B.
The standard of prudence to be used by the Treasurer shall be the
prudent person standard and shall be applied in the context of managing
an overall portfolio. The Treasurer, acting in accordance with written
procedures and this IPS and exercising reasonable due diligence, shall
be relieved of personal responsibility for an individual security's
credit risk or market price changes, provided that the purchases and
sale of securities are carried out in accordance with the terms of
this IPS.
C.
The Treasurer and Assistant Treasurer shall refrain from any personal
activity that may conflict with the proper execution of the investment
program or which could impair or appear to impair ability to make
impartial investment decisions. Said individuals shall disclose to
the Chief Executive Officer any material financial interest in financial
institutions that do business with the Town.
D.
It is the Town's policy that investment officers perform their duties
in accordance with the policies and procedures set forth in this manual
and according to the prudent person rule: Investments shall be made
with judgment and care under prevailing circumstances which persons
of prudence, discretion and intelligence exercise in the management
of their own affairs, not for speculation but for investment considering
the probable income to be derived. The standard of prudence to be
used by investment officials shall be the "prudent person" and shall
be applied in the context of managing an overall portfolio. Investment
officers acting in good faith and in accordance with these policies
and exercising due diligence shall be relieved of personal responsibility
for an individual security's performance, provided that deviations
from expectations are reported in a timely fashion and appropriate
action is taken to control adverse developments.
E.
All brokers, dealers and advisors to the Town of Barnstable are required to sign a statement of disclosure as presented in Appendix E.[1]
[1]
Editor's Note: Appendix E is included at the end of this chapter.
The Treasurer has authority to invest municipal funds, subject
to the statutes of the Commonwealth of Massachusetts MGL c. 44, §§ 55,
55A and 55B and in accordance with the Town of Barnstable's Investment
Policy.
The investments of the Town of Barnstable are administered according
to an investment program. The program is formulated by the Treasurer.
The Treasurer will evaluate the program at least monthly. The investment
program is developed by the Treasurer through the following procedures:
A.
On a quarterly basis, a report containing the following information
will be prepared by the Treasurer and distributed to the Finance Director
and/or his/her designee as appropriate. The quarterly report will
include the following information, as a minimum requirement:
(1)
A listing of the individual accounts held at the end of the reporting
period identifying the name of the account, the type of security(ies)
and the market value of each account.
(2)
A summary of the income earned on a monthly basis and year-to-date
basis shall be reported.
(3)
A brief statement of general market and economic conditions and other
factors that may affect the Town's cash position.
B.
Notwithstanding the foregoing, the Treasurer shall immediately bring to the attention of the Finance Director any matter of consequence related to the investment portfolio. Such matters include, but are not limited to, SEC or other federal or state investigations of any entity which is an issuer of an instrument found in the Town's investment portfolio, failure by an entity to pay timely expected dividends, interest payments or other items of value, defaults in the terms or conditions of any investment purchase contract by the issuer of the instrument and any conduct in violation of § 401-57 of this policy.
