[HISTORY: Adopted by the City Council of the City of Fairfax 4-5-1994; as amended 11-4-1998. Subsequent amendments noted where applicable.]
This policy applies to all investments made by the City of Fairfax regardless of the fund.
The primary objective of the City's investment activities shall be safety, liquidity, and yield.
The preservation of capital in the overall portfolio and the protection of the investment principal. The safety of principal is the foremost objective of the City of Fairfax;
To remain sufficiently liquid to meet disbursement requirements which might be reasonably anticipated; and
Investment income is a major contributor of revenue to the City's annual budget, the investment portfolio of the City of Fairfax shall be designed to attain a market-average, or better, rate of return.
The investment portfolio is subject to public review and evaluation. Therefore, the overall program shall be designed and managed with a degree of professionalism worthy of the public trust. The City Council, however, recognizes that with a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of the overall portfolio's investment return, provided adequate diversification has been implemented.
The City Clerk-Treasurer is authorized to make investments of public funds. No person may engage in an investment transaction except as provided in this policy.
All investment transactions shall be made in good faith with the degree of judgement and care, under the circumstances, that a person of prudence, discretion and intelligence would exercise in the management of their own affairs. This standard of prudence shall mean not for speculation and with consideration of the probable safety of the capital as well as the probable investment return, derived from assets, and will be applied in all investment transactions.
The City Clerk-Treasurer is responsible for investment decisions. The reporting requirements to the City Council are the internal control system primarily providing a management discipline. Monthly reconciliation of investment balances and investment performance results add an element of accountability and discipline to the investment operation. A quarterly report summarizing investment strategies and describing the portfolio in terms of investment, securities, and maturities and other features will be submitted. The report shall explain the total investment return and disclose all transactions during the past quarter. Each quarterly report shall indicate any areas of policy concern and suggested or planned revision of investment strategies.
External monitoring by independent auditors on an annual basis at the end of the fiscal year will be performed. The annual report shall include twelve-month comparisons of return and shall suggest policies and improvements that might be made in the investment program.
It is the policy of the City of Fairfax to offer local financial institutions an opportunity to bid on investments; however, because it is the City's policy to seek the highest investment yield, local investment bids below 100 basis points of other competitive bids will not be considered. A minimum of 75% of the total investment portfolio shall be invested in certificates of deposit or other instruments through local Fairfax banks.
The City Council shall designate the official depositories of the City of Fairfax and the City Clerk-Treasurer is designated as the authority to designate additional depositories for investment purposes.
Before engaging in investment transactions with the City of Fairfax, a broker/dealer shall submit a certification. The document will state that the officer has reviewed the investment policies and objectives, as well as applicable state law, and agrees to disclose potential conflict of interest or risk to public funds that might arise out of business transactions between the firm and the City of Fairfax.
All financial institutions shall agree to undertake reasonable efforts to preclude imprudent transactions involving City funds.
Assets of funds of the City of Fairfax may be invested in the following:
U.S. Government obligations, including Treasury bills, Treasury notes, and Treasury bonds.
Fully insured or collateralized certificates of deposit.
Repurchase agreements collateralized by U.S. Treasury securities.
Shares in mutual funds which invest exclusively in U.S. Government and federal agency issues.
Notes and bonds issued by agencies of the federal government, such as federal land banks or federal home loan banks.
Securities which are a general obligation of the State of Minnesota or Minnesota municipalities, provided the securities are rated A or better.
From the list of eligible institutions, the City Clerk-Treasurer will, at his or her discretion, select certain institutions from which to obtain investment bids. At a minimum, bids shall be obtained from the two local financial institutions and recorded on tally sheets unless the institution's responsiveness in providing timely bids results in investing monies without receiving two bids from local institutions. This will be noted on the tally sheet.
Investment bids shall be awarded to the institution whose percentage yield produces the greatest interest income to the City, provided the institution has fully collateralized the investment.
When the City deposits in the depository institution in excess of the FDIC insurance it shall be secured by the depository institution in pledged collateral. The securities pledged are to be at least 110% market value of the amount invested plus interest to be earned at the time of the investment. If the security is pledged mortgages, their market value must equal 140% of the uninsured amount. To qualify as collateral securities must be fully insured certificates of deposit, any qualified state or local government obligation, or any obligations that are legal investments for cities.
Investments purchased by the City and securities pledged as collateral for certificates of deposit or other evidences of deposit and for repurchase agreements shall be retained in safekeeping in a third-party safekeeping bank in the State of Minnesota. The City, financial institution, and the safekeeping bank shall operate in accordance with a master safekeeping agreement signed by all three parties. The City shall always hold the original safekeeping receipt for its investments and for pledged collateral. When investments purchased by the City are held in safekeeping by a broker/dealer they must provide asset protection of $500,000 through the Securities Investor Protection Corporation (SICP) and at least another $2,000,000 of supplemental insurance protection.
The City Clerk-Treasurer must approve release of collateral in writing prior to its removal from the safekeeping account.
The financial institutions with which the City invests shall provide monthly, and as requested by the Clerk-Treasurer, a listing of the collateral pledged to the City marked to current market prices. The listing shall include total pledged securities itemized by:
Recommendation of the City Clerk-Treasurer and action of the City Council may amend the policies. Investment Policy revisions may become necessary with changes in state law, City needs, the economy, and investment opportunities.