[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.
A.
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;
B.
To remain sufficiently liquid to meet disbursement requirements
which might be reasonably anticipated; and
C.
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.
A.
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.
B.
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.
A.
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.
B.
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.
C.
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:
A.
U.S. Government obligations, including Treasury bills,
Treasury notes, and Treasury bonds.
B.
Fully insured or collateralized certificates of deposit.
C.
Repurchase agreements collateralized by U.S. Treasury
securities.
D.
Shares in mutual funds which invest exclusively in U.S.
Government and federal agency issues.
E.
Notes and bonds issued by agencies of the federal government,
such as federal land banks or federal home loan banks.
F.
Securities which are a general obligation of the State
of Minnesota or Minnesota municipalities, provided the securities are rated
A or better.
A.
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.
B.
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.
A.
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.
B.
The City Clerk-Treasurer must approve release of collateral
in writing prior to its removal from the safekeeping account.
C.
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:
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Name
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Type/description
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Par value
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Current market value
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Maturity date
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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.
