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HomeMy WebLinkAboutC11-013 2011 Investment Policy Eagle Count Colorado • J County, Policy INTRODUCTION AND SCOPE Eagle County (the County), centrally located in the Rocky Mountains along Interstate 70, is home to the internationally renowned ski resorts Vail and Beaver Creek. Eagle County operates as a statutory county, with a three - member Board of County Commissioners. By approval of the Board of County Commissioners, Eagle County's Investment Policy was adopted on October 13, 1992, by Resolution 92 -128. This 10th revision was approved by the Board of County Commissioners on J ,( I ( 2011 by Consent Agenda. The following Investment Policy addresses the methods, procedures, and practices p p es which must be exercised to ensure effective and judicious fiscal and investment management of the County's funds. This Investment Policy shall apply to the investment management of those County funds listed in Annex I of this Investment Policy. All cash, except for certain restricted funds also listed in Annex I of this Investment Policy, shall be pooled for investment purposes. The investment income derived from • the pooled investment account shall be allocated to the pooled funds listed in Annex I based upon the proportion of their respective average balances relative to the total pooled balance. INVESTMENT OBJECTIVES The County's principal investment objectives are: • Preservation of capital and protection of investment principal. • Maintenance of sufficient liquidity to meet anticipated cash flows. • Diversification to avoid incurring unreasonable market risks. • Attainment of a market value rate of return. • Conformance with all applicable County policies, and State and Federal regulations. DELEGATION OF AUTHORITY In accordance with CRS 30 -10 -708, the Board of County Commissioners has granted the County Treasurer (the "Treasurer ") authority for conducting investment transactions. The Deputy Treasurer and other authorized persons may be appointed to assist the Treasurer in performing investment management functions. Persons authorized to • transact investment business for Eagle County are listed in Annex II of this Investment Policy. Page 1 Th Treasurer shall establish written administrative procedures for the operation of the • Co nty's investment program consistent with this Investment Policy. Th.. Treasurer may engage the support services of outside professionals in regard to its investment program, so long as it can be clearly demonstrated that these services produce a net financial advantage or necessary financial protection of the County's fin ncial resources. Such services may include engagement of financial advisors in co 'unction with debt issuance, portfolio management support, special legal rep esentation, third party custodial services, and independent rating services. Cutwater Inv stor Service Corporation shall continue as the Investment Advisor (for long term inv stments only) for Eagle County, Colorado through December 31, 2011 unless such ser ices are earlier terminated. PRUDENCE Th standard of prudence to be used for managing the County's assets is the "prudent inv tor" rule applicable to a fiduciary, which states that a prudent investor "shall exe cise the judgment and care, under circumstances then prevailing, which men of pru ence, discretion, and intelligence exercise in the management of the property of ano her, not in regard to speculation but in regard to the permanent disposition of funds, con idering the probable income as well as the probable safety of capital." (CRS 15-1 - 304 Standard for Investments.) The County's overall investment program shall be designed and managed with a degree • of ofessionalism that is worthy of the public trust. The County recognizes that no inve tment is totally riskless and that the investment activities of the County are a matter of p blic record. Accordingly, the County recognizes that occasional measured losses may occur in a diversified portfolio and shall be considered within the context of the ove II portfolio's return, provided that adequate diversification has been implemented and hat the sale of a security is in the best Tong -term interest of the County. The Treasurer and other authorized persons acting in accordance with written proc dures and exercising due diligence shall be relieved of personal responsibility for an i dividual security's credit risk or market price changes, provided that the deviations from expectations are reported in a timely fashion to the Board of County Com issioners and appropriate action is taken to control adverse developments. ETHICS AND CONFLICTS OF INTEREST S Elec d officials and employees involved in the investment process shall refrain from pers nal business activity that could conflict with proper execution of the investment prog am or that could impair or create the appearance of an impairment of their ability to mak impartial investment decisions. Employees and investment officials shall disclose to th Treasurer any material financial interest they have in financial institutions that cond ct business with the County, and they shall subordinate their personal investment trans ctions to those of the County. • Page 2 • The County adheres to the Government Finance Officers Association's Code of Professional Ethics, a copy of which is available online at http: / /www.gfoa.orq. AUTHORIZED SECURITIES AND TRANSACTIONS All investments shall be made in accordance with the Colorado Revised Statutes: CRS 11- 10.5 -101, et seq. Public Deposit Protection Act; CRS 24 -75 -601, et. seq. Funds - Legal Investments; CRS 24 -75 -603, Depositories; and CRS 24 -75- 702, Local Governments — authority to pool surplus funds. Any revisions or extensions of these sections of the CRS will be assumed to be part of this Investment Policy immediately upon being enacted. The Treasurer has further restricted the investment of County funds to the following types of securities and transactions: 1. U.S. Treasury Obligations: Treasury Bills, Treasury Notes, Treasury Bonds, and Treasury Strips with maturities not exceeding five years from the date of g y o trade settlement. 2. Federal Instrumentality Securities: Debentures, discount notes, callable securities, step -up securities, and stripped principal or coupons with maturities not exceeding five years from the date of trade settlement issued by the following only: Federal National Mortgage Association (FNMA), Federal Farm Credit Banks (FFCB), Federal III Home Loan Banks (FHLB), and Federal Home Loan Mortgage Corporation (FHLMC). Federal Instrumentality Securities shall be rated in the highest rating 1 category by at least two Nationally Recognized Statistical Rating Organizations ( NRSROs), and shall be rated not less by any NRSRO that rates the debt. 3. Commercial Paper with an original maturity of 270 days or less that is rated at least A -1, P -1 or the equivalent at the time of purchase by at least two NRSROs and rated not less by all NRSROs that rate the commercial paper. If the commercial paper issuer has senior debt . outstanding, the senior debt must be rated at least AA -, Aa3 or the equivalent at the time of purchase by at least two NRSROs and rated not less by all NRSROs that rate the issuer. The aggregate investment in commercial paper and banker's acceptances shall not exceed 50% of the County's total portfolio, and no more than 5% of the County's total portfolio may be invested in the obligations of any one issuer. 4. Eligible Banker's Acceptances with maturities not exceeding 180 days, issued by 1 banks domiciled in the U.S. and operating under U.S. banking laws. Banker's p g g Acceptances p s shall be rated A -1, P -1 or the equivalent at the time of purchase by at least two NRSROs and rated not less by all NRSROs that rate the instrument. If the issuing bank has senior long -term debt outstanding, it shall be rated, at the time of purchase, AA -, Aa3 or the equivalent by at least two NRSROs and rated not less by all NRSROs that rate the issuer. The aggregate investment in banker's acceptances and commercial paper shall not exceed 50% of the County's total portfolio, and no more than 5% of the County's total portfolio may be invested in the • obligations of any one issuer. Page 3 5. Repurchase Agreements with a defined termination date of 180 days or Tess 4111 collateralized by U.S. Treasury securities with a maturity not exceeding 10 years. For the purpose of this section, the term collateral shall mean purchased securities under the terms of the County's approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102 percent of the dollar value of the transaction. Collateral shall be held in the County's custodial bank as safekeeping agent, and the market value of the collateral securities shall be marked -to- the - market daily. Repurchase Agreements shall be entered into only with dealers who have executed a Master Repurchase Agreement with the County and who are recognized as Primary Dealers by the Federal Reserve Bank of New York or with firms that have a (Primary Dealer within their holding company structure. Approved repurchase agreement counterparties if rated, shall have a short -term debt rating of at least A -1 or the equivalent and a Tong -term debt rating of A or the equivalent from one or more 'IRSROs that regularly rate such obligations. Broker /dealers who have executed Master Repurchase Agreements with the County are listed in Annex III of this Investment Policy. 6. .ocal Government Investment Pools authorized under CRS 24 -75 -702 that: are "no- oad" (i.e., no commission or fee shall be charged on purchases or sales of shares); s ave a constant net asset value of $1.00 per share; limit assets of the fund to ecurities authorized by state statute; have a maximum stated maturity and weighted verage maturity a III 940 and have a rating in of accordance AAAm with or the Rule equivalent 2a -7 of the by each NRSRO Investment Comp that rates ny Act the of Pool. 7. Monev Market Mutual Funds registered under the Investment Company Act of 1940 that are "no -load" (i.e. no commission or fee shall be charged on purchases or sales Of shares); have a constant net asset value of $1.00 per share); limit assets of the Fund to securities authorized by state statute; have a maximum stated maturity and Weighted average maturity in accordance with Rule 2a -7 of the Investment Company ,atct of 1940 and have a rating of AAAm or the equivalent by each NRSRO that rates the fund. 8. Non-negotiable Certificates of Deposit in any FDIC insured state or national bank I4cated in Colorado that is an eligible public depository as defined in CRS 11 -10.5- 1103. Certificates of deposit that exceed FDIC insurance limits shall be collateralized ads required by the Public Deposit Protection Act. The County shall limit the ggregate value of Certificates of Deposit to no more than 25% of the County's total rtfolio, and the amount of Certificates of Deposit that can be purchased from any e financial institution shall be limited to 5% of the County's total portfolio. 9. General Obligation Debt with a final maturity not exceeding three years issued by ahy state of the United States or any political subdivision, institution, department, agency, instrumentality, or authority of any state that is (1) rated at least AA or the equivalent at the time of purchase by at least two NRSROs that rate the entity; or (2) escrowed to maturity with U.S. Treasury obligations as collateral. No more than 5% III Page 4 . of the County's total portfolio may be invested General Obligation Debt of any one • issuer. No more than 25% of the County's total portfolio may be invested in any combination of General Obligation and Revenue Obligation Debt. 10. Revenue Obligation Debt with a final maturity not exceeding three years issued by any state of the United States or any political subdivision, institution, department, agency, instrumentality, or authority of any state that is (1) rated at least AAA or the equivalent at the time of purchase by at least two NRSROs that rates the entity; or (2) escrowed to maturity with U.S. Treasury obligations as collateral. No more than 5% of the County's total portfolio may be invested Revenue Obligation Debt of any one issuer. No more than 25% of the County's total portfolio may be invested in any combination of General Obligation and Revenue Obligation Debt. The foregoing list of authorized securities shall be strictly interpreted. Any deviation from this list must be pre- approved by the Treasurer in writing. INVESTMENT DIVERSIFICATION The County shall diversify its investments to avoid incurring unreasonable risks inherent in over- investing in specific instruments, individual financial institutions, or maturities. Nevertheless, the asset allocation in the portfolio should be flexible depending upon the outlook for the economy, the securities market, and the County's anticipated cash flow needs. The County shall limit investments to a maximum percentage of the portfolio as follows: • Non - negotiable Certificates of Deposit: 25 %. Combined General Obligation and Revenue Obligation Debt: 25 %, 5% per issuer. Combined Commercial Paper and Banker's Acceptances: 50 %, 5% per issuer. INVESTMENT MATURITY AND LIQUIDITY Investments shall be limited to maturities not exceeding five years from the date of trade settlement unless otherwise approved in writing by the Treasurer. The maximum weighted average maturity for the portfolio shall be 2.5 years. The County's investable funds will be invested to meet cash flow projections. Core funds (those funds that the County will not need for expected, short -term liabilities) will be identified through cash flow projections so that they can be invested longer -term when market conditions are favorable for such strategies. In the case of callable securities, the first call date shall be used as the maturity date if, in the opinion of the Treasurer, there is little doubt that the security will be called on that call date. The final maturity date shall be used to disclose the maximum maturity liability in the County's financial reports. COMPETITIVE TRANSACTIONS III Page 5 With the exception of deposits, all investment transactions shall be conducted co petitively with authorized broker /dealers. At least three broker /dealers shall be III con acted for each transaction and their bid and offering prices shall be recorded. If t e County is offered a security for which there is no other readily available co petitive offering, then the Treasurer will document quotations for comparable or alternative securities. SELECTION OF BROKER /DEALERS ThelTreasurer shall maintain a list of broker /dealers approved for investment purposes, and firm$. it shall be the policy of the County to purchase securities only from those authorized To !fie eligible, a firm must meet at least one of the following criteria: 1. I be recognized as a Primary Dealer by the Federal Reserve Bank of New York or have a primary dealer within its holding company structure, 2. I report voluntarily to the Federal Reserve Bank of New York, or 3. Qualify under Securities and Exchange Commission (SEC) Rule 15c3 -1 (Uniform Net Capital Rule). The Treasurer will select broker /dealers on the basis of their expertise in public cash man gement and their ability to provide service to the County's account. Each auth rized firm shall be required to submit and annually update a County approved brok r /dealer Information Request Form that includes the firm's most recent financial statements. A list of authorized broker /dealers is included in Annex IV of this III Investment Policy. The County may purchase commercial paper from direct issuers even though they are not n the approved broker /dealer list as long as the commercial paper meets the criter a outlined in the Section, "Authorized Securities and Transactions" of this Inve ment Policy. SELECTION OF BANKS Bank shall be approved by written r esolution by the Board of County Commissioners to provide depository and other banking services for the County. To be eligible for autholrization, a bank must be a member of the FDIC and shall qualify as an eligible publid depository as defined in CRS 11- 10.5 -103. A list of approved banks is included in Anne V of this Investment Policy. SAFEKEEPING AND CUSTODY The Treasurer shall approve one or more banks to provide safekeeping and custodial services for the County. Custodian banks shall be selected on the basis of their ability to prot,ide service to the County's account and the competitive pricing of their services. A County approved custody agreement shall be executed with each custodian bank prior to utilizing that bank's safekeeping and custody services. To be eligible for • Page 6 • designation as the County's safekeeping and custodian bank, a financial institution shall • qualify as an eligible public depository as defined in CRS 11- 10.5 -103. The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery versus payment basis. Ownership of all securities shall be perfected in the name of the County. Sufficient evidence to title shall be consistent with modern investment, banking and commercial practices. All investment securities, except non - negotiable Certificates of Deposit, Local Government Investment Pools and Money Market Mutual Funds, purchased by the County will be delivered by either book entry or physical delivery and will be held in third - party safekeeping by the County approved custodian bank, its correspondent bank or the Depository Trust Company (DTC). All Fed wireable book entry securities owned by the County shall be evidenced by a safekeeping receipt or a customer confirmation issued to the County by the custodian bank stating that the securities are held in the Federal Reserve system in a Customer Account for the custodian bank which will name the County as "customer." All DTC eligible securities shall be held in the custodian bank's Depository Trust Company (DTC) participant account and the custodian bank shall issue a safekeeping receipt evidencing that the securities are held for the County as "customer." All non -book entry (physical delivery) securities shall be held by the custodian bank's correspondent bank and the custodian bank shall issue a safekeeping receipt to the • County evidencing that the securities are held by the correspondent bank for the County. The County's custodian will be required to furnish the County monthly reports of holdings of custodied securities as well as a report of monthly safekeeping activity. PERFORMANCE BENCHMARKS The investment and cash management portfolio shall be designed to attain a market rate of return throughout budgetary and economic cycles, taking into account prevailing market conditions, risk constraints for eligible securities, and cash flow requirements. Eagle County shall use a dynamic benchmark rate of return for the County's investment portfolio which corresponds to the yield for the current US Treasury security that matches the weighted average maturity of the portfolio. All fees involved with managing the portfolio should be included in the computation of the portfolio's rate of return. REPORTING Monthly, the Treasurer shall prepare a report listing the investments held by the County, the current market valuation of the investments and performance results. The report 1 • shall include a summary of investment earnings during the period. Portfolio reports Page 7 prepared for the County shall be compliant with all Governmental Accounting Standards Bo rd requirements. • POLICY REVISIONS Thi0 Investment Policy shall be reviewed annually and may be amended as conditions warjrant. Policy annexes may be updated by the Treasurer as necessary, provided the changes in no way affect the substance or intent of this Investment Policy. Eagle County, Colorado Investment Policy prepared by: kA-b&ti Karen L. Sheaffer, Treasure ) Eagle County, Colorado Appiroved as to legal form: 1 41 /I .� . ,I inf ,u Lrryan R, - eu County Attorne Eagle Cotinty, Colorado • Appiroved: Chairperson Eagle County Board of County Commissioners Date: • Page 8 f Annex 1 • Contributing Special Funds 1 The contributing special funds to the pooled investment portfolio that will be allocated proportionate investment income are: Offsite Road Improvement _ School Dedication Emergency 911 . E.V. Transportation E.V. Trails R.F. Transportation R.F. Trails Emergency Reserve Fund Transportation Vehicle Replacement Fund Open Space Fund Public Health Fund The following funds are restricted funds and are not included in the pooled investment portfolio: Alpine Bank Health Insurance Eagle County Reimbursement • Public Trustee Salary Accounts III Page 9 • Annex II • Authorized Personnel The following persons are authorized to transact investment business and wire funds for inv tment purposes on behalf of Eagle County, Colorado: Karen Sheaffer, Treasurer Mari Renzelman, Chief Deputy Treasurer • • Page 10 Annex 111 • Master Repurchase Agreement The following broker /dealers have an executed Master Repurchase Agreement on file with Eagle County, Colorado: Banc of America Securities, LLC Mizuho Securities USA Inc. Morgan Stanley DW, Inc. 111 0 Page 11 Annex IV • Approved Broker /Dealers Th following broker /dealers have been approved by Eagle County, Colorado. Banc of America Securities, LLC Citigroup Global Markets, Inc. J.P. Morgan Securities Inc. Merrill Lynch Mizuho Securities USA Inc. Morgan Stanley • Page 12 Annex V • Approved Banks and Savings and Loans The following depositories have been approved by Eagle County, Colorado. Alpine Bank American National Bank CoBiz Bank, NA Colorado Capital Bank Community Banks of Colorado FirstBank of Avon Millenium Bank U.S. Bank NA Wells Fargo Bank, NA • • • Page 13