August 16, 2005
SUBJECT: Investment and Cash Management Policy Update for Fiscal Year 2005/2006
REPORT IN BRIEF
The Redevelopment Agency’s Investment and Cash Management Policy requires that it be reviewed annually to ensure consistency with respect to the objectives of safety, liquidity, and yield and relevance to current laws and financial and economic trends. Section 53646(2) of the California Government Code also requires that the Redevelopment Agency’s Investment Policy be rendered annually to the Redevelopment Agency. A separate item came before the City Council for approval at tonight’s City Council meeting.
Staff is recommending no changes to the existing Investment Policy. The Redevelopment Agency’s Investment Policy has been reviewed and certified by the Association of Public Treasurers of the United States and Canada (APT US&C) since 1999 and staff will be submitting the Investment Policy for FY 2005/2006 (once approved by the Agency) to be re-certified.
BACKGROUND
In accordance with State law, the Redevelopment Agency adopted a policy governing investment of funds on July 30, 1985. This policy has been updated on an annual basis since that time.
EXISTING POLICY
The key provisions of the existing policy are as follows:
1. Safety of principal is the foremost objective of the investment program. Diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.
2. Liquidity- the portfolio will remain sufficiently liquid to enable the Redevelopment Agency to meet all operating requirements which might be reasonably anticipated.
3. Return on Investment-the portfolio will be maintained with the objectives of safety and liquidity first, and then the objective of obtaining a market rate of return throughout the budgetary and economic cycles, taking into account the Redevelopment Agency’s investment risk constraints and the cash flow characteristics of the portfolio.
DISCUSSION
Since City staff invests all City funds, including funds of the Redevelopment Agency, the report of compliance and portfolio performance for Redevelopment Agency funds was included in the report made earlier to the City Council.
Staff is recommending no changes to the existing Investment Policy. As previously mentioned, the Redevelopment Agency’s Investment Policy has been certified by the Association of Public Treasurer’s of the United States and Canada (APT US&C) beginning in 1999. This organization provides guidance and assistance in improving investment policies in the public sector and their program involves a review by at least three experts in the field, with certification that it meets their standards. Those jurisdictions which comply with APT US&C’s criteria are presented with the Association’s Written Investment Policy Certification. Once approved by the Redevelopment Agency, staff will be submitting the Investment Policy for FY 2005/2006 to be re-certified.
FISCAL IMPACT
There is no fiscal impact associated with adoption of the Investment and Cash Management Policy. Interest earnings for FY 2004/2005 for all City funds totaled $6.4 million.
Conclusion
State law and the Redevelopment Agency’s current Investment and Cash Management Policy require that the policy be reviewed annually to ensure consistency with respect to the objectives of safety, liquidity, and yield and relevance to current laws and financial and economic trends. Staff is recommending no changes to the Investment Policy.
PUBLIC CONTACT
Public Contact was made through posting of the agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s Office.
ALTERNATIVES
1. Adopt the attached Investment Policy as presented.
2. Adopt the attached Investment Policy with changes as proposed by the Redevelopment Agency.
RECOMMENDATION
It is recommended that the Redevelopment Agency adopt the attached Investment Policy for FY 2005/2006 as presented.
Prepared by:
Therese B. Balbo
Finance Manager
Reviewed by:
Mary J. Bradley
Agency Treasurer
Approved by:
Amy Chan
Executive Director
Attachments
Investment and Cash Management Policy for Fiscal Year 2005/2006 (.pdf format)