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HomeMy WebLinkAboutResolution 2004 (25) RESOLUTION TO ADOPT THE ST. CROIX COUNTY INVESTMENT POLICY RESOLUTION NO. S C ab0~~ St. Croix County, Wisconsin WHEREAS, Wisconsin Statutes §59.62 and §66.0603(2) directs that a county board may delegate the authority to invest county funds that are not immediately needed to any officer or employee of the county, and WHEREAS, by previous resolution (24-82), the County Finance Committee was delegated the joint responsibility with the County Treasurer for investment of County funds; and WHEREAS, the Finance Committee recommends a new policy, the St. Croix County Investment Policy, that delegates responsibility for investing County funds to the Finance Director (a copy of the new policy is attached). THEREFORE, be it resolved by the St. Croix County Board of Supervisors that the St. Croix County Investment Policy, as attached, is hereby adopted by the County Board, effective upon adoption. Offered by the Finance Committee on August 17, 2004. NEGATIVE AFFIRMATIVE /P J- Reviewed by Corporation Counsel: Date: 16 q This resolution was duly adopted by the St. Croix County Board of Supervisors on August 17, - 2004. Cindy Camp 11, ounty Clerk St. Croix County Investment Policy It is the policy of the St. Croix County to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the entity and conforming to all federal and state statutes governing the investment of public funds. 1.0 Scope: This investment policy applies to all financial assets of St. Croix County. These funds are accounted for in St. Croix County's Comprehensive Annual Financial Report and include: Funds: • General Fund • Special Revenue Funds • Capital Project Funds • Debt Services Funds • Enterprise Funds • Internal Services Funds • Trust and Agency Funds • Any new fund created by the Board of Supervisors, unless specifically exempted I 2.0 Prudence: Investments-shall be made with- judgment-and-care, under- circumstances-existing-at the time the investment is made, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The standard of prudence to be used by investment officials shall be the "prudent person rule" standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal liability for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. Those with access to and responsibility for County investments management must comply with investment procedures developed by the Finance Department. 3.0 Objective: The primary objectives, in priority order, of St. Croix County's investment activities shall be: A. Safety - Safety of principal is the foremost objective of the investment program. Investments of St. Croix County shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, St. Croix County will diversify its investments by investing funds among a variety of securities and financial institutions offering independent returns. Revised 8/10/04 Page 1 of 7 St. Croix County Investment Policy B. Liquidity - St. Croix County's investment portfolio will remain sufficiently liquid to enable St. Croix County to meet all operating requirements that might be reasonably anticipated. C. Return on Investments - St. Croix County's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, commensurate with the County's investment risk constraints and the cash flow characteristics of its portfolio. 4.0 Delegation of Authority: Authority to manage St. Croix County's investment program is granted to the Finance Director and derived from Wisconsin Statute 66.0603 regarding Investments. The Finance .Director shall act in accordance with established written procedures and internal controls for the operation of the investment program consistent with this investment policy. Procedures should include references to: safekeeping, delivery vs. payment, investment accounting, repurchase agreements, wire transfer agreements, and collateral/depository agreements. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Director. The Finance Director shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinates. 5.0 Ethics and Conflicts of Interest: Officers and employees involved in the investment process shall refrain from conducting personal business activity that could conflict with proper execution and management of the investment program, or that could impair their ability to make impartial decisions. The Finance Director and subordinates shall disclose to the Administrative Coordinator any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. The employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of St. Croix County. 6.0 Finance Committee The Finance Director shall report quarterly to the Finance Committee the performance of investments and review the investment strategy. 7.0 Authorized Financial Institutions: No St. Croix County deposit shall be made except in a qualified public depository as established by state laws. 8.0 Investment Advisor Services The Finance Director may enter into a contract with one or more investment advisor only upon the approval of the Finance Committee. The selection of an investment advisor will be based on the utilization of Requests for Proposal and interviews with at least one member of the Finance Committee on the interview team. Revised 8/10/04 Page 2 of 7 St. Croix County Investment Policy 9.0 Authorized & Suitable Investments: Minimal risk tolerance with long-term expectations for each asset classification will guide the strategic decisions regarding individual purchases and overall portfolio structure. St. Croix County is empowered to invest in certain types of securities by Wis. Statute 66.0603. These include: 1. Time deposits in any credit union, bank, savings bank, trust company or savings and loan association that is authorized to transact business in this state if the time deposits mature in not more than 3 years. 2. Repurchase agreements that are fully collateralized by bonds or securities. 3. Bonds or securities issued or guaranteed as to principal and interest by the federal government, or by a commission, board or other instrumentality of the federal government. 4. Bonds or securities of any county, city, drainage district, technical college district, village, town or school district of this state. . 5. Securities of a no-load investment trust with a portfolio limited to consisting of the following: • Bonds and securities issued by the federal government or a commission, board or other instrumentality of the federal government. • Bonds that are guaranteed as to principal and interest by the federal government or a commission, board or other instrumentality of the federal government. • Repurchase agreements that are fully collateralized by bonds or securities. 6. The State of Wisconsin Local Government Investment Pool and other states' managed local government investment pools (LGIPs). LGIPs other than the State of Wisconsin's should have a thorough investigation of the pool/fund prior to investing, and on a continual basis. 10.0 Collateralization: Collatera.lization will be required on two types of investments: certificates of deposit and repurchase (and reverse) agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 110% of market value of principal and accrued interest. St. Croix County chooses to limit collateral to the following U.S. government securities: • Treasury Bills • Treasury Notes • Treasury Bonds • Federal National Mortgage Association • Federal Credit Agencies such as the Federal Home Loan Bank, the Federal Farm Credit Bank, the Federal Home Loan Mortgage Corporation and the Student Loan Marketing Association • Mortgage Backed Securities • Government National Mortgage Association Revised 8/10/04 Page 3 of 7 St. Croix County Investment Policy Collateral will always be held by an independent third party with whom St. Croix County has a.current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to St. Croix County and retained. Collateralization shall be in the form of specific securities held for the County. The only exceptions are Federal Depository Insurance Corporation (FDIC), Securities Investor Protection Corporation (SIPC) and pre-approved insurance coverage. The County may collateralize its repurchase agreements using longer-dated investments not to exceed 5 years to maturity. The right of collateral substitution is granted. 11.0 Safekeeping .and Custody: - All security transactions, including collateral for repurchase agreements, entered into by St. Croix County shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third party custodian designated by the Treasurer and evidenced by safekeeping receipts. 12.0 Diversification: St. Croix County will diversify its investments by security type and institution. With the exception of U.S. Treasury securities and authorized pools, no more than 50% of the St. Croix. County total investment portfolio will be invested in a single security type or with a single financial institution. St. Croix County will make all reasonable efforts to place appropriate and competitive investments within institutions in St. Croix County. 13.0 Maximum Maturities: To the extent possible, St. Croix County will attempt to match its investments with anticipated cash flow liquidity requirements. Unless matched to a specific cash flow, St. Croix County will not directly invest in securities maturing more than 3 years from the date of purchase. However, St. Croix County may collateralize its repurchase agreements using longer-dated investments not to exceed 5 years to maturity and under terms outlined in a master repurchase agreement.- Reserve funds may be invested in securities exceeding 5 years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds. In no event will the County invest in securities with maturities exceeding 7 years. Because of the inherent difficulties in accurately forecasting cash flow requirements, a portion of the portfolio should be continuously invested in readily available funds such as LGIPs, money market funds or overnight repurchase agreements to ensure that appropriate liquidity is maintained to meet ongoing obligations. 14.0 Internal Control: The Finance Director is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of St. Croix County are protected from loss, theft or misuse. An internal control structure shall be designed to provide reasonable assurance that these objectives are met. 15.0 Performance Standards: The investment portfolio shall be designed with the objective of obtaining a rate of return Revised 8/10/04 Page 4 of 7 - St. Croix County Investment Policy during budgetary and economic cycles, commensurate with St. Croix County's investment risk constraints and cash flow needs. The County will always maximize the E amount of its cash fiends earning interest. The County's accounting system will provide I> monthly information concerning cash position, investment performance and percentage of the portfolio that is invested in: • Short term - less than one year • Medium term - one to two years • Long term - two to four years r< • Maximum term - longer than four years 16.0 Reporting: The Finance Director shall provide the Finance Committee quarterly investment reports that provide a clear picture of the status of the current investment portfolio. The management report should include comments on the fixed income markets and economic conditions, discussions regarding restrictions on percentage of investment by categories, possible changes in the portfolio structure going forward and thoughts on investment strategies, the name of any broker agent, investment hold period, discounts or premiums interest earned, yield, safekeeping agent and other information as requested by the Finance Committee. r I i Schedules in the quarterly report should include the following: • A listing of individual securities held at the end of the reporting period by authorized • Investment category • Average life and final maturity of all investments listed • Coupon, discount or earnings rate • Par value, Amortized Book Value and Market Value • Percentage of the Portfolio represented by each investment category 17.0 Investment Policy Adoption: St. Croix County's investment policy shall be adopted by resolution of the St. Croix County Board of Supervisors. The Finance Committee shall review the policy annually . and the County Board must approve any modifications made thereto. 18.0 Glossary: Because this policy is to be available to the public as well as the governing body, it is important that a glossary of related terminology be part of the policy. CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CD's are typically negotiable. COLLATERAL: Securities, evidence of deposit or other property that a borrower pledges j to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for St. Croix County. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting Revised 8/10/04 Page 5 of 7 I i St. Croix County Investment Policy schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits, currently up to $100,000 per deposit. FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank. FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 193 8. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owneA corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNNIA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FmHA mortgages. The term "pass- throughs" is often used to describe Ginnie Maes. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, Revised 8/10/04 Page 6 of 7 I St. Croix County Investment Policy among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the sellerborrower. PRUDENT PERSON RULE: An investment standard that states the trustee may invest in a security if it is one that would be bought by a prudent person of discretion and intelligence who is seeking preservation of capital and a reasonable income. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money, that is, increasing bank reserves. SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months; or one year. TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years. TREASURY NOTES: Medium-term coupon-bearing U.S. Treas-T securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years. i Revised 8/10/04 Page 7 of 7