Title
Staff Report for a City of San Leandro City Council Resolution Approving the City of San Leandro’s Investment Policy Statement for Fiscal Year 2021-2022
Staffreport
SUMMARY AND RECOMMENDATION
Staff recommends that the City Council approve the City of San Leandro Investment Policy Statement for Fiscal Year (FY) 2021-2022. The policy statement is approved annually.
BACKGROUND AND UPDATE
California Government Code Section 53600 et seq. and Section VIII of the San Leandro Investment Policy Statement requires the City Council to annually review and approve the City’s Investment Policy Statement. The policy was last approved on July 20, 2020.
Sound investment practices are facilitated by the written governing policy. The City’s Investment Policy Statement includes the primary objective of preserving the safety of principle, followed by objectives of meeting liquidity needs, and obtaining a fair rate of return. Return on investment is the least important criteria compared to the safety and liquidity of the City’s assets. Additionally, investments can be made bearing in mind the responsibility of city government to the community and alternative investments which enhance the quality of life.
The City’s Investment Policy Statement provides specific guidelines for the City’s investment functions and complies with the model policy approved by the Association of Public Treasurers of the United States and Canada, and the California Government Code. The Investment Policy Statement serves as a guide for setting and achieving investment objectives, defines rules and established benchmarks, and prohibits and/or restricts certain investment instruments. Compliance with the policy is an element of fiscal discipline considered by the auditors and ratings agencies during their respective reviews.
Other Investment Policy Statement provisions significantly guiding the portfolio makeup include:
• Listing of investment instruments permitted in the portfolio;
• A remaining term to maturity of five-years or less at security acquisition; and
• Yield comparisons for portfolio investment performance including LAIF (Local Agency Investment Fund), two-year Treasury Bills, and five-year Treasury Notes.
Staff proposes to add a new section (Section IX) to the Investment Policy Statement regarding prohibited investment vehicles and practices. The changes reflect the new guidelines issued by the state and are consistent with best practices. Finance staff makes this recommendation following a review by Chandler Asset Management.
Section IX. - Prohibited Investment Vehicles and Practices
• State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to futures and options.
• In accordance with Government Code Section 53601.6, investment in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited.
• Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. Under a provision sunsetting on January 1, 2026, securities backed by the U.S. Government that could result in a zero- or negative-interest accrual if held to maturity are permitted.
• Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited.
• Purchasing or selling securities on margin is prohibited.
• The use of reverse repurchase agreements, securities lending, or any other form of borrowing or leverage is prohibited.
• The purchase of foreign currency denominated securities is prohibited.
• Agencies that are not Qualified Institutional Buyers (QIB) as defined by the Securities and Exchange Commission are prohibited from purchasing Private Placement Securities. The SEC defines a QIB as having at least $100,000,000 in securities owned and invested.
Committee Action(s)
The FY 2021-2022 Investment Policy was reviewed by the Finance Committee on April 6, 2021.
Previous City Council Action(s)
The Investment Policy is reviewed annually and was last reviewed by the City Council on July 20, 2020.
ATTACHMENT:
• City of San Leandro FY 2021-2022 Investment Policy
PREPARED BY
Susan Hsieh, Finance Director