Fort Walton Beach Ordinance — 1876--beal cemetery perpetual fund — reading text

F1, " AD, CC ! orcrc l ORDINANCE 1876 z— AN ORDINANCE OF THE CITY OF FORT WALTON BEACH, FLORIDA, PROVIDING FOR THE INVESTMENT POLICY OF BEAL MEMORIAL CEMETERY PERPETUAL CARE FUNDS; AND PROVIDING AN EFFECTIVE DATE NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FORT WALTON BEACH, FLORIDA AS FOLLOWS: SECTION 1. AUTHORITY & INTENT Ordinance 526 provides that twenty percent ( 20 %) of all cemetery lots sold shall be set aside to establish a permanent maintenance fund. SECTION 2. PURPOSE The purpose of the Beal Memorial Cemetery Perpetual Care Fund Investment Policy is to set forth the investment objectives and parameters for the management of the permanent maintenance fund. The Investment Policy is designed to ensure the prudent management of cemetery funds, an investment return competitive with comparable benchmarks and financial market indices, and the availability of operating and capital funds when needed. SECTION 3. APPLICABILITY The Investment Policy applies to all funds controlled by the City for the maintenance of the Beal Memorial Cemetery in perpetuity after all cemetery lots are sold. SECTION 4. EFFECTIVE DATE This Ordinance shall take effect immediately upon ap rov by the City Council. Mikt7Xriderson, Mayor Attest: Approved for form, le Ps nc Helen en Spencer, ly Clerk Rayw d Dykes, Jr. i Attorney Additions are underlined; deletions Are sa i^',° p' s  City of Fort Walton Beach, FL BEAL MEMORIAL CEMETERY INVESTMENT POLICY To the extent possible, an attempt will be made to match investment maturities with known cash needs and anticipated cash flow requirements. The portfolio should be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. Asset Allocation To achieve the greatest likelihood of meeting the Fund' s investment objectives and the best balance between risk and return for optimal diversification, the Fund should allocate assets into two broad classes: Investment Assets and Liquidity Assets. The Investment Assets will be invested in accordance with the targets identified for each asset class to achieve an average total annual rate of return that is equal to or greater than comparable benchmarks. The Liquidity Assets will be held and used to pay operations and maintenance ( not applicable until all lots are sold). The following matrix identifies the portfolio investment allocation limits based on asset class, as established by the City. The asset weighting is calculated based on the market value of each investment. The Finance Director or Investment Advisors) shall have the option to further restrict investment allocations from time to time based on market conditions, risk, and diversification investment strategies. INVESTMENT ASSETS Asset Weighting Asset Class Rance Target 0 % - 50% 42% Domestic Equity 017, - 10% 8% International Equity Real Estate Investment Trusts 0%_ 10 % 5% Inflation Hedge 0 %- 107C 3% Fixed Income 35% - 100% 40% Cash Equivalent 2 % - 5% 2% Domestic Equity —No more than 5% of the total equity portfolio valued at market may be invested in the equity of any one corporation, ownership of the shares of one company shall not exceed 2% of those outstanding, and not more than 25% of equity valued at market may be held in any one sector, as defined by the Industry Classification Benchmark universe database. Other than these constraints, there are no quantitative guidelines as to issues, industry or individual security diversification. However, pmdent diversification standards should be developed and maintained by the Portfolio Manager. International Egwa — No more than 5% of the total equity portfolio valued at market may be invested in the common equity of any one corporation, ownership of the shares of one company shall not exceed 2% of those outstanding, and not more than 25% of equity valued at market may be held in any one sector, as defined by the Industry Classification Benchmark universe database. The overall non -U. S. equity allocation should include a diverse global mix that is comprised of the equity of companies from multiple regions and sectors. Real Estate Investment Trust — Real estate assets will be held only in diversified investments, primarily Real Estate Investment Trusts and servicing companies. Inflation Hedge — Inflation hedging assets will include only investments holding among other assets: Treasury Inflation Protected Securities ( " TIPS "), commodities or commodity derivative contracts, index -linked derivative contracts, or the equity of companies in generally accepted businesses believed to hedge inflation. Fixed Income — Diversified fixed income will be the fundamental basis for the Fund. Fixed income investments shall be high quality with a preponderance of the investments in ( 1) U. S. Treasury, federal agencies and U.S. Government guaranteed obligations, ( 2) corporate issues including convertibles, and ( 3) sovereign and corporate debt of foreign countries. Fixed income securities of any one issuer shall not exceed 5% of a total bond portfolio at time of purchase. The 5% limitation does not apply to issues of the U. S. Treasury or other Federal Agencies. The overall rating of the fixed income assets shall be at least investment grade based on the rating of two of the three Nationally Recognized Statistical Rating Organizations ( NRSRO) ( Moody' s Investor Service, Standard & Page 3 of 12 ONinance 1896, Adopted Mesh 12, 2013  City of Fort Walton Beach, FL BEAL MEMORIAL CEMETERY INVESTMENT Poor' s, and Fitch Ratings). In cases where the yield spread adequately compensates for additional risk, high yield or emerging market debt securities can be purchased. Cash Equivalent — Cash equivalents shall be held in funds complying with Rule 2( a) -7 of the Investment Company Act of 1940. Prohibited Investments Investments not listed in this Policy are prohibited. Except for purchase within authorized Investment Assets, securities having the following characteristics are not authorized and shall not be purchased: letter stock and other unregistered securities, commodities or commodity contracts where the Fund is a eounlerparty, short sales, margin transactions, private placements ( with the exception of Rule 144A securities), venture capital funds, private equity, or hedge funds. Further, derivatives, options, futures, or any other investment for the sole purpose of direct portfolio leveraging are prohibited. Direct ownership of real estate, natural resource properties such as oil, gas or timber and the purchase of collectibles is also prohibited. Illiquid investments for which a generally recognized market is not available or for which there is no consistent or generally accepted pricing mechanism are prohibited. Portfolio investments designed to hedge various risks including volatility risk, interest rate risk, etc. are allowed to the extent that the investments do not create direct portfolio leverage. One example of a hedge vehicle is an exchange traded fund ( "ETF') which takes short positions. V. BID REQUIREMENT After the Finance Director and Investment Advisor(s) have determined the approximate maturity date based on cash Bow needs and market conditions and have analyzed and selected one or more optimal types of investments, the security in question must be competitively bid when feasible and appropriate. Except as otherwise required by law, the most economically advantageous bid must be selected. However, if obtaining bids /offers is not feasible and appropriate, securities may be purchased utilizing the comparison to current market price method on an exception basis. Acceptable current market price providers include, but are not limited to: A. Telerate Information System B. Bloomberg Information Systems C. Wall Street Journal or a comparable nationally recognized financial publication providing daily market pricing D. Daily market pricing provided by the City' s custodian or the correspondent institution The Finance Director or the Investment Advisor( s) shall utilize the competitive bid process to select the securities to be purchased or sold. Selection by comparison to a current market price, as indicated above, shall only be utilized when, in judgment of the Finance Director or the Investment Advisor( s), competitive bidding would inhibit the selection process. Examples of when this method may be used include: A. Time constraints due to unusual circumstances preclude the competitive bidding process B. No active market exists for the issue being traded due to the age or depth of the issue C. A security is unique to a single dealer, for example, a private placement Ps, 4 of 12 Onimse ca 1876, Ad,,, d March 12, 2013  City of Fort Walton Beach, FL BEAL MEMORIAL CEMETERY INVESTMENT POLICY D. The transaction involves new issues or issues in the " when issued" market Overnight sweep investments or repurchase agreements will not be bid, but may be placed with the City' s depository bank relating to the demand account for which the sweep investments or repurchase agreement was purchased. VI. RISK AND DIVERSIFICATION The Fund recognizes the strategic importance of asset allocation and style diversification in investment performance over long periods of time. Asset allocation and diversification is the fundamental strategy adopted by the Fund to ensure risk versus reward in regards to standard deviation. Investments should be diversified to the extent practicable to control the risk of loss resulting from overconcentmtion of assets in a specific maturity, issuer, instrument, asset class, geography, investment style, dealer, or bank through which financial instruments are bought and sold. Investment risk can result from issuer defaults, market price changes, and changes in credit ratings, reinvestment of principal or interest, duration, or various technical complications leading to illiquidity. The Fund will be managed in a style that seeks to minimize principal fluctuations over the established investment horizon and that is consistent with the Fund' s investment objectives. Vll. REBALANCING The asset allocation range established by this Policy represents a long -term perspective and uses a strategic approach ( periodically rebalancing the portfolio in order to maintain the long -term asset allocation goal) to maintain consistency over time. However, a tactical