Fort Walton Beach Ordinance — 1894--Investment Policy-surplus funds — reading text

1894 rm AN ORDINANCE OF THE CITY OF FORT WALTON BEACH, FLORIDA, PROVIDING FOR THE INVESTMENT POLICY OF SURPLUS 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 The authority, for enactment of this ordinance is pursuant to Section 218.415( 16)( h) of the Florida Statutes. SECTION 2. PURPOSE The purpose of the City' s Investment Policy is to set forth the investment objectives and parameters for the management of the funds of the City of Fort Walton Beach. The Investment Policy is designed to ensure the prudent management of public funds, the availability of operating and capital funds when needed, and an investment return competitive with comparable benchmarks and financial market indices. The Investment Policy, Section IV, Authorized Investments, Maturity & Liquidity Requirements, and Portfolio Composition, Minimum Rating Requirement for Corporate Notes, is hereby amended to add the following language: Max 25% " BBB" with the remainder at least Single " A" by any NRSRO SECTION 3. APPLICABILITY The Investment Policy applies to all funds controlled by the City in excess of those required to meet current expenses, with the exception of pension funds and funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds. Additionally, any future revenues that have statutory investment requirements conflicting with the Investment Policy and funds held by state agencies are not subject to the provisions of the Investment Policy. SECTION 4. EFFECTIVE DATE This Ordinance shall take effect immediately upon appr al by the City Council. Z Mike Anderson, Mayor t: 26 Helen Spencer, Cit Clerk Additions are underlined; deletions are strrekz  City of Fort Walton Beach, FL INVESTMENT POLICY Table of Contents Page I. Pu rpose 2 II. Sco pe 2 III. Inv estment Objectives 3 IV. An thorized Investments, Maturity & Liquidity, and Portfolio Composition 3 V. Bi d Requirement 4 VI. Ris k and Diversification 5 VII. Ma ster Repurchase Agreement 6 VIII. De rivatives and Reverse Repurchase Agreements 6 IX. Per formance Measurements 6 X. Re porting 6 XI. Del egation of Authority 7 XII. Sta ndards of Prudence 7 XIII. Et hics and Conflicts of Interest 7 XIV. Int ernal Controls and Investment Procedures 7 XV. Co ntinuing Education 8 Ordinance 1875, Adopted January 8, 2013 Page 1 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY XVI. Au thorized Investment Advisors XVII. Au thorized Investment Institutions and Dealers XVIII. Th ird -Party Custodial Agreements Inv estment Policy Adoption ATTACHMENT A Review and Evaluation of Investment Advisor 10 ATTACHMENT .B Review and Evaluation of Portfolio Manager 11 ATTACHMENT C: Glossary of Investment Terms 12 ATTACHMENT D: Acknowledgement of Receipt of Current Investment Policy 25 Ordinance 1875, Adopted January 8, 2013 Page 2 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY I. PURPOSE The purpose of this Investment Policy ( hereinafter " Policy ") is to set forth the investment objectives and parameters for the management of the funds of the City of Fort Walton Beach, ( hereinafter " City"). This Policy is designed to ensure the prudent management of public funds, the availability of operating and capital funds when needed, and an investment return competitive with comparable benchmarks and financial market indices. II. SCOPE In accordance with Section 218. 415, Florida Statues, this Policy applies to all funds controlled by the City in excess of those required to meet current expenses, with the exception of pension funds and funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds and Beal Memorial Cemetery Perpetual Care funds. Additionally, any future revenues that have statutory investment requirements conflicting with this Policy and funds held by state agencies ( e. g. Department of Revenue) are not subject to the provisions of this Policy. Cash balances from all accounting funds are consolidated to maximize investment earnings. Investment income is allocated to each accounting fund based on the fund' s respective participation and in accordance with generally accepted accounting principles. The City could have four portfolios of investments. Each portfolio must be benchmarked, and may consist of subsidiary portfolios. Portfolios may be managed internally by City staff or externally by Investment Advisor(s). A. Liquidity Portfolio ( 0 — 60 Days Effective Duration) Minimal principal volatility - provides highest degree of principal protection Objective is to provide liquidity (constant NAV) for daily liquidity needs as well as an appropriate cushion B. Enhanced Cash Portfolio ( 60 Days — 13 Months Effective Duration) Longer duration may result in principal ( price) volatility Objective is to improve returns while still meeting the primary goals of safety of principal and liquidity Incremental risk is very low compared to increase in return C. Intermediate -Term Portfolio ( 1 — 5 Years Effective Duration) Longer duration results in higher principal ( price) volatility. Objective is to maintain and enhance the real purchasing power of the principal while limiting exposure to risk of loss. Greater short- term volatility in this portfolio is to be expected and accepted in exchange for the opportunity to seek growth of principal over time. D. Long -Term Portfolio ( 3 — 5 Years Effective Duration) Longer duration results in higher principal (price) volatility. Objective is to maintain and enhance the real purchasing power of the principal while limiting exposure to risk of loss. Greater short- term volatility in this portfolio is to be expected and accepted in exchange for the opportunity to seek growth of principal over time. The City anticipates that emergencies may arise and with the guidance of the Investment Advisor(s) will develop a strategy that complements the overall investment portfolios regarding reserves and emergency funds. Ordinance 1875, Adopted January 8, 2013 Page 3 of 25  City of Fort Walton Beach, FL INVESTMENT POLICY III. INVESTMENT OBJECTIVES The primary objectives, in order of importance, of the City of Fort Walton Beach' s investment policy are: Safety of Principal The foremost objective of this investment policy is the safety of the principal of the funds within the portfolios. Investment transactions shall seek capital preservation and keep capital losses at a minimum, whether they are from securities defaults or erosion of market value. To attain this objective, 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 of Funds The portfolios shall be managed in such a manner that funds are available to meet reasonably anticipated cash flow requirements in an orderly manner. Periodic cash flow analyses will be completed in order to ensure that the portfolios are positioned to provide sufficient liquidity for budgeted operating and capital needs. Details regarding the City' s budget and spending plan will be updated annually. 3. Investment Income The portfolios shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of least importance compared to the safety of principal and liquidity objectives described above. However, return is attempted through active management where the Portfolio Manager utilizes a total return strategy ( which includes both realized and unrealized gains and losses in the portfolio). This total return strategy seeks to increase the value of the portfolio through reinvestment of income and capital gains. The core of investments is limited to relatively low risk securities in anticipation of earning a fair