Fort Walton Beach Council agenda — 03-12-13--regular — reading text

words underlined are add  13. 1 City Council of Fort Walton Beach FINANCE MEMORANDUM To: Michael D. Beedie, City Manager From: Charlotte Dunworth, Budget and Grants Manager Date: March 12, 2013 Subject: 1876 - Cemetery Investment Policy (2nd reading) 1. BACKGROUND 1. 1. Ordinance 526 provides that twenty percent (20 %) of all cemetery lots sold shall beset aside to establish a permanent maintenance fund. 1. 2. These funds are currently commingled with the City's surplus funds, primarily in short- term investments. 2. DISCUSSION: 2. 1. Approximately half of the cemetery lots remain unsold, so perpetual care funds will not be needed for another 30 -50 years. Given this long -term investment horizon, it would be more prudent to segregate these funds and invest them in a manner focusing on long- term growth of assets rather than liquidity. 2. 2. Since the proposed investment policy permits investments beyond those specifically authorized in the Florida Statutes, the investment policy must be adopted by ordinance. 2. 3. Morgan Stanley Smith Barney Consulting Group ( MSSB) has been retained to manage these assets. 2. 4. Comparison of investment returns achieved by MSSB to appropriate benchmarks and investment objectives will be used to determine the level of value achieved from outsourcing this investment function. 3. RECOMMENDATION: 3. 1. Staff respectfully recommends City Council adoption of Ordinance No. 1876 to establish the Beal Memorial Cemetery Perpetual Care Fund' s Investment Policy. ATTACHMENTS: PDF) 2 -26 -13 Cemetery Investment Policy CC appv 2 -26 -13 ( 2) ( HISTORN': 02126' 13 City Council FIRST READING Next: 03/ 12/ 13 The City Attorney read the ordinance by title on first reading. Brandy Ferris, Finance Director, stated Ord. 1876 establishes the Beal Memorial Cemetery Perpetual Care Fund' s Investment Policy, whose purpose is to set forth the investment objectives for the management of the permanent maintenance fund. Dr. gossom moved to adopt Ord. 1876 on first reading. Mr. Rynearson seconded motion and it carried unanimously. Page I DOC 1D - 2129 A Packet P9.-  13 .1 ORDINANCE 1876 SIGNATURE BLOCK: Charlotte Dunworth Completed 12/ 19/ 2012 10: 48 AM Finance Completed 12/ 21/ 2012 8: 45 AM Completed 12/ 21/ 2012 10: 32 AM City Attorney Carole Jones Completed 12/ 21/ 2012 10: 39 AM Completed 01/ 02/ 2013 8: 24 AM City Manager City Council Completed 02/ 27/ 2013 3: 22 PM  13. 1 ORDINANCE 1876 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 approval by the City Council. Mike Anderson, Mayor Attest Approved for form, legal sufficiency Helen Spencer, City Clerk Hayward Dykes, Jr., City Attorney Additions are underlined; delptieas are qtF;eken*.  F13 1.. a City of Fort Walton Beach, FL BEAL MEMORIAL CEMETERY INVESTMENT POLICY Table of Contents Page 2 I. Purpose 2 11. Scope 2 III. Investment Objectives 2 IV. Authorized Investments, Maturity & Liquidity, and Portfolio Composition 4 V. Bid Requirement 5 Vt. Risk and Diversification 5 VII. Rebalancing Master Repurchase Agreement 5 VIII. Performance Measurements and Expected Rate of Return 5 IX. 6 X. Reporting 6 XI. Delegation of Authority XII. Standards of Prudence 6 Ethics and Conflicts of Interest 7 XIII. 7 XIV. Internal Controls and Investment Procedures 7 XV. Continuing Education Authorized Investment Advisors 7 XVI. S XVIL Authorized Portfolio Managers 8 XVIII. Third -Party Custodial Agreements 9 XIX. Voting of Proxies 9 XX. Investment Policy Adoption 10 ATTACHMENT A Review and Evaluation of Investment Advisor II ATTACHMENT B Review and Evaluation of Portfolio Manager 12 ATTACHMENT C: Acknowledgement of Receipt of Current Investment Policy P': Ocdm., n 1876, Ad,, vd March 12, 2013  F13 .1. a City of Fort Walton Beach, FL BEAL MEMORIAL CEMETERY INVESTMENT POLICY L PURPOSE The purpose of this Investment Policy ( hereinafter " Policy ") is to set forth the investment objectives and parameters for the management of the City of Fort Walton Beach Beal Memorial Cemetery Perpetual Care Fund hereinafter ` Fund "). This 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. H. SCOPE In accordance with Ordinance 526, this 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 Twenty percent (20 %) of cemetery lot sales is transferred annually to the Beal Memorial Cemetery Perpetual Care Fund. Current personnel, operating, and capital expenses are paid from current revenues ( e. g. the remaining 80% of lot sales). III. INVESTMENT OBJECTIVES The primary investment objective of the Fund is to achieve long -term growth of assets by maximizing long -term rate of return on investments and minimizing the risk of loss to fulfill the Fund' s current and long -term obligations. Investment objectives include: m r I. Invest assets in a manner consistent with the following fiduciary standards: ( a) all transactions undertaken must be for the sole interest of the Fund, and ( b) assets are to be diversified in order to minimize the impact of large losses from individual investments. 2. Conserve and enhance the value of assets in real terms through asset appreciation and income generation, while maintaining a reasonable investment risk profile. 3. Provide for funding and anticipated withdrawals on an as needed basis as well as reasonable expenses of operation of the cemetery in perpetuity after all lots have been sold. 4. Minimize principal fluctuations over the Investment Horizon ( as defined below). IV. AUTHORIZED INVESTMENTS, MATURITY & LIQUIDITY REQUIREMENTS, AND PORTFOLIO COMPOSITION Investment Horizon The Fund' s investment objectives are based on a 30 -year investment horizon, Interim fluctuations should be viewed with appropriate perspective. A long -term investment horizon has been adopted such that the risks and duration of investment losses are carefully weighed against the long -term potential for