HomeMy WebLinkAboutRESOLUTION 1984-146yr- ~---
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Suggested by: Administration
CITY OF KENAI
RESOLUTION N0. 84-146
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA,
ESTABLISHING INVESTMENT POLICIES FOR CITY MONIES.
WHEREAS, Section 5-5 of the City Charter authorizes the City
Council to regulate investment of City monies, and
WHEREAS, the City has not established a policy regarding which
types of investments are proper for City monies, and
WHEREAS, the City's current policy regarding collateral for
investments is inadequate and does not protect the City against
loss due to default.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CI1Y OF
KENAI, ALASKA, that Resolutions No. 80-135 and 82-133 be
rescinded and that the following policies be established for the
investment of City monies:
1. General Investment Policy: Investments shall be made
with judgment and care, under circumstances then prevailing,
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. Of primary
importance is safety of capital, with yield being a secondary
consideration. Each investment transaction shall seek to avoid
capital losses from securities defaults or erosion of market
value. The City will hold the City's investment manager harmless
with .regard to losses on investment transactions undertaken in
accordance with these investment policies.
2. Objective: The City's investment objective is to attain
market-average rates of return consistent with the risk tolerated
within the general investment policy.
3. Authority: The Finance Director is the City official
responsible for investment transactions.
4. Eligible Monies: All monies in all funds are eligible
for investment.
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5. Eligible Investments: Investments shall be restricted
to the following:
a) Bonds, bills, notes, or other obligations of the United
States or an agency or instrumentality of the United States.
b) Certificates of Deposit, savings accounts, and other
interest-earning deposit accounts of financial institutions
with offices in Alaska whose operations for the two most
recent fiscal years have resulted in a profit. Financial
institutions shall be restricted to:
[i] a bank which is a member of the Federal Deposit
Insurance Corporation;
[ii] a savings and loan association which is a member
of the Federal Savings and loan Insurance Corporation,
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[iii] a credit union whose deposits are insured by the
National Credit Union Administration.
c) Repurchase agreements against eligible collateral.
6. Investments Placed with: Investments may be placed with
or through financial institutions, security brokers, and security
dealers with offices in Alaska.
7. Maturities: Investments shall have maturities, measured
from the date of purchase, that do not exceed two years, except
for investments that shall be put to specific uses (such as
defeasance of debt or establishment of a sinking fund) where the
matching of maturity to the use is most important.
8. Collateralization: Collateral is required for all
investments other than bonds, bills, notes, or other obligations
of the United States or an agency or instrumentality of the
United States. The market value of collateral must be maintained
during the life of the investment at a level equal to or greater
than the amount of the investment. All collateral securities
must be delivered to, and held by, a third party trustee (bank or
other financial institution). An undivided interest in the
securities pledged as collateral must be granted to the City.
Eligible security for collateralization shall be limited to
bonds, bills, notes, or other obligations of the United States,
or an agency or instrumentality of the United States.
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PASSED BY THE COUNCIL OF iNE CIiY OF KENAI, ALASKA, this 5th day
of December, 1984. ~
TOM WAGONE , MAYOR
ATTEST:
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J e he an, City C erk
Approved by Finance: Z°Q
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CITY QF lCENA!
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210FIDAUiO KENAI,ALASKA pp811
-' TELEPHONE 283 - 7538
MEMO T0: Renai City Council
FROM: Charles A. Brown, Finance Director
SUBJECT: Investments
DATE: November 27, 1984
' I have drafted a resolution establishing investment policies for the
City. That resolution is scheduled t_o be on the December 5, 1984
Council Agenda. Tha City's current policy regarding investments is
based upon the City Charter (Section 5-5), Resolution No. 80-135, and
Resolution No. 82-133, all of which are attached.
generally, I see the following problems with the current policy:
1) It is not specific. Section 5-5 of the Charter says the City
can imrest in debts of the U.S. Govermnent, all States, and
City's and Boroughs in Alaska, plus "such other securities
as may be authorized by law". Common "other securities"
would generally include certificates of deposits (C.D's) and
repurchase agreements (repo's) from banks. In fact, the City
has invested in these. The authority for this seems weak.
Resolution No. 80-I35 designates Alaska banks as
depositories, but does not specify the instrument.
2) Our collateral policy is very bad (see Resolution No. 82-133).
The current policy says a bank may put up a State or Municipal
bond as collateral, at par. The problem here is that par
value may not even approach market value. For instance, a
recent Wall Street Journal shows that the bid price for Valdez
(Sohio) bonds is 62; maturity is 2007. This means that we
could purchase a C.D. for $1,000,000 from a bank. They could
then buy $1,000,000 par value of Valdez bonds (this ie only
an example-Valdez may be better than most), which would cost
the bank only $520,000 and pledge the bonds as collateral.
In case of a default, all the City would have for recurity is
$620,000; we'd stand to lose $380,000. This scenario is not
unrealistic. It is happening right now, and there have been
many bank failures across the country in recent years.
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What the Council should decide is what is the most important feature
of a City investment. Is it preF.ervation of capital, or is it high
yield? I have written the resolution with the belief that a_..Y loss
of capital is unacceptable, both from a fiduciary/public trust
standpoint, and from a political standpoint. I can easily justify
trading yield for safety, but it would be very difficult to explain a
lose of capital (or to put it mare sianply, I like my job).
The resolution would allow the City to invest in U.S. Government
securities or C. D's and repo's secured with U.S. Government securities.
This is a very conservative policy. However, the trade-off of lost
yield for safety is probably not near what you might guess. I have
found that the City can often obtain a higher yield by the direct
purchase of U.S. Treasury bills than by purchasing a bank C.D. through
competitive bids. This is not the way it's supposed to work, but it
does in fact happen that way much of the time.
I also recommend that, in general, maturities of investments be
limited to two years. This is to protect the City against market
value losses that might arise due to rising interest rates.
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Section -~- ;:ci:•: c_
accc;::lts _ _ ~ - racor~s. ;,11 records a::c
cever..:;ent, e:.-=__ _-,~-~~, _ .. at, or a~encf o~ tae tit!
"•:S ~.: 1 ACC'::' '+~= ~1SC1o57.1_ r
s•:hica :tou13 te.._ -- ~ .. ,.. .~e.. - the re c~
" ` ;:a=ear ,.: e la:tfLl purposa .::~icz the~• are
1:1te::Gew LO aCC; `_ :, S:^.all •.^,e C~c:1 t0 '~J::tj11C i:15A?C''10.^.i
p=o:•i~ed that sa_as-ta : record; s°1a11 be cenfi::ential i.-,
accord~rce *h__-- _--~ , ~.._~enc~s of the ci~•
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aRTZCL~ 5.
-:.:ti::;0:1 r1:vD FISCe;L AFP~.IP.S
Sectier. 5-1. :seal ~•ear. Ts:e ?fiscal :•ear of '-:;e ~it-r
y~overnmen•_ srai_ =_c~ ; oa t .e ;;first day of July and s'rali erd
on t:•1e last da c=-.:w^e Lzless ctiler:aise provided by ordi-
nance.
Sec±ion 5-2. Ta:;ation: Potters. The city shall have
all potters of tw:;a =~o ; V;hicn :^.ome-rule cities r-ay have under
the state consti_::=ion and law.
Section ~-3. ^a:;a+~; on: :.ssess*.:ent levy i o
tio:s o` nrocert•= ~ - =•- ~ ant. toll c-
__ .es--Lie::. The council a}' orairance
s.a 1 provide for =^e annual assessment, levy, and colle~-
tion of taxes on :=operly.
• The city sna:_ have a first lien on all real property
against which tare= are assessed, :or the taxes and any col-
lection charges, ::Wallies, and interest which r.!ay accumulate
. thereto; and the ..an stall continue until the taxes ar.d any
such charges, pen=.lies, Gnd interest are paid; provided, how-
e per, t :at no s i.^.: ~e home and lot li :•ea in by the oc,;ner sra11
be oaken by the c:r}• for unpaid ta:;es durir. the life of tre
o•Nrer-occupant if a is o~•pr the age o° sixty-fit;e years or
~ is permanently a: ;; lota111 disabled, and is unable to pay
the taxes.
Section 5-4. Taxation: P~ivar_e leaseholcs, etc., in
~; ronert•; owned or ~~ld b~• the Gnited States, the state or
;~ its aciitzcal subc_-:isio::s. Private leaserlolc;5, contracts,
or 1:llereslS in a :n or property o:tned or Field by t:1e t'nited
j' States, e
S''a`'e, J; lta political Su.~;C:~!~1510^S, 5:1311 be
to xable to tY:e ex~~::t of the interests.
SSCt].O~ 5-5. -dDCSit, d13bUrSer:ent, aacl invest:^eat of
fu?~. i:.e COUTC~_-.:td1 reculot? t:.e 6e 031'•
dr.C -:tees*_:rent G_° C..i P -~ G1SJ~.:'_ae:•.e: t,
of t: tilt. ~ :; - fu:lds, aad r.1a}• detcr~ize Ni1at -.::1as
in t e follo~a-:cpe V~•;esaed. C_tl ~.:1.:s °,ay be ir.:•estea only
c:•1~ :=tic: _vi;:~• a _ 1-obii~aticn bcnws ar.i ot..=_ caaa:al-
- :c=- ^= i^c:ab:ed :ess o: lee !•^itea-S:.a~es,
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o: this c? ~ •, o_' ~ _^er
/ of t .s state; a::,.-ssch
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O: C~..•?: 5~3~^S O° t::~3 ~nl~ed ~tuteS
..? __os o. ~.._s stag, ar.d of boroushs
c~.:e~ sc~.._ _t:~s as ..,~~ ~e a•~:..:o: iz_~
S?^ icn S-G Pul :aces a^^ sales ^he city ad-~inis:ra-
ter, s;.o~occ to a:, ;. rem •latio :sJ:ci:1C:1 the co~::cil r.:ay pre-
sc:-iba, s^all co..^.t_act for and purc:lase, or issue purchase
authorizations for, all supplies, ^aterials, and ecuip-lent
for the o=(ices, depart-eats, a.^.d agz::cies of the cit;~ gc•:er^-
nent. E•:2r}• such co:tract or purchase e::cee:3ing an ar..ou::t
to be established b;• ordinance, shall recui_-e the prior ap-
proval of the cou.^.cil. The city ad:linistr;:tor also iaj trans-
fer to or be;•een o=fices, departr.:ents, a^d agencies, or sell,
surplus, obsolete, or u:iused supplies, materials, and eCUip-
ment, subject to such regulations as the council may prescribe.
Be `ore the aurci:ase of, or contract for, and supplies,
materials, or equipment, or the sale of an': surplus, obsolete,
or unused supplies, materials, or equipment, ample opportunity
for cor.:netitive bidding, u.^.der such regulations and c;ith such
exceptions as the council nay prescribe, shall be giver.; but
the council s'rall not except a particular contract, pure^ase,
or sale from the requirement of co;~petitive bidding.
The council by ordinance may transfer sor..e or all of the
poc:er gra: fed to the city adalinistrator by this section to
an adrlinistrative officer appointed b;• the city ad:linistra-
tor.
Saction 5- ~ . Public i:.~aro°~eme.^.ts. Public improe•emerts,
includ-nq local l:nprove:^ents, :aa}• be rlade by the city go~•ern-
ment itself or b}• contract. Tale council shall acsard all con-
tracts for such i.:,pro~•e:^eats; pro•:iced that the council ^a}•
authorize the cif}• ad»linis~rato:- to 3t•:ard such contracts net
exceeding an amount to be determined by the council and sub-
ject to such regulations as t)le council --a:• prescribe.
Section. 5-3. Personal interest. ::eit her the cif}• ad-
ministrator nor an}• councillan shall sell or barter an}•thing
to the ci t:: , or ma!:e any contract ~: i to the ci t}', or purc'.lase
ar..:thl :C~ ~r0::1 t~^= Clt;' Ottlt?r ~~lail t::OSe till.^.^ys ::h1Ch tale Clt_.'
e?iers gem=1•all; .o file au~lis tas `or e::a:lple, utility: se:-
~•ices) , and ti:en onl;• on t a sa:~e tel-::s as ara of °ered~ to
t're publio, un?oss 3n_^.~~itatlon tc sau:~ic s2312d b1rS 1S
7'1a118:1eQ, a.^.C tale Cit;• 3CC=t)Cti t~lu S.alOa Jld tr:11C:: 1S :^.CSt
ad:'~f:taCe0~15 t0 t::c? Cit:'; pr0!'i~:t?;: t~l3t t:it? COS :cil :):: OY.^.1-
S:a.^.Ce :jaj dS~t:l•7r1«e S::C:1 Sa1LS, CG::tI'3Ct5, Or purC'.:3s•aS 1 :-
:'^1':ing a C^.:1Sl;.~e1'f1ti0^ 0= nct ::lCre? t:^.;in .~7'~i~ 1:1 •:alL`t", t0
ba ::lade .:it:iCil'. S:1C:: 'i..~3 Jt :i:'1CJ5 Cr r3t•;S .^.rc::•alll^~ .n
~~:@ CO- :::1 . a::,. ::1 t.^.Ci1 ~ ~ 3': O ~ 1`. ~ S^: 1 "1
Or d .iC_ :11n3t1C:..
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(City of Kenai
Supa. /~31 - 10/19/84)
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Sugce~teci by: Ad;.~inistration
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CITY OF I:EI:l.I
RESOLUTION P:O. 82-133
A RESCLUTION OF THE COUI•:CIL OF THE CITY OF KEIIAI, ALASKA,
RESCIiIDIP:G RESOLUTION NO. 78-3, AI:D F3TF~I3LISiiII~G NESd
COLLi.TEFv~LIZATION REQUIREIIEP:TS FOR THE II4'VESTI•IEI~iT OF PUBLIC
FUSDS.
WHEREAS, the City of Kenai currently has collateralization
requirements, as set forth in P.esolution Ito. 78-3, which allocos
the City to accept State and Municipal bonds and notes, U.S.
Government obligations, and loans as collateral for the
investment of City monies, and
t3H£REAS, the purpose of collateralization requirements is to~
assure maximum security, and to provide the greatest interest
revenue consistent with safety, and
SJHEREAS, the City believes that the acceptance of loans as
collateral is an unnecessary risk.
NOta, THEP.EFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
KE?1AI, ALASKA, as follows
• Sa~~iQa_i: Resolution No. 78-3 is rescinded. -
s_g~~iQn_2: Collateral will be required to secure one
hundred percent (1000 of all investments of the City of Kenai on
any sum in e:ccess of the amount insured by the F.D.I.C.,
F.S.L.I.C., or similar U.S. Government insurance.
SQfi~~.2I1_~,: The City of Kenai will accept various amounts of
the basic types of collateral listed below. Any one or a
combination of collateral types may be pledged as security with
the following percentages of par value.
Required for
~~ti~~_~n~_~l~ai~i~~i_LQD.~~_~.csl_LQ1:~~ ~o ~ ~._~~LQ;ii~~
1. Alaska Issues 100 of par
2. Federally Guaranteed Project I•totes -
Alaska issues 100 of par
3. Other States (1'. rating or better) 120 of par
4. City of Kenai Issues 100's of par
Il,....a.._~+QY~: D"ti-SIi~_4~211Ss'~~.14DS
1. Direct Obliyatiors 100 of par
2. FeCeral Agcrcy Issues 100 of par
3. Federall}• C~aranteed Project
totes - Ctrer 1C0~ of par
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~~~~:.QH_$: Any change in pledged collateral, except for par
value substitutions, will require a release from the City of
Kenai.
;~Y~~~iL~.: All collateral shall be held by a third party
trustee (bank or other financial institution).
Sgc~~Q~6: The City of Kenai reserves the right to change
collateral requirements zt any tine.
PASSEL BY THE COUNCIL OF THE CIT't OF KENAI, ALASKA, this 15th day
of December, 1982.
VINCENT O'RE~L'LY, r1AY0R
ATTEST:
Janet t7helan, City Clerk
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CITY OF KEPJAI
RESOLUTION N0. 80-135
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA,
ESTABLISHIPIG ALL ALASKA BANKS AS PERItISSABLE DEPOSITORIES FOR
I~tUNICIPAL FUNDS.
t~THEREAS, Resolution PJo. 78-I4b designated Alaska State Bank,
Kenai Branch, and/or National Bank of Alaska, Kenai Branch,
and/or First Federal Savings Bank, and/or First National Bank of
Anchorage, Kenai Branch as official depositories of municipal
funds, and
~1HEREAS, the City has received requests from other banks,
including those located in Soldotna and in Anchorage, to be
allowed to bid on City investments, and
~~HEREAS, the City may be able to receive better interest rates on
its investments by soliciting bids for investments, including
time certificates of deposit and repurchase agreements, from a
larger number of banks.
NOjT, THEREFORE. BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
KENAI, ALASKA, that:
$4tet,~on 1: Resolution t1o. 78-146 is rescinded.
Section 2: All Alaska banks be designated as permissable
depositories for municipal funds, subject to the
collateralization requirements of Resolution rlo. 78-3.
PASSED BY THE COUNCIL OF THE CITY OF KEN I', ALASKA, this 20th day
of August. 1980. ~ „ /f .,~
VINCEPJT O'REILLY, TSAYOR
ATTEST:
Janet 4lhelan, Citv Clerk
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