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Resolution 2912-121 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 RESOLUTION NO. 2912 -12 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SOUTH TAHOE PUBLIC UTILITY DISTRICT ADOPTING A STATEMENT OF INVESTMENT POLICY AND SUPERSEDING RESOLUTION NO. 2824 -07 BE IT RESOLVED, by the Board of Directors of the South Tahoe Public Utility District, County of El Dorado, State of Califomia, as follows: WHEREAS, the South Tahoe Public Utility District enters into various investments from time to time on behalf of the District as permitted by the California Government Code and the District's investment policy; and WHEREAS, the South Tahoe Public Utility District staff wish to update the Statement of Investment Policy to enhance the South Tahoe Public Utility District's opportunities for prudent and systematic investments, to delegate the Chief Financial Officer as the investment officer of the District, and to update certain language according to the California Government Code; and NOW, THEREFORE BE IT RESOLVED, by the Board of Directors of the South Tahoe Public Utility District that: The attached Statement of Investment Policy is hereby adopted and becomes a part of this Resolution by reference herein. WE, THE UNDERSIGNED, do hereby certify that the above and foregoing resolution was duly and regularly adopted and passed by the Board of Directors of the South Tahoe Public Utility District at a regular meeting duly held on the 21st day of June, 2012, by the following vote: AYES: Cefalu, Jones, Vogelgesang, Sheehan, Schafer NOES: None ABSENT: None ATTEST: c____ -X,/:)..t_ lie Kathy Sharp, Cler f the Board Eric Schafer) Boat€f President South Tahoe Public Utility District SOUTH TAHOE PUBLIC UTILITY DISTRICT STATEMENT OF INVESTMENT POLICY I Statement of Intent This statement of investment policy is adopted to establish an overall policy and procedures for the management and investment South Tahoe Public Utility District's funds available for investment. This policy is effective as of its adoption by the Board of Directors. It will be reviewed by the Board and readopted at least once each year. II Scope of Policy This policy covers all funds and investment activities under the direct authority of the District. It does not cover funds related to District borrowing, which are controlled by documents related to each debt issue. III Objectives The investment program shall be designed and managed with a degree of professionalism worthy of the public trust. The District's primary investment objectives, in order of priority, shall be: A Safety Safety of principal is the foremost objective of the District. Investments shall be made in a manner that first seeks to ensure the preservation of capital in the overall portfolio. And, second seeks to ensure that capital losses are avoided, whether they be from securities defaults or erosion of market value. B Liquidity The investment portfolio shall be structured to provide sufficient liquidity to enable the District to meet its cash flow requirements. An adequate percentage of the portfolio should be maintained in liquid short-term securities, which can be converted to cash if necessary to meet disbursement requirements. Since all cash requirements cannot be anticipated, investments in securities with active secondary or retail markets are highly recommended. Emphasis is on marketable securities with low sensitivity to market risk. C Yield The investment program shall be designed with the objective of attaining a market rate of return on its investments consistent with the constraints imposed by its safety objective and cash flow considerations. Yield should become a consideration only after the basic requirements of safety and liquidity have been met. IV Prudence The District adheres to the guidance provided by the "prudent investor rule," which states that when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person P:\F[MPolicis\Investment Policy 2012.docx 1 acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Authorized individuals acting in accordance with this Policy and written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion. V Delegation of Authority The Board of Directors has delegated management responsibility for the investment program to the Chief Financial Officer, who is designated as the Investment Officer of the District. This delegation is for a one -year period. Subject to review, the Board may renew the delegation of authority each year. In the Chief Financial Officer's absence, the Accounting Manager shall act as the Investment Officer. The Chief Financial Officer shall develop and maintain administrative procedures for the operation of the investment program, consistent with this investment policy. All participants in the investment process shall act as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public review and evaluation. The overall program shall be designed and managed with a degree of professionalism that is worthy of the public trust. VI Internal Controls The Chief Financial Officer shall establish a system of internal controls, which shall be reviewed annually by the independent auditor. The controls shall be designed to prevent loss of public funds arising from fraud, error, misrepresentation, unanticipated market changes or imprudent actions. Controls deemed most important include: minimization of opportunities for collusion, separation of duties, separating transaction authority from accounting and record keeping, custodial safekeeping, avoidance of bearer -form securities, specific limitation regarding securities losses and remedial actions, written confirmation of all transactions, minimizing the number of authorized investment officials, documentation of transactions and strategies, and proper review and approval of brokerage accounts and investment transactions. VII Reporting The Investment Officer, or her designee, shall submit a monthly investment report to the Board of Directors. The monthly reports shall include all investments held by the District, and/or under the management of any outside party and shall include: a list of security transactions; the type of investment; issuer; date of maturity; par and dollar amount invested on all securities; current market value on all securities (including the source of this valuation); a statement that the portfolio is in compliance with this Policy or the manner in which it is not in compliance; and, a statement that the District has the ability to meet its expenditure requirements for the next 6 months or an explanation as to why sufficient money may not be available. VIII Permitted Investments Sections 53600 et. seq. of the California Government Code provide basic investment limits and guidelines for government entities. Within the investments permitted by the P:\FIN\Policies\Investment Policy 2012.docx 2 Government Code, the District seeks to further restrict eligible investments as provided below. In the event an apparent discrepancy is found between this Policy and the Government Code, the more restrictive parameters shall take precedence. The Investment Officer shall invest District moneys as directed by this Policy and only in the investments specifically authorized in this section. A U.S. Treasury Instruments United States Treasury notes, bonds, bills or certificates of indebtedness, or those for which the full faith and credit of the United States is pledged for payment of principal and interest. B Federal Agency and Instrumentality Securities Federal agency or United States government- sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government- sponsored enterprises. The District should target a maximum allocation of 25% to callable Federal agency securities. Investments in Federal agency mortgage- backed pass - through securities or collateralized mortgage obligations may not exceed 20% of the District's portfolio. C U.S. Corporate Debt Medium -term notes, defined as all corporate and depository institution securities with a maximum remaining maturity of three (3) years or less, issued by corporations organized and operating within the United States or depository institutions licensed by the United States or any state and operating within the United States. Eligible investments shall be rated "A" or better by one or more nationally recognized rating services. A maximum of 30% of the District's portfolio may be invested in this category. D Negotiable Certificates of Deposit Negotiable certificates of deposit issued by a nationally or state - chartered bank or a state or federal association or by a federally- or state - licensed branch of a foreign bank. Purchasers are limited to issuers whose short-term debt is rated A- 1/P -1. A maximum of 30% of the District's portfolio may be invested in this category. E Commercial Paper Commercial paper of "prime" quality of the highest ranking or of the highest letter and number rating as provided for by a nationally recognized statistical - rating organization (NRSRO). The entity that issues the commercial paper shall meet all of the following conditions in either paragraph (1) or paragraph (2): P:\FIMPolicies\Investment Policy 2012.docx 3 (1) The entity meets the following criteria: organized and operating within the United States as a general corporation. Has total assets in excess of five hundred million dollars ($500,000,000). (iii) Has debt other than commercial paper, if any, that is rated "A" or higher, or the equivalent, by a nationally recognized statistical- rating organization. (2)The entity meets the following criteria: (i) Is organized within the United States as a special purpose corporation, trust, or limited liability company. (ii) Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond. (iii) Has commercial paper that is rated "A -1" or higher, or the equivalent, by a nationally recognized statistical- rating organization. Eligible commercial paper shall have a maximum of 270 days or less and not represent more than 10% of the outstanding paper of an issuing corporation. A maximum of 25% of the District's portfolio may be invested in this category. F Bank Deposits FDIC insured or fully collateralized demand deposit accounts, savings accounts, market rate accounts, time certificates of deposits in state or national banks located in California. As required by Government Code §53649, the District shall have a signed contract with each financial institution with the District's funds on deposit. Any financial institution accepting the District's funds for deposit must comply with the requirements of Government Code §53630 et seq., including collateralization of deposits. The District may waive the collateralization requirements for any portion of the deposit that is covered by Federal deposit insurance. To be eligible to receive District deposits, the fmancial institution must have received a minimum overall rating "satisfactory" in its most recent evaluation of its record of meeting the credit needs of California communities, as required by Government Code §53635 et. seq. A maximum of 20% of the District's portfolio may be invested in time certificates of deposit. G Bankers' Acceptances Bankers' acceptances which are otherwise known as bills of exchange or time drafts that are drawn on and accepted by a domestic commercial bank. Purchases are limited to issuers whose short-term debt is rated A- 1/P -1. Bankers' acceptances cannot exceed a maturity of 180 days. A maximum of 40% of the District's portfolio may be invested in this category. H State of California's Local Agency Investment Fund (LAIF) If the District has funds invested in LAIF, the District shall maintain on file LAIF's current investment policy and its requirements for participation, including limitations on deposits and withdrawals. In addition, the District's shall review annually investment policies of LAIF to ascertain that its funds are invested in accordance with the District's investment objectives. Furthermore, the District shall review the provisions of these investment policies requiring P:\FIN \Policies\lnvestment Policy 2012.docx 4 internal controls on the investment process to ascertain that there is a division of responsibility in the investment procedures. California Asset Management Trust A California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the Government Code of the State of California. CAMP must be rated "AAAm" to be eligible for investment of District funds. J Money Market Funds Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a -1 and following). The company shall have met either of the following criteria: (a) attained the highest ranking or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations and (b) retained an investment adviser registered or exempt from registration with the SEC with not less than five (5) years' experience managing money market mutual funds with assets under management in excess of five hundred million dollars ($500,000,000). A maximum of 20% of the District's portfolio may be invested in this category. K El Dorado County Pool The District shall review at least annually the El Dorado County investment pool to ascertain that its funds in these pools are invested in accordance with the District's investment objectives. The District shall also review the provisions of these investment policies requiring internal controls on the investment process to ascertain that there is a division of responsibility in the investment procedures. IX Prohibited Investments: Investments by the District in securities permitted by the California Government Code, but not specifically approved by this investment policy are prohibited without the prior approval of the Board. The District is prohibited from buying on margin or from speculative buying. Furthermore, the District is prohibited from investing in equity - linked securities or from entering into financial futures contracts, options, or swaps. However, the District may purchase U.S. government securities which are discount or securities bearing interest . In accordance with California Government Code §53601.6, the District shall not invest in inverse floaters, range notes, mortgage derived interest -only strips, or any security that could result in zero interest accrual if held to maturity. X Term of Investments The term of any investment may not exceed five years without express authority from Board of Directors received at least 90 days preceding the investment purchase. P:\F[MPolicies\lnvestment Policy 2012.docx 5 XI Diversification The investment portfolio shall be diversified to avoid incurring unreasonable and avoidable risks regarding specific security types or individual financial institutions. The portfolio shall also be diversified with respect to the term of individual investments purchased by the District. In addition to the percentage limitations specified in Section VIII Permitted Investments, the maximum amount of the portfolio the District may invest with any one issuer is 10 %, excluding U.S. Treasuries, Federal Agencies, and pooled investments. XII Credit Rating Changes In the event a security held by the District is subject to a rating change that brings it below the minimum credit ratings specified in this Policy, the Investment Officer should disclose such information in the monthly investment report. XIII Safekeeping All cash and securities in the District's portfolio, including those that are being managed by the Investment Officer, shall be held in safekeeping in the District's name by a third party bank trust department, acting as agent for the District under the terms of a custody agreement executed by the bank and the District. All securities will be received and delivered using standard delivery versus payment (DVP) procedures, the District's safekeeping agent will only release payment for a security after the security has been properly delivered. The only exception to the foregoing shall be depository accounts and securities purchases made with: (i) local government investment pools; and, (ii) money market mutual funds, since the purchased securities are not deliverable. XIV Securities Dealers The District has authorized the Investment Advisor to use broker /dealers, which the Investment Advisor has selected in accordance with its written selection policy. The Investment Officer may also use broker /dealers meeting credit worthiness standards established by the Investment Officer. XV Ethics and Conflicts of Interest Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Such employees and investment officials shall disclose to the District Board and the General Manager any material financial interests in financial institutions that conduct business within the District, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the District's portfolio. P:\FIMPolicies\Investment Policy 2012.docx 6