REPORT TO THE CITY COUNCIL
June 22, 2017
FROM: MICHAEL A. LIMA, Controller/Finance Director/(ex-officio)Treasurer
Finance Department
BY: CORRINA BARBARITE, Treasury Officer
Finance Department
SUBJECT
Title
Approve the City of Fresno (the “City”) Investment Policy for Fiscal Year 2017-2018
Body
RECOMMENDATION
Staff recommends that Council approve the accompanying Resolution to adopt the City Investment Policy (the “Policy”) for Fiscal Year 2017-2018.
EXECUTIVE SUMMARY
The Fresno Municipal Code (“FMC”) requires that Council annually approve and adopt an Investment Policy, and delegate its authority to invest City funds to the City Treasurer. State Law refers to “surplus money” that is not needed for current operations. Good cash management includes investing these funds, in accordance with an approved Investment Policy. Interest earnings on investments are allocated to all Funds based on the amount of cash the Fund has invested in the City-wide Pool. There is one change in the Investment Policy from last Fiscal Year. The City has raised the cap to fifteen million dollars ($15,000,000) for placement with local financial institutions.
BACKGROUND
Although State Law no longer requires it, good cash management necessitates a detailed plan for handling cash resources. The FMC therefore requires that Council annually adopt an investment policy for public funds. An investment policy establishes the objectives, guidelines, and types of investments for a government’s public funds investment program. State Law does contain numerous other stipulations that pertain to the City’s investment program.
Government Code Section 53601(“Section 53601”) sets forth certain parameters that govern a local agency’s investment program. This Law states that “The legislative body of a local agency having moneys in a sinking fund or moneys in its treasury not required for the immediate needs of the local agency may invest any portion of the moneys that it deems wise or expedient …”
The Treasury Section of the Finance Department is responsible for balancing the operating cash needs of the City with the amount of money available for investment. Operating cash is thus differentiated from surplus cash. These monies are aggregated together in a City-wide Pool for investment purposes. Each PeopleSoft Fund owns “shares” in the Pool, based on the Fund’s cash balance. Cash from the Pool is invested in financial instruments allowed by State Law, and the interest earnings are credited back to each Fund.
Section 53601 sets forth the types of investment instruments eligible for purchase by a local agency, the investment grade of those instruments, and the percentage of the local agency’s surplus monies that can be invested in each type of security. Since the City’s first investment objective is conformity with State Law, the Investment Policy generally conforms to Section 53601.
Section 16429.1 created the LAIF and gives the State Treasurer the authority to set the limits for local agencies with regard to the total amount which may be invested in the Fund. LAIF’s current limit is $65,000,000 per account and is reflected in the City’s Investment Policy.
Staff recommends that Council approve the City’s Investment Policy for Fiscal Year 2017-2018.
ENVIRONMENTAL FINDINGS
By the definition provided in the California Environmental Quality Act Guidelines Section 15378 this item does not qualify as a “project” and is therefore exempt from the California Environmental Quality Act requirements.
LOCAL PREFERENCE
Local preference was not considered because this Resolution does not include a bid or award of a construction or service contract.
FISCAL IMPACT
Approving this Resolution adopting an Investment Policy for Fiscal Year 2017-2018 will provide staff with direction on how to manage the City’s cash resources, specifically, how they shall be used to fund operations or invested to obtain interest earnings if not currently needed. Interest earnings are allocated to PeopleSoft Funds based on their cash balances.
Attachment(s): Resolution adopting Investment Policy for Fiscal Year 2017-2018
Exhibit A: Investment Policy for Fiscal Year 2017-2018