R-2011-05 amending the City of La Porte Investment Policy

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REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested: May 23, 2011 Appropriation Requested By: Michael G. Dolby, CPA Source of Funds: N/A Department: Finance Account Number: N/A Report: Resolution: X Ordinance: Amount Budgeted: N/A Exhibits Resolution Amount Requested: NSA Exhibits: Investment Policy- Clean & Edited Version Budgeted Item: YES NO Exhibits SUMMARY & RECOMMENDATION The City Council of the City of La Porte originally adopted an Investment Policy on January 13, 1992, by Ordinance No. 1802. The Investment Policy governs how the City will invest the City's funds and outlines administrative and legal guidelines for the Investment Officers to follow for the preservation of capital. The Public Funds Investment Act requires that a City must present the Investment Policy to Council annually for review or amendment. On May 9, 2011, the Finance Department presented the Investment Policy to the Fiscal Affairs Committee. A few changes have been made to the Investment Policy based on recommendations from the Government Treasurers Organization. Staff recommends that the Investment Policy be amended to include the following: • Address requirements for acceptance, substitution and release of collateral — Collateralization is the pledging of appropriate securities or other instruments (i.e. Federal agency securities or letters of credit) by depositories to protect public deposits. The investment officer should approve the acceptance, substitution and release of all collateral pledged in order to maintain control and reduce the risk to the City's deposits and investments. • Reference of independent third -party safekeeping for investment securities - Public deposits are best protected by collateral that is held in safekeeping by an independent third party, so the section on safekeeping has been added to the policy to better protect the City's investments. The City currently has third party agreements in place for safekeeping; however, that language is not in the current investment policy. • Outline reporting requirements for the quarterly investment reports — The reporting requirements include the investment details, market values and interest earnings. Additionally, verbiage has been added to reference the Public Funds Investment Act. The reference to annual reports has been removed, since more frequent reports are submitted. • Guaranteed Investment Contracts (GIC's) as an authorized investment - A guaranteed investment contract (GIC) is a contract that guarantees repayment of principal and a fixed or floating interest rate for a predetermined period of time. A GIC is used primarily as a vehicle that yields a higher return than a savings account or United States Treasury securities. Staff is proposing the addition of GICs as an authorized investment since a few of the pools include them in their investment portfolio. In addition to the above mentioned changes, the policy has been reformatted and the order of the wording moved around to improve the flow of the document. The authorized investment wording has been condensed and references to the Act added. The changes proposed are not making the policy less stringent. Additions have been made to better protect the City's investments.