Investment Policy 06-13-11CITY OF SHOREWOOD
RESOLUTION NO. 11 -030
A RESOLUTION MODIFYING THE INVESTMENT POLICY
WHEREAS, the City of Shorewood maintains cash balances beyond what is needed for
immediate expense payment; and
WHEREAS, prudent investment of those funds will earn market rate interest revenues
which can be used to reduce the amount of tax and fee revenues required to run the city's
essential services; and
WHEREAS, Minnesota Statutes 118A authorize investments in certain types of
securities; and
WHEREAS, the City of Shorewood desires to further limit the type of authorized
investments preserve the safety of its principal; .
NOW THEREFORE, BE IT RESOLVED, that the City of Shorewood, does hereby
adopt the attached investment policy to direct city staff in fulfilling their fiduciary duties as
stewards of the city's financial resources.
ADOPTED BY THE CITY COUNCIL OF THE CITY OF SHOREWOOD this 13th day of
June, 2011.
ATTEST
Brian Ile�" ily Adin /Clerk
Christine Lizee, Mayor
City of Shorewood, Minnesota
INVESTMENT POLICY
INTRODUCTION
This policy covers all monies and cash balances of the City of Shorewood and includes deposits and
investments of funds in interest bearing accounts. The policy is intended to be broad enough to allow
the Investment Officers to function properly within the parameters of responsibility and authority, yet
specific enough to adequately safeguard the investment assets.
PURPOSE
The purpose of this policy is to establish specific guidelines the City of Shorewood will use in the
investment of City funds. It will be the objective of this policy to invest City funds in order to attain a
market rate of return while preserving and protecting the capital of the portfolio. Investments will be
made, based on statutory and city policy constraints, in low risk instruments.
SCOPE
The Investment Officers are responsible for the investing of all funds in the custody of the City,
including, but not necessarily limited to, the General Fund, Special Revenue Funds, Debt Service Funds,
Capital Project Funds, Enterprise Funds, and Agency Funds.
PRUDENCE
The standard of prudence to be used by Investment Officers shall be the "prudent investor ", and shall
be applied in the context of managing the overall portfolio. Investment Officers acting in accordance
with this policy and with MN Statute 118A, and exercising due diligence shall be relieved of personal
responsibility for an individual security's credit risk or market price changes, provided that reasonable
action is taken to control adverse developments and unexpected deviations are reported in a timely
manner.
OBJECTIVE
There are three main objectives of all investment activities that are prioritized as follows:
A. Safety- Safety of principal is the foremost objective of the City. Each investment
transaction shall seek to first insure that capital losses are avoided. The
objective is to mitigate credit risk and interest rate risk. Credit Risk is the risk
of loss due to failure of the security issuer or backer. Interest Rate Risk is the
risk that the market value of securities in the portfolio will fall due to changes in
general interest rates.
Liquidity - The investment portfolio shall remain sufficiently liquid to meet all operating
requirements that may be reasonably anticipated. This is accomplished by
structuring the portfolio so that securities mature concurrent with cash needs
to meet anticipated demands.
C. Yield - The investment portfolio of the City of Shorewood shall be designed to attain a
market - average rate of return through budgetary and economic cycles, taking
into consideration the city's investment risk constraints, cash flow
characteristics of the portfolio and prudent investment principles.
Subject to the restrictions of the above objectives, it is the policy of the City of Shorewood to offer
financial institutions and companies within the corporate boundaries of Shorewood the opportunity to
bid on investments; however, the City of Shorewood will seek the best investment yields.
DELEGATION OF AUTHORITY
In accordance with Minnesota Statute 118A.02, the responsibility for conducting investment
transactions resides with the City Council of the City of Shorewood. Management responsibility for the
investment program is hereby delegated from the City Council to the Investment Officers (the City
Finance Director /Treasurer, and, in the absence of the Finance Director/ Treasurer, the City
Administrator). The Investment Officers shall establish procedures for the operation of the investment
program, consistent with this Investment Policy. Such procedures shall include delegation of authority
to persons responsible for investment transactions. The Investment Officers shall be responsible for all
transactions undertaken and shall establish a system of internal controls designed to prevent losses
from fraud and employee error.
AUTHORIZED FINANCIAL INSTITUTE AND DEALER
The Council authorizes the Investment Officers to exercise the powers of the Council in designating a
depository of the Funds. In selecting depositories, the credit worthiness of the institutions under
consideration shall be examined by the Investment Officers.
Only approved security broker /dealers selected by creditworthiness shall be utilized (minimum capital
requirement of $10 million dollars and at least five years of operation). These may include "primary'
dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15c3-1 (uniform
net capital rule).
OVERSIGHT COMMITTEE
The Council, at its discretion, may form an investment oversight committee for the specific and limited
purpose of reviewing the portfolio of investments and earnings with the Investment Officers, with the
purpose of ensuring the investment practices are in conformance with the provisions established in this
policy. The committee shall have no authority to suggest or direct the Investment Officers to invest city
funds in a particular security, with a particular broker, or in a particular manner. Members of the
Oversight Committee shall be the Finance Director, City Administrator, and two Council members. The
Committee shall meet at least twice each year but not more than quarterly.
CONFLICT OF INTEREST
Any City Official (elected or appointed) 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 his /her ability to make impartial investment decisions.
BROKER REPRESENTATIONS
Municipalities must obtain from their brokers certain representations regarding future investments.
Minnesota Statutes, Section 118A.04, Subdivision 9, requires municipalities to provide each broker with
information regarding the municipality's investment restrictions. Before engaging in investment
transactions with the City of Shorewood, the supervising officer at the securities broker /dealer shall
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submit a certification annually according to MN Statutes 118A.04. The document will be in the format
approved by the State Auditor.
AUTHORIZED AND SUITABLE INVESTMENTS
Minnesota Statutes, Section 118A.04, lists all permissible investments for municipalities. This list
establishes the maximum investment risk permitted for a Minnesota municipality. Even though MN
Statutes 118A provides for more instruments to be used for investing purposes; the following is a listing
of investments the City will be authorized to invest in:
1. United States securities.
Public funds may be invested in governmental bonds, notes, bills, mortgages (excluding high -risk
mortgage- backed securities), and other securities, which are direct obligations or are guaranteed or
insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act
of Congress.
2. State and local securities
Funds may be invested in any security which is a general obligation of any state or local government
with taxing powers which is rated "A" or better by a national bond rating service;
3. Commercial papers.
Funds may be invested in commercial paper issued by United States corporations or their Canadian
subsidiaries that is rated in the highest quality category by at least two nationally recognized rating
agencies and matures in 270 days or less.
4. Time deposits.
Funds may be invested in time deposits that are fully insured by the Federal Deposit Insurance
Corporation.
5. Investment Pools and Money Market Mutual Funds
Additionally, investments may be made in state -wide investment pools, including Minnesota Joint
Powers Investment Trust (4M Fund) and money market mutual funds which invest only in authorized
instruments according to MN Statutes 118A.
COLLATERALIZATION
Collateral ization will be required on two types of investments: Certificates of Deposit (above the FDIC
insurance amount) and Repurchase Agreements. In order to anticipate market changes and provide a
level of security for all funds, the collateral ization level will be 110 percent of the market value of
principal and accrued interest. When the pledged collateral consists of notes secured by first
mortgages, the collateral level will be 140% of the market value of the principal and accrued interest.
Collateral shall be deposited in the name of the City of Shorewood, subject to release by the Investment
Officers.
SAFEKEEPING AND CUSTODY
All invested assets of the City of Shorewood involving the use of public funds custodial agreement shall
comply with all rules adopted pursuant to Minnesota Statute 118A. All custodial agreements shall be it
writing and shall contain a provision that all custodial services are provided in accordance with the laws
of the State of Minnesota.
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DIVERSIFICATION
The City will attempt to diversify its investments according to type and maturity. The portfolio, as much
as possible, will contain both short -term and long -term investments. The City will attempt to match its
investments with anticipated cash flow requirements. Extended maturities may be utilized to take
advantage of higher yields; however, no more than 30% of the total investments should extend beyond
five (5) years and in no circumstance should any extend beyond fifteen (15) years. No more than 10% of
available funds shall be kept in commercial paper.
CERTIFICATE OF AUTHORITY
The Shorewood City Council hereby authorizes the following city staff to sell, assign and endorse for
transfer, certificates of deposit, and certificates representing stocks, bonds or other securities that are
registered in the name of the City of Shorewood: City Finance Director /Treasurer and City Administrator.
INVESTMENT REPORTING
The City Finance Director /Treasurer shall prepare an investment report at least quarterly, including a
management summary that provides a clear picture of the status of the current investment portfolio.
The investment report shall include the cost, date and place of each investment, the maturity date and
rate of interest earning on each as of that date; a cash flow analysis that shows investment maturities
and available cash sufficient to cover estimated bills, and any additional information as may be
requested from time to time by the City Council.
Modified June 13, 2011.
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