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HomeMy WebLinkAbout23. 21-106FEBRUARY 9, 2021 21-02 21-106 PENDING JANUARY 12, 2021 RESOLUTION WHEREAS, the Long Range Finance Committee reviewed the current Investment Policy and determined the need for the current policy to be updated; and WHEREAS, the updated policy ensures that the City maintains a prudent level of financial investing to operate in an effective and efficient manner. NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Oshkosh that the attached "Investment Policy" is hereby approved and the proper City officials are hereby authorized and directed to take those steps necessary to carry out the City's responsibilities under the Policy. (CARRIED__7-0__LOST_______LAID OVER______WITHDRAWN_______) PURPOSE: APPROVE THE REVISED INVESTMENT POLICY INITIATED BY: FINANCE DEPARTMENT Finance Department City Hall, 215 Church Avenue P.O. Box 1130 Oshkosh, WI 54903-1130 920.236.5005 http://www.ci.oshkosh.wi.us TO: Honorable Mayor and Members of the Common Council FROM: Russ Van Gompel, Director of Finance DATE: February 16, 2021 RE: Approve the Revised Investment Policy BACKGROUND As part of its mission to research, study, and address the investments of the City, the Long Range Finance Committee has been reviewing and updating the current Investment Policy. The Long Range Finance Committee initiated their review in October and concluded its review at their December 2, 2020 meeting. The Investment Policy was presented to City Council at their January 12, 2021 City Council meeting and the item was tabled until the February 23, 2021 Council meeting to give Council the opportunity to consider a proposed policy on divestment from fossil fuels as recommended by the Sustainability Advisory Board (SAB). ANALYSIS The Committee determined the need for updating the current Investment Policy and reviewed the best practices regarding all facets of an Investment Policy. The purpose of the attached policy is to acknowledge and formalize current practices and ensure the administration and the continuity of responsible investment management. This policy ensures that the City mainta ins a prudent level of financial investing to operate in an effective and efficient manner. It also provides written guidelines so that all stakeholders, both internally and externally, understand the investing of the City funds. As proposed, the policy is consistent with the intent of the SAB’s recommended policy on divestment from fossil fuels. RECOMMENDATION The Long Range Finance Committee recommends the Council adopt the attached Investment Policy. Respectfully Submitted, Approved: Russ Van Gompel Mark A. Rohloff Director of Finance City Manager TO: Honorable Mayor and Members of the Common Council FROM: Russ Van Gompel, Finance Director DATE: January 6, 2021 RE: Approve the Revised Investment Policy BACKGROUND As part of its mission to research, study, and address the investments of the City, the Long Range Finance Committee has been reviewing and updating the current Investment Policy. The Long Range Finance Committee initiated their review in October and concluded its review at their December 2, 2020 meeting. ANALYSIS The Committee determined the need for updating the current Investment Policy and reviewed the best practices regarding all facets of an Investment Policy. The Long Range Finance Committee was also in receipt of the resolution from the Sustainability Advisory Board to divest any investment in companies dealing with fossil fuels. After discussing the impact to staff and the City, and the types of investments authorized under Wisconsin Statutes 66.0603 (1m), the Long Range Finance Committee decided not to include any of the provisions of SAB Resolution #13-01 in their recommended Investment Policy to the City Council. The purpose of the attached policy is to acknowledge and formalize current practices and ensure the administration and continuity of responsible investment management. This policy ensures that the City maintains a prudent level of financial investing to operate in an effective and efficient manner. It also provides written guidelines so that all stakeholders, both internally and externally, understand the investing of the City funds. RECOMMENDATION The Long Range Finance Committee recommends the Council adopt the attached Investment Policy. Respectfully Submitted, 4-7 Russ Van Gompel, Finance Director Approved: Mark A. Rohloff, City Manager Finance Department City Hall, 215 Church Avenue P.O. Box 1130 Oshkosh, WI 54903-1130 920.236.5005 http://w .ci.oshkoshA.us City of Oshkosh, WI Investment Policy SCOPE This policy applies to all funds under the authority of the City of Oshkosh, Wisconsin (the "City") not immediately needed to meet operating expenses of the City. Specific funds covered under this policy include General, Special Revenue, Debt Service, Capital Projects, Sewer, Enterprise, Trust and Agency, and any newly created fund(s) unless specifically exempted. Financial assets of funds not under the authority of the City are administered in accordance with a separate policy. I. GENERAL OBJECTIVES 1. Safety Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in individual investments and the overall portfolio. The objective will be to mitigate credit risk, interest rate risk and custodial risk. a. Credit Risk The City will minimize credit risk, which is the risk of loss due to the failure of the security issuer or backer, by: Limiting investments to the types of securities permitted under Wisconsin Statutes Chapter 66.0603. Approving by resolution the public depositories that are deemed appropriate for use under Wisconsin and Federal law. Diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issuer will be minimized. b. Interest Rate Risk The City will minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by: Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. Limiting the maximum maturity of any individual security to a period not to exceed 7 years and the average weighted maturity of the investment portfolio to a period not to exceed 3 years. c. Custodial Risk The City will minimize custodial risk, which is the risk that in the event of a financial institution failure, the City's deposits may not be returned to it, by: Maintaining a list of public depositories, financial institutions, custodians and broker/dealers authorized to provide deposit and investment services. Requiring all public depositories, financial institutions, custodians and broker/dealers authorized to provide deposit and investment services to supply as appropriate audited financial statements demonstrating compliance with state and federal capital adequacy guidelines. 1 I Page 2. LIQUIDITY The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. Investment portfolios will be structured so that securities mature concurrent with cash needs to meet anticipated demands. Alternatively, a portion of any portfolio may be placed in money market mutual funds or local government investment pools authorized and permissible under Wisconsin statutes which offer same -day liquidity for short term funds. 3. YIELD Investment portfolios shall be designed with the objective of attempting to attain a market rate of return taking into account investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. Securities shall be held until maturity with the following exceptions: A security with declining credit quality may be sold prior to maturity to minimize loss of principal. Liquidity needs of the City require a security or securities to be sold prior to maturity. A security swap would improve the safety and yield of the overall portfolio. 4. COMPETITIVE QUOTATIONS With the exception of cash accounts, all investments will be selected on the basis of competitive quotations as presented through current market conditions; at least two qualified institutions will be contacted each time an investment is placed. IL STANDARDS OF CARE 1. Prudence The standard of care to be used by investment officials shall be the "prudent person" standard, which states "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" and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and this Investment Policy and acting as a prudent person 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 manner and the liquidity and the sale of securities are carried out in accordance with the terms of this policy. 2. Limitation of Liability Notwithstanding any other provision of law, the Finance Director (or other City employee in the absence of the Finance Director) who deposits public money in any authorized public depository, in compliance with Wisconsin statutes sec. 34.05 is, under the provisions of Wisconsin Statutes sec. 34.05, relieved of any liability for any loss of public monies which results from the failure of any public depository to repay the public depositor the full amount of its deposits, thus causing a loss as defined in Wisconsin Statutes sec. 34.01(2). 3. Ethics and Conflicts of Interest 2 1 P a g e City officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Officers and employees shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City. 4. Delegation of Authority Management and administrative responsibility for the investment program of the City is entrusted to the Finance Director under the directions of the City Council. Individuals authorized to engage in investment transactions on behalf of the City are the Finance Director, the City Manager or those individuals designated by the Finance Director, City Manager or City Council. 5. Authorized and Suitable Investments Authorized investments include any investment stipulated in Wisconsin statute 66.0603 (lm). a) In accordance with Wisconsin statutes 34.01 (5) and 34.09 all Wisconsin banks, state or federal chartered, and financial institutions which are members of the Federal Deposit Insurance Corporation (FDIC), as well as the Wisconsin local government pooled - investment fund, are authorized depositories. The City of Oshkosh, with the adoption of this investment policy, will allow its Finance Director to place additional funds in excess of $650,000 in any bank so named as a City depository if the depository provides a surety bond or collateralization of the time deposit or certificate of deposit. Additional unsecured deposits up to a maximum of 2,500,000 may be placed in any depository rated in the two highest categories by the financial rating institution used by the City. b) Investments considered or defined as "derivatives" are prohibited, including but not limited to Mortgaged Back Securities (MBS), Collateralized Mortgage Obligations CMO), Asset Backed Securities (ABS) and Interest Rate Swaps. c) Where possible, preference may be given to local financial institutions for the betterment of the local economy or that of local entities within the State. III. INTERNAL CONTROLS The Finance Director shall establish a system of internal controls designed to prevent losses of City funds arising from fraud, misrepresentation by third parties, unanticipated changes in financial markets, employee error or imprudent actions by employees. Internal controls shall address: Separation of transaction authority from accounting and record keeping. Clear delegation of authority to subordinate staff members. Written confirmation of transactions for investments and wire transfers. Dual authorizations of wire transfers. Development of a wire transfer agreement with the lead bank and third -party custodian. Investment and interest earnings will be recorded in the City's accounting records based on generally accepted accounting principles (GAAP). A monthly summary of all investment transactions will be prepared by the Finance Director for review by the City Council. 3 1 P a g e IV. COLLATERALIZATION Certificates of Deposit that exceed FDIC insurance limits and/or coverage limits specified in Wisconsin statutes 34.08(1) (2) shall require collateral valued at a minimum of 102% of the principal and accrued interest. Conditions of the collateral arrangement will be detailed in a Security Agreement" between the depository financial institution and the City. Collateral pledged to the City for this purpose will be held by a third -parry custodian, in the City's name, and evidenced by a " Tri-Party" agreement between the depository financial institution, the City and the custodian. Evidence of ownership must be detailed in a safekeeping receipt supplied to the Finance Director. Collateral substitution(s) must be authorized by the City. The City may also request collateral, under the same conditions as stated above, for any deposits at any financial institution that exceed FDIC insurance limits. V. INVESTMENT PARAMETERS Diversification Investments shall be diversified by: Limiting investments to avoid over concentration in securities from a specific issuer, industry or business sector, excluding U.S. Treasury obligations. Investing in securities with varying maturities. Continuously investing a portion of the investment portfolio in readily available funds such as local government investment pools, money market accounts or money market mutual funds permissible under state statute. VI. REPORTING The Finance Director shall present a monthly report on the investment program and investment activity to the City Council. The report shall include a management summary displaying the status of the investment portfolio and transactions made over the previous month. The management summary shall be prepared in a manner that will allow the City Council to determine if investment activities during the reporting period conform to this Investment Policy. VII. POOLING OF CASH Except where otherwise provided by the City Council, the Finance Director is authorized to pool the cash of the funds identified in this policy to maximize investment earnings where it is advantageous and prudent to do so. Investment income will be allocated to the various funds based on the pro rata portion of each fund. VIII. ADOPTION AND APPROVAL By resolution, the Investment Policy shall be formally approved and adopted by the City Council and reviewed as needed but at least every three years. IX. LIST OF ATTACHMENTS The following documents, as applicable, are attached to this policy; List of authorized personnel List of authorized public depositories, financial institutions and broker/dealers Internal Controls Relevant Wisconsin statutes and local ordinances 4 1 P a g e Approved and adopted this day of Authorized Personnel Russ Van Gompel, Director of Finance Jennifer Messerschmidt, Assistant Director of Finance Mark Rohloff, City Manager List of authorized public depositories, financial institutions and broker/dealers Associated Bank First National Bank Ehlers Investment Partners Local Government Investment Pool Wisconsin Investment Series Cooperative (PMA Securities) 6 1 P a g e Internal Controls The Finance Director is responsible for establishing and maintaining an internal control structure that will be reviewed annually with the City of Oshkosh's independent auditor. The internal control structure shall be designed to ensure that the assets of the City of Oshkosh are protected from loss, theft or misuse and to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits require estimates and judgements by management. The internal controls shall address the following points: Control of collusion. Separation of transaction authority from Finance and Accounting. Custodial safekeeping. Avoidance of physical delivery securities. Clear delegation of authority to subordinate staff members. Written confirmation of transactions for investment and wire transfers. Development of a wire transfer agreement with the lead bank and third party custodian. 7 1 P a g e Relevant Wisconsin statutes and local ordinances Wisconsin statute 66.0603 (1m) Wisconsin statutes 34.01 (2) (5) and 34.09 Wisconsin statutes 34.08 (1) (2)