[R.O. 2012 §140.010; Ord. No. 88-6-4, 6-1988]
A.
In
general, the cash management activities of the City of Excelsior Springs
shall be conducted in a manner which is consistent with the prevailing
prudent manner business practices which may be applied by other organizations
of similar size and financial resources.
B.
Investments
of the City, or funds held in its possession in a fiduciary capacity,
shall be made with the exercise of that judgment and care, under circumstances
then prevailing, which men 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.
C.
The
Director of Finance shall be authorized and required to promulgate
administrative rules and policies, consistent with the tenets of the
City Charter, relating to the cash management and investment policies
of the City, and in compliance with appropriate and prevailing State
Statutes.
1.
Such rules and policies shall be designed in the best interests of
the City and its general populace, and shall not afford special advantage
to any individual or corporate member of the financial or investment
community.
2.
Expenses incurred for banking or financial services shall be scrutinized
in the same competitive manner as are other expenditures of City monies.
3.
Financial institutions which serve as depositories of City funds
shall meet the City's established criteria for overall financial strength,
adequate capitalization, and appropriate liquidity, in addition to
fully complying with prevailing State Statutes.
4.
Securities dealers with whom the City conducts business shall be
subject to established guidelines and criteria.
5.
The City will limit its purchase of investment securities to those
of the highest quality, including, but not limited to fully-collateralized
time deposits in banks and savings and loan associations which are
chartered and headquartered within the State, deposits in the State's
Local Government Investment Pool, direct obligations of the United
States government, obligations of United States government agencies,
or purchases of such investment securities under the terms of repurchase
agreements.
6.
Such investments will be made in accordance with prevailing cash
management and investment policies which are promulgated and administered
by the Director of Finance. From time to time, such policies will
be refined and amended by the Director of Finance to reflect current
conditions prevailing in the cash management and investment marketplace,
thereby allowing the City to maintain an appropriate posture relative
to the contemporary financial marketplace.
[R.O. 2012 §140.020; Ord. No. 88-6-4, 6-1988]
A.
Under
the authority of the City Manager of the City of Excelsior Springs
(as established and amended through the passage of ordinance and resolution
of the governing body), the Director of Finance is authorized and
required to make rules and regulations and to establish administrative
policies and procedures relating to the cash management and investment
policies of the City. To this end, this statement of policies has
been prepared.
B.
It
is anticipated that this policy statement will be reviewed and evaluated
on a regular basis, to ensure that the policies and procedures expressed
herein are responsive to the prevailing cash management and investment
environment. Since this environment is subject to constant change,
care must be taken to ensure that such responsiveness is maintained.
This policy statement will, therefore, be appropriately revised, amended,
expanded, and purged on a continuing basis.
C.
If
any changes are contemplated which substantially alter the intent
and purpose of these policies, other than to effect further administrative
or procedural efficiencies, the Director of Finance will discuss such
changes with the City Manager.
[R.O. 2012 §140.030; Ord. No. 88-6-4, 6-1988]
A.
In
general, the cash management and investment activities of the City
of Excelsior Springs shall be conducted in a manner which is consistent
with prevailing prudent business practices which may be applied by
other organizations of similar size and financial resources, in compliance
with appropriate State Statutes.
B.
Investments
of the City, or of funds held in its possession in a fiduciary capacity,
shall be made with the exercise of that judgement and care, under
circumstances then prevailing, which men 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.
C.
Rules
and policies promulgated by the Director of Finance shall be designed
in the best interest of the City and its citizens, and shall not afford
special financial advantage to any individual or corporate member
of the financial or investment community.
D.
Expenses
incurred for banking or financial services shall be treated in the
same competitive manner as other expenditures of City funds.
E.
Financial
institutions which serve as depositories of City funds shall comply
with all prevailing provisions of State Statutes, and shall meet the
City's established criteria for overall financial strength, adequate
capitalization, and appropriate liquidity.
F.
Securities
dealers with whom the City conducts business shall be subject to established
guidelines and criteria.
G.
The
City will limit its purchase of investment securities to those which
are of the highest quality, including, but not limited to, fully-collateralized
time deposits in banks and savings and loan associations which are
chartered and headquartered within the State, deposits in the State's
Local Government Investment Pool, direct obligations of the United
States government, obligations of United States government agencies,
or the purchase of such U.S. government of agency securities under
the terms of repurchase agreements.
[R.O. 2012 §140.040; Ord. No. 88-6-4, 6-1988]
A.
The
Department of Finance is committed to the overall success of the City's
cash management programs. These programs address a variety of cash
management issues, including:
1.
The design and implementations of reliable and effective cash-flow
forecasting methodologies which will assist Finance Department personnel
in the determination of the amounts of cash available for investment,
the time period for which the funds may be invested with a reasonable
level of confidence, and a measure of the volatility of specific forecasts,
which will allow viable determination of the required liquidity which
must characterize the specific investments.
2.
The design and implementation of appropriate "revenue acceleration"
programs, aimed at enhancing the speed at which monies are collected
and deposited.
3.
The design and implementation of suitable "controlled disbursement"
programs, which will ensure that City expenses are met in a timely
manner, but not in such a way as to jeopardize the earning capacity
of the City's cash management portfolio.
4.
The utilization of modern and efficient techniques for the physical
movement of money, taking advantage of the technological and operational
procedures which have evolved in recent years.
5.
The design of investment policies which will allow the City to maximize
its interest earnings, while at the same time establishing policies
and procedures which will ensure the total safety of all funds entrusted
to the care and control of the Finance Department.
6.
The design and implementation of banking relationships which are
both favorable to the City and responsive to the day-to-day requirements
of the City's complex financial operations.
7.
The design and implementation of appropriate policies and procedures
with regard to the proper and effective use of City's municipal credit
authority.
[R.O. 2012 §140.050; Ord. No 88-6-4, 6-1988]
A.
The
statement, "Investments . shall be made with the exercise of that
judgement and care, under circumstances then prevailing, which men
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," imposes a wide variety of responsibilities upon the
Department of Finance. These responsibilities include, but are not
limited to: The need for prudence and care in the selection of appropriate
investment securities; the need for rational criteria for the selection
of financial institutions and securities dealers with whom the City
conducts business; and a distinct concentration upon the maximization
of investment yield within the parameters of the other listed responsibilities.
To meet these responsibilities, the Department of Finance has established
the following policies and procedures for cash investment:
1.
Investment instruments. The Director of Finance,
or designee, shall invest the temporarily idle funds of the City in
those investment instruments which are listed below:
a.
Fully-collateralized Certificates of Deposit issued by qualified commercial banks and savings and loan associations located within the State. The term "qualified" is explained more fully in Subsection (2) hereof.
b.
Deposits in the State's "Local Government Investment Pool", only
if authorized by State Statutes.
c.
Direct obligations of the United States government, including such
instruments as Treasury Bills, Treasury Notes, and Treasury Bonds.
d.
Other "direct obligations", while fully guaranteed by the "full faith
and credit" of the United States government, enjoy less active secondary
markets than the more traditional bills, notes, and bonds. Therefore,
the Finance Department will currently refrain from purchasing such
instruments as SBA loans, AID bonds, "stripped" Treasury Bonds, etc.,
unless special circumstances prevail which suggest their appropriate
use for specific investments. The "special circumstances" will be
fully documented at the time of their purchase and the City Council
will be notified.
e.
Obligations of U.S. Government agencies, including such instruments
as Federal Home Loan Bank bonds, Government National Mortgage Association
bonds, or a variety of "Federal Farm Credit" bonds.
f.
Purchases of the "direct" or "agency" securities mentioned in paragraphs
(3) and (4) above, under the terms of a repurchase agreement which
meets the procedures established in part (c) of this Subsection.
g.
In no event will any investment vehicle be selected and utilized
until the Director of Finance is fully convinced that departmental
personnel have full familiarity with the nature and nuances of the
specific investment vehicle. Furthermore, the Director of Finance
will endeavor to make available whatever professional training is
necessary to assist departmental personnel in the performance of their
cash management duties and responsibilities.
h.
Generally, the City will only invest in "money market instruments",
which are defined as very credit worthy, highly liquid investments
with maturities of one year or less. Although there may be certain
circumstances in which longer-term securities are utilized, such as
investments of long-term sinking fund contributions, or maturity-matched
construction funds, the general use of long-term securities shall
be avoided.
(Such instruments are generally inappropriate to the City's
cash management operations, since the purchase of such securities
infers certain level of "speculation", given the significant "market
risks" which characterize long-term investments.)
2.
Criteria for selection of financial intermediaries. Although the City's policies for the purchase of investment securities
are designed to ensure complete safety, accompanied by appropriate
liquidity and competitive yields, the "providers" of such securities
must also meet specific financial and operational standards.
Deposits in commercial banks and savings and loan associations,
whether they be time deposits, demand deposits, or deposits in special
interest-bearing accounts, ("NOW", "Super-NOW", etc.), shall only
be made in banks which qualify to accept public-sector deposits which
are protected under the terms of Chapter 110, RSMo.
However, certain "sweep" or "automatic repo" accounts, and certain
funds held under the terms of a "trust agreement" arrangement may
not be protected under the provisions of Chapter 110, RSMo.
Furthermore, the City has no desire to "test" such program as
FDIC or FSLIC insurance, nor does it wish to have to establish its
legal right to securities held by financially-insolvent brokers or
securities dealers. There are a sufficiently large number of financial
institutions and securities dealers which are of impeccable financial
standing. As a result, the City does not choose to do business with
"marginal" or financially-weak institutions.
Therefor, financial intermediaries which conduct business with
the City of Excelsior Springs shall be subject to the following types
of selection criteria:
a.
Commercial banks. Deposits of City monies in commercial
banks may only be made with institutions which possess the overall
financial strength, capitalization, and liquidity to reasonably ensure
the safety and availability of such monies. To assess the overall
financial strength of potential depositories, the City will utilize
third-party rating agencies to perform periodic reviews of various
commercial banks, relying upon their reports to determine the appropriateness
of the depository.
Currently, the City uses the services of Prudent Man Analysis,
Inc. (PMA) to rate the strength of the commercial banks with which
the City does business. Inasmuch as PMA utilizes overall ratings of
one (1) through five (5), (one (1) being strongest. five (5) being
weakest), the City's current policy is to seek depositories with a
PMA rating of one (1) or two (2). Banks with ratings of three (3)
shall be eligible to serve as a depository, but must be periodically
and substantively reviewed. Banks rated in the four (4) or five (5)
category will not qualify to receive City monies.
b.
Savings and loan associations. Deposits of City
monies in savings and loan associations shall be subject to the same
rating criteria which are applied to commercial banks. Their acceptability
as depositories will be judged on the third-party ratings of such
organizations as PMA or its counterparts.
c.
Securities dealers. There are currently thirty-six
(36) major investment banking firms which are listed by the market
Reports Division of the Federal Reserve Bank of New York as the thirty-six
(36) "primary" securities dealers. These dealers are unique within
the United States government securities industry in that they both
"report" and are "regulated" in an industry which is typically "non-reporting"
and "unregulated".
Included on this "blue chip" list are major securities firms
(Prudential-Bache, Dean Witter Reynolds, Merrill Lynch, Smith Barney,
etc.) and some of the world's largest banks (Bank of America, Citibank,
Manufacturers Hanover, Northern Trust, etc.).
Current Department of Finance policy is to restrict transactions
relating to the purchase and sale of U.S. Government securities to
this list of "primary" securities dealers. Such policy, therefor,
will preclude the City from doing business with other brokers and
dealers whose financial strength and operational capabilities cannot
be confidently determined, given the absence of "reporting" and "regulation"
requirements.
This policy may seem unduly restrictive. However, the City policy
is to "err on the side of prudence", rather than accept event the
smallest risk of loss of principal or interest.
3.
Procedures for the delivery and possession of securities. It provides insufficient protection for the City to simply limit
its cash investments to those listed in (a) of this Subsection. To
ensure total protection, the City has established delivery and possession
procedures which will be followed in every case. Specifically:
a.
All ownership of securities shall be evidenced by an acceptable safekeeping
receipt issued by a third-party financial institution which is acceptable
to the City, or by a safekeeping receipt from the Federal Reserve
Bank.
b.
All investment (or divestment) transactions will be implemented on
a "delivery vs. payment" (or "payment vs. delivery") basis. In the
absence of acceptable delivery, the City will refuse to enter the
transaction.
c.
Repurchase agreements will meet the aforementioned delivery criteria,
and will be accompanied by an acceptable "haircut" (i.e., excess of
market value of securities over principal amount of investment.)
Furthermore, securities purchased under the terms of a repurchase
agreement shall generally have maturity dates of ten (10) years or
less, and shall be "wirable" instruments through the U.S. Federal
Reserve System.
d.
From time to time, the City may choose to "reverse" certain of its
portfolio securities under the terms of a "reverse repurchase agreement".
However, this authority shall be severely restricted.
The primary rationale for "reversing" is to provide short-term
liquidity which is less costly than permanent liquidation of a portfolio
security. This method can be utilized to "temporarily liquidate" many
types of securities, including CDs, U.S. government obligations, U.S.
agency obligations, etc.
(In the case of local CDs, a "temporary reverse" or "reverse
to maturity" may allow the City to legally avoid any "early withdrawal
penalties", thereby preserving the City's investment capital. In the
case of government or agency securities, a "temporary reverse" may
allow the City to avoid liquidation of a desirable instrument in a
"disadvantageous" marketplace.
However, the City will not utilize "reverse" as a tool to effect
"margined purchases" of investment securities, nor as an action which
will essentially " disguise" or "cover up" unrecognized portfolio
losses. Finally the City will not utilize "reverses" to engage in
any types of "speculative" investment transactions.
e.
All wire transactions required to implement the aforementioned purchase
and sale transactions shall be supported by written instructions to
the City's bank, unless the timely preparation of such written instructions
would hinder the orderly completion of the transaction itself. In
such cases, the City will prepare follow-up letters confirming the
oral (typically telephonic) instructions, and forward such written
instructions to the bank without undue delay.
The Finance Department will, from time to time, recommend to
the governing body various financing opportunities which should be
of ultimate financial and operational benefit to the City and its
taxpayers. The Department will constantly monitor the City's existing
and potential financing alternatives to ensure that full advantage
is being taken of the special tax-exempt municipal financing authority
the City.
