HomeMy WebLinkAboutOCSD 15-25 (REPEALED)RESOLUTION NO. OCSD 15-25
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE
COUNTY SANITATION DISTRICT, AUTHORIZING THE DISTRICT'S
TREASURER TO INVEST AND/OR REINVEST DISTRICT'S FUNDS,
AND ADOPTING DISTRICT'S INVESTMENT POLICY STATEMENT
AND PERFORMANCE BENCHMARKS; AND REPEALING
RESOLUTION NO. OCSD 14-20
WHEREAS, on December 17, 2014, the Board of Directors adopted Resolution
No. 14-20, readopting the District's Investment Policy Statement, and establishing
specific performance benchmarks and objectives, together with a schedule of frequency
of investment performance reports; and
WHEREAS, pursuant to California Government Code Section 53607, the Board
of Directors may delegate authority to invest and/or reinvest District's funds to the
Treasurer for a one-year period; and
WHEREAS, pursuant to California Government Code Section 53646, the District
is required to review its Investment Policy annually and readopt its Policy at a public
meeting, which Policy will establish specific performance benchmarks and objectives,
and specific monitoring and reports.
NOW, THEREFORE, the Board of Directors of the Orange County Sanitation
District, DOES HEREBY RESOLVE, DETERMINE AND ORDER:
Section 1: That the authority of the Board of Directors to invest or reinvest
District's surplus funds, or to sell or exchange securities so purchased, or to deposit for
safekeeping the funds and investments of the Districts with depositories, as provided for
in California Government Code Sections 53608 and 53630, is hereby delegated to the
District's Treasurer for a one-year period commencing on the date this Resolution is
adopted, as authorized by California Government Code Section 53607.
OCSD 15-25-1
REPEALED BY
OCSD 16-19
Section 2: That the Board of Directors hereby adopts the Investment Policy
Statement of the Orange County Sanitation District, as set forth in Exhibit "A", attached
hereto and incorporated herein by reference.
Section 3: That the Board of Directors hereby adopts the following specific
performance benchmarks for their two investment funds in accordance with Section
14.0 of the District's Investment Policy:
LIQUID OPERATING MONIES: The Short-Term Operating Fund will be
compared to the three-month T-Bill rate, and the Callan Active Cash Flow
Income Style Group. The Callan Active Cash Flow Income Style Group
represents a peer group of managers who operate with a maximum maturity of
one year.
LONG-TERM OPERATING MONIES: The Long-Term Operating Fund will be
compared to the Merrill Lynch Government and Corporate One-to-Five Year
Maturity Index and to the Callan Defensive Fixed Income Style Group.
Section 4: That the Board of Directors hereby adopts a performance
monitoring and reporting schedule, as required by Section 15.0 of the District's
Investment Policy, which schedule is attached hereto as Exhibit "B", and incorporated
herein by reference.
Section 5: That Resolution No. OCSD 14-20 is hereby repealed.
OCSD 15-25-2
PASSED AND ADOPTED at regular meeting of the Board of Directors, Orange
County Sanitation District held December 16, 2015.
ATTEST:
OCSD 15-25-3
STATE OF CALIFORNIA )
) SS
COUNTY OF ORANGE )
I, Kelly A. Lore, Clerk of the Board of Directors of the Orange County Sanitation
Distr ict, do hereby certify that the foregoing Resolution No. OCSD 15-25 was passed and
adopted at a regular meeting of said Board on the 16th day of December, 2015, by the
following vote, to wit:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
Beamish ; Choi ; Curry; Deaton; Ferryman; Jones; Kiley; Kim;
Kring; Mills; M. Murphy (Alternate); R. Murphy; Nagel;
Neugebauer; Nielsen ; Parker; Peterson (Alternate);Shawver;
F. Smith;
Tinajero; Underhill (Alternate); Withers and Yarc
None
None
Bartlett and Sebourn
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official
seal of Orange County Sanitation District this 16th day of December, 2015.
e
Board of Directors
Orange County Sanitation Dis t.r lct
OCSD 15-25-4
ORANGE COUNTY SANITATION
DISTRICT
INVESTMENT
POLICY
STATEMENT
Proposed for
Review and Approval
By
Administration Committee
On
December 9, 2015
And for Adoption
By
Board of Directors
On
December 16, 2015
OCSD 15-25-5
Page Intentionally Left Blank
Section
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
16.0
Appendix
TABLE OF CONTENTS
Topic
Policy ...................................................................................... 2
Scope ...................................................................................... 2
Standard of Prudence ............................................................. 2
Investment Objectives ............................................................. 3
Delegation of Authority ............................................................ 3
Ethics and Conflicts of Interest.. ............................................. .4
Authorized Financial Dealers and Institutions ......................... 5
Authorized and Suitable Investments ...................................... 6
Collateralization .......................................................... 10
Safekeeping and Custody ............................................. 10
Diversification ............................................................. 11
Maximum Maturities .............................................................. 12
Internal Control. ..................................................................... 13
Performance Objectives and Benchmarks ............................ 13
Reporting .............................................................................. 13
Investment Policy Adoption and Revision ............................. 15
A. Summary of Investment Authorization
B. Treasury Management Procedures
C. Investment Manager Certification
D. Investment Pool Questionnaire (LAIF)
E. Board Resolution No. OCSD-15-25, Authorizing the District's Treasurer to Invest
and/or Reinvest District Funds, and Adopting Investment Policy and Performance
Benchmarks
F. Quarterly Investment Program Monitoring Reports
G. Sections of the California Government Code Pertinent to Investing Public Funds
H. Glossary of Investment Terms
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OCSD 15-25-7
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1.0 Policy:
ORANGE COUNTY SANITATION OISTRICT
INVESTMENT POLICY STATEMENT
It is the policy of the Orange County Sanitation District (OCSD) to invest public funds in
a manner which ensures the safety and preservation of capital while meeting
reasonably anticipated operating expenditure needs, achieving a reasonable rate of
return and conforming to all state and local statutes governing the investment of public
funds.
1.1. This Investment Policy is set forth by OCSD for the following purposes:
1.1.1. To establish a clear understanding for the Board of Directors,
OCSD management, responsible employees and third parties of the
objectives, policies and guidelines for the investment of the OCSD's idle
and surplus funds.
1.1.2. To offer guidance to investment staff and any external
investment advisors on the investment of OCSD funds (see Appendix "A").
1.1.3. To establish a basis for evaluating investment results.
1.2. OCSD establishes investment policies which meet its current investment
goals. OCSD shall review this policy annually, and may change its
policies as its investment objectives change.
2.0 Scope:
This Investment Policy applies to all financial assets of OCSD; except for the proceeds
of OCSD's capital projects financing program, which are invested in accordance with
provisions of their specific bond indentures; and such other funds excluded by law or
other Board-approved covenant or agreement.
These funds are accounted for by OCSD as Enterprise Funds as represented in
OCSD's Comprehensive Annual Financial Report.
3.0 Standard of Prudence:
The standard of prudence to be used by OCSD internal staff, and any authorized
investment advisor(s), shall be as described in Section 53600.3 of the California
Government Code as follows: Except as provided in subdivision (a) of Section
27000.3, all governing bodies of local agencies or persons authorized to make
investment decisions on behalf of those local agencies investing public funds
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OCSD 15-25-9
pursuant to this chapter are trustees and therefore fiduciaries subject to
the prudent investor standard. When investing, reinvesting, purchasing,
acquiring, exchanging, selling, or managing public funds, a trustee shall act with
care, skill, prudence, and diligence under the circumstances then prevailing,
including, but not limited to, the general economic conditions and the anticipated
needs of the agency, that a prudent person acting in a like capacity and
familiarity with those matters would use in the conduct of funds of a like character
and with like aims, to safeguard the principal and maintain the liquidity needs of
the agency. Within the limitations of this section and considering individual
investments as part of an overall strategy, investments may be acquired as
authorized by law.
4.0 Investment Objectives:
The primary objectives of OCSD's investment activities, in priority order, and as
described in Section 53600.5 of the California Government Code, shall be:
4.1 Safety: The safety and preservation of principal is the foremost objective
of the investment program of OCSD. Investments shall be selected in a
manner that seeks to ensure the preservation of capital in OCSD's overall
portfolio. This will be accomplished through a program of diversification,
more fully described in Section 11.0, and maturity limitations, more fully
described in Section 12.0, in order that potential losses on individual
securities do not exceed the income generated from the remainder of the
portfolio.
4.2 Liquidity: The investment program will be administered in a manner that
will ensure that sufficient funds are available for OCSD to meet its
reasonably anticipated operating expenditure needs.
4.3 Return on Investments: The OCSD investment portfolio will be
structured and managed with the objective of achieving a rate of return
throughout budgetary and economic cycles, commensurate with legal,
safety, and liquidity considerations.
5.0 Delegation of Authority:
5.1 Authority to manage OCSD's investment program is derived from the
California Government Code Sections 53600 et seq. and Sections 53635
et seq. The Board of Directors hereby delegates management
responsibility for the OCSD investment program to its Director of Finance
and Administrative Services/Treasurer, who shall establish written
procedures for the operation of the investment program, consistent with
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this Policy. The Controller/Assistant Treasurer shall be responsible for
day-to-day administration, monitoring, and the development of written
administrative procedures for the operation of the investment program,
consistent with this Policy. The current treasury management procedures
are presented in Appendix "B." No person may engage in an investment
transaction except as provided under the terms of this Policy and the
procedures established by the Treasurer. The Treasurer shall be
responsible for all transactions undertaken by OCSD internal staff, and
shall establish a system of controls to regulate the activities of internal
staff and external investment advisors engaged in accordance with
Section 5.3.
5.2 The administrative procedures for the operation of OCSD's investment
program will provide for, but not be limited to, the following:
5.2.1 Formats for monthly and quarterly reports to the Administration
Committee, and the Board of Directors.
5.2.2 Compliance with generally accepted accounting principles of
the Government Accounting Standards Board.
5.2.3 Establishment of benchmarks for performance measurement.
5.2.4 Establishment of a system of written internal controls.
5.2.5 Establishment of written procedures for competitive bids and
offerings of securities that may be purchased or sold by internal OCSD
staff.
5.2.6 Establishment of a Desk Procedures Manual for treasury
operations and management.
5.3 The Board of Directors of OCSD may, in its discretion, engage the
services of one or more registered investment advisors to assist in the
management of OCSD's investment portfolio in a manner consistent with
OCSD's objectives. Such external investment advisors, which shall be
selected through a competitive process, shall be granted discretion to
purchase and sell investment securities in accordance with this
Investment Policy. Such advisors must be registered under the
Investment Advisers Act of 1940, or be exempt from such registration.
6.0 Ethics and Conflicts of Interest:
6.1 Officers and employees of OCSD involved in the investment process shall
refrain from personal business activities that could conflict with proper
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OCSD 15-25-11
execution of OCSD's investment program, or which could impair their
ability to make impartial investment decisions. Employees and investment
officials shall disclose to the General Manager any material financial
interests in financial institutions that conduct business within OCSD's
boundaries, and they shall further disclose any large personal
financial/investment positions, the performance of which could be related
to the performance of positions in OCSD's portfolio.
7.0 Authorized Financial Dealers and Institutions:
7.1 For investment transactions conducted by OCSD internal staff, the
Treasurer will maintain a list of financial institutions authorized to provide
investment services to OCSD, including "primary" or regional dealers that
qualify under Securities and Exchange Commission Rule 15C3-1 (Uniform
Net Capital rule), and Federal or State of California chartered banks. No
public deposit shall be made except in a qualified public depository as
established by State law.
All financial institutions which desire to become qualified bidders for
investment transactions with OCSD must supply the following for
evaluation by the Treasurer:
7.1.1. Audited financial statements for the institution's three (3) most
recent fiscal years.
7.1.2. A statement, in the format prescribed by the Government
Finance Officers Association (GFOA), certifying that the institution has
reviewed OCSD's Investment Policy and that all securities offered to the
Districts shall comply fully and in every instance with all provisions of the
California Government Code and with this Investment Policy. The current
statement is presented in Appendix "C."
7.1.3. A statement describing the regulatory status of the dealer, and
the background and expertise of the dealer's representatives.
Selection of financial institutions, broker/dealers, and banks authorized to
engage in transactions with OCSD shall be made through a competitive
process. An annual review of the financial condition of qualified
institutions will be conducted by the Treasurer.
7.2 Selection of broker/dealers used by external investment advisors retained
by OCSD, shall be in compliance with contract provisions between OCSD
and any external investment advisors, and shall be in substantially the
following form:
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OCSD 15-25-12
Use of Securities Brokers: Neither the Investment Advisor nor any parent,
subsidiary or related firm shall act as a securities broker with respect to
any purchases or sales of securities which may be made on behalf of
OCSD, provided that this limitation shall not prevent the Investment
Advisor from utilizing the services of a securities broker which is a parent,
subsidiary or related firm, provided such broker effects transactions on a
"cost only" or "nonprofit" basis to itself and provides competitive execution.
The Investment Advisor shall provide the Districts with a list of suitable
independent brokerage firms (including names and addresses) meeting
the requirements of Government Code Section 53601.5, and, unless
otherwise directed by OCSD, the Investment Advisor may utilize the
service of any of such independent securities brokerage firms it deems
appropriate to the extent that such firms are competitive with respect to
price of services and execution.
8.0 Authorized and Suitable Investments:
All investments shall be made in accordance with the California Government Code
including Sections 16429.1 et seq., 53600 et seq., and 53684, and as described within
this Investment Policy. Permitted investments under this Policy shall include:
8.1 Securities, obligations, participations, or other instruments of, or
issued by, or fully guaranteed as to principal and interest by the US
Government, a federal agency, or a US Government-sponsored
enterprise pursuant to Section 53601 (f) of the California Government
Code. US Treasury securities must make up at least 10% of the portfolio.
8.2 Supranational Obligations issued or unconditionally guaranteed by the
International Bank for Reconstruction and Development, International
Finance Corporation, or Inter-American Development Bank. Securities
must be eligible for purchase in the United States and be US dollar
denominated senior unsecured unsubordinated obligations, with a
maximum maturity of five years. Securities eligible for purchase under this
section must be rated "AA" or better by a Nationally Recognized Statistical
Rating Organization (NRSRO) and shall not exceed 30% of the total
portfolio.
8.3 Mortgage pass-through security, collateralized mortgage obligation,
mortgage-backed or other pay-through bond, equipment lease-
backed certificate, consumer receivable pass-through certificate, or
consumer receivable-backed bond of a maximum maturity of five years.
Securities eligible for investment under this subdivision shall be issued by
an issuer having an "A" or higher rating for the issuer's debt as provided
by an NRSRO and rated in a rating category of "AA" or its equivalent or
better by an NRSRO. Purchase of securities
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OCSD 15-25-13
authorized by this subdivision may not exceed 20 percent of the agency's
surplus moneys that may be invested pursuant to this section. Purchase of
mortgage derivatives, which include interest-only payments (IOs) and
principal-only payments (POs); inverse floaters, and RE-REMICs (Real
Estate Mortgage Investment Conduits), is hereby prohibited.
8.4 Commercial paper of "prime" quality of the highest ranking or of the
highest letter and number rating as provided by an NRSRO, and issued by
a domestic corporation organized and operating in the United States with
assets in excess of $500 million and having a rating of "A" or better on its
long-term debt as provided by an NRSRO. Purchases of eligible
commercial paper may not exceed 270 days to maturity from the date of
purchase. Purchases of commercial paper shall not exceed 25% of the
market value of the portfolio. No more than 5% of the market value of the
portfolio, or 10% of the issuer's outstanding paper, may be invested in
commercial paper issued by any one (1) eligible corporation.
8.5 Banker's acceptances issued by institutions, the short-term obligations of
which are rated of the highest ranking or the highest letter and number
rating as provided by an NRSRO provided that: (a) the acceptance is
eligible for purchase by the Federal Reserve System; (b) the maturity does
not exceed 180 days; ( c) no more than 40% of the total portfolio may be
invested in banker's acceptances; and (d) no more than 30% of the total
portfolio may be invested in the banker's acceptances of any one (1)
commercial bank.
8.6 Medium term (or corporate) notes of a maximum of five (5) years
maturity issued by corporations organized and operating within the United
States, or issued by depository institutions licensed by the United States,
or any state, and operating within the United States with assets in excess
of $500 million, and which is rated in a rating category of "A" or better on
its long-term debt as provided by an NRSRO. If, after purchase, the rating
of an eligible note falls below the minimum rating category stipulated
above, the external investment advisor shall notify the District of the
downgrade, and shall present an analysis and recommendations as to the
disposition of the note consistent with the investment objectives of this
Investment Policy. No more than 30% of the portfolio may be invested in
medium term notes.
8. 7 Notes, bonds, or other obligations that are at all times secured by a
valid first priority security interest in securities of the types listed by
California Government Code Section 53651 as eligible securities for the
purpose of securing local agency deposits having a market value at least
equal to that required by California Government Code Section 53652 for
the purpose of securing local agency deposits. The securities serving as
collateral shall be placed by delivery or book entry into the custody of a
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trust company or the trust department of a bank that is not affiliated with
the issuer of the secured obligation, and the security interest shall be
perfected in accordance with the requirements of the Uniform Commercial
Code or federal regulations applicable to the types of securities in which
the security interest is granted.
8.8 Shares of mutual funds investing in securities permitted under this policy
and under Section 53601 (I) of the California Government Code. Such
funds must either: (1) attain the highest ranking, or the highest letter and
numerical rating, provided by not less than two of the three largest
nationally recognized rating services; or (2) have an Investment Advisor
registered with the Securities and Exchange Commission with not less
than five (5) years of experience investing in the securities and obligations
authorized under this Policy and under California Government Code
Section 53601, and with assets under management in excess of $500
million. The purchase price of shares of beneficial interest purchased
pursuant to this policy, and the California Government Code may not
include any commission that the companies may charge, and shall not
exceed 20% of the District's surplus money that may be invested pursuant
to this section. However, no more than 10% of the District's surplus funds
may be invested in shares of beneficial interest of any one (1) mutual fund
pursuant to this section.
8.9 Certificates of deposit:
8.9.1 Secured (collateralized) time deposits issued by a nationally or
state-chartered bank or state or federal savings and loan association, as
defined by Section 5102 of the California Financial Code, and having a net
operating profit in the two (2) most recently completed fiscal years.
Collateral must comply with Chapter 4, Bank Deposit Law, Section 16500
et seq., and Chapter 4.5, Savings and Loan Association and Credit Union
Deposit Law, Section 16600 et seq., of the California Government Code.
8.9.2 Negotiable certificates of deposit (NCDs) issued by a nationally
or state-chartered bank or state of federal savings and loan association,
as defined by Section 5102 of the California Financial Code; and which
shall have a rating of "A" or better on its long-term debt as provided by a
NRSRO; or which shall have the highest letter and number rating for
deposits as provided by a NRSRO; or as otherwise approved by the
District's Board of Directors. No more than 30% of the portfolio may be
invested in securities pursuant to this section.
8.9.3 To be eligible to receive local agency money, a bank, savings
association, federal association, or federally insured individual loan
company shall have received an overall rating of not less than
"satisfactory" in its most recent evaluation by the appropriate federal
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· financial supervisorial agency of its record of meeting the credit needs of
California's communities, including low and moderate income
neighborhoods, pursuant to Section 2906 of Title 12 of the United States
Code.
8.10 Taxable or tax-exempt municipal bonds issued by any of the 50 United
States. Such securities must be rated "A" or higher by a NRSRO; or as
otherwise approved by the Districts' Board of Directors.
8.11 The State of California Local Agency Investment Fund (LAIF). The
LAIF is an investment alternative for California's local governments and
special districts managed by the State Treasurer's Office. LAIF is more
fully described in the Glossary (See Appendix "H.") The District shall use
LAIF as a short-term cash management facility. Investment of District
funds in LAIF shall be subject to investigation and due diligence prior to
investing, and on a continual basis to a level of review pursuant to Section
3.0, Standard of Prudence, of this Policy. See Appendix "D" for
investment pool questionnaire.
8.12 The Orange County Treasurer's Money Market Commingled
Investment Pool (OCCIP). The OCCIP is a money market investment
pool managed by the Orange County Treasurer's Office. OCCIP is more
fully described in the Glossary. (See Appendix "H.") The District has no
funds invested in OCCIP at this time. Investment of District funds in
OCCIP would be subject to investigation and due diligence prior to
investing, and on a continual basis to a level of review pursuant to Section
3.0, Standard of Prudence, of this Policy.
8.13 Repurchase agreements provided that:
8.13.1 All repurchase agreements shall be collateralized with
securities eligible for purchase under this Policy. In order to anticipate
market changes and to provide a level of security for all repurchase
agreement transactions, collateralization shall be maintained at a level of
at least 102% of the market value of the repurchase agreements, and
shall be adjusted no less than weekly.
8.13.2 All repurchase agreements must be the subject of a Master
Repurchase Agreement between OCSD and the provider of the
repurchase agreement. The Master Repurchase Agreement shall be
substantially in the form developed by The Bond Market Association.
8.14 Reverse repurchase agreements provided that:
8.14.1 No more than five percent (5%) of OCSD's portfolio shall be
invested in reverse repurchase agreements, and there shall be no long-
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· term reverse repurchase agreements unless otherwise authorized by the
Districts' Board of Directors.
8.14.2 The maximum maturity of reverse repurchase agreements shall
be ninety (90) days.
8.14.3 Reverse repurchase agreements shall mature on the exact
date of a known cash flow which will be unconditionally available to repay
the maturing reverse repurchase agreement.
8.14.4 Proceeds of reverse repurchase agreements shall be used
solely to supplement portfolio income or to provide portfolio liquidity, and
shall not be used to speculate on market movements.
8.14.5 All reverse repurchase agreements must be the subject of a
Master Repurchase Agreement between OCSD and the provider of the
reverse repurchase agreement. The Master Repurchase Agreement shall
be substantially in the form developed by The Bond Market Association.
8.15 Sales of OCSD-owned securities in the secondary market may incur
losses in order to improve the risk or return characteristics of the portfolio,
to prevent anticipated further erosion of principal, or when trading for
securities that result in an expected net economic gain to OCSD.
8.16 If securities owned by the OCSD are downgraded below the quality
required by this Investment Policy, it shall be OCSD's policy to review the
credit situation and make a determination as to whether to sell or retain
such securities in the portfolio. If a decision is made to retain the
downgraded securities in the portfolio, their presence in the portfolio will
be monitored and reported monthly to the OCSD General Manager, the
Administration Committee and Board of Directors.
9.0 Collateralization:
Generally, the value to secure deposits under this Policy shall comply with Section
53652 of the California Government Code. Collateralization will be required for secured
time deposits, as more fully described in Section 8.8.1; and repurchase agreements, as
more fully described in Section 8.13.1 . Collateral will always be held by an independent
third-party, as more fully described in Section 10.1. The right of collateral substitution is
granted.
10.0 Safekeeping and Custody:
10.1 All securities transactions, including collateral for repurchase agreements,
entered into by, or on behalf of OCSD, shall be conducted on a
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delivery-versus-payment (DVP) basis. Securities will be held by
OCSD's third-party custodian bank, which shall be selected through a
competitive process, or that agent's representative, or in the agent's
account at the Federal Reserve Bank, or within clearing corporations in
the U.S., and evidenced by book entry statements.
11.0 Diversification:
OCSD will diversify its investments by security type, issuer, and financial institution in
accordance with the following:
11.1 There is no limit on investment in securities issued by or guaranteed by
the full faith and credit of the U.S. government.
11.2 No more than 20% of the portfolio may be invested in securities of a single
agency of the U.S. government, which does not provide the full faith and
credit of the U.S. government.
11.3 No more than 5% of the portfolio may be invested in securities of any one
issuer, other than the U.S. government or its agencies. Investment in
mutual funds is not governed by this Section 11.3. See Section 11 .8 for
conditions of purchase of mutual funds.
11.4 No individual holding shall constitute more than 5% of the total debt
outstanding of any issuer.
11.5 No more than 40% of the portfolio may be invested in banker's
acceptances.
11.6 No more than 25% of the portfolio may be invested in commercial paper.
11. 7 No more than 30% of the portfolio may be invested in medium-term
(corporate) notes.
11.8 No more than 20% of the portfolio may be invested in mutual funds.
However, no more than 10% of the District's portfolio may be invested in
shares of beneficial interest of any one (1) mutual fund.
11 .9 No more than 30% of the portfolio may be invested in negotiable
certificates of deposit.
11.10 No more than 10% of the portfolio may be invested in eligible municipal
bonds.
11.11 No more than 20% of the Long Term Operating Monies portfolio may be
invested in a combination of mortgage-backed securities, CMOs and
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asset-backed securities.
11 .12 No more than the lesser of 15% of the portfolio or the statutory maximum
may be invested in LAIF.
11.13 No more than 15% of the portfolio may be invested in the Orange County
Investment Pool.
11 .14 No more than 20% of the portfolio may be invested in repurchase
agreements.
11.15 No more than 5% of the portfolio may be invested in reverse repurchase
agreements.
12.0 Maximum Maturities:
To the extent possible, OCSD will attempt to match its investments with reasonably
anticipated cash flow requirements. The Treasurer shall develop a five-year cash flow
forecast, which shall be updated quarterly. Based on this forecast, the Treasurer shall
designate, from time-to-time, the amounts to be allocated to the investment portfolio.
OCSD monies invested in accordance with this Policy are divided into two (2)
categories:
12.1 Liquid Operating Monies. Funds needed for current operating and
capital expenditures are known as Liquid Operating Monies.
12.1.1 The maximum final stated maturity of individual securities in the
Liquid Operating Monies account portfolio shall be one (1) year from the
date of settlement.
12.1.2 The average duration of the Liquid Operating Monies account
portfolio shall be recommended by the Treasurer based on the Districts'
cash flow requirements, but may never exceed 180 days.
12.2 Long Term Operating Monies. Funds needed for longer term purposes
are known as the Long Term Operating Monies.
12.2.1 The maximum final stated maturity of individual securities in the
Long Term Operating Monies account portfolio shall be five (5) years from
the date of settlement.
12.2.2 The duration of the Long Term Operating Monies account
portfolio shall be recommended by the Treasurer based on the Districts'
five-year cash flow forecast, but may never exceed 60 months.
12.2.3 The duration of the Long Term Operating Monies account
portfolio shall never exceed 120% of the duration as established in
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accordance with Section 12.2.2.
12.2.4 The duration of the Long Term Operating Monies account
portfolio shall never be less than 80% of the duration as established in
accordance with Section 12.2.2
13.0 Internal Control:
13.1 The Treasurer shall establish an annual process of independent review by
an external auditor. This review will provide internal control by assuring
compliance with policies and procedures. The current treasury
management procedures are presented in Appendix "B."
14.0 Performance Objectives and Benchmarks:
14.1 Overall objective. The investment portfolio of OCSD shall be designed
with the overall objective of obtaining a rate of return throughout budgetary
and economic cycles, commensurate with investment risk constraints and
reasonably anticipated cash flow needs.
14.2 The Liquid Operating Monies. The investment performance objective
for the Liquid Operating Monies shall be to earn a total rate of return over
a market cycle which exceeds the return on a market index approved by
the Administration Committee, and by the District's Board of Directors,
when the duration of the portfolio is established. This market index is more
fully described in Board Resolution No. OCSD 15-25.
14.3 The Long Term Operating Monies. The investment performance
objective for the Long Term Operating Monies shall be to earn a total rate
of return over a market cycle which exceeds the return on a market index
selected by the Administration Committee and approved by the Districts'
Board of Directors, when the duration of the portfolio is established. This
market index is more fully described in Board Resolution No. OCSD 15-
25.
15.0 Reporting:
15.1 Monthly transaction reports in accordance with California Government
Code Section 53607 shall be submitted by the Treasurer to the
Administration Committee which shall forward the reports to the District's
Board of Directors.
15.2 Quarterly investment reports will be submitted by the Treasurer to the
Administration Committee which shall forward the reports to the District's
Board of Directors. The quarterly reports shall provide clear and concise
status information on the District's portfolios at the end of each reporting
Page 13
OCSD 15-25-20
period, including performance measures using the benchmarks described
in Section 14.0 of this Investment Policy. Sample quarterly reports are
presented in Appendix "F." These reports shall contain listings of
individual securities held at the end of each reporting period, and shall
disclose, at a minimum, the following information about the risk
characteristics of OCSD's portfolio:
15.2.1 Cost and accurate and complete market value of the portfolio.
15.2.2 Modified duration of the portfolio compared to Benchmark.
15.2.3 Dollar change in value of the portfolio for a one-percent (1 %)
change in interest rates.
15.2.4 Percent of portfolio invested in reverse repurchase
agreements, and a schedule which matches the maturity of such reverse
repurchase agreements with the cash flows which are available to repay
them at maturity.
15.2.5 For the Liquid Operating Monies account only, the percent of
portfolio maturing within 90 days.
15.2.6 Average portfolio credit quality.
15.2. 7 Percent of portfolio with credit ratings below "A" by any rating
agency, and a description of such securities.
15.2.8 State that all investments are in compliance with this policy and
the California Government Code, or provide a listing of any transactions or
holdings which do not comply with this policy or with the California
Government Code.
15.2.9 Time-weighted total rate of return for the portfolio for the prior
three months, twelve months, year to date, and since inception compared
to the Benchmark returns for the same periods.
15.2.10 State that sufficient funds are available for OCSD to meet its
operating expenditure requirements for the next six months, or if not, state
the reasons for the shortfall.
15.2 OCSD's Treasurer shall meet quarterly with the Administration Committee
to review investment performance, proposed strategies and compliance
with this Investment Policy. External investment advisors may be required
to attend said meetings at the discretion of the Chairman of the
Administration Committee.
Page 14
OCSD 15-25-21
16.0 Investment Policy Adoption and Revision:
16.1 The Investment Policy of OCSD shall be reviewed by the Administration
Committee and shall be adopted by resolution of the Board of Directors of
OCSD. The Policy shall be reviewed on an annual basis in accordance
with California Government Code Section 53646, and this Investment
Policy, by the Administration Committee, which shall recommend
revisions, as appropriate, to the Board of Directors. Any modifications
made thereto shall be approved by the Board of Directors.
16.2 The Administration Committee shall serve as the oversight committee for
the District's Investment program and shall adopt guidelines for the
ongoing review of duration, quality and liquidity of the District's portfolio.
Page 15
OCSD 15-25-22
APPENDIX "A"
SUMMARY OF INVESTMENT AUTHORIZATION
INTERNAL AND EXTERNAL MANAGERS
SHORT TERM OPERA TING FUND
INVESTMENT
U.S. Treasuries
Federal Agencies
Supranationals
Mortgage-backed
Commercial paper
Banker's Accept.
Medium Term Notes
Mutual Funds
Negotiable CDs
Municipal Bonds
LAIF
OCIP
CM Os
Asset-backed
Repurchase Agree.
Reverse Repos
INTERNAL
OK
Fixed coupon, fixed mat.
NO
NO
OK
OK
Fixed coupon, fixed mat.*
Money Market Only**
Fixed coupon, fixed mat.*
OK*
OK
OK
NO
NO
OK
OK*
EXTERNAL
OK
OK
OK
NO
OK
OK
OK
Money Market Only
OK
NO
NO
NO
OK
OK
OK
OK
LONG TERM OPERA TING PORTFOLIO
INVESTMENT
U.S. Treasuries
Federal Agencies
Supranationals
Mortgage-backed
Commercial Paper
Banker's Acceptances
Medium Term Notes
Mutual Funds
Negotiable CDs
Municipal Bonds
LAIF
OCIP
CM Os
Asset-backed
Repurchase Agree.
Reverse Repos
INTERNAL
OK
Fixed coupon, fixed mat.
NO
NO
OK
OK
Fixed coupon, fixed mat.*
Money Market Only**
Fixed coupon, fixed mat.*
OK*
OK
OK
NO
NO
OK
OK*
*with prior approval of the Administration Committee.
**Using financial institutions approved by the Administration Committee.
EXTERNAL
OK
OK
OK
OK
OK
OK
OK
OK
OK
OK
NO
NO
OK
OK
OK
OK
OCSD 15-25-23
EXHIBIT "B"
Calendar Year 2016 Performance Monitoring & Reporting Schedule
For the Administration Committee The Quarterly Investment
and Board of Directors meetings of: Management Program Report to be
presented for the period of:
January 2016 (Board only)
February Oct-Dec 2015
March
April
May Jan -March 2016
June
July
August (Board only) April -June 2016
September
October
November July-Sept 2016
December
OCSD 15-25-24
POLICY
REFERENCE
15.1.1
15.1.2
15.1.3
15.1.4
15.1.5
15.1.6
15.1.7
15.1.8
15.1.9
ADDL**
ADDL**
ADDL**
ADDL**
EXHIBIT "B"
ORANGE COUNTY SANTIATION DISTRICT
PERFORMANCE MONITORING & REPORTING SUMMARY
FOR THE
DISTRICT'S INVESTMENT PROGRAM
PERFORMANCE CHARACTERISTIC
Cost and market value of the portfolio (monthly mark-to-market).
Modified duration of the portfolio compared to benchmark.
Dollar change in value of the portfolio for a 1 % change in interest rate.
Percent of portfolio invested in reverse repurchase agreements, and a schedule which
matches the maturity of such reverse repurchase agreements with the cash flows which
are available to repay them at maturity.
For the Liquid Operating Monies account only, the percent of portfolio maturing within 90
days.
Average portfolio credit quality.
Percent of portfolio with credit ratings below "A" by any rating agency, and a description
of such securities.
Listing of any transaction or holdings which do not comply with this policy or with the
California Government Code.
Time-weighted total rate of return for the portfolio for the prior three months, twelve
months, year-to-date, and since inception compared to the benchmark returns for the
same periods.
Comparison of portfolio performance to market index benchmark.
Comparison of Manager's performance to peer group benchmark.
Monitoring of organizational and structural changes of investment management firm.
Audit portfolios for compliance with investment policy guidelines.
REPORTING PARTY*
Chandler BNY Callan
M,Q M,Q Q
1M,Q Q
M,Q Q
M,Q
M,Q Q
M,Q Q
M,Q Q
M,Q
M,Q Q
M,Q Q
Q
Q
Q
15.1.10 OCSD will report if sufficient funds are available for it to meet operating expenditure requirements for the next six months, or if
not, state the reason for the shortfall.
Notes
*M =Monthly
*Q = Quarterly
**ADDL =Monitoring of Additional Performance Characteristics OCSD 15-25-25