Chapter 3.34
INVESTMENT AND COLLATERALIZATION OF PUBLIC FUNDS

Sections:

3.34.010    Purpose.

3.34.015    Policy.

3.34.020    Definitions.

3.34.030    Authorized investments.

3.34.040    Safekeeping and custody.

3.34.050    Delegation of authority.

3.34.010 Purpose.

This chapter is intended to govern the investment and collateralization of funds under the control of the city. This chapter does not apply to any funds controlled by a separate trust indenture. (Ord. 585 § 4, 2002)

3.34.015 Policy.

It is the policy of the city to invest public funds in a manner which, in order of relative importance, will preserve capital, meet the daily cash flow demands of the city, and provide a reasonable market rate of investment. All investments of city funds must conform to the city code of ordinances governing the investment of public funds. (Ord. 585 § 4, 2002)

3.34.020 Definitions.

As used in this chapter:

A. “Authorized investment” is as defined in PMC 3.34.030.

B. “Bank” means a state or federally chartered commercial or mutual bank, savings and loan association or credit union located in the United States and having insurance of accounts through the appropriate insuring agency of the United States.

C. “Certificate of deposit” means a nonnegotiable certificate of deposit or other depository agreement issued, or to be issued, to the city by a bank.

D. “City” means the city of Palmer, Alaska.

E. “Government obligations” means interest-bearing obligations of the United States, or for the payment of principal and interest on which the full faith and credit of the United States is pledged.

F. “Moody’s” means Moody’s Investment Service, its successors and assigns, or, if such organization shall be dissolved or liquidated or shall no longer perform the functions of a securities rating organization, any other nationally recognized securities rating organization designated by the city manager.

G. “Rated bank” means a bank:

1. Whose short-term obligations are rated, at all times, “A-1” or better by S&P, and “P-1” or better by Moody’s; or

2. Whose letters of credit secure third-party debt issues rated at least “A” by S&P or Moody’s; or

3. Which is a subsidiary of a one-bank holding company, all of whose commercial paper has the highest rating given by S&P or Moody’s or whose long-term debt issues are rated at least “A” or its equivalent by S&P or Moody’s.

H. “S&P” means Standard and Poor’s Ratings Group, its successors and assigns, or, if such organization shall be dissolved or liquidated or shall no longer perform the functions of a securities rating organization, any other nationally recognized securities rating organization designated by the city manager. (Ord. 585 § 4, 2002)

3.34.030 Authorized investments.

In order to provide maximum security for the investment of city funds and to provide the greatest interest revenue consistent with safety, only the following investments of the city’s funds will be authorized:

A. Government obligations;

B. Commercial paper (i) having original maturities of not more than 270 days and rated, at all times, “A-1” or better by S&P, and “P-1” or better by Moody’s; and (ii) bearing interest at a rate at least 25 basis points (0.25 percent) above the rate of interest on United States Treasury obligations of the same maturity at the time of purchase;

C. Banker’s acceptances accepted by a rated bank and eligible for rediscount with, or purchase by, Federal Reserve System banks;

D. Interest-bearing obligations of a corporation, or of any state of the United States of America or any political subdivision thereof, which obligations at all times are rated at least “AA” by S&P or Moody’s; provided, that any such obligation of a corporation shall bear interest at a rate at least 25 basis points (0.25 percent) above the rate of interest on United States Treasury obligations of the same maturity at the time of purchase;

E. Shares of Securities and Exchange Commission registered money market mutual funds conforming to Rule 2a-7 of the Investment Company Act of 1940 that invest primarily in direct obligations of the United States and repurchase agreements backed by those obligations, and rated in the highest category by S&P and Moody’s;

F. Certificates of deposit of any rated bank; provided, that such certificates of deposit are (i) fully insured by the appropriate insuring agency of the United States; and (ii) to the extent not so insured, collateralized with government obligations held by a third party custodian, in an amount equal to 102 percent of the principal and unpaid accrued interest;

G. Repurchase agreements with primary dealers or rated banks, collateralized with government obligations held by a third party custodian, in an amount equal to 102 percent of the principal and unpaid accrued interest;

H. In addition to the above, the city may invest its funds pursuant to an investment agreement with an investment pool organized and operated in accordance with the Alaska Investment Pool Act (Alaska Statute Chapter 37.23, Investment Pools for Public Entities). (Ord. 585 § 4, 2002)

3.34.040 Safekeeping and custody.

All security transactions, including collateral for repurchase agreements, entered into by the city shall be conducted on a delivery-versus-payment basis. Securities shall be held in the city’s name by a third party custodian designated by the city manager and evidenced by safekeeping receipts and statements. (Ord. 585 § 4, 2002)

3.34.050 Delegation of authority.

The city manager is authorized to appoint custodian banks and external investment managers subject to approval by the city council. The investment manager may be retained to invest city funds in lieu of city staff. The investment manager shall be registered as a financial advisor with the U.S. Securities and Exchange Commission (except for an authorized bank), must hold professional liability insurance of at least $1,000,000 and must have experience in the management of municipal funds. The investment manager shall provide a monthly report summarizing investment activity in the portfolio. (Ord. 585 § 4, 2002)