Memorandum 18-009 City of Homer Investment Policy

Memorandum 18-009

TO:                        Mayor Zak and Homer City Council

THROUGH:       Katie Koester, City Manager

FROM:                 Elizabeth Walton, Finance Director

DATE:                   January 2, 2018

SUBJECT:          City of Homer Investment Policy

The purpose of this memo is to discuss the current investment policy for the City of Homer.

Brief Overview:

The investment policy for the City of Homer has not been substantially modified since 1993.  Over this period of time, industry norms have changed and, thus, our policies need to reflect this change.

Upon speaking with our investment partners, it was identified that one of the greatest weaknesses in our investment policy is our term of maturity.  The industry standard for maturity length is now 5 years, not 3 years (as we have it now).

It is my recommendation as Finance Director, to modify the investment policy so that the City of Homer’s policy is more in line with other local governments.  Given the tight constraints the City is under due to our conservative nature, it would be of great benefit to be able to invest in securities with a longer maturity date.  With proper due diligence, the City stands to profit more from investment instruments with a longer maturity date.  There will be no obligation to only purchase instruments with this longer maturity date, however it allows for the flexibility to better position our investment portfolio.  The City’s portfolio will be staggered throughout the five year time horizon.

There is no need to modify our list of approved investment instruments, as these currently match other local governments.

The other change the ordinance makes is repealing HCC 3.10.130, Governance of Homer permanent fund assets, as the permanent fund no longer exists. This section of code is left over from when the Permanent Fund was active and is a cleanup measure.

Recommendation:

Amend HCC 3.10.040, Authorized Investments, to authorize the extension of the term to maturity from three to five years.

Repeal, Governance of Homer permanent fund assets, as the permanent fund no longer exists.