Ordinance 17-32 Establish a Balanced Fund as the Investment Mechanism for the Homer Permanent Fund

CITY OF HOMER
HOMER, ALASKA

ORDINANCE NOT INTRODUCED

Stroozas

ORDINANCE 17-32

AN ORDINANCE OF THE CITY COUNCIL OF HOMER, ALASKA, AMENDING CHAPTER 3.12, PERMANENT FUND AND HCC 3.10.130, GOVERNANCE OF PERMANENT FUND, TO REMOVE ALL REFRENCES OF SUBFUNDS AND ESTABLISH A BALANCED FUND AS THE INVESTMENT MECHANISM FOR THE HOMER PERMANENT FUND.

WHEREAS, The Homer Permanent Fund was established by Ordinance 05-14(S) for the purpose of receiving monies from the distribution of the Exxon Valdez Oil Spill settlement and other “wind-fall” funds, and serving as an endowment whose income would be used to support City government, and whose principal could be loaned to support City capital projects; and

WHEREAS, The Homer Permanent Fund is divided into income and growth sub-funds with different investment and expenditure requirements for each; and

WHEREAS, A balanced fund is a fund investing in stocks and bonds to provide both income and growth; and

WHEREAS, Simplifying the Permanent Fund to one balanced fund streamlines the administration while maintaining a conservative balance between growth and risk.

NOW, THEREFORE, THE CITY OF HOMER ORDAINS:

Section 1.  Homer City Code 3.10.130, Governance of Homer permanent fund assets is amended to read:

3.10.130 Governance of Homer permanent fund assets

a. In investing and managing the monies of the permanent fund established pursuant to Chapter 3.12 HCC, the persons having responsibility for making decisions shall exercise the judgment and care under the circumstances then prevailing which an institutional investor of ordinary prudence, discretion, and intelligence exercises in the management of large investments entrusted to it, not in regard to speculation, but in regard to the long-term investment of funds considering the probable safety of capital as well as probable income, in accordance with the stated objectives of the permanent fund.

b. In order to ensure sound investment strategy, the City Council will take action in the following manner:

1. The City Council shall establish written investment policies by resolution which shall be adhered to without exception;

2. The City Council shall review the performance and investment policies of the permanent fund at least once each year during the first quarter and shall, by resolution, re-adopt or modify said policies; review of the fund shall take into account the following priorities listed in order of importance:

                    1. Preservation of capital

                    2. Long-term growth of capital

                    3. Preservation of purchasing power

                    4. Current income

                    5. Stability of return

3.  The City Council shall establish, by resolution, a plan for the allocation of investment assets each year that provides for the following:

a. That Earnings available for annual appropriation and distribution shall be confined to the interest, dividends or coupon discounts derived from the investments of the fund. Realized or unrealized gains to the portfolio value are not considered earnings.

b. The portfolio of the growth sub-fund will be invested in a balanced fund primarily in equities, with 25% equities and 75% bonds or other fixed rates securities and is exempt from HCC 3.10.040.

c. Rebalancing of the fund when out of balance by $100,000 or more in equities/fixed rate securities.

c. The portfolio of the income sub-fund will be invested primarily in bonds and the other fixed rate securities authorized by HCC 3.10.040.

d. The income sub-fund may be used as a revolving loan fund for various City capital projects as provided in Chapter 3.12 HCC.

e. That states pPortfolio duration, performance benchmarks, and the estimated percentage or amount of that year’s earnings that would be necessary to retain to inflation-proof the fund principal;

f. That states portfolio’s investment objective.

4. The City administration shall maintain on file within the offices of the Finance Department monthly reports which indicate transactions affecting the investment account, to include, at a minimum, transfers of cash into and out of the account, and interest or dividends received by the account;

5. The City administration shall order an objective performance evaluation of the investment program every year;

56. The City administration shall retain one or more bank custodians to hold all investments cash and fixed income securities of the permanent fund and require that the custodians shall render monthly reports to the administration regarding assets held at both book and market values, and individual transactions which have taken place, that the banks shall have adequate fidelity insurance, and that written contracts be entered into between the City and the custodian banks.

Section 2.  Homer City Code 3.12.030, Allocation to sub-funds, is repealed.

Section 3. Homer City Code 3.12.060, Expenditures from income sub-fund is amended to read:

3.12.060 Expenditures from income sub-fund.

Expenditures from the income sub-fund may be made only as authorized in this section.

a. The income from the income sub-fund may be appropriated by the City Council and be expended for general governmental purposes, including but not limited to ordinary operating expenses.

b. The principal of the income sub-fund may be used as a source of loan funds for City capital projects, and not as a grant. To be eligible for such a loan the project must receive a majority of its funding from other sources. Such loans shall be on terms approved by resolution of the City Council, which must provide for the repayment of the loan over a reasonable period of time.       

Section 4. Section 3.10.120, Definitions is amended to add:

“balanced fund” is a fund investing in stocks and bonds to provide both income and growth.

Section 5.  This ordinance is of a permanent and general character and shall be included in the City Code.

ENACTED BY THE CITY COUNCIL OF HOMER, ALASKA, this ____ day of August, 2017.

CITY OF HOMER

______________________
BRYAN ZAK, MAYOR

ATTEST:

____________________________

MELISSA JACOBSEN, MMC, CITY CLERK

YES:
NO:
ABSTAIN:
ABSENT:

First Reading:
Public Hearing:
Second Reading:
Effective Date:

Reviewed and approved as to form:

Mary K. Koester, City Manager                                              Holly C. Wells, City Attorney

Date: _________________________                                Date: _________________________