Ordinance 18-01 Amending HCC Title 3 Investments and Permanent Fund Assets

Summary

An Ordinance of the City Council of Homer, Alaska, Amending Homer City Code 3.10.040(A) Authorized Investments and Repealing 3.10.130 Governance of Homer Permanent Fund Assets. City Manager/Finance Director.

Ordinance/Resolution ID: 
18-01
Ordinance/Resolution Status: 
Adopted
Introduction Date: 
01/08/2018
Effective Date: 
01/23/2018
File Attachments: 
Public Hearing Date: 
01/22/2018
Second Reading Date: 
01/22/2018

Details

CITY OF HOMER
HOMER, ALASKA

City Manager/Finance Director

ORDINANCE 18-01

 

AN ORDINANCE OF THE CITY COUNCIL OF HOMER, ALASKA, AMENDING HOMER CITY CODE 3.10.040(A) AUTHORIZED INVESTMENTS AND REPEALING 3.10.130 GOVERNANCE OF HOMER PERMANENT FUND ASSETS.

WHEREAS, 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 our policies need to reflect this change; and

WHEREAS, It has been 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; and

WHEREAS, Chapter 3.12 Permanent Fund was repealed in Ordinance 17-23.

                NOW, THEREFORE, THE CITY OF HOMER ORDAINS:

Section 1. HCC 3.10.040(a) is amended to read as follows:

a. City monies shall be invested only in the following instruments. All securities purchased by the City, and all other City investments, must mature not later than the time indicated below, measured from the date of the City’s investment transaction:

1. U.S. Treasury securities – three five years;

2. Other obligations by the U.S. Government, its agencies and instrumentalities – three five years;

3. Repurchase agreements of acceptable securities listed in subsections (a)(1) and (2) of this section which meet a margin requirement of 102 percent; provided, however, the maturity limitations specified in those subsections do not apply if the securities in the repurchase agreement are marked to market daily;

4. Units of the Alaska Municipal League Investment Pool in accordance with an executed common investment agreement and in conformance with AS 37.23.010 through 37.23.900;

5. Certificates of deposit and other deposits at banks and savings and loan associations collateralized as provided in HCC 3.10.070 – three five years;

6. Uncollateralized deposits at banks and savings and loan associations, to the extent that the deposits are insured by the Federal Deposit Insurance Corporation (FDIC) or the Federal Savings and Loan Insurance Corporation – three five years;

7. Taxable bonds or notes which are issued by any state or political subdivision thereof, and which are graded AA or higher by Moody’s Investor’s Service, Inc., or Standard and Poor’s Corporation – three five years;

8. Commercial paper graded Al or higher by Moody’s Investor’s Service, Inc., or P1 or higher by Standard and Poor’s Corporation – 270 days;

9. Bankers’ acceptances offered by banks rated at least “AA” by Moody’s or Standard and Poor’s;

10. Money market mutual funds whose portfolios consist entirely of instruments specified in subsections (a)(1), (2) and (3) of this section – with net asset value of $1.00.

Section 2.  Section 3.10.130 Governance of Homer permanent fund assets is hereby repealed.

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 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;

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 primarily in equities, and is exempt from HCC 3.10.040.

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 portfolio 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;

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;

6. The City administration shall retain one or more bank custodians to hold all investment 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 3. This ordinance is of a permanent and general character and shall be included in City Code.

ENACTED BY THE CITY COUNCIL OF HOMER, ALASKA, by the Homer City Council this ­­­­____ day of ­­­­­_________, 2018.

                                                                                     

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 Wells, City Attorney

Date: _____________________                                                           Date: ________________________