RES 06025 - Laserfiche WebLink

b. Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. c. Return on Investment: The City's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the City's investment risk constraints and the cash flow characteristics of the portfolio. CONCENTRATION OF RISK GASB 40 recognizes that there are many factors that can affect the value of investments. Investment risk factors include credit risk, custodial credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. Credit risk is the risk of loss due to failure of an issuer of a security or a financial institution. The City purchases U.S. Treasuries and high -grade securities which will lessen this type of risk. In addition, the portfolio will be diversified so that the failure of any one issuer will not unduly harm the City's cash flow. Custodial credit risk is the risk that in the event of the failure of the custodian, the investments may not be returned. The City's investment securities are to be held by a third party custodian designated by the City and evidenced by safekeeping receipts. Concentration of credit risk is the risk associated with a lack of diversification of having too much invested in a few individual issuers, thereby exposing the organization to greater risks resulting from adverse economic, political, regulatory, geographic, or credit developments. The City's investments will be diversified and will not exceed maximum percentages allowed in the California Government Code. Interest rate risk is the risk that the market value of securities in the portfolio will fall due to an increase in general interest rates. Interest rate risk may be reduced by structuring the portfolio so that securities are maturing periodically to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. The City will limit investments to a maximum maturity of five years (unless otherwise authorized by City Council). Foreign currency risk results from investment in foreign currency- denominated securities. The City will not invest in foreign currency investments. DELEGATION OF AUTHORITY Authority to manage the City's investment program is derived from Section 53600 et seq. of the Government Code and City Ordinance No. 279. Management responsibility for the investment program is delegated by the City Council and City Manager to the Director of Finance. ETHICS AND CONFLICTS OF INTEREST Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials who manage the