HomeMy WebLinkAbout55C - RESO - STATEMENT OF INVESTMENT} 0 _. _ •
CITY COUNCIL MEETING DATE:
JUNE 21, 2016
TITLE:
STATEMENT OF INVESTMENT
POLICY AND MUNICIPAL SECURITIES DISCLOSURE
POLICY AND PROCEDURES
(STRATEGIC PLAN NO. 4, 1)
C.
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
UAIU=004
❑ As Recommended
❑ As Amended
❑ Ordinance on 1 51 Reading
❑ Ordinance on 2nd Reading
❑ implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
1. Adopt a Resolution approving the City's Investment Policy
2. Adopt a Resolution approving the City's Municipal Securities Continuing Disclosure Policy &
Procedures
3. Receive and file the Annual Statement of Investment Policy
4. Receive and file the Municipal Securities Disclosure Policy & Procedures
DISCUSSION
Statement of Investment Policy
In accordance with state law the Finance and Management Services Agency has annually
submitted the City's Investment Policy (Policy) to the City Council. AB 2853 amended Section
53646 of the Government Code making the requirement to render a Statement of Investment
Policy to the City Council permissive rather than mandatory. However, the Finance and
Management Services Agency believes it to be both prudent and in keeping with the spirit of the
City's Sunshine Policy that such documents continue to be regularly provided. The Executive
Director, Finance and Management Services Agency, therefore continues to render to the City
Council an annual Statement of Investment Policy.
The Statement of Investment Policy outlines the City's investment guidelines, rules, and practices.
The primary goals of the City's investment policy are:
1) To assure compliance with all Federal, State, and local laws governing investment of monies.
2) To provide the safety of principal and sufficient liquidity.
55C -1
Annual Statement of Investment Policy and Municipal Securities Disclosure Policy and Procedures
June 21, 2016
Page 2
3) To provide an investment return within the parameters of the Statement of Investment Policy
and Investment Portfolio guidelines.
The Policy applies to all financial assets of the City, with the exception of Bond Proceeds. Finance
and Management Services Agency Treasury and Customer Service ( "Treasury ") staff continually
analyze the portfolio and act to maximize earnings while safeguarding assets and maintaining
liquidity.
Annually, Treasury staff conducts an evaluation of the City's Policy to determine compliance with
applicable Federal and State regulations and with industry standards and best practices to
determine if any enhancements or newly adopted rules and regulations are required to be
incorporated within the document. Based on these regular staff evaluations periodic updates and
revisions to the investment policy are recommended. On June 14, 2014, the City was awarded a
Certificate of Excellence Award from The Association of Public Treasurers of United States of
America & Canada ( "Association ") for the City's success in developing a comprehensive written
investment policy in accordance with industry best practices. In addition to receiving the 2014
award, the City subsequently exceeded its earnings forecast for FY 2014 -15 and is projected to so
again for FY 2015 -16.
The Association's Investment Policy Certification Committee recommends recertification of
member cities' investment policies every 3 years. However, in the event that substantive changes
are made during the intervening period, the Association's recommendation is to recertify within one
year. As a result of Treasury staff's research and analysis, substantive changes were made and
have been incorporated in this year's Annual Statement of Investment. After approval of the
Policy, the document will be resubmitted for re- certification by "The Association ", California
Municipal Treasurer Association Investment Policy Certification Program and with the California
Debt and Investment Advisory Commission.
Continuing Disclosure Policy
Pursuant to SEC Rule 15c2 -12, issuers of debt are required under most circumstances to provide
financial and operating information on an annual basis with the Municipal Securities Rulemaking
Board (MSRB) using the Electronic Municipal Market Access system (EMMA). In order to ensure
full compliance and continuing with the City's strategy in implementing best practices regarding
financial disclosure, Staff has fulfilled its disclosure requirements of its bonded debt instruments by
virtue of operating via the guidelines set forth in its Municipal Securities Disclosure Policy &
Procedures (Disclosure Policy).
The Disclosure policy is intended to assure that all filings required under the SEC Rule are made
timely, completely and meet all applicable requirements. Furthermore, this Disclosure Policy also
outlines the steps taken by the Finance and Management Services Agency in disclosing both
financial and operational information that any prudent investor of City debt would require and the
timeliness of that notification.
55C -2
Annual Statement of Investment and Continuing Disclosure Policy
June 21, 2016
Page 3
STRATEGIC PLAN ALIGNMENT
Approval of this item allows the City to meet Goal No. 4 City Financial Stability, Objective No. 1
(maintain a stable, efficient and transparent financial environment).
FISCAL IMPACT
There is no fiscal impact associated with this action.
Francisco Gutierrez
Executive Director / City Treasurer
Finance & Management Services Agency
Exhibit: 1. Resolution- Investment Policy
2. Resolution - Municipal Securities Disclosure Policy and Procedures
3. Investment Policy
4. Municipal Securities Disclosure Policy and Procedures
SV /RPNVH /AC
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55C -4
LS 6.7.16
RESOLUTION NO. 2016-
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SANTA ANA APPROVING THE CITY'S
STATEMENT OF INVESTMENT POLICY
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA
ANA AS FOLLOWS:
Section 1. The City Council of Santa Ana hereby finds, determines and
declares as follows:
A. California Government Code §53646, provides that each city may
have a written statement of investment policy to govern investment
of the City's monies.
B. Pursuant to §53646, the City Treasurer shall annually submit a
statement of investment policy for City Council consideration.
C. The City Treasurer has submitted the attached Statement of
Investment Policy to this Council at its regular meeting of June 21,
2016, for its consideration.
Section 2. The City Council of the City of Santa Ana has duly considered
and approves the City's statement of investment policy submitted by the City
Treasurer.
Section 3. The City Treasurer shall submit quarterly reports to the City
Council stating all investments made in the preceding quarter and that such
investments have been made in conformance with the City's investment policy.
Section 4. This Resolution shall take effect immediately upon its adoption
by the City Council, and the Clerk of the Council shall attest to and certify the
vote adopting this Resolution.
ADOPTED this day of 2016.
Miguel A. Pulido
Mayor
Resolution No, 2016 -XXX
EXHIBIT 1 Page 1 of 2
55C -5
APPROVED AS TO FORM:
Sonia Carvalho, City Attorney
By: '<' C�
Lisa Storck
Assistant City Attorney
AYES: Councilmembers:
NOES: Councilmembers:
ABSTAIN: Councilmembers:
NOT PRESENT: Councilmembers:
CERTIFICATION OF ATTESTATION AND ORIGINALITY
I, MARIA D. HUIZAR, Clerk of Council, do hereby attest to and certify the
attached Resolution No. to be the original resolution adopted by
the City Council of the City of Santa Ana on
Date:
Resolution No. 2016 -XXX
Page 2 of 2
Clerk of Council
City of Santa Ana
55C -6
jmf 6113116
RESOLUTION NO. 2016 -XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA ANA APPROVING THE ADOPTION OF
MUNICIPAL SECURITIES DISCLOSURE POLICY AND
PROCEDURES
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA AS
FOLLOWS:
Section 1. The City Council of the City of Santa Ana hereby finds, determines
and declares as follows:
A. The City of Santa Ana and its related entities issue municipal bonds,
notes, and other obligations ( "Obligations ") from time to time that are
offered to the investing public.
B. Publicly offered debt obligations and securities, such as bonds or
certificates of participation, are offered pursuant to an Official Statement or
other type of offering document that must comply with the "anti -fraud
rules" of federal securities laws. ( "Anti -fraud rules" refers to Section 17 of
the Securities Act of 1933 and Section 10(b) of the Securities and
Exchange Act of 1934, and regulations adopted by the Securities and
Exchange Commission under those Acts, particularly "Rule 10b -5" under
the 1934 Act.)
C. The City of Santa Ana has determined that it would be proper in the
management of its financial affairs to establish policies of the City and its
related entities with respect to the preparation of disclosure documents
and the continuing disclosure requirements related to the public offering of
Obligations.
D. City staff is directed and has prepared a Municipal Securities Disclosure
Policy and Procedures, a copy of which is attached as Exhibit A.
Section 2. The City Council of the City of Santa Ana hereby approves and
adopts the Municipal Securities Disclosure Policy and Procedures, a copy of which is
attached as Exhibit A and will be on file at the offices of the Finance and Management
Services Agency of the City for public inspection.
Exhibit 2
Resolution No. 2016 -xxx
Page 1 of 2
55C -7
Section 3. This Resolution shall take effect immediately upon its adoption by
the City Council, and the Clerk of the Council shall attest to and certify the vote adopting
this Resolution.
ADOPTED this 21 st day of June, 2016.
Miguel A. Pulido
Mayor
APPROVED AS TO FORM:
Sonia R. Carvalho
City Attorney
By: ` . 'i'` __.
Joh . Funk
Assistant City Attorney
AYES: Councilmembers
NOES: Councilmembers
ABSTAIN: Councilmembers
NOT PRESENT: Councilmembers
CERTIFICATE OF ATTESTATION AND ORIGINALITY
I, Maria D. Huizar, Clerk of the Council, do hereby attest to and certify the
attached Resolution No. 2016 -XXX to be the original resolution adopted by the City
Council of the City of Santa Ana on June 21, 2016.
Date:
Clerk of the Council
City of Santa Ana
55C -8
Resolution No. 2016 -xxx
Page 2 of 2
EXHIBIT A
Please see exhibit 4 attached to the Request for Council Action for this item.
55C -9
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CITY OF SANTA ANA
ANNUAL STATEMENT OF INVESTMENT POLICY
JULY 2016
INTRODUCTION:
This statement is intended to outline the policies for prudent investment of idle City funds by
providing guidelines for suitable investments while maximizing the efficiency of the City's Cash
Management Program.
Under the direction of the Executive Director, Finance and Management Services (FMSA), the
responsibility for the day to day investment of the City's funds is delegated to the Treasury and
Customer Services Manager and /or Assistant Finance Director only. The investment policy
applies to all financial assets of the City which are pooled in an actively managed portfolio. The
investment pool or portfolio will be referred to as the "Fund" throughout this document.
Bond proceeds shall be invested in accordance with requirements and restrictions outlined in the
bond documents. Bond proceeds are not considered part of the Fund nor subject to this
Investment Policy.
The City's Cash Management Program is designed to accurately monitor and forecast
expenditures and revenues, thus enabling the investment of funds to the fullest extent possible.
Maturities are matched as close as possible to coincide with cash requirements.
The investment policies and practices of the City of Santa Ana are based upon Federal, State
and Local law and prudent money management. The primary goals of these policies are:
1. To assure compliance with all Federal, State and Local laws governing the investment
of monies.
2. To provide for the safety of principal and sufficient liquidity.
3. To provide an investment return within the parameters of this Statement of Investment
Policy.
Officers and employees involved in the investment process shall refrain from personal business
activity that could conflict with the proper execution and management of the investment program,
or that could impair their ability to make impartial decisions. Employees and investment officials
shall disclose any material interests in financial institutions with which they conduct business.
They shall further disclose any personal financial /investment positions that could be related to
the performance of the investment portfolio. Employees and officers shall refrain from
undertaking personal investment transactions with the same individual with whom business is
conducted on behalf of the City.
EXHIBIT 3
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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 2
OBJECTIVES:
1. SAFETY OF PRINCIPAL - Safety of principal is the foremost objective of the City of
Santa Ana. Each investment transaction shall be undertaken in a manner that seeks to
ensure preservation of capital in the overall portfolio. The objective will be to mitigate
credit risk and interest rate risk.
A. Credit Risk
Credit Risk is the risk of loss due to the failure of the security issuer or backer to redeem
the outstanding debt at the stated maturity date. Credit risk also applies to the overall
market perception of the financial strength and capacity of the issuer. Credit risk may be
mitigated by:
- Limiting investments to the safest types of securities;
- Pre - qualifying the financial institutions, broker /dealers, intermediaries, and
advisors with which the City will do business; and
- Diversifying the investment portfolio so that potential losses on individual
securities will be minimized.
B. Market or Interest Rate Risk
Market or interest rate risk is the risk that the market value of securities in the portfolio
may fall due to changes in general interest rates. Market or interest rate risk may be
mitigated by:
- Structuring the Fund so that securities mature to meet cash requirements for
ongoing operations, thereby avoiding the need to sell securities on the open
market prior to maturity, and
- By investing operating funds primarily in shorter -term securities.
The cash flow is updated on a daily basis and will be considered prior to the investment of
securities, which will reduce the necessity to sell investments for liquidity purposes.
2. LIQUIDITY - The investment portfolio shall remain sufficiently liquid to meet all operating
requirements that may be reasonably anticipated. This is accomplished by structuring the
portfolio so that securities mature concurrent with cash needs to meet anticipated
demands (static liquidity). Furthermore, since all possible cash demands cannot be
anticipated, the portfolio should consist largely of securities with active secondary or
resale markets (dynamic liquidity).
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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 3
3. YIELD - The City's Fund shall be designed with the objective of attaining a market -
average rate of return throughout budgetary and economic cycles taking into account the
investment risk constraints and liquidity needs. The market - average rate of return is
defined as the average return on three -month U.S. Treasury Bills. Return on investment
is of least importance compared to the safety and liquidity objectives described above.
The core of investments is limited to relatively low risk securities in anticipation of earning
a fair return relative to the risk being assumed. It is the general policy of the City to hold
investments until market value equals or exceeds amortized cost or book value of the
security. Securities shall not be sold prior to maturity with the following exceptions:
1) a declining credit security could be sold early to minimize loss of principal;
2) a simultaneous purchase of a security and the sale of another (security swap) to
enhance the quality, yield, or target duration in the portfolio; or
3) liquidity needs of the portfolio require that the security be sold;
4) a sale of a specific security prior to its maturity and a capital gain or loss recorded
in order to improve the credit quality, liquidity, or rate of return of the portfolio in
response to market conditions and /or City risk preferences.
The City strives to maintain one hundred percent (100 %) investment of idle funds after
consideration for a compensating balance to cover the cost of services provided by the bank.
The funds available for investment are determined by cash flow projections updated daily.
Investments are monitored so that legal limits on types of investments are not exceeded.
PRUDENT PERSON STANDARD:
The "prudent person" standard shall be applied in the context of managing the overall portfolio.
Investment officers acting in accordance with written procedures and this investment policy and
exercising due diligence shall be relieved of personal responsibility for an individual security's
credit risk or market price changes, provided deviations from exceptions are reported in a timely
fashion and the liquidity and the sale of securities are carried out in accordance with the terms of
this policy. Investments shall be made with judgment and care, under circumstances then
prevailing, which persons of prudence, discretion, and intelligence exercise in the management
of their own affairs, not for speculation, but for investment, considering the probable safety of
their capital as well as the probable income to be derived.
The City is governed by the California Government Code, Sections 16429.1 and Title 5, Division
2, Part 1, Chapter 4, entitled Financial Affairs, commencing with section 53630. Each investment
55C -13
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 4
transaction and the entire portfolio must comply with California Government Code, Sections
53600 and 53635 et seq. and this policy.
ALLOWABLE INVESTMENT INSTRUMENTS — STATE LAW
California Government Code Section 53601 establishes allowable investment instruments
applicable to all local agencies along with maximum maturities, maximum specified percentages
of total portfolio, and minimum quality requirements. Section 53601.1 authorizes local agencies
to invest in financial futures or financial option contracts in any of the allowable investment
categories enumerated in section 53601.
INELIGIBLE INVESTMENTS - STATE LAW:
Certain investments, however, are prohibited by California Government Code Section 53601.6.
Accordingly, the City shall not invest in any inverse floaters, range notes, or mortgage derived,
interest -only strips. In addition, the City shall not invest any funds in any security that could
result in zero interest accrual if held to maturity. However, prohibited securities that are in the
City's portfolio, as of the date of this policy adoption, may be held until their maturity dates.
DISALLOWED INVESTMENTS - HIGHER PERCEIVED RISK
Besides investments prohibited by statute, this policy disallows investments in the following due
to a higher perceived risk:
• Asset - backed securities (ABS) — securities supported by pools of installment loans
or leases or by pools of revolving lines of credit;
Derivatives — financial instruments which have a principal and /or interest payment
subject to uncertainty as to timing and /or amount including financial instruments
whose return profile is linked to, or derived from, the movement of one or more
underlying index or security, and may include a leveraging factor, or financial
contracts based upon notional amounts whose value is derived from an underlying
index or security (interest rates, foreign exchange rates, equities or commodities);
Investment agreements — contracts regarding funds deposited by an investor often
separated into those offered by banks and those offered by insurance companies
commonly known as Guaranteed Investment Contracts (GICs) or Guaranteed
Investment Agreements (GIAs);
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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 5
• Mortgage- backed securities — securities created when a mortgage or purchaser of
residential real estate mortgages creates a pool of mortgages and markets
undivided interests or participation in the pool, including principal only strips;
• Repurchase and Reverse Repurchase agreements — agreements involving the
borrowing of cash from a financial institution for the purchase of securities in which
a financial asset is instead pledged as a collateral for a loan and reverse purchase
agreements in which the roles of borrower and lender are reversed.
• Securities lending agreements — agreements allowing local agencies to earn
incremental income on their investment portfolio by loaning securities in their
portfolio to financial services companies for a limited time;
AUTHORIZED INVESTMENTS:
Santa Ana further restricts permitted investments to those listed below. Within this scope, the
City diversifies its investments by maturity dates and types of investments. Concentration limits
are indicated for all investment categories except Treasury securities, which are considered the
safest investments.
A. United States Treasury Bills, Notes, and Bonds, for which the full faith and credit of the
United States are pledged for payment of principal and interest. Purchases of this
category shall not exceed five years to maturity. There is no percentage limit in this
category.
B. Obligations issued by a Federal Agency or a United States Government Sponsored
Enterprise. Federal Agency Issues include, but are not limited to GNMA (Government
National Mortgage Association), FFCB (Federal Farm Credit Bank), FHLB (Federal Home
Loan Bank), FHLMC (Federal Home Loan Mortgage Corporation), FNMA (Federal
National Mortgage Association), SLMA (Student Loan Mortgage Administration), FHA
(Federal Housing Administration), and TVA (Tennessee Valley Authority). Although there
is no percentage limitation on these issues, purchases of this category shall not exceed
five years to maturity and the "prudent investor" rule shall apply for a single agency name
as U.S. Government backing is implied rather than guaranteed.
C. Supranational Obligations in United States dollar denominated senior unsecured
unsubordinated obligations issued or unconditionally guaranteed by the International
Bank for Reconstruction and Development, International Finance Corporation, or Inter -
American Development Bank, with a maximum remaining maturity of five years or less,
and eligible for purchase or sale within the United States. Investments under this
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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 6
subdivision shall be rated "AA" or better by an NRSRO and shall not exceed 30 percent of
the cost value of the Fund.
D. Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise
known as banker's acceptances, which are eligible for purchase by the Federal Reserve
System. Purchases of banker's acceptances may not exceed one hundred, eighty (180)
days or forty percent (40 %) of the cost value of the Fund which may be invested pursuant
to this section. However, no more than thirty percent (30 %) of the City's cost value of the
Fund may be invested in the banker's acceptances of any one commercial bank pursuant
to this section.
E. Commercial paper of "prime" quality of the highest ranking or of the highest letter and
number rating as provided for by a nationally recognized statistical rating organization
( NRSRO). The entity that issues the commercial paper shall be organized and operating
within the United States, as a general corporation, shall have total assets in excess of
five - hundred, million dollars ($500,000,000), and has debt other than commercial paper, if
any, that is rated "A" or higher by NRSRO The entity is organized within the United
States as a special purpose corporation, trust, or limited liability company; has program
wide credit enhancements including, but not limited to: over - collateralization, letters of
credit, or a surety bond; has commercial paper that is rated "A -V or higher, or the
equivalent, by an NRSRO Eligible commercial paper shall have a maximum maturity of
two - hundred seventy (270) days or less. The City may purchase no more than ten
percent (10 %) of the outstanding commercial paper of any single corporate issue.
Purchases of commercial paper may not exceed twenty -five percent (25 %) of the surplus
money which may be invested.
F. Negotiable certificates of deposit issued by a nationally or state - chartered bank, a savings
association or a federal association (as defined by Section 5102 of the Financial Code), a
state or federal credit union or by a state - licensed branch of a foreign bank. However, the
City shall not invest in negotiable certificates of deposit issued by a state or federal credit
union if a member of the City Council or any City personnel with investment decision
making authority also serves on the board of directors, or any committee appointed by the
board of directors, or the credit committee or the supervisory committee of the state or
federal credit union issuing the negotiable certificates of deposit. The City's investment in
negotiable certificates of deposit may not exceed thirty percent (30 %) of the cost value of
the Fund. The amount so invested shall be subject to the limitations of Government
Code Section 53638 which generally provides that the deposit shall not exceed the
shareholder's equity of any depository bank, or the total net worth of any depository
savings association or federal association, or the total of the unimpaired capital and
surplus of an insured industrial loan company. Purchases of this category shall not
exceed five years to maturity.
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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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G. Local Agency Investment Fund - State Pool - the City may invest in the Local Agency
Investment Fund (LAIF) established by the State Treasurer under California Government
Code Section 16429.1 for the benefit of local agencies. LAIF provides daily liquidity;
therefore, there is no final stated maturity for this investment category. Although there is
no percentage limitation on this fund, the "prudent investor" rule shall apply for a single
agency name. Investments in LAIF shall not exceed $65 million per account.
H. Bonds issued by the City or agency of the City including bonds payable solely out of the
revenues from a revenue - producing property owned, controlled, or operated by the City or
agency of the City. Purchases of this category shall not exceed five years to maturity.
There is no percentage limit in this category.
Other State of California Local Agency bonds, notes, warrants or other evidence of
indebtedness of any local agency within this state, including bonds payable solely out of
the revenues from a revenue - producing property owned, controlled, or operated by the
local agency, or by a department, board, agency, or authority of the local agency.
Purchases of this category shall not exceed five years to maturity. There is no
percentage limit in this category.
J. Medium Term Corporate Notes (MTN) defined as all corporate and depository institution
debt securities with a maximum remaining maturity of five years or less, issued by
corporations organized and operating within the United States or by depository institutions
licensed by the United States or any state and operating within the United States. Notes
eligible for investment shall be rated in a rating category of "A" or its equivalent or better
by a nationally recognized rating service. Purchases in this category shall not exceed five
(5) years to maturity or fifteen percent (15 %) of the cost value of the Fund. Purchases in
a single issuer in this category shall not exceed five percent (5 %) of the cost value of the
Fund.
K. Shares of beneficial interest issued by diversified management companies that are
money market funds registered with the Securities and Exchange Commission under the
Investment Company Act of 1940. The company shall have met either of the following
criteria:
1. Attain the highest ranking or the highest letter and numerical rating provided by not
less than two NRSROs, and
2. Retained an investment adviser registered or exempt from registration with the
Securities and Exchange Commission with not less than five (5) years experience
investing in the securities and obligations authorized by subsection (a) to (k),
inclusive, and subdivisions (m) to (o), inclusive, of Section 53601 of the
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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Government Code and with assets under management in excess of five - hundred,
million dollars ($500,000,000).
The purchase price of shares of beneficial interest, (mutual funds) purchase pursuant to
this subdivision shall not include any commission that these companies may charge.
Investments in this category shall be restricted to money market mutual funds that seek to
maintain a Net Asset Value of $1. Money market mutual funds provide daily liquidity;
therefore, there is no final stated maturity for this investment category. Investments in
mutual funds shall be restricted to Funds that have the highest ranking or the highest
letter and numerical rating provided by not less than two of the following nationally
recognized statistical rating organizations: Moody's, Standard & Poor's or Fitch.
Purchases in this category shall not exceed 20% of the book value of the Portfolio.
Purchases in a single mutual fund shall not exceed 10% of the book value of the Portfolio.
Money must be deposited in state or national banks, state or federal savings associations or
state or federal credit unions in the State of California. It may be in inactive deposits, active
deposits or interest- bearing active deposits. The deposits cannot exceed the amount of the
bank's or savings and loan's paid up capital and surplus.
The bank or savings and loan must secure the active and inactive deposits with eligible
securities having a market value of one - hundred, ten percent (110 %) of the total amount of the
deposits. State law also allows as an eligible security, first trust deeds having a value of one -
hundred, fifty percent (150 %) of the total amount of the deposits. A third class of collateral is
letters of credit drawn on the Federal Home Loan Bank (FHLB).
The Treasurer may waive, at his discretion, security for that portion of a deposit which is insured
pursuant to federal law. Currently, the first two- hundred, fifty- thousand dollars ($250,000) of a
deposit is federally insured. It is to the City's advantage to waive this collateral requirement for
the first $250,000 because we receive a higher interest rate.
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QUALIFIED DEALERS AND INSTITUTIONS:
The City shall transact business only with banks, savings and loans and registered investment
securities dealers. The purchase by the City of any investment other than those purchased
directly from the issuer, shall be purchased either from an institution licensed by the State as a
Broker - Dealer, as defined in Section 25004 of the Corporations Code and registered with
Financial Industry Regulatory Authority ( FINRA), or a member of a Federally regulated securities
exchange, a National or State - Chartered Bank, a Federal or State Association (as defined by
Section 5102 of the Financial Code), or a brokerage firm designated as a Primary Government
Dealer by the Federal Reserve Bank, and who is registered with FINRA. The City's investment
staff shall investigate all institutions which wish to do business with the City as a Qualified City of
Santa Ana Broker - Dealer, in order to determine if they are adequately capitalized, make markets
in securities appropriate to the City's needs, and agree to abide by the conditions set forth in the
City of Santa Ana Annual Statement of Investment Policy. This will be done by having the
Financial Institutions complete and return the appropriate City of Santa Ana Broker - Dealer
Questionnaire, along with their most current FINRA Report and Audited Financial Statement
(available within one - hundred, twenty (120) days of the Institution's fiscal year -end). The
Treasury and Customer Services Manager shall maintain a list of Financial Institutions
authorized to provide investment services to the City, along with their FINRA Report. Financial
Institutions previously certified as Qualified City of Santa Ana Broker - Dealers shall complete and
return the appropriate City of Santa Ana Broker - Dealer Questionnaire bi- annually, but shall be
subject to the Audited Financial Statement and FINRA annual reporting requirements. However,
if the interaction with the Broker - Dealer is limited to investment trades through an electronic
trading platform, then the Broker - Dealer is exempt from completion of a questionnaire.
In selecting external Broker - Dealers, past performance, stability, financial strength, reputation,
area of expertise, and willingness and ability to provide the highest investment return at the
lowest cost to the City within the parameters of this Investment Policy and the California
Government Code shall be primary considerations. Investment staff will only conduct business
with registered representatives of broker - dealers that have a minimum of three (3) years
continuous experience working for a primary dealer or five (5) years continuous experience
working for a non - primary dealer. Investment staff will only purchase or sell securities from
registered representatives that possess an active Series 7 license, an active Series 66 license,
or an active Series 63 license, and who submit a FINRA form U4 (employment history) and a
current FINRA form U5 Disclosure Statement and have completed the City's Broker - Dealer
questionnaire.
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CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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SAFEKEEPING OF SECURITIES:
In accordance with California Government Code Section 53601, to protect against potential
losses caused by collapse of individual securities dealers, all securities owned by the City except
securities used as collateral for repurchase agreements, shall be kept in safekeeping with
"perfected interest" by the City's custodial bank or a third party bank trust department, acting as
agent for the City under the terms of a custody agreement executed by the bank and by the City.
All securities, excepting investments in the State Pool or money market mutual funds, will be
received and delivered using standard delivery versus payment.
INTERNAL CONTROLS:
The Executive Director for FMSA is responsible for establishing and maintaining an internal
control structure designed to ensure that the assets of the entity are protected from loss, theft or
misuse. The Executive Director for FMSA has developed a system of internal investment
controls and a segregation of responsibilities of investment functions in order to assure an
adequate system of internal control over the investment function. Internal control procedures
address wire controls, separation of duties, delivery of securities to a third party for custodial
safekeeping, and written procedures for placing investment transactions. Cash balances are
reconciled daily by non - investment employees and reconfirmed by the City's accounting staff. In
addition, the City's accounting staff also verifies investment activities and holdings on a monthly
basis. The Executive Director for FMSA, at his /her discretion, shall establish a process for
annual independent reviews by an external auditor to the extent contemplated by generally
accepted auditing standards.
REPORTING:
Government Code Section 53646 previously mandated that annual investment policies and
quarterly reports be rendered to the legislative body (for the City of Santa Ana - the City Council).
AB 2853 amended Government Code Section 53646 making these requirements permissive
rather than mandatory. Although the Annual Investment Policy and Quarterly Reports to City
Council are no longer required, we believe it to be both prudent and in keeping with the spirit of
the City's Sunshine Policy that these documents continue to provided. The Executive Director
for FMSA shall therefore continue to render to the City Council a statement of investment policy
and a report to the City Council and City Manager containing detailed information on all
securities, investments, and moneys of the City. The report will be submitted on at least a
quarterly basis and provided to the Council within thirty (30) days following the end of the
quarter.
55C -20
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 11
The report will contain the following information on the funds that are subject to this investment
policy:
1) Type of investment (name of the issuer)
2) Date of maturity
3) Par and dollar amounts invested in each security
4) Weighted average maturity of the investments
5) Market value as of the date of report
6) Source of the market value information
7) Any funds, investments or programs, including loans, under the management of
contracted parties
In addition, a description of the City's compliance with the Statement of Investment Policy shall
be provided along with a statement denoting the City's ability to meet its expenditure
requirements for the next six months.
POLICY REVIEW:
This investment policy shall be reviewed at least annually to ensure its consistency with the
overall objectives of preservation of PRINCIPAL, LIQUIDITY, AND YIELD and its relevance to
current law, financial and economic trends, and to meet the needs of the City of Santa Ana.
Francisco Gutierrez
Executive Director / City Treasurer
Finance & Management Services Agency
NTZI
55C -21
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 12
APPENDIX
APPENDIX — TABLE OF CONTENTS ........................................ ............................... ...........................Page 12
CORPORATIONS CODE SECTION 25004 .............................. ...............................
.Page 13
FINANCIAL CODE SECTION 5102 ............................................ ............................... ...........................Page 15
GOVERNMENT CODE SECTION 16429. 1 ................................ ............................... ...........................Page 16
GOVERNMENT CODE SECTION 53630 ................................. ...............................
.Page 18
GOVERNMENT CODE SECTION 53635 ................................... ............................... ...........................Page 19
GOVERNMENT CODE SECTION 53601 ................................... ............................... ...........................Page 20
GOVERNMENT CODE SECTION 53601. 1 .................. ...............................
GOVERNMENT CODE SECTION 53601.6....
........................Page 25
......... ...........................Page 26
GOVERNMENT CODE SECTION 53638 ................................... ............................... ...........................Page 26
GOVERNMENT CODE SECTION 53646 ................................... ............................... ...........................Page 27
TABLES
LOCAL AGENCY INVESTMENT GUIDELINES
ALLOWABLE INVESTMENT INSTRUMENTS PER
STATE GOVERNMENT CODE (AS OF JANUARY 1, 2016)
APPLICABLE TOO ALL LOCAL AGENCIES
(FIGURE 1) - LOCAL AGENCY INVESTMENT GUIDELINES .............................. ............................... Page i
ALLOWABLE INVESTMENT INSTRUMENTS
TABLE OF NOTES FOR FIGURE 1 - LOCAL AGENCY INVESTMENT GUIDELINES ...................... Page ii
55C -22
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 13
CORPORATIONS CODE - CORP
TITLE 4. SECURITIES [25000 - 315161
( Title 4 added by Stats. 1949, Ch. 384. )
DIVISION 1. CORPORATE SECURITIES LAW OF 1968 [25000 - 257071
( Division 1 repealed and added by Slats. 1968, Ch. 88. )
PART 1. DEFINITIONS [25000 - 250231
( Part 1 added by Slats. 1968, Ch. 88. )
CORPORATIONS CODE
SECTION
25004.
(a) "Broker- dealer" means any person engaged in the business of effecting transactions in securities in this
state for the account of others or for his own account. `Broker- dealer" also includes a person engaged in the
regular business of issuing or guaranteeing options with regard to securities not of his own issue. "Broker -
dealer" does not include any of the following:
(1) Any other issuer.
(2) An agent, when an employee of a broker - dealer or issuer.
(3) A bank, trust company, or savings and loan association.
(4) Any person insofar as he buys or sells securities for his own account, either individually or in some
fiduciary capacity, but not as part of a regular business.
(5) A person who has no place of business in this state if he effects transactions in this state exclusively with
(A) the issuers of the securities involved in the transactions or (B) other broker - dealers.
(6) A broker licensed by the Real Estate Commissioner of this state when engaged in transactions in
securities exempted by subdivision (f) or (p) of Section 25100 or in securities the issuance of which is
subject to authorization by the Real Estate Commissioner of this state or in transactions exempted by
subdivision (e) of Section 25102.
(7) An exchange certified by the Commissioner of Corporations pursuant to this section when it is issuing or
guaranteeing options. The commissioner may by order certify an exchange under this section upon such
conditions as he by rule or order deems appropriate, and upon notice and opportunity to be heard he may
suspend or revoke such certification, if he finds such certification, suspension, or revocation to be in the
public interest and necessary and appropriate for the protection of investors.
(b) For purposes of this section, an agent is an employee of a broker - dealer under paragraph (2) of
subdivision (a) when the agent is employed by or associated with the broker - dealer under all of the following
conditions:
(1) The agent is subject to the supervision and control of the broker - dealer.
(2) The agent performs under the name, authority, and marketing policies of the broker - dealer.
55C -23
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 14
(3) The agent discloses to investors the identity of the broker - dealer.
(4) The agent is reported pursuant to subdivision (c) of Section 25210 and the rules adopted thereunder.
(Amended by Stats. 2004, Ch, 461, Sec. 1. Effective January 1, 2005)
55C -24
�yr�-><.» y_ �. rr_ �_ vr_ ��r_ �r��• ��aarr.»lu•���r�•�la.r�l.�r�e -i
JULY 1, 2016 — JUNE 30, 2017
Page 15
FINANCIAL CODE - FIN
DIVISION 2. SAVINGS ASSOCIATION LAW [5000 - 100091
( Division 2 repealed and added by Slats. 1983, Ch. 1091, Sec. 2. )
CHAPTER 1. Short Title, General Definitions, and General Provisions [5000 - 5330]
( Chapter 1 added by Stats. 1983, Ch. 1091, Sec. 2. )
ARTICLE 2. General Definitions [5100 -5124]
( Article 2 added by Slats. 1983, Ch. 1091, Sec. 2. )
FINANCIAL CODE
SECTION
5102.
(a) "Association" or "savings association" means a mutual or stock savings association, savings and loan
association or savings bank subject to the provisions of this division, but excluding a federal association.
(b) "Federal association" means a savings and loan association or federal savings bank that is chartered by
the Office of Thrift Supervision under Section 5 of the Home Owners' Loan Act of 1933 (12 U.S.C. Sec.
1464), as amended.
(Amended by Stats. 1990, Ch, 1118, Sec. 8.)
55C -25
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 16
GOVERNMENT CODE - GOV
TITLE 2. GOVERNMENT OF THE STATE OF CALIFORNIA [8000 - 229801
( Title 2 enacted by Stats. 1943, Ch. 134 )
DIVISION 4. FISCAL AFFAIRS [16100 - 17700]
( Division 4 added by Stats. 1945, Ch. 119. )
PART 2. STATE FUNDS [16300 - 16649.951
( Part 2 added by Stats. 1945, Ch. 120. )
CHAPTER 2. Special Funds [16346 - 16429.4]
( Chapter 2 added by Stats. 1945, Ch. 120. )
ARTICLE 11. Local Agency Investment Fund [16429.1 - 16429.41
( Article 11 added by Slats. 1976, Ch. 730. )
GOVERNMENT CODE
SECTION
16429.1.
(a) There is in trust in the custody of the Treasurer the Local Agency Investment Fund, which fund is hereby
created. The Controller shall maintain a separate account for each governmental unit having deposits in this
fund.
(b) Notwithstanding any other law, a local governmental official, with the consent of the governing body of
that agency, having money in its treasury not required for immediate needs, may remit the money to the
Treasurer for deposit in the Local Agency Investment Fund for the purpose of investment.
(c) Notwithstanding any other law, an officer of any nonprofit corporation whose membership is confined to
public agencies or public officials, or an officer of a qualified quasi - governmental agency, with the consent
of the governing body of that agency, having money in its treasury not required for immediate needs, may
remit the money to the Treasurer for deposit in the Local Agency Investment Fund for the purpose of
investment.
(d) Notwithstanding any other law or provision of this section, a local agency, with the approval of its
governing body, may deposit in the Local Agency Investment Fund proceeds of the issuance of bonds,
notes, certificates of participation, or other evidences of indebtedness of the agency pending expenditure of
the proceeds for the authorized purpose of their issuance. In connection with these deposits of proceeds,
the Local Agency Investment Fund is authorized to receive and disburse moneys, and to provide
information, directly with or to an authorized officer of a trustee or fiscal agent engaged by the local agency,
the Local Agency Investment Fund is authorized to hold investments in the name and for the account of that
trustee or fiscal agent, and the Controller shall maintain a separate account for each deposit of proceeds.
(e) The local governmental unit, the nonprofit corporation, or the quasi - governmental agency has the
exclusive determination of the length of time its money will be on deposit with the Treasurer.
55C -26
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 17
(f) The trustee or fiscal agent of the local governmental unit has the exclusive determination of the length of
time proceeds from the issuance of bonds will be on deposit with the Treasurer.
(g) The Local Investment Advisory Board shall determine those quasi - governmental agencies which qualify
to participate in the Local Agency Investment Fund.
(h) The Treasurer may refuse to accept deposits into the fund if, in the judgment of the Treasurer, the
deposit would adversely affect the state's portfolio.
(i) The Treasurer may invest the money of the fund in securities prescribed in Section 16430. The Treasurer
may elect to have the money of the fund invested through the Surplus Money Investment Fund as provided
in Article 4 (commencing with Section 16470) of Chapter 3.
(j) Money in the fund shall be invested to achieve the objective of the fund which is to realize the maximum
return consistent with safe and prudent treasury management.
(k) All instruments of title of all investments of the fund shall remain in the Treasurer's vault or be held in
safekeeping under control of the Treasurer in any federal reserve bank, or any branch thereof, or the
Federal Home Loan Bank of San Francisco, with any trust company, or the trust department of any state or
national bank.
(1) Immediately at the conclusion of each calendar quarter, all interest earned and other increment derived
from investments shall be distributed by the Controller to the contributing governmental units or trustees or
fiscal agents, nonprofit corporations, and quasi - governmental agencies in amounts directly proportionate to
the respective amounts deposited in the Local Agency Investment Fund and the length of time the amounts
remained therein. An amount equal to the reasonable costs incurred in carrying out the provisions of this
section, not to exceed a maximum of 5 percent of the earnings of this fund and not to exceed the amount
appropriated in the annual Budget Act for this function, shall be deducted from the earnings prior to
distribution. However, if the 13 -week Daily Treasury Bill Rate, as published by the United States Department
of the Treasury on the last day of the state's fiscal year is below 1 percent, then the above -noted reasonable
costs shall not exceed a maximum of 8 percent of the earnings of this fund for the subsequent fiscal year,
shall not exceed the amount appropriated in the annual Budget Act for this function, and shall be deducted
from the earnings prior to distribution. The amount of the deduction shall be credited as reimbursements to
the state agencies, including the Treasurer, the Controller, and the Department of Finance, having incurred
costs in carrying out the provisions of this section.
(m) The Treasurer shall prepare for distribution a monthly report of investments made during the preceding
month.
(n) As used in this section, "local agency," "local governmental unit," and "local governmental official"
includes a campus or other unit and an official, respectively, of the California State University who deposits
moneys in funds described in Sections 89721, 89722, and 89725 of the Education Code.
(Amended by Stats. 2014, Ch. 28, Sec. 39. Effective June 20, 2014.)
55C -27
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Page 18
GOVERNMENT CODE - GOV
TITLE 5. LOCAL AGENCIES [50001 - 575501
( Title 5 added by Slats. 1949, Ch. 81, )
DIVISION 2. CITIES, COUNTIES, AND OTHER AGENCIES [53000 - 558211
( Division 2 added by Slats. 1949, Ch. 81. )
PART 1. POWERS AND DUTIES COMMON TO CITIES, COUNTIES, AND OTHER
AGENCIES [53000 - 54999.7]
( Part 1 added by Slats. 1949, Ch. 81. )
CHAPTER 4. Financial Affairs [53600 - 53997]
( Chapter 4 added by Slats. 1949, Ch. 81. )
ARTICLE 2. Deposit of Funds [53630 - 53686]
( Article 2 added by Slats. 1949, Ch. 81. )
GOVERNMENT CODE
SECTION
53630.
As used in this article:
(a) "Local agency" means county, city, city and county, including a chartered city or county, a community
college district, or other public agency or corporation in this state.
(b) "Treasurer' means treasurer of the local agency.
(c) "Depository" means a state or national bank, savings association or federal association, a state or
federal credit union, or a federally insured industrial loan company, in this state in which the moneys of a
local agency are deposited.
(d) "Agent of depository" means a trust company or trust department of a state or national bank located in
this state, including the trust department of a depository where authorized, and the Federal Home Loan
Bank of San Francisco, which is authorized to act as an agent of depository for the purposes of this article
pursuant to Section 53657.
(e) "Security' means any of the eligible securities or obligations listed in Section 53651.
(f) "Pooled securities" means eligible securities held by an agent of depository for a depository and securing
deposits of one or more local agencies.
(g) "Administrator" means the Administrator of Local Agency Security of the State of California.
(h) "Savings association or federal association" means a savings association, savings and loan association,
or savings bank as defined by Section 5102 of the Financial Code.
55C -28
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 19
(i) "Federally insured industrial loan company" means an industrial loan company licensed under Division 7
(commencing with Section 18000) of the Financial Code, the investment certificates of which are insured by
the Federal Deposit Insurance Corporation.
(j) "Corporation" includes a limited liability company.
(Amended by Stats. 2004, Ch. 118, Sec. 19.7. Effective January 1, 2005.)
GOVERNMENT CODE
SECTION
53635.
(a) This section shall apply to a local agency that is a county, a city and county, or other local agency that
pools money in deposits or investments with other local agencies, including local agencies that have the
same governing body. However, Section 53601 shall apply to all local agencies that pool money in deposits
or investments exclusively with local agencies that have the same governing body.
This section shall be interpreted in a manner that recognizes the distinct characteristics of investment pools
and the distinct administrative burdens on managing and investing funds on a pooled basis pursuant to
Article 6 (commencing with Section 27130) of Chapter 5 of Division 2 of Title 3.
A local agency that is a county, a city and county, or other local agency that pools money in deposits or
investments with other agencies may invest in commercial paper pursuant to subdivision (h) of Section
53601, except that the local agency shall be subject to the following concentration limits:
(1) No more than 40 percent of the local agency's money may be invested in eligible commercial paper.
(2) No more than 10 percent of the total assets of the investments held by a local agency may be invested
in any one issuer's commercial paper.
(b) Notwithstanding Section 53601, the City of Los Angeles shall be subject to the concentration limits of
this section for counties and for cities and counties with regard to the investment of money in eligible
commercial paper.
(Amended by Stats. 2008, Ch. 709, Sec. 10.7. Effective January 1, 2009.)
55C -29
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 20
GOVERNMENT CODE
SECTION
53601.
This section shall apply to a local agency that is a city, a district, or other local agency that does not pool
money in deposits or investments with other local agencies, other than local agencies that have the same
governing body. However, Section 53635 shall apply to all local agencies that pool money in deposits or
investments with other local agencies that have separate governing bodies. The legislative body of a local
agency having moneys in a sinking fund or moneys in its treasury not required for the immediate needs of
the local agency may invest any portion of the moneys that it deems wise or expedient in those investments
set forth below. A local agency purchasing or obtaining any securities prescribed in this section, in a
negotiable, bearer, registered, or nonregistered format, shall require delivery of the securities to the local
agency, including those purchased for the agency by financial advisers, consultants, or managers using the
agency's funds, by book entry, physical delivery, or by third -party custodial agreement. The transfer of
securities to the counterparty bank's customer book entry account may be used for book entry delivery.
For purposes of this section, "counterparty" means the other party to the transaction. A counterparty bank's
trust department or separate safekeeping department may be used for the physical delivery of the security if
the security is held in the name of the local agency. Where this section specifies a percentage limitation for
a particular category of investment, that percentage is applicable only at the date of purchase. Where this
section does not specify a limitation on the term or remaining maturity at the time of the investment, no
investment shall be made in any security, other than a security underlying a repurchase or reverse
repurchase agreement or securities lending agreement authorized by this section, that at the time of the
investment has a term remaining to maturity in excess of five years, unless the legislative body has granted
express authority to make that investment either specifically or as a part of an investment program approved
by the legislative body no less than three months prior to the investment:
(a) Bonds issued by the local agency, including bonds payable solely out of the revenues from a revenue -
producing property owned, controlled, or operated by the local agency or by a department, board, agency,
or authority of the local agency.
(b) United States Treasury notes, bonds, bills, or certificates of indebtedness, or those for which the faith
and credit of the United States are pledged for the payment of principal and interest.
(c) Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of
the revenues from a revenue - producing property owned, controlled, or operated by the state or by a
department, board, agency, or authority of the state.
(d) Registered treasury notes or bonds of any of the other 49 states in addition to California, including bonds
payable solely out of the revenues from a revenue - producing property owned, controlled, or operated by a
state or by a department, board, agency, or authority of any of the other 49 states, in addition to California.
(e) Bonds, notes, warrants, or other evidences of indebtedness of a local agency within this state, including
bonds payable solely out of the revenues from a revenue - producing property owned, controlled, or operated
by the local agency, or by a department, board, agency, or authority of the local agency.
(f) Federal agency or United States government- sponsored enterprise obligations, participations, or other
instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or
United States government- sponsored enterprises.
55C -30
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
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Page 21
(g) Bankers' acceptances otherwise known as bills of exchange or time drafts that are drawn on and
accepted by a commercial bank. Purchases of bankers' acceptances shall not exceed 180 days' maturity or
40 percent of the agency's moneys that may be invested pursuant to this section. However, no more than
30 percent of the agency's moneys may be invested in the bankers' acceptances of any one commercial
bank pursuant to this section.
This subdivision does not preclude a municipal utility district from investing moneys in its treasury in a
manner authorized by the Municipal Utility District Act (Division 6 (commencing with Section 11501) of the
Public Utilities Code).
(h) Commercial paper of "prime" quality of the highest ranking or of the highest letter and number rating as
provided for by a nationally recognized statistical rating organization (NRSRO). The entity that issues the
commercial paper shall meet all of the following conditions in either paragraph (1) or (2):
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general corporation.
(B) Has total assets in excess of five hundred million dollars ($500,000,000).
(C) Has debt other than commercial paper, if any, that is rated "A" or higher by an NRSRO.
(2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose corporation, trust, or limited liability company.
(B) Has program wide credit enhancements including, but not limited to, overcol lateral ization, letters of
credit, or a surety bond.
(C) Has commercial paper that is rated "A -1" or higher, or the equivalent, by an NRSRO.
Eligible commercial paper shall have a maximum maturity of 270 days or less. Local agencies, other than
counties or a city and county, may invest no more than 25 percent of their moneys in eligible commercial
paper. Local agencies, other than counties or a city and county, may purchase no more than 10 percent of
the outstanding commercial paper of any single issuer. Counties or a city and county may invest in
commercial paper pursuant to the concentration limits in subdivision
(a) of Section 53635.
(i) Negotiable certificates of deposit issued by a nationally or state - chartered bank, a savings association or
a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or
by a federally licensed or state - licensed branch of a foreign bank. Purchases of negotiable certificates of
deposit shall not exceed 30 percent of the agency's moneys that may be invested pursuant to this section.
For purposes of this section, negotiable certificates of deposit do not come within Article 2 (commencing
with Section 53630), except that the amount so invested shall be subject to the limitations of Section 53638.
The legislative body of a local agency and the treasurer or other official of the local agency having legal
custody of the moneys are prohibited from investing local agency funds, or funds in the custody of the local
agency, in negotiable certificates of deposit issued by a state or federal credit union if a member of the
legislative body of the local agency, or a person with investment decision - making authority in the
administrative office manager's office, budget office, auditor - controller's office, or treasurer's office of the
local agency also serves on the board of directors, or any committee appointed by the board of directors, or
the credit committee or the supervisory committee of the state orfederal credit union issuing the negotiable
certificates of deposit.
55C -31
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 22
(j) (1) Investments in repurchase agreements or reverse repurchase agreements or securities lending
agreements of securities authorized by this section, as long as the agreements are subject to this
subdivision, including the delivery requirements specified in this section.
(2) Investments in repurchase agreements may be made, on an investment authorized in this section, when
the term of the agreement does not exceed one year. The market value of securities that underlie a
repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those
securities and the value shall be adjusted no less than quarterly. Since the market value of the underlying
securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in
compliance if the value of the underlying securities is brought back up to 102 percent no later than the next
business day.
(3) Reverse repurchase agreements or securities lending agreements may be utilized only when all of the
following conditions are met:
(A) The security to be sold using a reverse repurchase agreement or securities lending agreement has been
owned and fully paid for by the local agency for a minimum of 30 days prior to sale.
(B) The total of all reverse repurchase agreements and securities lending agreements on investments
owned by the local agency does not exceed 20 percent of the base value of the portfolio.
(C) The agreement does not exceed a term of 92 days, unless the agreement includes a written codicil
guaranteeing a minimum earning or spread for the entire period between the sale of a security using a
reverse repurchase agreement or securities lending agreement and the final maturity date of the same
security.
(D) Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security
to a counterparty using a reverse repurchase agreement or securities lending agreement shall not be used
to purchase another
security with a maturity longer than 92 days from the initial settlement date of the reverse repurchase
agreement or securities lending agreement, unless the reverse repurchase agreement or securities lending
agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period
between the sale of a security using a reverse repurchase agreement or securities lending agreement and
the final maturity date of the same security.
(4) (A) Investments in reverse repurchase agreements, securities lending agreements, or similar
investments in which the local agency sells securities prior to purchase with a simultaneous agreement to
repurchase the security may be made only upon prior approval of the governing body of the local agency
and shall be made only with primary dealers of the Federal Reserve Bank of New York or with a nationally
or state - chartered bank that has or has had a significant banking relationship with a local agency.
(B) For purposes of this chapter, "significant banking relationship" means any of the following activities of a
bank:
(i) Involvement in the creation, sale, purchase, or retirement of a local agency's bonds, warrants, notes, or
other evidence of indebtedness.
(ii) Financing of a local agency's activities.
(iii) Acceptance of a local agency's securities or funds as deposits.
55C -32
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 23
(5) (A) "Repurchase agreement" means a purchase of securities by the local agency pursuant to an
agreement by which the counterparty seller will repurchase the securities on or before a specified date and
for a specified amount and the counterparty will deliver the underlying securities to the local agency by book
entry, physical delivery, or by third -party custodial agreement. The transfer of underlying securities to the
counterparty bank's customer book -entry account may be used for book -entry delivery.
(B) "Securities," for purposes of repurchase under this subdivision, means securities of the same issuer,
description, issue date, and maturity.
(C) "Reverse repurchase agreement" means a sale of securities by the local agency pursuant to an
agreement by which the local agency will repurchase the securities on or before a specified date and
includes other comparable agreements.
(D) "Securities lending agreement" means an agreement under which a local agency agrees to transfer
securities to a borrower who, in turn, agrees to provide collateral to the local agency. During the term of the
agreement, both the securities and the collateral are held by a third party. At the conclusion of the
agreement, the securities are transferred back to the local agency in return for the collateral.
(E) For purposes of this section, the base value of the local agency's pool portfolio shall be that dollar
amount obtained by totaling all cash balances placed in the pool by all pool participants, excluding any
amounts obtained through selling securities by way of reverse repurchase agreements, securities lending
agreements, or other similar borrowing methods.
(F) For purposes of this section, the spread is the difference between the cost of funds obtained using the
reverse repurchase agreement and the earnings obtained on the reinvestment of the funds.
(k) Medium -term notes, defined as all corporate and depository institution debt securities with a maximum
remaining maturity of five years or less, issued by corporations organized and operating within the United
States or by depository institutions licensed by the United States or any state and operating within the
United States. Notes eligible for investment under this subdivision shall be rated "A" or better by an NRSRO.
Purchases of medium -term notes shall not include other instruments authorized by this section and shall not
exceed 30 percent of the agency's moneys that may be invested pursuant to this section.
(1) (1) Shares of beneficial interest issued by diversified management companies that invest in the securities
and obligations as authorized by subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and
that comply with the investment restrictions of this article and Article 2 (commencing with Section 53630).
However, notwithstanding these restrictions, a counterparty to a reverse repurchase agreement or securities
lending agreement is not required to be a primary dealer of the Federal Reserve Bank of New York if the
company's board of directors finds that the counterparty presents a minimal risk of default, and the value of
the securities underlying a repurchase agreement or securities lending agreement may be 100 percent of
the sales price if the securities are marked to market daily.
(2) Shares of beneficial interest issued by diversified management companies that are money market funds
registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15
U.S.C. Sec. 80a -1 et seq.).
(3) If investment is in shares issued pursuant to paragraph (1), the company shall have met either of the
following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating provided by not less than two
NRSROs.
55C -33
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 24
(B) Retained an investment adviser registered or exempt from registration with the Securities and Exchange
Commission with not less than five years' experience investing in the securities and obligations authorized
by subdivisions (a) to (k), inclusive, and subdivisions (m) to (q), inclusive, and with assets under
management in excess of five hundred million dollars ($500,000,000).
(4) If investment is in shares issued pursuant to paragraph (2), the company shall have met either of the
following criteria:
(A) Attained the highest ranking or the highest letter and numerical rating provided by not less than two
NRSROs.
(B) Retained an investment adviser registered or exempt from registration with the Securities and Exchange
Commission with not less than five years' experience managing money market mutual funds with assets
under management in excess of five hundred million dollars ($500,000,000).
(5) The purchase price of shares of beneficial interest purchased pursuant to this subdivision shall not
include commission that the companies may charge and shall not exceed 20 percent of the agency's
moneys that may be invested pursuant to this section. However, no more than 10 percent of the agency's
funds may be invested in shares of beneficial interest of any one mutual fund pursuant to paragraph (1).
(m) Moneys held by a trustee or fiscal agent and pledged to the payment or security of bonds or other
indebtedness, or obligations under a lease, installment sale, or other agreement of a local agency, or
certificates of participation in those bonds, indebtedness, or lease installment sale, or other agreements,
may be invested in accordance with the statutory provisions governing the issuance of those bonds,
indebtedness, or lease installment sale, or other agreement, or to the extent not inconsistent therewith or if
there are no specific statutory provisions, in accordance with the ordinance, resolution, indenture, or
agreement of the local agency providing for the issuance.
(n) Notes, bonds, or other obligations that are at all times secured by a valid first priority security interest in
securities of the types listed by Section 53651 as eligible securities for the purpose of securing local agency
deposits having a market value at least equal to that required by Section 53652 for the purpose of securing
local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the
custody of a trust company or the trust department of a bank that is not affiliated with the issuer of the
secured obligation, and the security interest shall be perfected in accordance with the requirements of the
Uniform Commercial Code or federal regulations applicable to the types of securities in which the security
interest is granted.
(o) A mortgage pass- through security, collateralized mortgage obligation, mortgage- backed or other pay -
through bond, equipment lease- backed certificate, consumer receivable pass- through certificate, or
consumer receivable- backed bond of a maximum of five years' maturity. Securities eligible for investment
under this subdivision shall be issued by an issuer having an "A" or higher rating for the issuer's debt as
provided by an NRSRO and rated in a rating category of "AK or its equivalent or better by an NRSRO.
Purchase of securities authorized by this subdivision shall not exceed 20 percent of the agency's surplus
moneys that may be invested pursuant to this section.
(p) Shares of beneficial interest issued by a joint powers authority organized pursuant to Section 6509.7 that
invests in the securities and obligations authorized in subdivisions (a) to (q), inclusive. Each share shall
represent an equal proportional interest in the underlying pool of securities owned by the joint powers
authority. To be eligible under this section, the joint powers authority issuing the shares shall have retained
an investment adviser that meets all of the following criteria:
55C -34
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 25
(1) The adviser is registered or exempt from registration with the Securities and Exchange Commission
(2) The adviser has not less than five years of experience investing in the securities and obligations
authorized in subdivisions (a) to (q), inclusive.
(3) The adviser has assets under management in excess of five hundred million dollars ($500,000,000).
(q) United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally
guaranteed by the International Bank for Reconstruction and Development, International Finance
Corporation, or Inter - American Development Bank, with a maximum remaining maturity of five years or less,
and eligible for purchase and sale within the United States. Investments under this subdivision shall be
rated "AK or better by an NRSRO and shall not exceed 30 percent of the agency's moneys that may be
invested pursuant to this section.
(Amended by Stats. 2014, Ch, 59, Sec. 1. Effective January 1, 2015)
GOVERNMENT CODE
SECTION
53601.1.
The authority of a local agency to invest funds pursuant to Section 53601 includes, in addition thereto,
authority to invest in financial futures or financial option contracts in any of the investment categories
enumerated in that section.
(Added by Stats. 1983, Ch. 534, Sec. 3.)
55C -35
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 26
GOVERNMENT CODE
SECTION
53601.6.
(a) A local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing
with Section 53630) in inverse floaters, range notes, or mortgage- derived, interest -only strips.
(b) A local agency shall not invest any funds pursuant to this article or pursuant to Article 2 (commencing
with Section 53630) in any security that could result in zero interest accrual if held to maturity. However, a
local agency may hold prohibited instruments until their maturity dates. The limitation in this subdivision
shall not apply to local agency investments in shares of beneficial interest issued by diversified
management companies registered under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a -1 et
seq.) that are authorized for investment pursuant to subdivision (1) of Section 53601.
(Amended by Stats. 2009, Ch. 332, Sec. 68.1. Effective January 1, 2010.)
GOVERNMENT CODE
SECTION
53638.
(a) The deposit shall not exceed the shareholder's equity of any depository bank. For the purposes of this
subdivision, shareholder's equity shall be determined in accordance with Section 463 of the Financial Code,
but shall be deemed to include capital notes and debentures.
(b) The deposit shall not exceed the total of the net worth of any depository savings association or federal
association, except that deposits not exceeding a total of five hundred thousand dollars ($500,000) may be
made to a savings association or federal association without regard to the net worth of that depository, if
such deposits are insured or secured as required by law.
(c) The deposit to the share accounts of any regularly chartered credit union shall not exceed the total of the
unimpaired capital and surplus of the credit union, as defined by rule of the Commissioner of Financial
Institutions, except that the deposit to any credit union share account in an amount not exceeding five
hundred thousand dollars ($500,000) may be made if the share accounts of that credit union are insured or
guaranteed pursuant to Section 14858 of the Financial Code or are secured as required by law.
(d) The deposit in investment certificates of a federally insured industrial loan company shall not exceed the
total of the unimpaired capital and surplus of the insured industrial loan company.
(Amended by Stats. 2015, Ch. 190, Sec. 64. Effective January 1, 2016.)
55C -36
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 27
GOVERNMENT CODE
SECTION
53646.
(a) (1) In the case of county government, the treasurer may annually render to the board of supervisors and
any oversight committee a statement of investment policy, which the board shall review and approve at a
public meeting. Any change in the policy shall also be reviewed and approved by the board at a public
meeting.
(2) In the case of any other local agency, the treasurer or chief fiscal officer of the local agency may
annually render to the legislative body of that local agency and any oversight committee of that local agency
a statement of investment policy, which the legislative body of the local agency shall consider at a public
meeting. Any change in the policy shall also be considered by the legislative body of the local agency at a
public meeting.
(b) (1) The treasurer or chief fiscal officer may render a quarterly report to the chief executive officer, the
internal auditor, and the legislative body of the local agency. The quarterly report shall be so submitted
within 30 days following the end of the quarter covered by the report. Except as provided in subdivisions (e)
and (f), this report shall include the type of investment, issuer, date of maturity, par and dollar amount
invested on all securities, investments and moneys held by the local agency, and shall additionally include a
description of any of the local agency's funds, investments, or programs, that are under the management of
contracted parties, including lending programs. With respect to all securities held by the local agency, and
under management of any outside party that is not also a local agency or the State of California Local
Agency Investment Fund, the report shall also include a current market value as of the date of the report,
and shall include the source of this same valuation.
(2) The quarterly report shall state compliance of the portfolio to the statement of investment policy, or
manner in which the portfolio is not in compliance.
(3) The quarterly report shall include a statement denoting the ability of the local agency to meet its pool's
expenditure requirements for the next six months, or provide an explanation as to why sufficient money
shall, or may, not be available.
(4) In the quarterly report, a subsidiary ledger of investments may be used in accordance with accepted
accounting practices.
(c) Pursuant to subdivision (b), the treasurer or chief fiscal officer shall report whatever additional
information or data may be required by the legislative body of the local agency.
(d) The legislative body of a local agency may elect to require the report specified in subdivision (b) to be
made on a monthly basis instead of quarterly.
(e) For local agency investments that have been placed in the Local Agency Investment Fund, created by
Section 16429.1, in National Credit Union Share Insurance Fund - insured accounts in a credit union, in
accounts insured or guaranteed pursuant to Section 14858 of the Financial Code, or in Federal Deposit
Insurance Corporation- insured accounts in a bank or savings and loan association, in a county investment
pool, or any combination of these, the treasurer or chief fiscal officer may supply to the governing body,
chief executive officer, and the auditor of the local agency the most recent statement or statements received
by the local agency from these institutions in lieu of the information required by paragraph (1) of subdivision
(b) regarding investments in these institutions.
55C -37
CITY OF SANTA ANA STATEMENT OF INVESTMENT POLICY
JULY 1, 2016 — JUNE 30, 2017
Page 28
(f) The treasurer or chief fiscal officer shall not be required to render a quarterly report, as required by
subdivision (b), to a legislative body or any oversight committee of a school district or county office of
education for securities, investments, or moneys held by the school district or county office of education in
individual accounts that are less than twenty -five thousand dollars ($25,000).
(g) In recognition of the state and local interests served by the actions made optional in subdivisions (a) and
(b), the Legislature encourages the local agency officials to continue taking the actions formerly mandated
by this section. However, nothing in this subdivision may be construed to impose any liability on a local
agency that does not continue to take the formerly mandated action.
(Amended by Stats. 2009, Ch. 332, Sec. 68.5. Effective January 1, 2010.)
55C -38
FIGURE 1
ALLOWABLE INVESTMENT INSTRUMENTS PER STATE GOVERNMENT
CODE (AS OF JANUARY 1, 2016) A APPLICABLE TO ALL LOCAL AGENCIES
See "Table of Notes for Figure 1" on the next page for footnotes related to this figure.
Local Agency Bonds
5 years
None
None
U.S. Treasury Obligations
5 years
None
None
State Obligations — CA And Others
5 years
None
None
CA Local Agency Obligations
5 years
None
None
U.S Agency Obligations
5 years
None
None
Bankers' Acceptances
180 days
40 %E
None
Highest letter and number
Commercial Paper — Pooled Funds
270 days
40% of the agency's money c
rating by an NRSRO H
Commercial Paper— Non - Pooled
Highest letter and number
Funds F
270 days
25% of the agency's money c
rating by an NRSRO H
Negotiable Certificates of Deposit
5 years
30% 1
None
Non - negotiable Certificates of Deposit
5 years
None
None
30% K
(inclusive of placement service
Placement Service Deposits
5 years
CDs)
None
30% K
Placement Service Certificates of
(combined with placement
Deposit
5 years
service deposits)
None
Repurchase Agreements
1 year
None
None
Reverse Repurchase Agreements and
20% of the base value of the
Securities Lending Agreements
92 days L
portfolio
None M
Medium -Term Notes N
5 years
30%
"A" Rating
Mutual Funds And Money Market
Mutual Funds
N/A
20%0
Multiple P' o
Collateralized Bank Deposits
5 years
None
None
Mortgage Pass – Through Securities
5 years
20%
"AA" Rating Category R
County Pooled Investment Funds
N/A
None
None
Joint Powers Authority Pool
N/A
None
Multiple s
Local Agency Investment Fund (LAIF)
N/A
None
None
Voluntary Investment Program Fund
N/A
None
None
Supranational Obligations u
5 years
30%
"AA" Rating
L LOCAL AGENCY INVESTMENT GUIDELINES
55C -39
^ Sources: Sections 16340, 16429.1, 53601,
53601.8, 53635, 53635.2, 53635.8, and
53638.
e Municipal Utilities Districts have the author-
ity under the Public Utilities Code Section
12871 to invest in certain securities not ad-
dressedhere.
Section 53601 provides that the maximum
term of any investment authorized under
this section, unless otherwise stated, is five
years. However, the legislative body may
grant express authority to make investments
either specifically or as a part of an invest-
ment program approved by the legislative
body that exceeds this five year maturity limit.
Such approval must be issued no less than
three months prior to the purchase of any se-
curity exceeding the five -year maturity limit.
° Percentages apply to all portfolio Invest-
ments regardless of source of funds.
For instance, cash from a reverse is or-
chase agreement would be subject to the
restrictions.
` No more than 30 percent of the agency's
money may be in bankers' acceptances of
any one commercial bank.
"Select Agencies" are defined as a "city, a
district, or otherlocal agency that doles) not
pool money in deposits or Investment with
other local agencies, other than local agen-
cies that have the same governing body."
Local agencies, other than counties are city
and county, may purchase no more than 10
percent of the outstanding commercial pa-
per of any single issuer.
Issuing corporation must be organized and
operating within the U.S., have assets in ex-
cess of $500 million, and debt other than
commercial paper must be rated "A" or the
issuing corporation must be organized within
the U.S. as a special purpose corporation,
trust, or LLC, has program wide credit en-
hancements, and has commercial paper that
is rated'A - i "or higher, or the equivalent, by
a nationally recognized rating agency.
"Other Agencies" are counties, a city and
county, or other local agency "that pools
money in deposits or investments with other
local agencies, replacing local agencies
that have the same governing body." Local
agencies that pool exclusively with other lo-
cal agencies that have the same governing
body must adhere to the limits set for "Se-
lect Agencies," above,
' No more than 30 percent of the agency's
money may be in negotiable certificates of
deposit that are authorized under Section
53601(1).
" No more than 30 percent of the agency's
moneymaybe invested in deposits, including
certificates of deposit, through a placement
service (excludes negotiable certificates o/
deposit authorized under Section 53601(1)).
Reverse repurchase agreements or secud-
ties lending agreements may exceed the
92 -day term it the agreement includes a
written codicil guaranteeing a minimum
earning or spread for the entire period be-
tween the sale of a security using a reverse
repurchase agreement or securities lending
agreement and the final maturity dates of
the same security.
Reverse repurchase agreements must be
made with primary dealers of the Federal Re-
serve Bank of New York or with a nationally
or state chartered bank that has a significant
relationship with the local agency. The local
agency must have held the securities used
for the agreements for at least 30 days.
" "Medium -term notes" are defined in Section
53601 as "all corporate and depository in-
stitution debt securities with a maximum re-
maining maturity of five years or less, issued
by corporations organized and operating
within the United States or by depository in-
stitutions licensed by the United States or any
state and operating within the United States"
° No more than 10 percent Invested in any
one mutual fund.
° A mutual fund must receive the highest rank-
ing by not less than two nationally recog-
nized rating agencies or the fund must retain
an investment advisor who is registered with
the SEC (or exempt from registration), has as-
sets under management in excess of $500
million, and has at least five years experience
investing in instruments authorized by Sec-
tions 53601 and 53635.
° A money market mutual fund must receive
the highest ranking by not less than two
nationally recognized statistical rating or-
ganizations or retain an investment advisor
registered with the SEC or exempt from
registration and who has not less than five
years experience investing in money market
instruments with assets under management
in excess of $500 million.
a Issuer must be rated "A" or higher as provid-
ed bya nation,ally recognized rating agency.
s A joint powers authority pool must retain an
investment advisor who is registered with the
SEC (or exempt from registration), has as-
sets under management in excess of $500
million, and has at least five years experience
investing in instruments authorized by Sec-
tion 53601, subdivisions (a) to (o).
' Local entitles can deposit between $200
million and $10 billion into the Voluntary
Investment Program Fund, upon approval
by their governing bodies. Deposits in the
fund will be invested in the Pooled Money
Investment Account.
° Only those obligations issued or uncondition-
ally guaranteed by the International Bank for
Reconstruction and Development USED),
International Finance Corporation fIFC), and
Inter- American Development Bank (IADB).
LOCAL AGE55lCE4aT GUIDELINES
ii.
Also, while not expressly prohibited by State law, unregistered securities, such as
Rule 144A securities, may not be purchased by local agencies because local agen-
cies do not meet the Securities and Exchange Commission definition of Qualified
Institutional Buyers (QIB).
iii. LOCAL AGEN661ST*IT GUIDELINES
55C -42
City of Santa Ana
;. Administrative
mow. Policies and Procedures
City Manager's Authorization
Subject
Date
Municipal Securities Disclosure Policy & Procedures
June 21, 2016
PURPOSE
The purpose of this Municipal Securities Disclosure Policy ( "Policy ") is to memorialize and communicate
the policies and procedures in connection with both the initial and annual continuing disclosure
undertakings for municipal securities issued by the City of Santa Ana, California (the "City "), the Santa
Ana Public Financing Authority, the Successor Agency to the Santa Ana Redevelopment Agency and
certain community facility districts and assessment districts (collectively, the "Santa Ana Issuers ").
Adherence to the Policy will ensure compliance with federal securities laws, promote best practices, and
enhance the City's internal controls and control environment. In addition, the Policy will also establish a
Continuing Disclosure Committee which will have general oversight of the disclosure process.
This Policy is subject to recommendations for improvements during the annual disclosure process. As
such, the Executive Director of Finance & Management Services Agency ( "Finance ") is authorized and
has the responsibility to update, modify, and /or make recommended changes when appropriate.
BACKGROUND
The Santa Ana Issuers have issued and expect that they will in the future issue bonds, certificates of
participation, notes or other obligations (collectively, "Obligations ") which are offered to the investing
public. Issuers of publicly offered municipal securities are required under most circumstances to provide
certain financial and operating information on an annual basis to the Municipal Securities Rulemaking
Board (MSRB) utilizing the database Electronic Municipal Market Access system (EMMA) to assist the
underwriter of such municipal securities in complying with Rule 15c2- 12(b)(5) promulgated under the
Securities and Exchange Act of 1934 (the "Rule "). The Santa Ana Issuers have covenanted or will
covenant to assist such underwriters in complying with the Rule through the execution and delivery of
continuing disclosure agreements or certificates (each, a "Continuing Disclosure Undertaking ")
applicable to each issue of Obligations. The Santa Ana Issuers must comply with any required filings in a
timely manner in accordance with its respective offering documents for the Obligations. This Policy and
the associated procedures are intended to ensure that all filings required under the Rule are made
timely and all requirements set forth in the Continuing Disclosure Undertakings are met.
The Rule requires that an underwriter, prior to purchasing or selling an issue of municipal securities in
connection with a covered offering, determine that the issuer, and any other "Obligated Person" (as
defined in the Rule) for whom financial or operating data is presented in the official statement, has
undertaken in writing to provide the following information to the MSRB using EMMA:
• By a specified date, annual financial and operating information for each Obligated Person for whom
financial information or operating data is presented in the official statement (an "Annual Information
Filing ");
EXHIBIT 4
55C -43
Municipal Securities Disclosure Policy & Procedures
Page 2
June 21, 2016
• By a specified date, if available, audited annual financial statements for each Obligated Person
( "Audited Financial Statements" and together with the Annual Information Filing, the "Annual Report ")
and, if not available by the date required, unaudited financial statements with Audited Financial
Statements;
• In a timely manner within 10 business days of occurrence, notice of the occurrence of one or more of
the listed events described in the Rule (a "Rule 15c2 -12 Event Notice "); and
• In a timely manner, notice of a failure of any Obligated Person required to make the Annual
Information Filing and /or file the Audited Financial Statements on or before the date(s) specified in
the Continuing Disclosure Undertaking ( "Notice of Failure ").
DISCLOSURE COMMITTEE
The Disclosure Committee ( "Committee ") shall be responsible for the general oversight of the disclosure
process, which includes:
A. Initial Offering Disclosure
• Participating in due diligence activities
• Reviewing each disclosure document
• Identifying subject matter reviewers ( "Subject Matter Reviewers ")
• Approving draft preliminary official statement before it is submitted to the City Council or such
other legislative body of the respective Santa Ana Issuer
B. Continuing Disclosure
• Periodically reviewing the Policy
• Periodically reviewing compliance difficulties and recommending changes
• Waiving procedures when appropriate
The composition of the Committee shall include, but not limited to the following:
• Executive Director of Finance
• Assistant Director of Finance
• Supervising Accountant
• Disclosure Coordinator
• Representative from the City Attorney's Office (CAO)
55C -44
Municipal Securities Disclosure Policy & Procedures
Page 3
June 21, 2016
The Disclosure Coordinator shall be appointed by the Executive Director of Finance. The duties of the
Disclosure Coordinator include:
• Prepare, file and document the annual filings required by the Continuing Disclosure Undertakings
• Oversee the drafting of the annual filings and other event notices required by the Continuing
Disclosure Undertakings
• Coordinate the process of preparing the initial offering documents
• Ensure compliance with the Policy
• Maintain a compliance file; and
• Develop a training process.
GENERAL PRINCIPLES
In accordance with this Policy, any member of the Committee may raise potential disclosure concerns or
issues at any time during the disclosure process (the "Process "). The Process is designed to facilitate the
review of all disclosure and offering documents, including but not limited to, Continuing Disclosure
Undertakings, Annual Information Filings, Audited Financial Statements, Rule 15c2 -12 Event Notices,
Notices of Failure, official statements, preliminary official statements, fiscal agent agreements, trust
agreements, and bond indentures for revisions, clarifications and /or improvements. Any other
disclosure or offering documents that are not specifically listed shall be reviewed and verified during the
Process.
PREPARATION OF OFFERING DOCUMENTS
The Committee and /or the Disclosure Coordinator shall manage the process of reviewing and
commenting on the preliminary official statement (the "Preliminary Official Statement') and will send
comments to the assigned disclosure counsel for each particular transaction. The drafts of the
Preliminary Official Statement shall be reviewed by the Committee, Subject Matter Reviewers, financial
advisor, bond counsel, disclosure counsel and other assigned parties. The final draft of the Preliminary
Official Statement shall be reviewed by the Executive Director of Finance and /or his /her designee and /or
the Assistant Director of Finance and /or his /her designee prior to approval by the City Council, or such
other legislative body of the respective Santa Ana Issuer. The Preliminary Official Statement and
financing documents must be approved as discussion items on the agenda and may not be placed on the
consent calendar. The Preliminary Official Statement and the final official statement will not be finalized
nor posted until all of the parties have signed -off.
PREPARATION & DOCUMENTATION OF ANNUAL REPORTS
The Disclosure Coordinator shall establish a disclosure calendar outlining the annual submission dates
for the Annual Report required pursuant to each Continuing Disclosure Undertaking. Approximately 90
days before the submission date for each required filing established under such Continuing Disclosure
Undertaking, the Disclosure Coordinator shall initiate the process of preparing the financial and
operating information required to be submitted thereunder and shall assemble the information
available at that time and determine the scope of additional information to be required. The Disclosure
Coordinator shall also contact the third - party, engaged to complete the required filing, to establish a
schedule for completion and submission of the Annual Report.
55C -45
Municipal Securities Disclosure Policy & Procedures
Page 4
June 21. 2016
Not less than 30 days before the submission date, the Disclosure Coordinator, in coordination with the
Subject Matter Reviewers, shall prepare a draft submission of financial and operating information
required to be included in the Annual Information Filing, highlighting any information still unavailable.
Additionally, the draft of the Annual Information Filing and Audited Financial Statements shall be
submitted to CAO for review.
ANNUAL REPORT FILING PROCESS
The Disclosure Coordinator along with the Subject Matter Reviewers shall evaluate all the components
of the Annual Reports and make the appropriate updates. Following the updating of the Annual Reports,
the Committee shall review the drafts of the Annual Reports. The Disclosure Coordinator shall make any
changes recommended by the Committee and resubmit the Annual Reports to the Committee.
Subsequent to the final approval by the Committee, the Disclosure Coordinator along with the Santa Ana
Issuers' Dissemination Agent shall finalize the Annual Reports. The Disclosure Coordinator shall maintain
and update the compliance files for each Continuing Disclosure Undertaking.
On or before the submission date established under each Continuing Disclosure Undertaking, the
Disclosure Coordinator or the dissemination agent, if applicable, shall file the Annual Report. If the
Audited Financial Statements are not available, unaudited financial information shall be filed with the
MSRB using EMMA and the Audited Financial Statements shall be filed within 10 business days of their
receipt and acceptance.
LISTED EVENTS
The Rule also requires filing of a Rule 15c2 -12 Event Notice upon the occurrence of certain listed events
described in the Continuing Disclosure Undertakings including rating changes. The Committee shall
provide a Rule 15c2 -12 Event Notice to the MSRB using EMMA within 10 business days of occurrence of
any such listed event.
The listed events most likely to occur on a regular basis relate to bond redemptions or defeasances of
outstanding issues and rating changes. The Disclosure Coordinator shall, on a periodic basis, monitor all
of the Santa Ana Issuers transactions which are rated or insured.
REPORTING REQUIREMENTS
The Committee shall identify any incidents of non - compliance and prepare a report for the City
Manager, Executive Director of Finance and the CAO. Such report shall include recommendations to
resolve any non - compliance with the respective Continuing Disclosure Undertaking.
AUDITED FINANCIAL STATEMENTS (COMPREHENSIVE ANNUAL FINANCIAL REPORT)
The Committee shall review and provide feedback in the preparation of the Management Discussion &
Analysis (MD &A) and the debt - related footnotes to the Audited Financial Statements. Additionally, the
Committee along with the disclosure counsel shall compare the MD &A and related footnote sections to
the Annual Information Filing and any Preliminary Official Statement being prepared at the time to
ensure consistency.
55C -46
Municipal Securities Disclosure Policy & Procedures
Page 5
June 21, 2016
RECORDS RETENTION
The Disclosure Coordinator shall maintain records with respect to the filings with the MSRB using
EMMA, including, but not limited to, EMMA posting receipts showing dates and nature of contents of all
filings for each issue of Obligations outstanding.
TRAINING
To ensure adequate resources to comply with the Continuing Disclosure Undertakings, the Disclosure
Coordinator shall develop a training process aimed at providing additional assistance in preparing
required information. The training process shall be conducted at least every other calendar year and
shall encompass a review of the EMMA submission process and an understanding of the timing
requirements necessary for full compliance with the Continuing Disclosure Undertakings.
55C -47
55C -48