Lake Wales (Current through Ordinance 2023-17, Adopted 7-05-2023)
 Code of Ordinances
 Chapter 2. Administration   
 Article V. Financial Administration
 Division 1. Investment Of Public Funds
  

Division 1. Investment Of Public Funds  

§ 2-500. Definitions.
Latest version.

When used in this division, the following words, terms or phrases shall have the meanings ascribed to them in this section unless the context clearly indicates otherwise:

Agencies. Federal agency securities.

Bankers' acceptance. A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer.

Certificate of deposit (CD). A time deposit with a specific maturity evidenced by a certificate. Large-denomination CD's are typically negotiable.

Collateral. Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan.

Counterparty. A party, other than the city, to a hedge agreement.

Diversification. Dividing investment funds among a variety of securities offering independent returns.

Hedge agreement. An interest rate exchange agreement, an interest rate agreement, forward purchase contract, put option contract, call option contract or other financial product, any of which is used by the city as a hedging device, entered into between the city and a counterparty; provided that such counterparty shall be an entity whose long-term debt obligations, or whose payment obligations under the hedge agreement are guaranteed by an entity whose senior long-term debt obligations, in either case are rated (on the date the hedge agreement is entered into) by at least two (2) nationally recognized rating agencies in a rating category not less than double-A category without regard to gradations.

Interest rate agreement. An agreement between the city and a counterparty under which the city is obligated to make periodic payments on a "notional amount" to the counterparty and the counterparty is obligated to make periodic payments to the cityon such "notional amount" on a different basis or formula, and under which the amounts so payable by the city and such counterparty on any date are netted against each other with the party owing the larger amount making a net payment to the other party.

Liquidity. A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value.

Market value. The price at which a security is trading and could presumably be purchased or sold.

Master repurchase agreement. A written contract covering all future transactions between the parties to repurchase agreements that establishes each party's rights in the transactions. A master repurchase agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower.

Maturity. The date upon which the principal or stated value of an investment becomes due and payable.

Portfolio. Collection of securities held by an investor.

Repurchase agreement (REPO). Securities sold to an investor by the holder with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer," in effect, lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate the "buyer" for this.

Safekeeping. A service to customers rendered by banks for a fee whereby securities are held in the bank's vaults for protection.

SBA. The Florida Local Government Surplus Funds Trust Fund; the aggregate of all funds from political subdivisions that are placed in the custody of the state treasurer for investment and reinvestment.

(Ord. No. 95-44, § 1, 12-19-95; Ord. No. 2003-35, § 1, 12-2-03)
§ 2-501. Scope.
Latest version.

(a) There is hereby established an investment policy for the investment of surplus public funds of the City of Lake Wales in accordance with F.S. § 218.415, which applies to all investments of the city's pooled cash and includes cash and investment balances of the following funds:

(1) General fund.

(2) Special revenue funds.

Airport fund

AWARE fund

CRA fund

Library fund

Transportation fund

(3) Enterprise funds.

Cemetery fund

Sewer fund

Waste disposal fund

Water fund

(4) Debt service fund.

(5) Capital projects fund.

(6) Any new fund created by the city, unless specifically exempted by the city commission.

(b) The policies set forth in this division do not apply to the three (3) employee pension funds of city, depositories for deceased debt, or assets under bond trust indenture agreements, when held by third party custodians and/or money managers.

(c) All financial assets held or controlled by the city, not otherwise classified as restricted assets requiring separate investing, shall be identified as "general operating funds" of the city for the purpose of this policy, and shall be invested under the guidelines as herein set forth.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-502. Delegation of authority; establishment of investment committee. [Repealed]
Effective on Tuesday, February 7, 2017

(a) Responsibility for the administration of the investment program is hereby delegated to the city manager. The finance director will be responsible for developing and executing internal controls and monitoring the activities of subordinate staff necessary to implement the city's investment policy.

(b) An investment committee will be appointed in accordance with City of Lake Wales Code section 2-26 for the purpose of formulating alternative investment strategies and short-range directions and for monitoring the performance and structure of the portfolio within established policies. The committee will formulate and recommend change, if necessary, to the investment policies. Members of the committee shall include the city manager, a city commissioner, the finance director, and two (2) members of the public who are eligible for board appointment in accordance with Code section 2-26 and who are qualified to perform the duties assigned to the committee. Public members shall be appointed by the city commission to serve four (4) year terms. The investment committee shall meet on a quarterly basis or as needed.

(Ord. No. 95-44, § 1, 12-19-95; Ord. No. 2017-02, § 9, 02-07-2017)
§ 2-503. Investment objectives.
Latest version.

The following investment objectives will be applied in the management of the city's funds.

(a) Safety of capital. Safety of principal is the primary objective of the City of Lake Wales. Each investment shall be executed to ensure that capital (principal) losses are avoided, whether from market value fluctuations or credit erosion.

(b) Liquidity. The investment strategy must provide sufficient liquidity to meet the city's operating, payroll and capital requirements. The city's portfolio must always encompass the ability for quick conversion to cash without loss of principal to meet cash flow requirements.

(c) Return on investments. In investing public funds, the city will strive to maximize the return on the portfolio and to preserve the purchasing power but will avoid assuming unreasonable investment risk.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-504. Performance measurement.
Latest version.

The city seeks to optimize return on investments within the constraints of safety and liquidity. The investment portfolio shall be designed with the annual objective of equaling or exceeding the average annual return earned on investments held by the Florida Local Government Surplus Funds Trust Fund (SBA).

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-505. Prudence and ethical standards.
Latest version.

(a) The "prudent person" standard shall be used in the management of the overall investment portfolio. The city manager, acting as a "prudent person" in accordance with these written policies and procedures, and exercising due diligence, shall not be responsible for an individual security's credit risk or market price changes provided that appropriate monitoring efforts are performed.

(b) The "prudent person standard" is herewith understood to mean the following: "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."

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-506. Authorized instruments of investment.
Latest version.

The city shall purchase or sell investment securities at prevailing market rates. Authorized instruments are as follows:

(1) The Florida Local Government Surplus Funds Trust Fund (SBA).

(2) Negotiable direct obligations, or obligations the principal and interest of which are unconditionally guaranteed by the United States government. Such securities will include, but not be limited to, the following:

a. Cash management bills.

b. Treasury securities—State and local government series (SLGS).

c. Treasury bills.

d. Treasury notes.

e. Treasury bonds.

f. Treasury strips.

(3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by United States agencies, provided such obligations are backed by the full faith and credit of the United States Government. Such securities will include, but not be limited to, the following:

a. United States Export-Import Bank Direct obligations or fully guaranteed certificates of beneficial ownership.

b. Farmers Home Administration Certificates of beneficial ownership.

c. Federal Financing Bank Discount notes, notes and bonds.

d. Federal Housing Administration Debentures.

e. General Service Administration Participation Certificates.

f. Government National Mortgage Association (GNMA).

Guaranteed mortgage-backed bonds.

Guaranteed pass-through obligations.

g. United States Maritime Administration Guaranteed Title XI.

h. New Communities Debentures United States Government guaranteed debentures.

i. United States Government Guaranteed Public Housing Notes and Bonds.

j. United States Department of Housing and Urban Development Project notes and local authority bonds.

(4) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by United States government agencies (federal instrumentalities) which are nonfull faith and credit agencies limited to the following:

a. Federal Farm Credit Bank (FFCB).

b. Federal Home Loan Bank or its district banks (FHLB).

c. Federal National Mortgage Association (FNMA).

d. Federal Home Loan Mortgage Corporation (Freddie-Macs) including Federal Home Loan Mortgage Corporation participation certificates.

e. Student Loan Marketing Association (Sallie-Mae).

(5) Nonnegotiable interest bearing time certificates of deposit or savings accounts in banks organized under the laws of this state and/or in national banks organized under the laws of the United States and doing business in this state, provided that any such deposits are secured by the Florida Security for Public Deposits Act, F.S. ch. 280, and provided that the bank is not listed with any recognized credit watch information service.

(6) Repurchase agreements comprised of only those investments as authorized in paragraphs (b) and (d) above.

(7) Bankers' Acceptances which are inventory-based and issued by a domestic bank which has an unsecured, uninsured and unguaranteed obligation rating of at least "Prime-1" and "A" by Moody's Investors Service and "A-1" and "A" by Standard & Poor's Corporation and ranked in the top fifty (50) United States banks in terms of total assets by the American Banker's yearly report.

(8) Commercial Paper of any United States company which are rated, at the time of purchase, "Prime-1" by Moody's and "A-1" by Standard & and Poor's (prime commercial paper); if backed by a letter of credit (LOC), the long-term debt of the LOC provider must be rated at least "A" by at least two (2) nationally recognized rating agencies, and the LOC provider must be ranked in the top fifty (50) United States banks in terms of total assets by the American Banker's yearly report.

(9) State and/or local government taxable and tax-exempt debt, general obligation and/or revenue bonds rated at least "Aa" by Moody's and "AA" by Standard & Poor's for long-term debt, or rated at least MIG-1 by Moody's and SP-2 by Standard & Poor's for short-term debt.

(10) Fixed income mutual funds comprised of only those investment instruments as authorized in paragraphs (2), (3), (4), and (9) above.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-507. Maturity and liquidity requirements.
Latest version.

To meet the day-to-day operating needs of the city and to provide the ready cash to meet unforeseen temporary cash requirements, the general operating pool shall maintain a minimum of five hundred thousand dollars ($500,000.00) in liquid investments defined as repurchase agreements purchased under the terms of the city's depository contract, open repurchase agreements, negotiable certificates of deposit, banker's acceptances, commercial paper, U.S. Treasury direct and agency obligations all having a maturity of sixty (60) days or less, and the SBA Local Government Pool, all as purchased under the dictates of this policy.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-508. Portfolio composition.
Latest version.

Guidelines for investments and limits on security issues, issuers, and maturities established by this investment policy are incorporated into this division as Exhibit A. The city manager shall have the option to further restrict or increase investment percentages from time to time based on market conditions. Any changes to the established portfolio composition must be documented in writing, reviewed by the investment committee and approved by resolution of the city commission. Purchase of investments based on bond covenant requirements are excluded from the portfolio's composition calculations.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-509. Risk and diversification.
Latest version.

Assets held shall be diversified to control the risk of loss resulting from over concentration of assets in a specific maturity, issuer, instrument, dealer, or bank through which these instruments are bought and sold. Diversification strategies within the established guidelines shall be reviewed and revised periodically as necessary by the investment committee.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-510. Investment institutions and dealers.
Latest version.

(a) The city shall only purchase securities from financial institutions which are qualified as public depositories by the Treasurer of the State of Florida or from primary securities dealers as designated by the Federal Reserve Bank of New York.

(b) Repurchase agreements shall only be entered into with primary security dealers and financial institutions which are state-qualified public depositories. The city manager will require a master repurchase agreement to be executed prior to any repurchase transactions.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-511. Third-party custodial agreements.
Latest version.

(a) All securities purchased by the city under this investment policy shall be properly designated as an asset of the city and held in safekeeping by a third party custodial bank or other third party custodial institution, chartered by the United States government or the State of Florida and no withdrawal of such securities, in whole or in part, shall be made from safekeeping except by the city manager or his designee.

(b) The strongest assurance and control that the securities have been properly segregated on behalf of the city is provided by an independent third-party custodian. In addition, it may be appropriate to accept confirmation from the trust company affiliated with the other party of the transaction. Assurances shall be obtained that the structure of this affiliation is such that the two (2) entities are fully independent of each other, that controls are adequate and that the city's security interest in the assets is not lost.

(c) The city will execute third-party custodial agreements with its bank(s) and depository institution(s). Such agreements shall include letters of authority from the city that details the responsibilities of each party, notification of security purchases, sales, delivery, repurchase agreements, wire transfers, safekeeping and transactions costs, procedures in case of wire failure or other unforeseen mishaps including liability of each party.

(d) An exception to this method of control will be the safekeeping of nonnegotiable bank certificates of deposit which would require physical delivery without systematic handling found commonly with book entry securities.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-512. Master repurchase agreements.
Latest version.

The city manager will require all approved institutions and dealers transacting repurchase agreements to execute and perform as stated in the master repurchase agreement. All repurchase agreement transactions will adhere to requirements of the master repurchase agreement.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-513. Bid requirements.
Latest version.

(a) When purchasing or selling securities, the city shall select the security which provides the highest rate of return within the parameters of this policy and which meets the current objectives and needs of the city's portfolio. Selections shall be made utilizing one (1) of the following methods:

(1) Competitive bids, wherein the city solicits proposals from a minimum of three (3) firms.

(2) Comparison to the current market price as indicated by one (1) of the market pricing resources available to the city. These resources include, but are not limited to:

a. Bloomberg Information Delivery System.

b. Wall Street Journal, or a comparable nationally recognized financial publication providing daily market pricing.

c. Daily market pricing provided by the city's custody agent or their correspondent institution.

(b) In most situations, the city shall utilize the competitive bid process to select the securities to be purchased or sold. Selection by comparison to a current market price, as indicated in paragraph (a)(2), shall be utilized when in the judgment of the city manager, competitive bidding would inhibit the selection process. Examples of when this might occur are:

(1) When a dealer brings to the city an unsolicited swap or proposal.

(2) When no active market exists for the issue being traded due to the age or depth of the issue.

(3) When time constraints due to unusual circumstances preclude use of the bidding process.

(4) When a security is unique to a single dealer.

(5) When the transaction involves new issues or issues in the "when issued" market.

(c) When using the competitive bid process, all bids shall become part of the record of the specific security involved. When selection is made based on comparison to current market price, the following information shall become part of the record of the security involved:

(1) Reason for use of this method.

(2) Source of the current market value used.

(3) Price and/or interest rate quoted by said source.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-514. Internal controls.
Latest version.

The finance director will establish a system of internal controls which will be documented in writing. The internal controls will be reviewed and approved by the investment committee. The controls will be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent action by employees and officers of the city.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-515. Reporting.
Latest version.

A portfolio report will be provided to the city commission on a quarterly basis. The report shall include a breakdown of the portfolio as well as its overall performance during that period. A recapitulation report will be provided to the city commission on an annual basis.

(Ord. No. 95-44, § 1, 12-19-95)
§ 2-516. Resolution of conflicts.
Latest version.

In any instance where the permitted investments authorized in this policy are in conflict with permitted investments specified in any resolution or agreement approved by the city commission related to short-term or long-term debt issuances of the City of Lake Wales, then the provision of the debt-related resolution or agreement will prevail.

(Ord. No. 95-44, § 1, 12-19-95)