Transcript INVESTMENT POLICY - Joshua Basin Water

JOSHUA BASIN WATER DISTRICT
October 2012
 The District is required to re-approve the investment policy
on an annual basis. We must also prepare a quarterly
investment report, which details the District’s investments
and earnings for the governing body. Both requirements
were enacted in response to the 1994 County of Orange
bankruptcy in which the County Board of Supervisors was
unaware of questionable investments made by the County
Treasurer.
 By law, the primary objective of any person investing public
funds is to safeguard principal; secondly to meet liquidity
needs; and lastly, to achieve a return or yield on invested
funds.
The District’s investment policy allows
investments such as the following:
 Obligations issued or guaranteed by the
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United States of America
Certificates of Deposit fully insured by the
FDIC
Highly-rated money market portfolios
Long and medium-term corporate debt
guaranteed by a highly-rated corporation
Public housing bonds issued by public
agencies
Local Agency Investment Fund
 The District invests all reserves in LAIF, currently $7.3
million, including $2.4 million deposit from HDMC,
because we have no staff with training and expertise in
evaluating and making investments.
 The Government Code declares that each person,
treasurer, or governing body authorized to make
investment decisions act with care, skill, prudence and
diligence when handling public funds.
 The Local Agency Investment
Fund (LAIF) was created by state
statute in 1977 as an investment
alternative for California’s local
governments and special districts.
The program enables us to
participate in a major portfolio
which invests hundreds of
millions of dollars, using the
expertise of the Treasurer’s Office
investment staff.
 Oversight is provided by the Local
Agency Investment Advisory
Board, consisting of five
members.
 LAIF is part of the Pooled Money Investment
Account (PMIA), begun in 1953, to invest
taxpayers’ money and manage the State’s cash
flow. Policies, goals and objectives established for
the portfolio make certain that the goals of safety,
liquidity and yield are not jeopardized.
 Oversight is provided by the Pooled Money
Investment Board including the State Treasurer,
Director of Finance and State Controller.
 2,693 participants and $21 billion invested; 64% of
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the participants are special districts.
Maximum $50M investment except for bond
proceeds.
15 transactions per month, in or out, in minimum
$5,000 increments.
Funds available same day.
Bond proceeds allow for a one-time deposit, no
maximum, withdrawals every 30 calendar days
from date of deposit.
 Goal 1
Portfolio safety/diversification – high quality mix of
securities, spreading investments over different types
minimizes the impact of any one industry/investment class
 Goal 2
Liquidity - managed to ensure normal as well as scheduled
extraordinary cash needs can be met. Further, marketable
treasuries will also be maintained to cover unforeseen
withdrawals or delayed deposits.
 Goal 3
Yield on investment – investments are made in such a way as
to realize the maximum return consistent with safe and
prudent treasury management.
 State statute requires that administrative costs not
exceed 5% of quarterly interest earnings; however,
costs are directly correlated to the cost of operation
only. Costs have not exceeded 2.1% since at least
2004.
 State Treasurer’s Office has oversight responsibility
and they are audited by the Bureau of State Audits
on an annual basis.
Insurance related to
the credit risk
of the investments:
Insurance related to
fraudulent acts
or lack of fidelity
on the part of
administrators or custodians:
 There is no insurance for
 The State is self-insured and any
individual securities or the
portfolio in general. However,
due to the characteristics of the
portfolio, credit risk is minimal.
 Certain trigger mechanisms for
such insurance policies to
become effective are judged to
be improbable, such as the
requirement that all investment
earnings are exhausted before
insurance coverage becomes
effective.
fraud assertions would be heard
by the Attorney General and any
judgment awarded would be
appropriated by the Legislature.
 Third-party designated
depositories provide insurance
coverage for any fraudulent acts.
Risk management controls cover
losses ranging up to $500
million, depending upon the
incident.
 The State cannot declare bankruptcy under Federal
regulations; therefore, money in the LAIF shall not be subject
to transfer or loan or seizure by any state official or state agency.
 Further, Government Code 16429.3 states that moneys placed
with the Treasurer for deposit in the Local Agency Investment Fund
by cities, counties, special districts, nonprofit corporations, or
qualified quasi-government agencies shall NOT be subject to either
of the following:
 Transfer or loan pursuant to Sections 16310, 16312, or 16313:
 16310 – authorizes transfer of money not needed to the General Fund when
the General Fund in the State Treasury is or will be exhausted.
 16312 – authorizes withdrawal of funds from the General Fund to fund a
program or project which will be repaid at a later sale of state bonds or notes.
 16313 – authorizes loans to state agencies from the Pooled Money Investment
Account to repay or replace existing financing.
 Impoundment or seizure by any state official or state agency.
 Additionally, the Government Code also says that our right to
withdraw our deposited money may not be affected by the State’s
failure to adopt a budget by July 1.
QUESTIONS?