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S-795 - 01/24/1995 - FINANCE - Ordinances ORDINANCE 95-FI-EXI-S-795 AN ORDINANCE ADOPTING AN INVESTMENT POLICY FOR THE VILLAGE OF OAK BROOK, IL WHEREAS, the Board of Trustees of the Village of Oak Brook wish to adopt a uniform and comprehensive investment policy encompassing funds governed by it; and WHEREAS, it is in the best interests of the Village of Oak Brook that the attached Investment policy be adopted. NOW, THEREFORE, BE IT ORDAINED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF OAK BROOK, DU PAGE AND COOK COUNTIES, ILLINOIS as follows: Section 1: That the provisions of the preamble hereinabove set forth are hereby adopted as though fully set forth herein. Section 2: That the Village of Oak Brook Investment Policy, a copy of which is attached hereto and incorporated herein as Exhibit A, is hereby approved and adopted in its entirety. Section 3: That the Village Clerk is hereby authorized and directed to publish this ordinance in pamphlet form in the manner provided by law. Section 4: That this ordinance shall be in full force and effect from and after passage and approval pursuant to law. Section 5: That all ordinances or parts thereof in conflict with the provisions of this ordinance be and the same are hereby repealed to the extent of such conflict. PASSED THIS 24th day of January, 1995. Ayes: Trustees Bartecki, Calzaretta Kenny McInerney Payovich and Shumate Nays: Non Absent: None Abstain: None APPROVED THIS 24th day of January, 1995. Village President ATTEST:. Jill Age Clerk ordinance 95-FI-EXI-S-795 Adopting an Investment Policy Page 2 Approved as to Form: A&a a. Village Attorney Published 1-25-95 Pamphlet form Date Paper Not Published EXHIBIT A VILLAGE OF OAK BROOK INVESTMENT POLICY SCOPE This policy governs the investment practices of all funds of the Village of Oak Brook, excepting the Police Pension Fund and the Firefighters' Pension Fund, which are governed by the Boards of Trustees of each fund and who determine investment policies of those funds, in accordance with applicable law. The funds governed by this policy are accounted for in the Village's Comprehensive Annual Financial Report and include the General Corporate Fund, Special Revenue funds, Capital Project funds, Enterprise funds, Internal Service funds, and any other funds that may be created from time to time. All transactions involving the financial assets and related activity of the foregoing funds shall be administered in accordance with the provisions of this policy. OBJECTIVES 1. Safety of Capital - Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is desired in order to avoid incurring unreasonable risks from concentrating investments in specific security types and/or particular financial institutions. 2. Liquidity - The Village's investment portfolio shall remain sufficiently liquid to enable the Village to meet all operating requirements which may be reasonably anticipated in any Village fund. Maturities of investments in all funds covered by this policy shall not exceed five years, unless a temporary extension of maturities is approved by the Board of Trustees. 3. Return on Investments -The investment portfolio of the Village shall be designed to attain, at a minimum, a market-average rate of return equal to 50 basis points greater than the interest rate on 90 day U.S. Treasury Bills throughout budgetary and economic cycles, taking into account the Village's risk constraints, the cash flow characteristics of the portfolio and legal restrictions on eligible investments. 4. Maintenance of Public Trust - All participants in the investment process shall seek to act responsibly as custodians of the public trust and shall avoid any transaction that might impair public confidence in the Village. 5. Prudence - 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 standard of prudence to be used by investment officials shall be the "prudent person" and shall be applied in the context of managing the overall portfolio. Village of Oak Brook Investment Policy Page 2 RESPONSIBILITY Management responsibility for the investment program of the Village of Oak Brook is hereby delegated to the Finance Officer/Treasurer, who shall direct the investment program in a manner consistent with this policy. The Finance Officer/Treasurer shall be responsible for all transactions undertaken, shall establish a system of controls to regulate the activities of subordinate employees, and shall provide written approval for each investment placement. The Finance Officer/Treasurer, when acting in accordance with this policy, shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. INVESTMENT INSTRUMENTS The Village may invest in any type of investment instrument permitted by Illinois law, as described in Chapter 30 of the Illinois Compiled Statutes, 30 ILCS 235/2. Permitted investment instruments include: 1. Bonds, notes, certificates of indebtedness, Treasury bills or other securities which are guaranteed by the full faith and credit of the United States of America as to principal and interest. 2. Bonds, notes, debentures, or other similar obligations of the United States of America or its agencies. 3. Commercial paper, provided that, (a) the issuer is a U.S. Corporation with more than $500 million in assets, (b) the security is rated within the 3 highest classifications by two standard rating services, (c) the security will mature within 180 days of purchase, and (d) such purchase does not exceed 10% of the issuer's outstanding obligations. 4. The State of Illinois Public Treasurer's Investment Pool 5. Money market mutual funds which are registered under the Investment Company Act of 1940, provided the portfolio is limited to bonds, notes, certificates, treasury bills, or other securities which are guaranteed by the United States of America as to principal and interest. 6. Repurchase Agreements which are collateralized by full faith and credit U.S. Treasury securities. Village of Oak Brook Investment Policy Page 3 7. Short term discount obligations of the Federal National Mortgage Association. 8. Insured accounts of credit unions whose principal office is in Illinois. For purposes of this section, the term "agencies of the United States of America" include: the federal land banks, federal intermediate credit banks, banks for cooperative, federal farm credit banks, or any other entity authorized to issue debt obligations under the Farm Credit Act of 1971; the federal home loan banks and the federal home loan mortgage corporation; and any other agency created by act of Congress. This policy expressly prohibits investments in derivative type securities. DIVERSIFICATION It is the policy of the Village to diversify its investment portfolio. Investments shall be diversified in order to reduce the risk of loss resulting from concentration in a specific maturity, issuer, or class of securities. In order to achieve a diversified investment portfolio, no one financial institution shall hold more than 25% of the Village's investments, exclusive of securities guaranteed by the full faith and credit of the United States of America, or obligations of the United States of America agencies. COLLATERALIZATION 1. It is the policy of the Village to require that all deposits in excess of FDIC insurable limits be secured by collateral to protect public deposits in a single financial institution if it were to default. 2. Eligible collateral instruments and collateral ratios (market value divided by deposit) are as follows: a) U.S. Government Securities = 110% b) Obligations of Federal Agencies = 115% c) Obligations of the State of Illinois = 115% d) Local and Municipal Bonds rated "A" or better = 115% by Moody's The ratio of fair market value of collateral to the amount of funds secured shall be reviewed at least quarterly and additional collateral shall be requested when the ratio declines below the level required. Village of Oak Brook Investment Policy Page 4 3. Safekeeping of Collateral a) Third party safekeeping is required for all collateral. To accomplish this, the securities can be held at the following locations: 1) A Federal Reserve Bank or branch office. 2) At another custodial facility - generally in a trust department through book-entry at the Federal Reserve, unless physical securities are involved. If physical securities are involved, at a third party depository in a suitable vault and insured against loss by fire, theft and similar causes. 3) By an escrow agent of the pledging institution. b) Safekeeping of collateral shall be documented by a written agreement approved by the Village. This may be in the form of a safekeeping agreement, trust agreement, escrow agreement or custody agreement. c) Substitution or exchange of securities held in safekeeping as collateral may occur without prior written notice to the Village provided that the market value of the replacement securities are equal to or greater than the market value of the securities being replaced. The Village shall be notified in writing within two days of all substitutions. SAFEKEEPING OF SECURITIES 1. Third party safekeeping is required for all securities owned by the Village. To accomplish this, the securities shall be held in a trust department through book-entry at the Federal Reserve. 2. Safekeeping shall be documented by an approved written agreement. The agreement may be in the form of a safekeeping agreement, trust agreement, escrow agreement or custody agreement. Fees for this service shall be mutually agreed upon by the Village and the safekeeping bank selected by the Village. QUALIFIED FINANCIAL INSTITUTIONS All depositories of the Village shall execute a contract every three years which shall designate the requirements of serving as depository for the Village, including collateralization of Village funds invested at such depository and the related safekeeping requirements of pledged securities. The Village shall have a separate contract with an "operating bank" for demand deposits, which shall also Village of Oak Brook Investment Policy Page 5 execute a contract with the Village for such service at least once every three years. Such financial institutions shall provide such financial data to the Finance Officer/Treasurer as may be required by the Finance Officer/Treasurer to evaluate the financial condition of the institution. Such data may be in the form of audited financial statements, FDIC regulatory reports, and shall be provided at least annually to the Finance Officer/Treasurer. Any refusal to provide such information to the Village may cause termination of the depository contract with such institution. 1. Depositories - Demand Deposits a) The Village shall select one financial institution to provide operating banking services, including, but not limited to: checking accounts, wire transfers, purchase and sale of U.S. Treasury securities and safekeeping. b) The Village shall not maintain funds in any financial institution that is not a member of the FDIC. In addition, the Village shall not maintain funds in any institution not willing or capable of posting required collateral for funds in excess of FDIC insurable limits. c) Fees for banking services shall be mutually agreed to by an authorized representative of the depository bank and the Village from time to time. 2. Depositories - Certificates of Deposit Any financial institution selected to be eligible for the Village's competitive certificate of deposit purchase program must meet the following requirements. a) Shall provide wire transfer and safekeeping services. b) Shall be a member of FDIC system and shall be willing and capable of posting required collateral for funds in excess of FDIC or insurable limits. 3. The total amount of Village funds deposited and/or invested in a financial institution shall not exceed 25% of the institution's capital stock, surplus, and undivided profits. BIDDING PROCEDURES ON INVESTMENTS Except for cash management accounts and the State of Illinois Public Treasurer's Investment Pool, all investments shall be selected on the basis of competitive quotations. The Village shall place its investment funds with the qualified financial institution, or investment instrument, that best meets the needs of the Village and the principles and objectives of this policy. Village of Oak Brook Investment Policy Page 6 POOLING OF CASH AND INVESTMENTS The Village may pool the cash and investments of various funds in order to maximize investment earnings. Investment income shall be allocated to the various funds based upon their respective participation. ETHICS AND CONFLICTS OF INTEREST Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution of the investment program, or which could impair their ability to make impartial investment decisions. INDEMNIFICATION Investment officers and employees of the Village acting in accordance with this Investment Policy and such written procedures as have been or may be established, in relation thereto, and exercising due diligence, shall be relieved of personal liability for an individual security's credit risk or market changes. REPORTING On a monthly basis, the Finance Officer/Treasurer shall submit to the Village Board an investment report which shall describe the portfolio in terms of investment securities, maturities and cost by fund, and earnings.for the current period and year to date. The report shall indicate any areas of policy concern and planned revision of investment strategies. The Finance Officer/Treasurer shall also submit a comprehensive annual report on the investment program and activity. The report shall include a review of the year's overall performances as well as a projection of what may be anticipated in the future. AMENDMENT This policy may be amended by the Village President and Board of Trustees, upon recommendation of the Finance Officer/Treasurer and Village Manager. Village of Oak Brook Investment Policy Page 7 CONFLICT In the event of any conflict between this Policy and the Illinois Compiled Statutes or case decisions of the State of Illinois, the Statutes and case law decisions shall control. ADOPTION Adopted by the Village President and Board of Trustees by Ordinance # 95-FI-EX1-S-795 on January 24, 1995.