It is the policy of Elyria, Ohio to invest public funds in a manner which will provide the highest investment return with the maximum security, safety and preservation of the principal while meeting the daily cash flow demands of the City and conforming to all applicable statutes governing the investment of public funds by an Ohio municipality. The Treasury Investment Board, pursuant to Article 17 of the Charter of the City of Elyria, is vested with the power to provide for the investment of all funds of the City in the manner provided by the general laws of Ohio. The Treasury Investment Board may delegate the responsibility of the purchase and sale of investments to the Finance Director who will also be responsible for the carrying out of this Investment Policy.
(a) Scope. This Investment Policy applies to all financial assets of the City, including State and Federal funds held by it. The Finance Director shall routinely monitor the contents of the City's investment portfolio, the available markets and relative value of competing investments and will adjust the portfolio accordingly.
(b) Prudence.
(1) Investments shall be made with the 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.
(2) The standard of prudence to be used by the Finance Director shall be the "prudent person" standard and shall be applied in the context of managing the overall portfolio. Acting in accordance with this Investment Policy and exercising due diligence shall relieve the Finance Director of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported to the Council in a timely fashion and appropriate action is taken to control adverse developments.
(c) Objectives. The primary objectives, in priority order, of the City's investment activities shall be:
(1) Safety. Safety of principal is the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.
(2) Liquidity. The City's investment portfolio will remain sufficiently liquid to enable it to meet all operating requirements which might be reasonably anticipated.
(3) Return on investment. The City's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account this Investment Policy and the cash flow characteristics of the portfolio.
(d) Ethics and Conflict of Interest. Employees, officers and elected officials 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. Employees, officers and elected officials and any investment consultants shall disclose any material interests in financial institutions that conduct business with the City, and they shall further disclose any personal financial/investment positions that could be related to the performance of the City's portfolio.
(e) Authorized Financial Dealers and Institutions.
(1) The Finance Director will maintain a list of financial institutions and approved security broker/dealers selected by creditworthiness who are authorized to provide investment services and which qualify under Ohio R.C. 135.14(M)(1). These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15c3-l and are registered with the Ohio Department of Commerce to do business in the State.
(2) All financial institutions and broker/dealers which desire to become qualified suppliers of investment transactions to the City must provide the Finance Director with audited annual financial statements, proof of good standing with the comptroller of currency or State banking regulators or National Association of Securities Dealers certification, proof of Ohio registration and biographical and regulatory information on the persons who are the primary contact with the entity. All financial institutions, broker/dealers and consultants which desire to conduct investment business with the City must sign this Investment Policy, certifying that they have read it, understand it and agree to abide by its contents.
(f) Authorized Investments. The City is empowered by Ohio R.C. Chapter 135 and other relevant sections as amended to invest in the following types of securities:
(1) United States Treasury bills, notes, bonds or any other obligation or security issued by the United States Treasury or any other obligation guaranteed as to principal and interest by the United States.
(2) Bonds, notes, debentures or other obligations or securities issued by any Federal government agency or instrumentality, including but not limited to the Federal National Mortgage Association, Federal Home Loan Bank, Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation, and Government National Mortgage Association. All such securities shall be direct issuances of Federal government agencies or instrumentalities.
(3) Interim deposits in duly authorized depositories of the City, provided those deposits are properly insured or collateralized as required by law.
(4) Bonds and other obligations of the State of Ohio or its political subdivisions provided that with respect to political subdivisions such investments are made per Ohio R.C. 135.14(B)(4). The aggregate value of investments in political subdivisions shall not exceed twenty percent of the City's interim funds at the time of purchase.
(5) No-load money market mutual funds consisting exclusively of securities described in paragraphs (1) and (2) of this subsection (f) and repurchase agreements secured by such obligations, provided all such investments under this paragraph (5) shall be made with a bank or savings and loan association eligible to be a depository for public funds of Ohio subdivisions and provided further that any such fund meets the requirements of Ohio R.C. Chapter 135, including that such fund not include any investment in a "derivative".
(6) Ohio Subdivision' Fund (Star Ohio).
(7) Overnight or term (not exceeding thirty days) repurchase agreements meeting the requirements of Ohio R.C. 135.14(E), with a bank or savings and loan association eligible to be a depository for public funds of Ohio subdivisions or a member of FINRA.
(8) Deposits in the Certificate of Deposit Account Registry Service (CDARS) and any other program that is deemed to meet the requirements of Ohio R.C. 135.144 or 135.145.
(9) Up to forty percent of the following:
A. Commercial paper notes issued by any entity that is defined in division (D) of Ohio R.C. Section 1705.01 and has assets exceeding five hundred million dollars ($500,000,000). The notes must be rated at the time of purchase in the highest classification established by at least two nationally recognized standard rating services and the aggregate value of the notes does not exceed ten percent of the aggregate value of the outstanding commercial paper of the issuing corporation. The notes must mature no later than 270 days after purchase and any purchase of a single issuer shall not exceed five percent of the City's interim funds at time of purchase.
B. Bankers acceptances of banks that are insured by the Federal Deposit Insurance Corporation. The obligations must mature no later than 180 days after purchase.
(g) Maximum Maturities. To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. No investment shall be made unless the Finance Director, at the time of making the investment, reasonably expects it can be held to its maturity. Unless matched to a specific obligation or debt of the City, the City will not directly invest in securities listed as paragraphs (1) through (5) above maturing more than five years from the date of settlement if such securities bear interest at a fixed rate, and it will not directly invest in such securities maturing more than two years from the date of settlement if they bear interest at a variable rate.
(h) Safekeeping and Custody. All security transactions, including securities acquired subject to repurchase agreements from "eligible securities dealers", but not including securities acquired subject to repurchase agreements from "eligible institutions" entered into by the City shall be conducted on a delivery-versus-payment basis. Purchased securities shall be held by a third party custodian, designated by the Finance Director, that is a Federal Reserve Bank or other "qualified trustee" within the meaning of Ohio R.C. 135.18(I), and the safekeeping of those securities for the benefit of the City shall be evidenced by safekeeping receipts. Purchased securities shall be released by the City only upon verification that the principal and interest, or proceeds of sale of the securities, have been credited to the City's account.
(i) Prohibited Investment Practices. In addition to any other prohibitions in the Revised Code, the City shall not:
(1) Contract to sell securities that have not yet been acquired on the speculation that prices will decline.
(2) Make any investment in "derivatives" as defined in Ohio R.C. 135.14(C).
(3) Invest in a fund established by another public body for the purpose of investing public money of other subdivisions unless the fund is either: (a) STAR Ohio, or (b) a fund created solely from the purpose of acquiring, construction, owning, leasing or operating municipal utilities as authorized under Ohio R.C. 715.02 or Section 4 of Article XVIII of the Ohio Constitution.
(4) Enter into reverse purchase agreements.
(5) Leverage current investments as collateral to purchase other assets.
(6) Invest in stripped principal or interest obligations of otherwise eligible obligations.
(j) Internal Controls. The Finance Director shall develop and maintain procedures for the operation of the City's investment program in accordance with this Investment Policy. These procedures shall be designed to prevent loss of the City's funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent actions.
(k) Reporting.
(1) The Finance Director shall maintain a current inventory of all investments including:
A. Description of each security;
B. Cost;
C. Par value;
D. Dates (beginning, settlement and maturity);
E. Rates;
F. Seller.
(2) The Finance Director shall also prepare and distribute quarterly (or more frequently if requested by Council) a list of all investments and a report of investment activity and returns.
(l) Education. The Finance Director shall participate in any beginning and/or continuing education training programs sponsored by the State Treasurer or the State Auditor in which the Finance Director is required to participate pursuant to Ohio R.C. 117.44, 135.22 and 733.27. Through participation in those programs, the Finance Director will develop and maintain an enhanced background and working knowledge in investment, case management and ethics.
(m) Non-binding Arbitration. The Finance Director may enter into a written investment or deposit agreement that includes a provision under which the parties agree to submit to nonbinding arbitration (but not binding arbitration) to settle any controversy that may arise out of that agreement so long as such provision meets the requirements of the Ohio Revised Code and is specifically approved by the Council.
(n) Investment Policy Adoption. This Investment Policy shall be adopted by the Council and, upon adoption, filed in the office of the Auditor of State. The policy shall be reviewed on an annual basis by the Council or a committee designated by it and any modifications made thereto must be approved by the Council and, upon adoption, filed in the office of the Auditor of State.
(Ord. 96-261. Passed 11-4-96; Ord. 2016-68. Passed 6-6-16.)