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(a) Purpose. It is the policy of the City to invest public funds in a manner which will provide the highest investment return with the maximum security, safety and preservation of 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 Director of Finance shall be the investment officer for the City, charged with the responsibility for the purchase and sale of investments and the carrying out of this investment policy.
(b) Scope. This investment policy applies to all financial assets of the City, including State and Federal funds held by it. The Director of Finance 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.
(c) 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 the Director of Finance 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 Director of Finance of personal responsibility for an individual security's credit risk or market price changes, provided that deviations from expectations are reported to Council in a timely fashion and appropriate action is taken to control adverse developments.
(d) 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.
(e) Ethics and Conflicts of Interest. Persons involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment consultants shall disclose to the City any material financial interests in financial institutions that conduct business within the City and any large personal financial or investment positions that could be related to, or affected by, the performance of the City's portfolio. All employees and officers of, and investment consultants to, the City shall subordinate their personal investment transactions to those of the City, particularly with regard to the timing of purchases and sales.
(f) Authorized Financial Dealers and Institutions. The Director of Finance will maintain a list of financial institutions and approved security brokers/dealers selected by credit worthiness who or which are authorized to provide investment services and qualify under Ohio R.C. 135.14(M)(1). These may include "primary" dealers or regional dealers who or which qualify under Securities and Exchange Commission Rule 15c 3-1 and are registered with the Ohio Department of Commerce to do business in the State.
All financial institutions and brokers/dealers who or which desire to become qualified suppliers of investment transactions to the City must provide the Director of Finance 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, brokers/dealers and consultants who or 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.
The Director of Finance shall receive prior approval by majority vote of City Council to effectuate a transfer of City accounts presently held by financial institutions to new financial institutions for those funds held pursuant to this section.
(g) Authorized Investments. The City is empowered by statute 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, Government National Mortgage Association and Student Loan Marketing 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 that such deposits are properly insured or collateralized as required by law;
(4) Bonds and other obligations of the State of Ohio;
(5) No-load money market mutual funds consisting exclusively of securities as described in paragraphs (g)(1) and (2) hereof, and repurchase agreements secured by such obligations, provided that all such investments under this paragraph 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's Fund (STAROhio); and
(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 the National Association of Securities Dealers.
(h) Diversification. The City will diversify its investments by security, type and institution.
(i) 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 Director of Finance, 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 as set forth in paragraphs (g)(1) to (5) hereof 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.
(j) Safekeeping and Custody. All security transactions, including securities acquired subject to repurchase agreements, entered into by the City, shall be conducted on a delivery-versus-payment basis. Purchased securities will be held by a third party custodian, designated by the Director of Finance, 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.
(k) Prohibited Investment Practices. In addition to any other prohibitions in the Ohio 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 STAROhio or a fund created solely for the purpose of acquiring, constructing, 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 repurchase agreements;
(5) Leverage current investments as collateral to purchase other assets; and
(6) Invest in stripped principal or interest obligations of otherwise eligible obligations.
(l) Internal Controls. The Director of Finance 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.
(m) Reporting. The Director of Finance shall maintain a current inventory of all investments including:
(1) A description of each security;
(2) The cost;
(3) Par value;
(4) Dates (beginning, settlement and maturity);
(5) Rates; and
(6) The seller.
The Director of Finance shall also prepare and distribute quarterly (or more frequently, if requested by the Council) a list of all investments and a report on investment activity and returns.
(n) Education. The Director of Finance shall participate in any beginning and/or continuing education training programs sponsored by the State Treasurer or the State Auditor in which the Director of Finance is required to participate pursuant to Ohio R.C. 117.44, 135.22 and 733.27. Through participation in those programs, the Director of Finance will develop and maintain an enhanced background and working knowledge in investment, case management and ethics.
(o) Nonbinding Arbitration. The Director of Finance 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.
(p) Investment Policy Adoption. This investment policy shall be adopted by Council and, upon adoption, filed in the office of the Auditor of State. The policy shall be reviewed on an annual basis by Council or a committee designated by it and any modifications made thereto must be approved by Council and, upon adoption, filed in the office of the Auditor of State.
(Res. 97-R36. Passed 5-27-97; Res. 2019-R37. Passed 6-11-19.)