AgdaPkt 2019-01-14 Joint SA PFA - Laserfiche WebLink

Browse Search

6.A. - Page 2 of 22 The updated Policy is included as Attachment A (in strike -text format). ANALYSIS State Code Changes The recommended update to the Policy includes one change necessary to incorporate Code language that will be in effect on January 1, 2019 for Asset-backed Securities (ABS). Section N of the Policy has been updated to conform to new Code language, which will go into effect on January 1, 2019. Code changes removed the issuer rating requirement, while maintaining the "AA" security rating requirement, in orderto simplify and clarify the security rating requirement. All other policy limits remain the same: a maximum allocation of 20 percent, an issuer limitation of 5 percent, and a maximum maturity of 5 years. The City added ABS as an authorized investment to the City's Investment Policy in 2017. ABS are bonds backed by various types of assets. The most common structures are backed by auto loans or credit card receivables, but can be backed by other obligations as well, such as trade receivables, equipment leases, airplane leases, home equity loans, and student loans. Each pool of assets is usually broken down into individual tranches, with varying coupons and average lives, and can be either fixed rate or floating rate. Originators of the loans or receivables, such as a bank, manufacturer, or finance company, package them into securities in much the same way that mortgages are pooled to form mortgage-backed securities. ABS represent an investment-grade sector available to high quality investors. ABS offers the City another way to diversify its holdings and potentially enhance returns, as this asset class offers yields that are favorable relative to similarly rated issues in other asset classes. Attachment B presents a summary of all investment types and policy limits. Other Minor Changes to the Policy Staff recommends the following administrative changes in three other sections of the policy, listed by policy section below. I. Policy — Minor edits to clarify the City is complying with all federal and state statues governing the investment of public funds. II. Scope — Minor edits to clarify the City is complying with all federal and state statues governing the investment of public funds, and further clarify what funds are excluded from the Policy. V. Delegation of authority — Updated to accurately describe the role of the City Treasurer per municipal code section 2.33.1, and stating that the City Council Finance/Audit Committee acts in an advisory capacity in its oversight of the investment functions of the City. Other minor administrative changes include: updating names of the City Council Finance/Audit Committee and City Treasurer; changing references from monthly reports to quarterly reports; and updating one definition in the glossary. City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 20