CHAPTER 109

Investment Policy

109.01 Purpose and policy.
109.02 Authorized financial dealers and institutions.
109.03 Authorized investments.
109.04 Diversification.
109.05 Maximum maturities.
109.06 Competitive bids.
109.07 Safekeeping and custody.
109.08 Prohibited investment practices.
109.09 Internal controls.
109.10 Ethics and conflict of interest.
109.11 Nonbinding arbitration.
109.12 Reporting.
109.13 Investment policy adoption.

CROSS REFERENCES

Deposit of public funds - see Ohio R.C. Ch. 135


109.01 PURPOSE AND POLICY.
It is the policy of the City of Bellaire, Ohio 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 municipal corporation. The City Auditor shall be the investment officer responsible for the purchases and sale of all investments.

The investment objectives of the Auditor shall include the following:

(a) Investment shall be made in order to seek preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities, whether by default or erosion of market value, does not exceed the income generated from the remainder of the portfolio.

(b) The City's portfolio will remain sufficiently liquid to enable the City to meet reasonably anticipated operational requirements.

(c) The portfolio will be managed in such a way as to exceed or at least equal the market average rate of return over the course of budgetary and economic cycles, taking into account Ohio law (which restricts the type of investments), safety considerations and cash flow requirements.

(d) Bank account relationships will be managed in order to secure adequate services while minimizing costs.

(e) All deposits will be concentrated in one account except where audit control considerations dictate otherwise.
(Ord. 97-008. Passed 4-4-97.)


109.02 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS.
The Auditor 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 15C3-1 and are registered with the Ohio Department of Commerce to do business in the State.

All financial institutions and broker/dealers which desire to become qualified suppliers of investment transactions to the City must provide the Auditor with audited annual financial statements, proof of good standing with the Comptroller of Currency or State banking regulators or National Association of Security Dealers certification, proof of Ohio registration and geographic and regulatory information on the person who is the primary contact with the entity. All financial institutions, brokers/dealers and consultants which desire to conduct investment business with the City must sign this Investment Policy, certifying they have read it, understand it and agree to abide by its contents.
(Ord. 97-008. Passed 4-4-97.)


109.03 AUTHORIZED INVESTMENTS.
The City is empowered by statute to invest in the following types of securities:

(a) 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;

(b) 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 Association and Student Loan Marketing Association. All such securities shall be direct issuance of federal government agencies or instrumentalities;

(c) Interim deposits in any approved depository of the City, provided those deposits are properly insured or collateralized as required by law;

(d) Bonds and other obligations of the State of Ohio;

(e) No-loan money market mutual funds consisting exclusively of securities described in subsections (a) and (b) hereof and repurchase agreements secured by such obligations, provided all such investments under this subsection 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";

(f) The Ohio Subdivision Fund (STAR Ohio);

(g) Overnight or term (not exceeding 30 days) repurchase agreements meeting the requirements of Ohio R.C. 133.14(C), 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; and

(h) Bankers acceptances and commercial paper notes, each with a maturity not exceeding 180 days and meeting all of the requirements of Ohio R.C. 135.152, but only upon specific authorization of the Board required by law and completion of the required training by the investment officer.
(Ord. 97-008. Passed 4-4-97.)


109.04 DIVERSIFICATION.
The Auditor will diversify the City's investments by security, type and institution. With the exception of direct obligations of the U.S. Treasury and STAR Ohio, no more than 35% of the City's total investment portfolio will be invested in a single security type or with a single financial institution without the approval of City Council.
(Ord. 97-008. Passed 4-4-97.)


109.05 MAXIMUM MATURITIES.
To the extent possible, the Auditor will attempt to match its investments with anticipated cash flow requirements. No investment shall be made unless the Auditor, 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 Section 109.03 (a) to (e) above maturing more than five (5) years from the date of settlement.
(Ord. 97-008. Passed 4-4-97.)


109.06 COMPETITIVE BIDS.
All sales and purchases of securities will be bid competitively and to the extent practical will be placed with the institution yielding the highest return. The right is reserved to reject the bid yielding the highest return on any investment if inconsistent with the investment strategy, i.e., maturity, risk, liquidity, etc.
(Ord. 97-008. Passed 4-4-97.)


109.07 SAFEKEEPING AND CUSTODY.
All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery-versus-payment basis. Securities will be held by a third party custodian designated by the Auditor and evidenced by safekeeping receipts. Securities shall be pledged at the Federal Reserve Bank to collateralize all repurchase agreements with financial institutions. Pledge collateral will only be released by the City after verification that the principal and interest have been credited to the City's account.
(Ord. 97-008. Passed 4-4-97.)


109.08 PROHIBITED INVESTMENT PRACTICES.
The Auditor is not authorized to:

(a) Contract to sell securities that have not yet been acquired on the speculation that prices will decline;

(b) Make any investment in derivatives;

(c) Invest in a fund established by another public body for the purpose of investing public money or other subdivision (other than STAR Ohio); or

(d) Leverage current investment as collateral to purchase other assets.
(Ord. 97-008. Passed 4-4-97.)


109.09 INTERNAL CONTROLS.
The Auditor 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.
(Ord. 97-008. Passed 4-4-97.)


109.10 ETHICS AND CONFLICT 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 Auditor 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, officers 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.
(Ord. 97-008. Passed 4-4-97.)


109.11 NONBINDING ARBITRATION.
The Auditor 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 Revised Code and is specifically approved by the Board.
(Ord. 97-008. Passed 4-4-97.)


109.12 REPORTING.
The Auditor 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; and

(f) Seller.

The Auditor shall also prepare and distribute quarterly (or more frequently if requested by Council) a list of all investments and a report on investment activity and returns.
(Ord. 97-008. Passed 4-4-97.)


109.13 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 the Finance Committee and any modifications made thereto must be approved by Council and, upon adoption, filed in the office of the Auditor of State.
(Ord. 97-008. Passed 4-4-97.)

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