BOARD AGENDA MEMORANDUM
SUBJECT:
Title
Adopt Resolutions (2) Delegating Authority to Deposit and Invest Funds to the Treasurer or their Designee, and Authorizing Investment of Monies in the Local Agency Investment Fund.
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RECOMMENDATION:
Recommendation
A. Adopt the Resolution DELEGATING AUTHORITY TO DEPOSIT AND INVEST FUNDS TO THE TREASURER OR THEIR DESIGNEE;
B. Approve the Board Investment Policy; and
C. Adopt the Resolution AUTHORIZING INVESTMENT OF MONIES IN THE LOCAL AGENCY INVESTMENT FUND.
Body
SUMMARY:
In accordance with Executive Limitation 4.9 regarding treasury and investment management, and pursuant to California Government Code (Government Code) Sections 53607 and 53608, staff recommends that the Board:
(A) Adopt the resolution delegating authority to deposit and invest funds to the Treasurer or designee (Attachment 1);
(B) Approve the investment policy (Attachment 2); and
(C) Adopt the resolution authorizing investment of monies in the Local Agency Investment Fund (LAIF) (Attachment 3).
Delegation of Authority to Deposit and Invest Public Funds
The authority to deposit and invest public funds belongs to the Board and may be delegated to the Treasurer or designee. The Treasurer is designated by the Chief Executive Officer and is currently the Chief Financial Officer, who in turn has delegated the investment duties to the Treasury and Debt Officer.
Per Government Code Sections 53607 and 53608, the delegation of authority to invest must be renewed annually by the Board. The Board’s current delegation to the Treasurer to invest Santa Clara Valley Water District (Valley Water) funds expire on June 30, 2021. If the Board chooses not to delegate the authority to invest funds in Fiscal Year 2021-22, the Treasurer will be limited to making deposits only, and the Board will be responsible for the investment of Valley Water’s funds. Furthermore, Government Code Section 53608 requires the Board to delegate the authority to deposit funds for safekeeping with a federal or state association (as defined by Section 5102 of the California Financial Code), a trust company or state or national bank located within this state or with the Federal Reserve Bank of San Francisco or any branch thereof within this state, or with any Federal Reserve bank or with any state or national bank located in any city designated as a reserve city by the Board of Governors of the Federal Reserve System. Through the Board’s adoption of the resolution attached to this memorandum as Attachment 1, the Board, pursuant to Government Code Sections 53607 and 53608, will delegate to the Treasurer, designated by the Chief Executive Officer, the authority to invest or deposit such funds during Fiscal Year 2021-22 in accordance with the provisions set forth in the Government Code.
Investment Policy
The Valley Water Investment Policy is consistent with the Government Code and follows the priorities of safety, liquidity and yield. The Investment Policy applies to Valley Water’s pooled investment fund which encompasses all monies under the direct oversight of the Treasurer. Included in the investment pool are Valley Water’s General Fund, the Safe, Clean Water Fund, the Watershed Funds, the Water Utility Enterprise Fund, the Equipment Service Fund, the Risk Insurance Fund, and debt proceeds with special consideration given to specific provisions contained in the indentures for each debt issuance.
The Investment Policy in Attachment 2 is presented in redlined format to highlight the minor editorial changes as well as the following updates to conform to the current Government Code requirements:
• Section 7.4 Commercial Paper: Government Code Portfolio limit updated to 40%
• Section 8.3 Placement Service Certificates of Deposit: up to 50% of the portfolio may be invested in deposits, including placement service such as the Certificate of Deposit Account Registry Service (CDARS) program.
LAIF Resolution
Approval of the resolution authorizing investments in LAIF would allow Valley Water to update the authorized signers for the LAIF program. LAIF is a voluntary investment program created by California statute and is administered by the State Treasurer’s Office. Valley Water currently has $74 million in operating funds on deposit with LAIF which earned an average interest rate of 1% for the last 12 months.
Climate Divestment Policy
On August 27, 2013, the Board adopted a new Executive Limitation, EL-4.9.3. No investments will be made in fossil fuel companies with significant carbon emissions potential. As a result of this action, Valley Water shall not invest in the top 200 fossil fuel companies based on the list published by the non-profit organization, 350.org. The list published by 350.org is included in Exhibit C of Attachment 2-Investment Policy.
Valley Water’s investment portfolio is in full compliance with the Climate Divestment Policy and has zero investments in fossil fuel companies.
ESG Policy
At its August 11, 2020 meeting, the Board approved an update to Executive Limitation 4.7.7 to stipulate that Valley Water can only do business with banks that have an Environmental, Social and Governance (ESG) risk rating of average/medium or better from at least one professional ESG research company. Small and local banks/credit unions located within the nine Bay Area counties with total assets at or below $10 billion are exempt from this provision.
Valley Water currently conducts commercial banking business with MUFG Union Bank, N.A., and bond trustee business with US Bank. Both banks have an ESG rating of Medium from Sustainalytics (Attachment 4). Effective July 1, 2021, Union Bank will be transferring Valley Water’s trust and custody investment portfolio to US Bank as part of a planned sale of Union Bank’s custody business to US Bank.
FINANCIAL IMPACT:
Adoption of the resolution will ensure that Valley Water funds continue to be invested under the Investment Policy for Fiscal Year 2021-22. Estimated investment earnings of $6 million have been included in the Fiscal Year 2021-22 budget.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Resolution, Delegating Authority
Attachment 2: FY 21-22 Investment Policy
Attachment 3: Resolution, Authorizing Investment
Attachment 4: ESG Reports
UNCLASSIFIED MANAGER:
Manager
Darin Taylor, 408-630-3068