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HomeMy WebLinkAboutOrd1985-550 . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, CREATING SECTION 10-21 OF THE SEWARD CITY CODE RELATIVE TO INVESTMENT AND COLLATERALIZATION OF PUBLIC FUNDS THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, HEREBY ORDAINS that: Section 1. A new Section 10-21 of the Seward City Code is hereby created to read as follows: Sec. 10-21. Investment and collateralization of public funds. (a) Purpose. This section is intended to govern the investment and collateralization of funds under the control of the City of Seward. This section shall not apply to any funds controlled by a separate trust indenture. (b) Definitions. For section, unless the context terms listed below shall be the purposes of this otherwise requires, the defined as follows: (1) investment as Code. "Authorized Investment" means an defined in Section 10-21 (c) of this (2) "Bank" means a state or federally chartered commercial or mutual bank, savings and loan association or credit union located in the United States and having insurance of accounts through the appropriate federal insuring agency of the United States. (3) "Certificate of Deposit" means a non-negotiable certificate of deposit or other depository agreements issued, or to be issued, to the City by a Bank. (4) "City" means the City of Seward, Alaska. (5) "Rated Bank" means: are rated nationally a. a Bank, all of whose debt issues at least "A" or its equivalent by a recognized rating service; or -1- . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 b. a Banks whose letters of credit secure third-party debt issues rated at least "A" or its equivalent by a nationally recognized rating service; or c. a Bank which is a subsidiary of a one-bank holding company, all of whose commercial paper has the highest rating given by a nationally recognized rating service, or whose debt issues are rated at least "A" or its equivalent by a nationally recognized service. (c) Authorized Investments. In order to provide maximum security for the investment of public funds and to provide the greatest interest revenue consistent with safety, only the following investments of the City's funds will be authorized: (1) obligations of, or obligations insured or guaranteed by, the United States or an agency or instrumentality of the United States; months having rating (2) commercial paper maturing within nine issued by corporations or businesses and the highest rating of a nationally recognized service; (3) Banker's acceptances accepted by a Rated Bank and eligible for rediscount with, or purchase by, Federal Reserve System Banks; (4) negotiable Certificates of Deposit issued by Rated Banks; (5) Certificates of Deposit secured as provided in Section lO-21(d) of this Code and a. issued by Banks with a main or branch office within the City; or b. issued by a Rated Bank; (6) repurchase agreements with: a. the City's bank of account and which are entered into in conjunction with the City's zero-balance ("sweep") demand deposit account and secured by obligations insured or guaranteed by the United States or agencies or instrumentalities of the United States; or -2- . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 (b) Rated Banks or primary dealers in government securities and secured by obligations insured or guaranteed by the United States, or agencies or instrumentalities of the United States, with said collateral to be assigned as provided in Section 10-21(d)(4) of this Code; (7) federally insured deposits in Banks with a main or branch office within the City. (d) Collateral required to secure Certificates of Deposit. (1) Eligible Collateral. Payments of the principal and interest due upon maturity of a Certificate of Deposit, in excess of insurance of accounts through the appropriate federal insuring agency of the United States, must be secured by collateral valued as set forth in this section and conforming to the other requirements of this sub- section. a. The following collateral will be accepted and valued at current market value, deter- mined by the Bank (subject to audit by the City). Pledged collateral shall be re-evaluated at least monthly at the then-current market value, based upon the closing bid price as quoted by the Wall Street Journal or a market-maker in the pledged security. 1. Obligations of, or obliga- tions insured or guaranteed by, the United States or an agency or instrumentality of the United States; 2. general obligation bonds and notes issued and insured or guaranteed by the State of Alaska, an agency or instrumentality of the State of Alaska, or other political subdivision of the State of Alaska, which are rated at least "A" or its equivalent by a nationally recognized rating service; 3. revenue bonds issued by the State of Alaska, an agency or instrumentality of the State of Alaska, or other political subdivision of the State of Alaska, which are rated at least "A" or its equivalent by a nationally recognized rating service; -3- . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 4. corporate debt securities rated at least "AA" or its equivalent by a nation- ally recognized rating service; 5. general obligation bonds issued by states and municipalities in the United States outside of Alaska rated at least "~' or its equivalent by a nationally recognized rating ser- vice. (2) Ownership; encumbrance of collateral. Pledged collateral must be owned by the Bank and, except for the assignment required under Section 10-21 (d) (4) of this Code, the Bank must keep the pledged collateral free and clear of liens, security interests or encumbrances and will not release, assign, sell, mortgage, lease, transfer, pledge or grant a security interest in, encumber, substitute or otherwise dispose of or abandon any part or all of the pledged collateral without the written authorization of the City. (3) Substitution of Collateral. a. Notwithstanding any other pro- visions of this section, the City reserves the right to review, from time to time, any and all collateral proposed or submitted by a Bank to secure Certifi- cates of Deposit, and if the City determines that the Collateral does not meet the requirements of this section, or otherwise determines that the public funds are not adequately secured by the Collateral, the City may demand additional col- lateral or substitution of collateral. b. Such additional collateral or substitution of collateral may be demanded if the aggregate value of the federally insured portions of Certificates of Deposit and the value of pledged Collateral, as determined pursuant to Section 10-21(d) (4) of this Code, falls below or is less than the total amount of principal and interest due upon maturity of Certificates of Deposit issued by a Bank. c. In the event any other property pledged by the Bank no longer is eligible as Collat- eral to secure the Certificates of Deposit, the Bank shall, within three (3) business days, notify the City, in writing, of such decline in value and/or loss of acceptable credit rating and shall pledge -4- . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 either additional or substitute collateral meeting the requirements of this section. ment. (4) Security agreement; Tri-party agree- a. A Bank issuing Certificates of Deposit shall enter into a security agreement with the City for all property pledged as collateral and which shall assign to the City the Bank's interests in said property. The security agreement shall identify all property pledged to the City and shall set out the authority of the City to demand a substitution of collateral and to exercise assign- ment or other rights under Section 10-21(d)(6). The security agreement and arrangements and maintenance thereof shall be at the expense of the Bank issuing the Certificates of Deposit. (b) Collateral pledged by a Bank shall be kept in escrow accounts with another Bank ("Escrow Bank") acceptable to the City pursuant to an agreement between the Bank, the Escrow Bank and the City. Such agreement shall give the City control over pledged collateral submissions to, and withdrawals from, the escrow account. The receipt of the collateral by the Escrow Bank shall e further evidenced by telephonic assurance, provided to the City within twenty-four (24) hours of receipt of collateral, and a depository receipt received by the City within a reasonable time following award of the bid or notification or demand for substitute collat- eral. The escrow agreement and arrangements and maintenance thereof shall be at the expense of the Bank that issued the Certificates of Deposit. (5) Reports; access to records. a. A Bank bidding on Certificates of Deposit, or having outstanding Certificates of Deposit, shall, within forty-five (45) days of the end of each fiscal quarter, provide the City a copy of its Balance Sheet prepared in accordance with generally accepted accounting principles consistent- ly applied; or, if a Bank does not prepare its reports in accordance with generally accepted accounting principles, such reports prepared in accordances with state or federal regulatory re- quirements shall be provided to the City. -5- . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 b. On or before the 10th day of each month, a Bank which has outstanding Certificates of Deposit shall deliver to the treasurer of the City a list, prepared as of the last day of the previous month and certified by an officer of the Bank, setting forth the principal amount and then-current market value of all pledged collateral. c. The City shall, to the extent not expressly prohibited by law, at all times during normal business hours have free access to, the right of inspection of, and the right to make extracts from, any records of the Bank relating to part or all of the collateral, and the Bank will deliver to the City the originals or true copies of such papers and instruments relating to any or all of the collateral as the City may request. d. Upon request, a Bank bidding on Certificates of Deposit, or which has outstanding Certificates of Deposit, shall provide the City with reports of examinations by state or federal regu- latory agencies and reports by the Bank's indepen- dent auditors. (6) Noncompliance. In the event a Bank defaults in the payment of principal or interest due upon maturity of a certificate of deposit, or otherwise fails to comply with the provisions of this section, including the security and escrow agreements provided for in Section 10-21 (d) (4) of this Code, the City may: a. call all or a portion of the Certificates of Deposit issued by the Bank; b. sell, exchange, transfer or otherwise dispose of the pledged collateral to recover the principal and interest due upon maturity of the Certificate of Deposit and all costs incurred by the City as a result of such sale, exchange, transfer or disposal; c. take other action available under the security and escrow agreements provided for in Section 10-21(d)(4); or d. take other action available to it at law or equity. -6- . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 To the extent not prohibited by law, the Bank shall hold the City harmless from any forfeiture or loss of interest or other penalty or cost, including attorney fees, imposed upon or incurred by the City by reason of its early withdrawal of any or all Certificates of Deposit issued by the Bank. (e) Certificate of Deposit restrictions. After reviewing a Bank's financial position and determining that such a limit is necessary to assure the safety of City funds, the City may limit the total amount of principal and interest due upon maturity of all Certificates of Deposit issued by that Bank. (f) Bid prov1s10ns for authorized investments. Except for the Repurchase Agreements referenced in Section 10-21(b)(6)(a), the City shall solicit bids in accordance with the procedures set forth in this section. (1) Notices to bid shall be delivered in person or by mail, or by other electronic means, including telephone, authorized by the City to: a. those eligible Banks with offices in the City which have offered bids, or provided the City with a written statement of interest to receive notices to bid, within six (6) months preceding the date of notice; and b. such other eligible Banks or dealers as the City may elect. Except as set forth in this section, no Bank or dealer shall have a right to receive notices to bid. (2) Notices to bid shall set forth: a. the principal amount, the maturi- ty date and number of days for which the Authorized Investment will be outstanding; b. the date, time and place of bid openings; and c. such other information as the City from time to time may deem necessary or appro- priate. -7- . . . . . CITY OF SEWARD, ALASKA ORDINANCE NO. 550 The City reserves the right to cancel any or all notices to bid, in whole or in part, for any reason and at any time, and the cancellation of a notice to bid will be binding on the bidders. (3) Bids may be delivered to the City in person or by mail, or by other electronic means, including telephone, as authorized by the City. No bid or amendment to a bid will be accepted after the time set forth in the notice. In the event no bids are received, the City may negotiate with any eligible Bank or dealer. (4) Bids shall be submitted separately for each Authorized Investment identified by amount and maturity date. Unless otherwise specified by the City, interest rates bid shall be a rate per annum calculated on a 360-day year. Bids for portions of the Authorized Investment may be accept- ed by the City at its discretion. (5) The City, at its discretion, may deny eligibility to bid on any future offering to any Bank or dealer which: a. at the time of bid offering, or at any previous time, has violated this section or has rejected a bid award after its acceptance by the City; or b. if awarded, the bid would have outstanding Certificates of Deposit whose total amount of principal and interest due exceeds a limit established for that Bank under Section 10-21(e). (6) The City reserves the right to accept or reject any or all bids, in whole or in part, for any reason. A rejection of a bid shall be binding on the Bank or dealer. (7) A bank or dealer awarded a bid must honor its commitment to issue the Authorized Invest- ment pursuant to the terms of this section, the invitation to bid and its bid. (8) If identical bids are received from two or more Banks or dealers, and the City is otherwise prepared to accept both bids, then the Authorized Investment will be divided equally among such bidders if the divided Authorized Investment amount would not result in loss of interest to the -8- . . . . e CITY OF SEWARD, ALASKA ORDINANCE NO. 550 City. If the division of the Authorized Investment would result in loss of interest, then the Autho- rized Investment will be awarded by lot to one of the bidders submitting the identical bids. Section 2. This ordinance shall take effect 10 days following enactment. ENACTED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, this 9th day of Se tember , 19 85 OF SEWARD, ALASKA ?~p 4J'n DONALD W. CRIPPS, MAYOR AYES: NOES: ABSENT: ABSTAIN: CRIPPS, GILLESPIE. HILTON, MEEHAN. SCHOLL, SIMUTIS & WILLIAMS NONE NONE NONE ATTEST: APPROVED AS TO FORM: HUGHES, THORSNESS. GANTZ, POWELL AND BRUNDIN. Attorneys for the City of Seward, Alaska 7~(}j~ Fred B. Arvidson, City Attorney (City Introduction Date: 08/26/85 Introduced By: Public Hearing & Enactment Date: City Manager 09/09/85 -9-