HomeMy WebLinkAboutbocc.packet.ws.12-18-2018 p'fKIN Board of Commissioners
COUNT1 Work Session Agenda
TUESDAY,DECEMBER 18,2018, 11:00 AM
Q/D. G Pitkin County BOCC Meeting Room
530 E.Main St., 1st Floor,Aspen,CO 81611
A work-session agenda is structured to give the Board of Commissioners an opportunity to touch base with each other,staff,and
invited community members and organizations to discuss and work through issues the County is facing,but not ready to take official
action on at a regular board meeting. Work sessions are open to the public(with exception of executive session). However,public
input is typically not taken during a work session unless specifically asked for by the Board.
11:00 AM Upcoming Regular Meeting Items
11:00 AM Airport Update,John Kinney(45 minutes)no packet material
11:45 AM Review of Future Agenda Calendar-Work Session/Regular Meeting(15 minutes)
12:00 PM Lunch Break
1:00 PM Staff/Community Presentations
This is time set aside for staff and community partners to formally present community or organizational
issues that may lead to future Board action.
1:00 PM Presentation of Investment Advisors, Strategies and Revised Investment Policy,Ann Driggers
and invited guests(1 hour)
2:00 PM Discussion Items/Open Discussion
No formal written materials
2:00 PM Board Open Discussion(15 Minutes)
2:15 PM Ambulance Building Project Update,Rich Englehart
2:30 PM Courthouse Remodel Update,Jodi Smith
2:45 PM Adjourn for Executive Session
3:00 PM SPECIAL MEETING-EXECUTIVE SESSION(Attorney Conference Room)
APCHA Enforcement of Restrictive Covenants
FAA-ATC Regulatory Changes
Upper Midnight,LLC Water Litigation
Personnel Claim
CRS 24-6-402 (4)(b)
5:00 PM Adjourn
MONDAY,JANUARY 7,2019 8-6 PM
Basalt Mountain Family Health Grand Opening
123 Emma Road,Basalt
AGENDA and TIMES ARE SUBJECT TO CHANGE
1
Future Agendas
‘pt1'K I N Board of Commissioners
COUNT1 Work Session Agenda
TUESDAY,JANUARY 8,2019, 10:00 AM
Q/D• G BOCC Meeting Room, 1st Floor
530 E Main St,Aspen,CO 81611
A work-session agenda is structured to give the Board of Commissioners an opportunity to touch base with each other,staff,and
invited community members and organizations to discuss and work through issues the County is facing,but not ready to take official
action on at a regular board meeting. Work sessions are open to the public(with exception of executive session). However,public
input is typically not taken during a work session unless specifically asked for by the Board.
9:00 AM Special Meeting-Willoughby Ponds
A. Resolution Approving the Willoughby Ponds Trust Subdivision Exemption for a Lot Line Adjustment and
Minor Plat Amendment and Activity Envelope and Site Plan Review on Lot 6, (Continued from 12/5/18),PH
(PN 10/11/18), T. Kochen
10:00 AM Adjourn Special Meeting
10:15 AM Staff/Community Presentations
This is time set aside for staff and community partners to formally present community or organizational
issues that may lead to future Board action.
12:00 PM Lunch Break- Swearing In Ceremony&Reception
1:00 PM Upcoming Regular Meeting Items
This portion of the agenda is intended to: 1)Provide the Board and Staff an opportunity to discuss items
that will come before the Board and public for formal adoption at a future Regular Meeting/Public
Hearing, 2) To review the calendar of business for future Board Work Sessions and Regular Meetings
1:00 PM Board Appointments to Committees Discussion, Jon Peacock(30 min.)
2:45 PM Break
3:00 PM Discussion Items/Open Discussion
No formal written materials
3:00 PM Board Open Discussion(15 Minutes)
3:15 PM Department Updates and Board Membership Reports
Department Updates provide an opportunity for staff to share accomplishments, trends, issues and
challenges with the Board. Board Membership Reports is time set aside for Board members to report on
the activities of other boards, commissions and entities they have been appointed to as representative of
Pitkin County.
NWCCOG,RRR, CORE, QQ, CCI, Club 20, CRRTB,RWPA,ACRA, RFTA, Senior
Council,NC, Intermountain TPR, Colorado Communities for Climate Action(CC4CA),
Healthy Forest Collaborative, Compact for Colorado Communities, Colorado Commissioners
Acting Together(CCAT) (15 minutes)
AGENDA and TIMES ARE SUBJECT TO CHANGE
3
3:30 PM Adjourn for Executive Session
3:45 PM SPECIAL MEETING-EXECUTIVE SESSION
5:00 PM Adjourn
AGENDA and TIMES ARE SUBJECT TO CHANGE
4
41)friCKIN Board of Commissioners
COUNT1 Regular Meeting Agenda
WEDNESDAY,JANUARY 9,2019, 12:00 PM
@ D• BOCC Meeting Room, 1st Floor
530 E Main St,Aspen,CO 81611
Additions/Deletions to Agenda
Public Comments(please limit to 3 minutes per speaker unless otherwise advised by the Chair)
Commissioner Comments
Consent Items: Consent items are generally perceived as non-controversial and allow the Board to spend its time on more
complex items elsewhere on the agenda.A Board member or member of the public may ask for a Consent item be removed for
individual consideration.Consent items typically have been discussed in work sessions with the Board and are approved by a single
motion.
Consent Items-Single Reading:
1. Minutes of
2. Resolution Appointing Chair and Vice-Chair; Commissioner Representatives to Various Boards, Committees
and Authorities,Jon Peacock
3. Resolution Approving the Revision of the Pitkin County Investment Policy,Ann Driggers&Tom Oken
4. Resolution Appointing Official Custodians of County Funds, Aim Driggers&Tom Oken
Consent Items Set for Public Hearing on DATE:
Individual Consideration Items:
Individual Consideration Items/First Readings set for Public Hearings on DATE:
Individual Consideration Items/Public Hearing, One Reading:
Individual Consideration Items/Public Hearing, 2nd Readings:
5. Resolution Authorizing a Network Operator Agreement with Visionary Communications Inc., d/b/a
Mammoth Networks for the Purpose of Managing the Pitkin County Middle Mile Broadband Network-Kara
Silbernagel
Individual Consideration Items/Emergency Ordinance and Resolution Confirmatory Reading:
Land Use Items:
Land Use Public Hearings:
6. Summers Road Easement Vacation, 1st Reading, PH(PN 12/6/18),T.Kochen
7. Highland Ranch Ltd Subdivision Conceptual Submission, Designation of Historic STructures to the Pitkin
County Historic Register and Granting of Incentives,Activity Envelope/Site Plan Review, Special Review
for a TDR Receiver Site, Special Review for a CDU, and Use of Growth Management Exemption on
Adjacent Parcel, 1st Reading&PH(LUC AND HRC formal reso notice required), S. Wolff(P095-17)
Land Use Actions:
Open Discussion
Adjourn Regular Meeting
CCI New Commissioner Orientation
January 9-11,2019
AGENDA and TIMES ARE SUBJECT TO CHANGE
5
trKIN Board of Commissioners
COUNT1 Work Session Agenda
TUESDAY,JANUARY 15,2019, 10:00 AM
Q/D• G BOCC Meeting Room, 1st Floor
530 E Main St,Aspen,CO 81611
A work-session agenda is structured to give the Board of Commissioners an opportunity to touch base with each other,staff,and
invited community members and organizations to discuss and work through issues the County is facing,but not ready to take official
action on at a regular board meeting. Work sessions are open to the public(with exception of executive session). However,public
input is typically not taken during a work session unless specifically asked for by the Board.
10:00 AM Staff/Community Presentations
This is time set aside for staff and community partners to formally present community or organizational
issues that may lead to future Board action.
Lunch Break
1:00 PM Upcoming Regular Meeting Items
This portion of the agenda is intended to: 1)Provide the Board and Staff an opportunity to discuss items
that will come before the Board and public for formal adoption at a future Regular Meeting/Public
Hearing, 2) To review the calendar of business for future Board Work Sessions and Regular Meetings
3:00 PM Break
3:15 PM Discussion Items/Open Discussion
No formal written materials
3:15 PM Board Open Discussion(15 Minutes)
3:30 PM Department Updates and Board Membership Reports
Department Updates provide an opportunity for staff to share accomplishments, trends, issues and
challenges with the Board. Board Membership Reports is time set aside for Board members to report on
the activities of other boards, commissions and entities they have been appointed to as representative of
Pitkin County.
4:00 PM Adjourn for Executive Session
4:15 PM SPECIAL MEETING-EXECUTIVE SESSION
5:00 PM Adjourn
AGENDA and TIMES ARE SUBJECT TO CHANGE
6
trKIN Board of Commissioners
COUNT1 Work Session Agenda
TUESDAY,JANUARY 22,2019, 10:00 AM
Q/D• G BOCC Meeting Room, 1st Floor
530 E Main St,Aspen,CO 81611
A work-session agenda is structured to give the Board of Commissioners an opportunity to touch base with each other,staff,and
invited community members and organizations to discuss and work through issues the County is facing,but not ready to take official
action on at a regular board meeting. Work sessions are open to the public(with exception of executive session). However,public
input is typically not taken during a work session unless specifically asked for by the Board.
11:00 am Staff/Community Presentations
This is time set aside for staff and community partners to formally present community or organizational
issues that may lead to future Board action.
11:00 am Moving Forward on Buildout, Energy Use&Infrastructure Capacity(continued), Cindy
Houben,Ellen Sassano,Brian Pawl(1 hour)
12:00 PM Lunch Break
1:00 PM Staff/Community Presentations(cont.)
1:00 PM Community Survey Presentation, Pat Bingham&Rich Englehart(1 hour) DO NOT MOVE-
CONSULTANT INVITED
2018 Community Survey Results
2:00 PM Upcoming Regular Meeting Items
This portion of the agenda is intended to: 1)Provide the Board and Staff an opportunity to discuss items
that will come before the Board and public for formal adoption at a future Regular Meeting/Public
Hearing, 2) To review the calendar of business for future Board Work Sessions and Regular Meetings
2:45 PM Break
3:00 PM Discussion Items/Open Discussion
No formal written materials
3:00 PM Board Open Discussion(15 Minutes)
3:30 PM Department Updates and Board Membership Reports
Department Updates provide an opportunity for staff to share accomplishments, trends, issues and
challenges with the Board. Board Membership Reports is time set aside for Board members to report on
the activities of other boards, commissions and entities they have been appointed to as representative of
Pitkin County.
5:00 PM Adjourn
AGENDA and TIMES ARE SUBJECT TO CHANGE
7
pirKIN Board of Commissioners
COUNT1 Regular Meeting Agenda
WEDNESDAY,JANUARY 23,2019, 12:00 PM
@ D• BOCC Meeting Room, 1st Floor
530 E Main St,Aspen,CO 81611
Additions/Deletions to Agenda
Public Comments(please limit to 3 minutes per speaker unless otherwise advised by the Chair)
Commissioner Comments
Consent Items: Consent items are generally perceived as non-controversial and allow the Board to spend its time on more
complex items elsewhere on the agenda.A Board member or member of the public may ask for a Consent item be removed for
individual consideration.Consent items typically have been discussed in work sessions with the Board and are approved by a single
motion.
Consent Items-Single Reading:
1. Minutes of
Consent Items Set for Public Hearing on DATE:
Individual Consideration Items:
Individual Consideration Items/First Readings set for Public Hearings on DATE:
Individual Consideration Items/Public Hearing, One Reading:
Individual Consideration Items/Public Hearing, 2nd Readings:
2. Ordinance Repealing and Reenacting,the 2015 Energy Code Adoption and Repealing the Efficient Building
Program,Brian Pawl, Cindy Houben
Individual Consideration Items/Emergency Ordinance and Resolution Confirmatory Reading:
Land Use Items:
Land Use Public Hearings:
3. Summers Road Easement Vacation,2nd Reading,T.Kochen
4. Highland Ranch Ltd Subdivision Conceptual Submission, Designation of Historic STructures to the Pitkin
County Historic Register and Granting of Incentives,Activity Envelope/Site Plan Review, Special Review
for a TDR Receiver Site, Special Review for a CDU, and Use of Growth Management Exemption on
Adjacent Parcel, 1st Reading&PH(LUC AND HRC formal reso notice required), S. Wolff(P095-17)
5. McCabe Properties LLC Extension of Vested Rights,PH(PN 12/20/18), S. Wolff
6. Helvetica Endeavours LLC Amendment to BOCC Resolution#122-2006, L. Lamont
Land Use Actions:
Open Discussion
Adjourn Regular Meeting
AGENDA and TIMES ARE SUBJECT TO CHANGE
8
‘pt1'K IN Board of Commissioners
COUNT1 Work Session Agenda
TUESDAY,JANUARY 29,2019, 10:00 AM
Q/D• G BOCC Meeting Room, 1st Floor
530 E Main St,Aspen,CO 81611
A work-session agenda is structured to give the Board of Commissioners an opportunity to touch base with each other,staff,and
invited community members and organizations to discuss and work through issues the County is facing,but not ready to take official
action on at a regular board meeting. Work sessions are open to the public(with exception of executive session). However,public
input is typically not taken during a work session unless specifically asked for by the Board.
10:00 AM Staff/Community Presentations
This is time set aside for staff and community partners to formally present community or organizational
issues that may lead to future Board action.
1:00 PM Upcoming Regular Meeting Items
This portion of the agenda is intended to: 1)Provide the Board and Staff an opportunity to discuss items
that will come before the Board and public for formal adoption at a future Regular Meeting/Public
Hearing, 2) To review the calendar of business for future Board Work Sessions and Regular Meetings
3:00 PM Break
3:15 PM Discussion Items/Open Discussion
No formal written materials
3:15 PM Board Open Discussion(15 Minutes)
4:00 PM Department Updates and Board Membership Reports
Department Updates provide an opportunity for staff to share accomplishments, trends, issues and
challenges with the Board. Board Membership Reports is time set aside for Board members to report on
the activities of other boards, commissions and entities they have been appointed to as representative of
Pitkin County.
5:00 PM Adjourn
AGENDA and TIMES ARE SUBJECT TO CHANGE
9
AGENDA ITEM SUMMARY
WORK SESSION MEEING DATE: December 18, 2018
AGENDA ITEM TITLE: Presentation of Investment Advisors, Strategies and Revised
Investment Policy
STAFF RESPONSIBLE: Ann Driggers, Tom Oken
ISSUE STATEMENT: The County has recently retained Chandler Asset Management(CAM) as
investment advisors to oversee the purchase, sale and safekeeping of county investments.
The County is now in the process of transferring management of the investments from staff to
CAM. Staff wishes to introduce CAM to the board who will present the initial investment strategy.
They will also, in conjunction with staff,present a proposed revised investment policy for review
and discussion by the board.
BACKGROUND: The County has been planning for the retirement of current Treasurer, Tom
Oken, and the transfer of the statutory duties of the office of Treasurer to the Finance Director, Ann
Driggers, as prescribed in the Home Rule Charter. The management of county investments has been
handled by the Treasurer until this time. With the retirement of the Treasurer the county has retained
the professional expertise of CAM in managing the county's substantial investments of
approximately $60 million.
With the retention of CAM comes a new strategy for investment and the need to revise the county's
investment policy,previously last amended in 2008.
The purpose of the investment policy is to specify various policies and procedures that will foster a
prudent and systematic investment program designed to achieve the County's objectives of safety,
liquidity and return on investment through a diversified investment portfolio. This policy also serves
to organize and formalize Pitkin County's investment-related activities, while complying with all
applicable statutes governing the investment of public funds.
LINK TO STRATEGIC PLAN: Pitkin County's Strategic Plan discusses responsible and
accountable stewardship of County assets in the Core Focus Area of Prosperous Economy. Improved
data accuracy, system functionality and integration across areas will help fulfill this mission.
KEY DISCUSSION ITEMS:
• Presentation of Economic Outlook and the Investment Strategy for 2019.
• Review the Proposed Revised Investment Policy
10
BUDGETARY IMPACT: Investment earnings for the county exceeded$800k in 2017. With a
revised investment policy and strategy and a rising interest rate environment, it is expected the
investment earnings of the county will increase in 2019.
RECOMMENDED BOCC ACTION: Grant permission to staff to bring the revised
Investment Policy for their approval in January 2019.
ATTACHMENTS:
• Presentation from Chandler Asset Management
• Proposed Revised Investment Policy
11
CiiiCHANDLER
ASSET MANAGEMENT
'4w.
County .•
Board of County Commissioners Meeting K;
December 18, 2018
,.
4 •d• - •
, r.vniv.vxsvav
A - III n - as
Scott Prickett, CTP Julie Hughes +` ,_ _ ' `~
Executive Vice President, Senior Vice President,
Portfolio Strategist Portfolio Strategist
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For One-on-One Presentation Only r at
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Table of Contents Cin
SECTION 1 Economic Outlook
SECTION 2 2019 Investment Strategy
1
13
Section 1 I Economic Outlook
Z CM
14
IEconomic Update
■ As expected, the Federal Open Market Committee (FOMC) left the fed funds target rate unchanged in November at a range
of 2.00%-2.25%. The vote was unanimous, including a vote from the new San Francisco Fed President, Mary Daly. The Fed
did not provide updated economic projections or host a press conference in conjunction with the meeting. Going forward,
Fed Chair Powell will hold a press conference after every FOMC meeting (eight meetings per year). The November policy
statement was nearly identical to the statement in September, except for noting that business fixed investment has
moderated from earlier in the year. The last FOMC meeting of this year will be held on December 18-19 and expectations
for a December rate hike remain very high. Michelle Bowman was sworn in as a new Federal Reserve Board member on
November 26 and will be a voting FOMC member at the December policy meeting.
■ Although a 25-basis point rate hike is widely expected at the upcoming FOMCmeeting, recent comments by the Fed Chair
and other members of the FOMCsuggestthatthe Fed may pause or move more slowly with additional rate hikes next year.
Interest rate sensitive sectors such as housing and autos have softened, and financial conditions have tightened in recent
months as equity prices have declined, borrowingcosts have increased,and the US dollar has strengthened.Although labor
market conditions remain tight, initial jobless claims have unexpectedly ticked higher in the past few weeks. Meanwhile,
inflation pressures remain subdued.Though we don't expect a meaningful slowdown in the economyover the near-term,
economic growth has eased since the second quarter of this year. The economy is expected to grow 2.6%next year versus
2.9% this year.
■ The Treasury yield curve flattened in November. Most of the flattening occurred in the second half of the month as the Fed
began to signal a more dovish approach to policy tightening. At month-end, the 2-year Treasury yield was down eight basis
points to 2.79%, while the 10-year Treasury yield was down nearly 16 basis points to 2.99%. The spread between 2- and 10-
year Treasury yields narrowed to just 20 basis points at month-end.
3 CA
15
IEmployment
Nonfarm Payroll (000's) Unemployment Rate
350 12.0% —
11.0% —Underemployment Rate(U6) -
300 I ::
10.0% — Unemployment Rate (U3)/ 41 I f
cu
0. 7.0%
m cc
V
u 150 — 6.0%
0 100 - 5.0% —� -
4.0%
50 —
' 3.0%
0 2.0%
'yok I 40, q4., 41o, ,cP6 4 -94, 41)4 iyok �P6 4 94g 4/0, , 4 9�'g °k
16 1> 1> 1> 1> 18 1� 1c9 18 16 1> 1> 1> 1> c9 1,9 18 18
Source:US Department of Labor Source:US Department of Labor
U.S. payrolls rose by 155,000 in November, below the consensus forecast of 198,000. September and October payrolls were revised down by a
net 12,000. On a trailing 3-month and 6-month basis payrolls increased by an average of 170,000 and 195,000 per month, respectively, more than
enough to absorb new entrants into the labor market. The unemployment rate was unchanged in November at 3.7%. The labor participation
rate was also unchanged at 62.9%. A broader measure of unemployment called the U-6, which includes those who are marginally attached to
the labor force and employed part time for economic reasons, increased to 7.6% from 7.4% in October. Wages rose 0.2% in November on a
month-over-month basis, slightly below expectations. Wages were up 3.1% on a year-over-year basis in November, unchanged from October.
The average workweek declined to 34.4 hours in November from 34.5 hours in October.
4 CM
16
I Inflation
Consumer Price Index(CPI) Personal Consumption Expenditures(PCE)
3.5% 3.5% —
3.0% 3.0% —
2.5% 2.5% —
v ai
c ba
C
r 2.0% t 2.0%
u u
} 1.5% 1.5%
O
>- 0
}
1.0% 1.0%
.—CPI YOY%Change —PCE Price Deflator YOY%Change
0 0
0.5 o Core CPI YOY% Change 0.5/o —PCE Core Deflator YOY%Change
0.0% 0.0% —
Oce, ✓d,21 10 ✓4/Z� Oce ✓d/1 10 7 ✓4/Zd' Oce, 0,e
✓d�1 9p~I ✓e,x Oc�'Z ✓d,1 94 Z ✓,xZ8 Oc1'Z
> > > c? d' 8 .. > > > d' 9 8
Source:US Department of Labor Source:US Department of Commerce
The Consumer Price Index (CPI) was up 2.5% year-over-year in October(in line with the consensus estimate), versus up 2.3% year-over-year in
September. Core CPI (CPI less food and energy) was up 2.1% year-over-year in October(below the consensus estimate of 2.2%), versus up 2.2%
year-over-year in September. The Personal Consumption Expenditures (PCE) index was up 2.0% year-over-year in October, unchanged from
September. Core PCE (excluding food and energy) was up just 1.8% on a year-over-year basis in October, versus a downwardly-revised 1.9% in
September. Core PCE inflation, which is the Fed's primary inflation gauge is below the Fed's 2.0%target.
5 CM
17
IConsumer
Retail Sales YOY % Change Consumer Confidence
7.0% 145
6.0% 140
135
5.0% 130
ao
4.0% 1111
; 125
3 120
} 3.0% 115
O
2.0% 110
105
1.0%
100
0.0% 95
Oc�l6 ✓d�j� 9p~7� ✓4/1� Oc,I� ✓ jcP 9pr78 ✓4/18 Oc�IcP okl6✓dhl��dr1�d`1�4•,/ SPp7��okl�✓d�18�drjcP�dyjd'4/d' SO/1
Source:US Department of Commerce Source:The Conference Board
On a year-over-year basis, retail sales were up 4.6% in October, versus up 4.2% year-over-year in September. On a month-over-month basis,
retail sales increased 0.8% in October, above expectations for a 0.5% increase. However, this follows a downwardly-revised 0.1% decline in
sales in September. Sales were also down 0.1% in August. October sales were likely boosted in part by a hurricane-related rebound in auto
sales and building materials in October. Restaurant and furniture sales were weak in October. The Consumer Confidence Index remains strong
but eased to 135.7 in November from 137.9 in October. Looking ahead, labor market strength should continue to support consumer confidence
and spending trends.
6 CM
18
IEconomic Activity
Leading Economic Indicators(LEI) Chicago Fed National Activity Index(CFNAI)
1.4% 0.80
1.2% 0.60
to
1.0%
tu
0.40
cc 0.8%
t N
7 0.6% s 0.20
c
0 0.4%
\V\ 0.00
0.2%
0.0% 0.20
-0.2% -0.40
Oct °b 9a, ✓4/1 Oct ✓d7 9br ✓4/1 Oct Oee ✓d� 94 ✓ox Oct ✓d� 94 ✓ox OCs
1a. 1� 18 8 18 1 1 jj 1> 1) 18 c9 18 cP
Source:The Conference Board Source:Federal Reserve Bank of Chicago
The Index of Leading Economic Indicators (LEI) rose 0.1% month-over-month in October, following a 0.6% increase in September. The
Conference Board believes US economic growth will be robust in early 2019 but then moderate in the second half of the year. The Chicago Fed
National Activity Index (CFNAI) increased to 0.24 in October from 0.14 in September. On a 3-month moving average basis, the index ticked up to
0.31 in October from 0.30 in September. The index points to above trend economic growth.
CM
19
IHousing
Housing Starts S&P/CaseShiller 20 City Composite Home Price Index
1800 7.5%
H 1600 ■Multi Family Housing Starts
c ■Single Family Housing Starts 7.0%
1400
6 1200 — 6.5%
a)
ra
1000 ra
s 800 ra
u 6.0%
c 600 0 5.5%
>-
f6
u 400
o 200 5.0%
2
0 4.5%
0c ✓d 9 ✓C/� � ✓d to 10/ 0C o % % ✓(/ SP 6 /11 ✓(/ SP
l:1 7Z rZ 1j 41 71 ~1 18 1:1 b, 0� dr /)Z b, 0e d rIZ b1
6 > > > 8 8 8 4 16 7] > Z� 'I� 1� 8 8
Source:US Department of Commerce Source:S&P
Total housing starts were softer than expected in October, up 1.5% to a 1.229 million annualized rate. Single-family starts declined 1.8% in
October but multi-family starts increased 10.3%. Meanwhile, permits fell 0.6% in October. According to the Case-Shiller 20-City home price
index, home prices were up 5.1% year-over-year in September, versus up 5.5% in August. The housing sector has softened as mortgage rates
have increased.
8 CM
20
IManufacturing
Institute of Supply Management Purchasing Industrial Production
Manager Index
64 6.0%
Expanding
62 5.0%
60 4.0%
I ::::
58 .
56
54 0 1.0%
52 0.0%
50 1.0%
Contracting
48 -2.0%
�pk'l6 '�c�6•1 2,d`1, L�zj tio`Z, FP618 2,d`18 �G�18 ' k pc41G ✓dh1� y?O ii oc,1, ,�h1� ypZ� ,4/Z� °c.16)
Source:Institute for Supply Management Source:Federal Reserve
The Institute for Supply Management (ISM) manufacturing index increased to 59.3 in November from 57.7 in October. A reading above 50.0
suggests the manufacturing sector is expanding. The Industrial Production index was up 4.1% year-over-year in October versus up 5.6% year-
over-year in September. On a month-over-month basis, the manufacturing component of the index increased 0.3% in October, following a 0.2%
increase in September, pointing to modest growth in the sector. Capacity Utilization increased to 78.4% in October, but remains below the long-
run average of 79.8% indicating there is still excess capacity for growth.
9 CAVt
21
IGross Domestic Product (GDP)
Components of GDP 12/17 3/18 6/18 9/18 Gross Domestic Product(GDP)
6.0%
Personal Consumption Expenditures 2.6% 0.4% 2.6% 2.5%
5.0% - -
4.0%
Gross Private Domestic Investment 0.1% 1.6% -0.1% 2.5%
3.0%
Net Exports and Imports -0.9% 0.0% 1.2% -1.9% 2.0%
1.0%
Federal Government Expenditures 0.3% 0.2% 0.2% 0.2% 0.0% ' ' 1 ' I '
State and Local (Consumption and I GDP QOQ%Change
Gross Investment) 0.2% 0.1% 0.2% 0.2% 1.o% GDP YOY% Change
-2.0%
Total 2.3% 2.2% 4.2% 3.5% sPa, 44. soa44,. so,o �a,. soa, 41a,. soo, 44,. soa, 44,. so,o
Z3 1� Vol1 1Q 1Q 1s 1S 16, s 1) ,? :18 d8
Source: US Department of Commerce
Source: US Deportment of Commerce
According to the second estimate, third quarter GDP grew at an annualized rate of 3.5% (unchanged from the advance estimate). This follows
growth of 4.2% in the second quarter. Inventories and consumer spending drove growth in the third quarter, while net exports were a drag.
Looking ahead, economic growth is expected to ease to 2.6% in the current quarter and 2.6% in 2019.
10 CM
22
Bond Yields
US Treasury Note Yields US Treasury Yield Curve
4.0% 4.0%
3.5% 3.5%
3.0% 3.0%
2.5% 2.5%
0
a 2.0% v 2.0%
u
>
1.5% 1.5%
1.0% 2-Year —5-Year 1.0% Nov 18
0.5% 10-Year — —Aug-18
0.5% Nov-17
0.0%
0.0%
4 1) `1) °pdj -1 4 `1d, -4 1� 2/0 4io it 1, 1, �), �/r
Source:Bloomberg Source:Bloomberg
On a year-over-year basis, Treasury yields have increased and the Treasury yield curve has flattened. The spread between 2-Year and 10-year
Treasury yields has narrowed from 63 basis points to 20 basis points, year-over-year as of November month-end. Rate hikes by the Federal
Reserve have put upward pressure on rates, while supply and demand imbalances, technical factors, and subdued inflation expectations have
contributed to the curve flattening.
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Section 2 I 2019 Investment Strategy
12 citi
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2019 Investment StrategyCAI
Increase allocation to US Treasuries and Agencies to provide diversification, and enhance safety,
liquidity, and yield
Longer weighted average maturity and duration to enhance potential returns over time
Improved diversification by adding allocations to other asset classes permitted by CRS 24-75-601 LTotal Investments as of 12/31/20
$113,455,222
Sector Allocation Maturity Distribution
LG IP
45.3% 90.0%
75.0%
66.6%
60.0%
45.0%
33.4%
30.0%
CDs 15.0%
40.2% Agency
11.9% 0.0%
0-1 Year 1-3 Years
Money Market US Treasury
0.2% 2.4%
13 C.-
Source:Pitkin County RFP#165.2018 Addendum#1 with Asset Allocation as of 12/31/2017.
25
INVESTMENT POLICY
ADOPTED JANUARY X,2019
CONTENTS
INTRODUCTION 2
II. Scope 2
III. Prudence 2
IV. Objectives 3
V. Delegation of Authority 3
VI. Ethics and Conflicts of Interest 4
VII. Internal Controls 4
VIII. Authorized Financial Institutions, Depositories and Broker/Dealers 5
IX. Delivery, Safekeeping and Custody 5
X. Competitive Transactions 6
Xl. Authorized Investments 6
XII. Prohibited Investment Vehicles and Practices 10
XIII. Investment Pools/Mutual Funds 10
XIV. Maximum Maturity 10
XV. Risk Management and Diversification 10
XVI. Review of Investment Portfolio 12
XVII. Performance Evaluation 12
XVIII. Reporting 12
XIX. Review of Investment Policy 13
GLOSSARY OF INVESTMENT TERMS 14
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I. INTRODUCTION
The purpose of this investment policy is to specify various policies and procedures that
will foster a prudent and systematic investment program designed to achieve Pitkin
County's objectives of safety, liquidity and return on investment through a diversified
investment portfolio. This policy also serves to organize and formalize Pitkin County's
investment-related activities, while complying with all applicable statutes governing the
investment of public funds. This policy is written to incorporate industry best practices
and recommendations from sources such as the Government Finance Officers Association
(GFOA) and the Association of Public Treasurers (APT).
This investment policy was endorsed and adopted by the Pitkin County Board of County
Commissioners (hereinafter referred to as "the Commissioners") and is effective as of the
9th day of January, 2019, and replaces any previous versions.
II. Scope
The provisions of this Policy shall apply to all investable funds of Pitkin County, Colorado
(hereinafter referred to as "the County") except the Pitkin County Public Employee's
Retirement Fund(invested pursuant to C.R.S. § 24-54-101, et seq.) and the donated Pitkin
County Library Capital Reserve (invested pursuant to C.R.S. § 15-1-1101, et seq.).
• Proceeds of debt issuance shall be invested in accordance with the County's general
investment philosophy as set forth in this policy; however, such proceeds are to be
invested pursuant to the permitted investment provisions of their specific bond
indentures.
POOLING OF FUNDS
Except for cash in certain restricted and special funds, the County will consolidate cash
and reserve balances from all funds to maximize investment earnings and to increase
efficiencies with regard to investment pricing, safekeeping and administration. Investment
income will be allocated to the various funds based on their respective participation and in
accordance with generally accepted accounting principles.
III. Prudence
The standard of prudence to be used for managing the County's assets is the "prudent
person standard" which states, "fiduciaries...shall exercise the judgment and care, under
the circumstances then prevailing, which men of prudence, discretion, and intelligence
exercise in the management of the property of another, not in regard to speculation but in
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regard to the permanent disposition of funds, considering the probable income as well as
the probable safety of capital." (C.R.S. § 15-1-304, Standard for Investments).
The County's overall investment program shall be designed and managed with a degree of
professionalism that is worthy of the public trust. The County shall recognize that no
investment is totally riskless and that the investment activities of the County are a matter
of public record. Accordingly,the County recognizes that occasional measured losses may
occur in a diversified portfolio and shall be considered within the context of the overall
portfolio's return, provided that adequate diversification has been implemented and that
the sale of a security is in the best long-term interest of the County.
The County's Treasurer and authorized investment personnel acting in accordance with
written procedures and this Investment Policy and exercising due diligence shall be
relieved of personal responsibility for an individual security's credit risk or market price
changes,provided that the deviations from expectations are reported in a timely fashion to
the Commissioners and appropriate action is taken to control adverse developments.
IV. Objectives
The overriding objectives of the program are to preserve principal, provide sufficient
liquidity, and manage investment risks, while seeking a market-rate of return.
• SAFETY. Safety of principal is the foremost objective of the investment program.
Investments will be undertaken in a manner that seeks to ensure the preservation of
capital in the overall portfolio. To attain this objective, the County will diversify its
investments by investing funds among a variety of securities.
• LIQUIDITY. The investment portfolio will remain sufficiently liquid to meet all
operating requirements that may be reasonably anticipated.
• RETURN ON INVESTMENTS. The investment portfolio will be designed with the
objective of attaining a market rate of return throughout budgetary and economic
cycles, taking into account the investment risk constraints for safety and liquidity
needs.
V. Delegation of Authority
Authority to manage the County's investment program is derived from Colorado Revised
Statutes (C.R.S. § 24-75-601.1). The Commissioners are responsible for the adoption of
this Policy. Management responsibility for the administration of this Policy is hereby
delegated to the County's Treasurer.
The Treasurer shall develop written administrative procedures and internal controls,
consistent with this Policy, for the operation of the County's investment program. Such
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procedures shall be designed to prevent losses of public funds arising from fraud,employee
error,misrepresentation by third parties,or imprudent actions by employees of the County.
The Treasurermay delegate the authority to conduct investment transactions and manage
the operation of the investment portfolio to specifically authorized staff members. No
person may engage in an investment transaction except as expressly provided under the
terms of this Policy.
The County may engage the support services of advisors, consultants and professionals in
regard to its investment program, so long as it can be clearly demonstrated that these
services produce a net financial advantage or necessary financial protection of the County's
financial resources. Investment Advisors shall be registered with the Securities Exchange
Commission under the Investment Advisors Act of 1940. Advisors shall be selected using
the County's authorized purchasing procedures for selection of professional services.
Advisors may be granted discretion to purchase and sell investment securities subject to
the provisions of this Policy, but shall not, under any circumstances, take custody of any
County funds or securities.
VI. Ethics and Conflicts of Interest
All participants in the investment process shall act as custodians of the public trust.
Investment officials shall recognize that the investment portfolio is subject to public review
and evaluation. Thus employees and officials involved in the investment process shall
refrain from personal business activity that could create a conflict of interest or the
appearance of a conflict with proper execution of the investment program, or which could
impair their ability to make impartial investment decisions.
Employees and investment officials shall disclose to the County Manager any material
interests in financial institutions with which they conduct business, and they shall further
disclose any large personal financial/investment positions that could be related to the
performance of the investment portfolio. Employees and officers shall refrain from
undertaking any personal investment transactions with the same individual with whom
business is conducted on behalf of the County.
VII. Internal Controls
The Treasurer is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the entity are protected from loss, theft or misuse. The
internal control structure shall be designed to provide reasonable assurance that these
objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a
control should not exceed the benefits likely to be derived; and (2) the valuation of costs
and benefits requires estimates and judgments by management.
Periodically an independent analysis by an external auditor shall be conducted to review
internal controls, account activity and compliance with policies and procedures.
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VIII. Authorized Financial Institutions,Depositories and Broker/Dealers
Public deposits will be made only in qualified public depositories pursuant to the Public
Deposit Protection Act (CRS 11-10.5-101, et seq.) for banks and the Savings and Loan
Association Public Deposit Protection Act(CRS 11-47-101, et seq.).
To the extent practicable,the Treasurer shall endeavor to complete investment transactions
using a competitive bid process whenever possible. The Treasurer will determine which
financial institutions are authorized to provide investment services to the County. It shall
be the County's policy to purchase securities only from authorized institutions and firms.
The Treasurer shall maintain procedures for establishing a list of authorized broker/dealers
and financial institutions which are approved for investment purposes that are selected
through a process of due diligence as determined by the County. Approved broker/dealers
and the firms they represent shall be licensed to do business in the State of Colorado and
as such are subject to the provisions of the Colorado Revised Statutes, including but not
limited to C.R.S. § 24-75-604. Due diligence inquiry shall determine whether such
authorized broker/dealers, and the individuals covering the County are reputable and
trustworthy, knowledgeable and experienced in public agency investing and able to meet
all of their financial obligations. To be eligible, a firm must meet at least one of the
following criteria:
1. Be recognized as a Primary Dealer by the Federal Reserve Bank of New
York or have a primary dealer within its holding company structure;
2. Report voluntarily to the Federal Reserve Bank of New York,
3. Qualify under Securities and Exchange Commission (SEC) Rule 15c3-1
(Uniform Net Capital Rule).
All financial institutions which desire to become qualified bidders for investment
transactions (and which are not dealing only with the investment adviser)must supply the
Treasurer with audited financials and a statement certifying that the institution has
reviewed Colorado Revised Statutes 24-75-601, et seq. and the County's investment
policy. The Treasurer will conduct an annual review of the financial condition and
registrations of such qualified bidders.
Selection of broker/dealers used by an external investment adviser retained by the County
will be at the sole discretion of the adviser.
The County may purchase commercial paper from direct issuers even though they are not
on the approved broker/dealer list as long as the paper meets the criteria outlined in item
#3 of the section"XI"titled"Authorized Investments."
IX. Delivery, Safekeeping and Custody
Delivery-versus-Payment (DVP). All investment transactions shall be conducted on a
delivery-versus-payment basis.
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Safekeeping and Custody. To protect against potential losses due to failure of individual
securities dealers, and to enhance access to securities, interest payments and maturity
proceeds, all cash and securities in the County's portfolio shall be held in safekeeping in
the County's name by a third party custodian, acting as agent for the County under the
terms of a custody agreement executed by the bank and the County. All investment
transactions will require a safekeeping receipt or acknowledgment generated from the
trade. A monthly report will be received by the County from the custodian listing all
securities held in safekeeping with current market data and other information.
The only exceptions to the foregoing shall be depository accounts and securities purchases
made with: (i)local government investment pools; (ii)time certificates of deposit,and, (iii)
money market mutual funds, since the purchased securities are not deliverable.
The County may utilize the services of the Depository Trust Corporation (DTC) as a
depository for delivery of securities not wired through the Federal Reserve system.
X. Competitive Transactions
Where possible, transactions with broker/dealers shall be selected on a competitive basis
with at least three broker/dealers contacted, and their bid or offering prices shall be
recorded. If there is no other readily available competitive offering, best efforts will be
made to document quotations for comparable or alternative securities. When purchasing
original issue instrumentality securities, no competitive offerings will be required as all
dealers in the selling group offer those securities at the same original issue price.
XI. Authorized Investments
Except as specifically defined in this Policy, all investments of the County shall be made
in accordance with applicable laws contained in the Colorado Revised Statutes, as
amended: C.R.S. § 11-10.5-101, et seq., Public Deposit Protection Act; C.R.S. §
11-47-101, et seq., Savings and Loan Association Public Deposit Protection Act; C.R.S. §
24-75-601,et seq.,Funds-Legal Investments;C.R.S. §24-75-603,Depositories,and C.R.S.
§ 24-75-702, Local governments-authority to pool surplus funds. Any revisions or
extensions of these sections of the Colorado Revised Statutes will be assumed to be part of
this Investment Policy immediately upon the effective date thereof.
The credit quality of any eligible investment will be evaluated using the following
Nationally Recognized Statistical Rating Organizations (NRSROs): Standard & Poor's,
Moody's or Fitch(or any of their successor agencies).
The County has further defined the following types of securities and transactions as eligible
for use by the County:
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1. U.S.TREASURY SECURITIES fully guaranteed by, or for which the full credit of
the United States Treasury is pledged for payment.
• Maturities shall not exceed five years from the date of trade
settlement.
• There are no limits on the dollar amount or percentage that the
County may invest in U.S. Treasuries.
2. FEDERAL AGENCY AND U.S. GOVERNMENT-SPONSORED ENTERPRISE (GSE)
SECURITIES issued by or fully guaranteed as to principal and interest by federal
agencies or U.S. GSEs.
• Maturities shall not exceed five years from the date of trade
settlement.
• No more than 75% of the total portfolio may be invested in federal
agency and GSE securities.
• No more than 25% of the total portfolio may be invested in any
single Agency/GSE issuer.
3. CORPORATE OR BANK SECURITIES denominated in United States dollars.
• Maturities shall not exceed three years from the date of trade
settlement.
• At the time of purchase must carry at least two credit ratings from
the above mentioned NRSROs and are not rated below:
a. "Al, P1, or F1" or their equivalents if the security is a money
market instrument such as commercial paper or bankers'
acceptance; or
b. "AA- or Aa3" or their equivalents if the security is any other
kind of security.
• At no time shall the book value of investments in corporate and bank
securities total more than 25% of the total book value of the
County's portfolio with no greater than 5% exposure to any single
issuer.
• No subordinated security may be purchased.
• No security issued by a corporation or bank that is not organized and
operated within the United States may be purchased without
authorization by Commissioners to invest in such securities.
4. MONEY MARKET MUTUAL FUNDS registered under the Investment Company
Act of 1940,provided they:
• Have a constant daily net asset value per share of$1.00;
• Are "no-load" (i.e.: no commission or fee shall be charged on
purchases or sales of shares) and charge no 12b1 fees;
• Limit assets of the fund to securities authorized by state statute;
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• Have a maximum stated maturity and weighted average maturity in
accordance with Rule 2a-7 of the Investment Company Act of 1940;
and
• Have a rating of AAAm by Standard and Poor's or AAA by
Moody's, or AAA/V-1+by Fitch Investors Service or have assets of
one billion dollars or more.
5. LOCAL GOVERNMENT INVESTMENT POOLS authorized under C.R.S. § 24-75-
701, et seq.,provided they:
• Have a constant daily net asset value per share of$1.00;
• Are "no-load" (i.e., no commission or fees shall be charged on
purchases or sales of shares) and charge no 12b1 fees;
• Limit assets of the fund to securities authorized by state statute;
• Have a maximum stated maturity and weighted average maturity in
accordance with Rule 2a-7 of the Investment Company Act of 1940;
and
• Have a rating of AAAm by Standard and Poor's or AAA by
Moody's or AAA/V-1+by Fitch Investors Service.
• No more than 25% of the total portfolio may be invested in any
single local government investment pool.
6. CERTIFICATES OF DEPOSITS with a maturity not exceeding five years in any
bank that is a member of the Federal Deposit Insurance Corporation (FDIC).
• Certificates of deposit that exceed FDIC insurance limits shall be
collateralized as required by the Public Deposit Protection Act or
the Savings and Loan Association Public Deposit Protection Act.
• No more than 30% of the total portfolio may be invested in
certificates of deposit.
• No more than 15% of the total portfolio may be invested in any one
issuer.
7. REPURCHASE AGREEMENTS collateralized with marketable U.S. Treasury,
Agency or GSE securities listed in items #1 & 2 above and maintained at a
market value plus accrued interest of at least 102% of the dollar value of the
repurchase agreement.
• Repurchase agreements are subject to a Master Repurchase
Agreement between the County and the provider of the repurchase
agreement. The Master Repurchase Agreement will be substantially
in the form developed by the Securities Industry and Financial
Markets Association(SIFMA).
• Repurchase agreements shall be entered into only with dealers who
have executed an approved Master Repurchase Agreement with the
County and who are recognized as primary dealers with the Federal
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Reserve Bank of New York or have a primary dealer within their
holding company structure.
• For the purpose of this section, the term collateral shall mean
purchased securities under the terms of the Master Repurchase
Agreement and shall be delivered versus payment to the County's
custodian bank for safekeeping on behalf of the County.
• The collateral for the repurchase agreement may not have a maturity
in excess of five years.
• The market value plus accrued interest of the collateral securities
shall be marked-to-the-market no less frequently than weekly.
• The County may utilize Tri-party Repurchase Agreements provided
that the County is satisfied that it has a perfected interest in the
securities used as collateral and that the County has a properly
executed Tri-party Agreement with both the counterparty and
custodian bank.
• The maximum maturity of the repurchase agreement shall not
exceed one year.
8. MUNICIPAL SECURITIES of state or local governments with a maturity not
exceeding five years from the date of trade settlement.
• General obligation and revenue obligation securities of this state or
any political subdivision of this state must be rated at the time of
purchase at least"AA" or its equivalent by at least two NRSROs.
• General obligation and revenue obligation securities of any other
state or political subdivision of any other state must be rated at the
time of purchase at least "AA" or its equivalent by at least two
NRSROs.
• No more than 30% of the total portfolio may be invested in
municipal securities.
• No more than 5% of the total portfolio may be invested in the
securities of any single issuer.
9. SUPRANATIONALS,provided that:
• Issues are U.S. dollar denominated senior unsecured unsubordinated
obligations issued or unconditionally guaranteed by the World
Bank.
• The securities are rated at the time of purchase at least "AA" or its
equivalent by an NRSRO.
• No more than 30% of the total portfolio may be invested in these
securities.
• No more than 10% of the portfolio may be invested in any single
issuer.
• The maximum maturity does not exceed five (5)years.
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XII. Prohibited Investment Vehicles and Practices
State law notwithstanding, any investments not specifically authorized pursuant to this
approved Investment Policy are prohibited, including but not limited to:
• Futures and options
• Investment in inverse floaters,range notes, or mortgage derived interest-only strips
• Investment in any security that could result in a zero interest accrual if held to
maturity
• Trading securities for the sole purpose of speculating on the future direction of
interest rates
• Purchasing or selling securities on margin
• The purchase of foreign currency denominated securities
XIII. Investment Pools/Mutual Funds
The County shall conduct a thorough investigation of any local government investment
pool or money market mutual fund prior to making an investment, and on a continual
basis thereafter. The following general questions should be addressed:
1. A description of eligible investment securities, and a written statement of investment
policy and objectives.
2. A description of interest calculations and how it is distributed, and how gains and
losses are treated.
3. A description of how the securities are safeguarded (including the settlement
processes), and how often the securities are priced and the program audited.
4. A description of who may invest in the program, how often, what size deposit and
withdrawal are allowed.
5. A schedule for receiving statements and portfolio listings.
6. Are reserves, retained earnings, etc. utilized by the pool/fund?
7. A fee schedule, and when and how is it assessed.
8. Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
XIV. Maximum Maturity
To the extent possible, investments shall be matched with anticipated cash flow
requirements and known future liabilities.
The County will not invest in securities maturing more than 5 years from the date of trade
settlement (3 years for corporate securities), unless the Commissioners have by resolution
granted authority to make such an investment.
XV. Risk Management and Diversification
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MITIGATING CREDIT RISK IN THE PORTFOLIO
Credit risk is the risk that a security or a portfolio will lose some or all of its value due to
a real or perceived change in the ability of the issuer to repay its debt. The County will
mitigate credit risk by adopting the following strategies:
• The diversification requirements included in the "Authorized Securities and
Transaction" section of this policy are designed to mitigate credit risk in the
portfolio.
• No more than 5%of the total portfolio maybe invested in securities of any single issuer
per each category in "Authorized Securities and Transaction" section of this policy,
except where the issuer is the U.S. Government, its Agencies and GSEs or where the
security is Money Market Mutual Funds or Local Government Investment Pools or
where the security is a certificate of deposit collateralized as required by the Public
Deposit Protection Act or the Savings and Loan Association Public Deposit Protection
Act.
• The County may elect to sell a security prior to its maturity and record a capital
gain or loss in order to improve the quality, liquidity or yield of the portfolio in
response to market conditions or the County's risk preferences.
• If securities owned by the County are downgraded by a nationally recognized
statistical ratings organization (NRSRO) to a level below the quality required
by this Investment Policy, it will be the County's policy to review the credit
situation and make a determination as to whether to sell or retain such securities
in the portfolio.
• If a security is downgraded,the Treasurer will use discretion in determining
whether to sell or hold the security based on its current maturity, the
economic outlook for the issuer, and other relevant factors.
• If a decision is made to retain a downgraded security in the portfolio, its
presence in the portfolio will be monitored and reported monthly to the
Commissioners.
MITIGATING MARKET RISK IN THE PORTFOLIO
Market risk is the risk that the portfolio value will fluctuate due to changes in the general
level of interest rates. The County recognizes that, over time, longer-term portfolios have
the potential to achieve higher returns. On the other hand, longer-term portfolios have
higher volatility of return. The County will mitigate market risk by providing adequate
liquidity for short-term cash needs,and by making longer-term investments only with funds
that are not needed for current cash flow purposes.
The County further recognizes that certain types of securities, including variable rate
securities, securities with principal pay downs prior to maturity, and securities with
embedded options,will affect the market risk profile of the portfolio differently in different
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interest rate environments.The County,therefore,adopts the following strategies to control
and mitigate its exposure to market risk:
• The County shall maintain at least 10% of its total portfolio in instruments
maturing in 90 days or less to provide sufficient liquidity for expected
disbursements.
• The maximum percent of callable securities (does not include "make whole
call" securities as defined in the Glossary) in the portfolio will be 20%.
• The maximum stated final maturity of individual securities in the portfolio will
be five years, except as otherwise stated in this policy.
The duration of the portfolio will at all times be approximately equal to the duration
(typically, plus or minus 20%) of a Market Benchmark, an index selected by the County
based on the County's investment objectives, constraints and risk tolerances.
XVI. Review of Investment Portfolio
The Treasurer shall periodically,but no less than quarterly,review the portfolio to identify
investments that do not comply with this investment policy and establish protocols for
reporting major and critical incidences of noncompliance to the Commissioners.
XVII. Performance Evaluation
The investment portfolio shall be designed to attain a market-average rate of return
throughout budgetary and economic cycles, taking into account the County's risk
constraints, the cash flow characteristics of the portfolio, and state and local laws,
ordinances or resolutions that restrict investments.
The Treasurer shall monitor and evaluate the portfolio's performance relative to market
benchmark, which will be included in the Treasurer's periodic report. The Treasurer shall
select an appropriate, readily available index to use as a market benchmark.
XVIII.Reporting
SEMI-ANNUAL REPORTS
The Treasurer will submit a semi-annual investment report to the Commissioners which
provides full disclosure of the County's investment activities within 60 days after the end
of the quarter. These reports will disclose, at a minimum, the following information about
the County's portfolio:
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1. An asset listing showing par value, cost and independent third-party fair market value
of each security as of the date of the report, the source of the valuation, type of
investment, issuer, maturity date, interest rate and interest rate.
2. Transactions for the period.
3. A description of the funds, investments and programs (including lending programs)
managed by contracted parties (i.e. local government investment pools, outside money
managers and securities lending agents)
4. A one-page summary report that shows:
a. Average maturity of the portfolio and modified duration of the portfolio;
b. Maturity distribution of the portfolio;
c. Percentage of the portfolio represented by each investment category;
d. Average portfolio credit quality; and,
e. Time-weighted total rate of return for the portfolio for relevant periods compared
to the County's market benchmark returns for the same periods;
5. A statement of compliance with the Investment Policy, including a schedule of any
transactions or holdings which do not comply with this Policy or with Colorado
Revised Statutes, including a justification for their presence in the portfolio and a
timetable for resolution.
ANNUAL REPORTS
A comprehensive annual report will be presented to the Commissioners. This report will
include comparisons of the County's return to the market benchmark return, suggest
policies and improvements that might enhance the investment program, and will include
an investment plan for the coming year.
XIX. Review of Investment Policy
The investment policy will be reviewed at least annually within 120 days of the end of the
fiscal year,to ensure its consistency with the overall objectives of preservation of principal,
liquidity and return, and its relevance to current law and financial and economic trends.
Any recommended modifications or amendments shall be presented by the Treasurer to the
Commissioners for their consideration and adoption.
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GLOSSARY OF INVESTMENT TERMS
AGENCIES. Shorthand market terminology for any obligation issued by a government-sponsored
entity(GSE), or afederally related institution.Most obligations of GSEs are not guaranteed
by the full faith and credit of the US government. Examples are:
FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the
agricultural industry. FFCB issues discount notes and bonds.
FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market.
FHLB issues discount notes and bonds.
FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and
liquidity in the housing market. FHLMC, also called "FreddieMac" issues discount
notes, bonds and mortgage pass-through securities.
FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was
established to provide credit and liquidity in the housing market. FNMA, also known
as "FannieMae," issues discount notes, bonds and mortgage pass-through securities.
GNMA. The Government National Mortgage Association,known as "GinnieMae," issues
mortgage pass-through securities, which are guaranteed by the full faith and credit of
the US Government.
PEFCO.The Private Export Funding Corporation assists exporters.Obligations of PEFCO
are not guaranteed by the full faith and credit of the US government.
TVA. The Tennessee Valley Authority provides flood control and power and promotes
development in portions of the Tennessee, Ohio, and Mississippi River valleys. TVA
currently issues discount notes and bonds.
ASKED. The price at which a seller offers to sell a security.
ASSET BACKED SECURITIES. Securities supported by pools of installment loans or leases or by
pools of revolving lines of credit.
AVERAGE LIFE. In mortgage-related investments, including CMOs, the average time to expected
receipt of principal payments, weighted by the amount of principal expected.
BANKER'S ACCEPTANCE. A money market instrument created to facilitate international trade
transactions. It is highly liquid and safe because the risk of the trade transaction is
transferred to the bank which "accepts"the obligation to pay the investor.
BENCHMARK. A comparison security or portfolio. A performance benchmark is a partial market
index, which reflects the mix of securities allowed under a specific investment policy.
BID. The price at which a buyer offers to buy a security.
BROKER. A broker brings buyers and sellers together for a transaction for which the broker
receives a commission. A broker does not sell securities from his own position.
CALLABLE. A callable security gives the issuer the option to call it from the investor prior to its
maturity. The main cause of a call is a decline in interest rates. If interest rates decline since
an issuer issues securities,it will likely call its current securities and reissue them at a lower
rate of interest. Callable securities have reinvestment risk as the investor may receive its
principal back when interest rates are lower than when the investment was initially made.
CERTIFICATE OF DEPOSIT (CD). A time deposit with a specific maturity evidenced by a
certificate. Large denomination CDs may be marketable.
CERTIFICATE OF DEPOSIT ACCOUNT REGISTRY SYSTEM (CDARS). A private placement
service that allows local agencies to purchase more than $250,000 in CDs from a single
financial institution(must be a participating institution of CDARS)while still maintaining
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FDIC insurance coverage. CDARS is currently the only entity providing this service.
CDARS facilitates the trading of deposits between the California institution and other
participating institutions in amounts that are less than $250,000 each, so that FDIC
coverage is maintained.
COLLATERAL. Securities or cash pledged by a borrower to secure repayment of a loan or
repurchase agreement. Also, securities pledged by a financial institution to secure deposits
of public monies.
COLLATERALIZED MORTGAGE OBLIGATIONS(CMO).Classes of bonds that redistribute the cash
flows of mortgage securities(and whole loans)to create securities that have different levels
of prepayment risk, as compared to the underlying mortgage securities.
COMMERCIAL PAPER. The short-term unsecured debt of corporations.
COST YIELD.The annual income from an investment divided by the purchase cost.Because it does
not give effect to premiums and discounts which may have been included in the purchase
cost, it is an incomplete measure of return.
COUPON. The rate of return at which interest is paid on a bond.
CREDIT RISK. The risk that principal and/or interest on an investment will not be paid in a timely
manner due to changes in the condition of the issuer.
CURRENT YIELD. The annual income from an investment divided by the current market value.
Since the mathematical calculation relies on the current market value rather than the
investor's cost, current yield is unrelated to the actual return the investor will earn if the
security is held to maturity.
DEALER. A dealer acts as a principal in security transactions, selling securities from and buying
securities for his own position.
DEBENTURE. A bond secured only by the general credit of the issuer.
DELIVERY VS.PAYMENT(DVP). A securities industry procedure whereby payment for a security
must be made at the time the security is delivered to the purchaser's agent.
DERIVATIVE. Any security that has principal and/or interest payments which are subject to
uncertainty(but not for reasons of default or credit risk) as to timing and/or amount, or any
security which represents a component of another security which has been separated from
other components ("Stripped" coupons and principal). A derivative is also defined as a
financial instrument the value of which is totally or partially derived from the value of
another instrument, interest rate, or index.
DISCOUNT. The difference between the par value of a bond and the cost of the bond,when the cost
is below par. Some short-term securities, such as T-bills and banker's acceptances, are
known as discount securities. They sell at a discount from par, and return the par value to
the investor at maturity without additional interest. Other securities, which have fixed
coupons,trade at a discount when the coupon rate is lower than the current market rate for
securities of that maturity and/or quality.
DIVERSIFICATION. Dividing investment funds among a variety of investments to avoid excessive
exposure to any one source of risk.
DURATION. The weighted average time to maturity of a bond where the weights are the present
values of the future cash flows.Duration measures the price sensitivity of a bond to changes
in interest rates. (See modified duration).
FEDERAL FUNDS RATE. The rate of interest charged by banks for short-term loans to other banks.
The Federal Reserve Bank through open-market operations establishes it.
FEDERAL OPEN MARKET COMMITTEE. A committee of the Federal Reserve Board that
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establishes monetary policy and executes it through temporary and permanent changes to
the supply of bank reserves.
LEVERAGE. Borrowing funds in order to invest in securities that have the potential to pay earnings
at a rate higher than the cost of borrowing.
LIQUIDITY. The speed and ease with which an asset can be converted to cash.
LOCAL AGENCY INVESTMENT FUND (LAIF). A voluntary investment fund open to government
entities and certain non-profit organizations in California that is managed by the State
Treasurer's Office.
LOCAL GOVERNMENT INVESTMENT POOL. Investment pools that range from the State
Treasurer's Office Local Agency Investment Fund(LAIF)to county pools,to Joint Powers
Authorities (JPAs). These funds are not subject to the same SEC rules applicable to money
market mutual funds.
MAKE WHOLE CALL. A type of call provision on a bond that allows the issuer to pay off the
remaining debt early. Unlike a call option, with a make whole call provision, the issuer
makes a lump sum payment that equals the net present value (NPV) of future coupon
payments that will not be paid because of the call. With this type of call, an investor is
compensated, or "made whole."
MARGIN.The difference between the market value of a security and the loan a broker makes using
that security as collateral.
MARKET RISK. The risk that the value of securities will fluctuate with changes in overall market
conditions or interest rates.
MARKET VALUE. The price at which a security can be traded.
MARKING TO MARKET. The process of posting current market values for securities in a portfolio.
MATURITY. The final date upon which the principal of a security becomes due and payable.
MEDIUM TERM NOTES.Unsecured, investment-grade senior debt securities of major corporations
which are sold in relatively small amounts on either a continuous or an intermittent basis.
MTNs are highly flexible debt instruments that can be structured to respond to market
opportunities or to investor preferences.
MODIFIED DURATION. The percent change in price for a 100 basis point change in yields.
Modified duration is the best single measure of a portfolio's or security's exposure to
market risk.
MONEY MARKET. The market in which short-term debt instruments (T-bills, discount notes,
commercial paper, and banker's acceptances) are issued and traded.
MORTGAGE PASS-THROUGH SECURITIES.A securitized participation in the interest and principal
cash flows from a specified pool of mortgages. Principal and interest payments made on
the mortgages are passed through to the holder of the security.
MUNICIPAL SECURITIES. Securities issued by state and local agencies to finance capital and
operating expenses.
MUTUAL FUND. An entity which pools the funds of investors and invests those funds in a set of
securities which is specifically defined in the fund's prospectus. Mutual funds can be
invested in various types of domestic and/or international stocks,bonds,and money market
instruments, as set forth in the individual fund's prospectus. For most large, institutional
investors, the costs associated with investing in mutual funds are higher than the investor
can obtain through an individually managed portfolio.
NEGOTIABLE CD. A short-term debt instrument that pays interest and is issued by a bank, savings
or federal association, state or federal credit union, or state-licensed branch of a foreign
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bank. Negotiable CDs are traded in a secondary market and are payable upon order to the
bearer or initial depositor(investor).
PREMIUM. The difference between the par value of a bond and the cost of the bond, when the cost
is above par.
PREPAYMENT SPEED. A measure of how quickly principal is repaid to investors in mortgage
securities.
PREPAYMENT WINDOW. The time period over which principal repayments will be received on
mortgage securities at a specified prepayment speed.
PRIMARY DEALER. A financial institution (1) that is a trading counterparty with the Federal
Reserve in its execution of market operations to carry out U.S. monetary policy, and (2)
that participates for statistical reporting purposes in compiling data on activity in the U.S.
Government securities market.
PRUDENT PERSON (PRUDENT INVESTOR) RULE. A standard of responsibility which applies to
fiduciaries. In California,the rule is stated as"Investments shall be managed with the care,
skill, prudence and diligence, under the circumstances then prevailing, that a prudent
person, acting in a like capaTown and familiar with such matters,would use in the conduct
of an enterprise of like character and with like aims to accomplish similar purposes."
REALIZED YIELD. The change in value of the portfolio due to interest received and interest earned
and realized gains and losses. It does not give effect to changes in market value on
securities, which have not been sold from the portfolio.
REGIONAL DEALER. A financial intermediary that buys and sells securities for the benefit of its
customers without maintaining substantial inventories of securities and that is not a primary
dealer.
REPURCHASE AGREEMENT. Short-term purchases of securities with a simultaneous agreement to
sell the securities back at a higher price. From the seller's point of view, the same
transaction is a reverse repurchase agreement.
SAFEKEEPING. A service to bank customers whereby securities are held by the bank in the
customer's name.
STRUCTURED NOTE.A complex,fixed income instrument,which pays interest,based on a formula
tied to other interest rates, commodities or indices. Examples include inverse floating rate
notes which have coupons that increase when other interest rates are falling, and which fall
when other interest rates are rising, and "dual index floaters," which pay interest based on
the relationship between two other interest rates - for example, the yield on the ten-year
Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of
borrowing by purchasing interest rate swap agreements.
SUPRANATIONAL. A Supranational is a multi-national organization whereby member states
transcend national boundaries or interests to share in the decision making to promote
economic development in the member countries.
TOTAL RATE OF RETURN.A measure of a portfolio's performance over time. It is the internal rate
of return, which equates the beginning value of the portfolio with the ending value; it
includes interest earnings, realized and unrealized gains, and losses in the portfolio.
U.S.TREASURY OBLIGATIONS. Securities issued by the U.S. Treasury and backed by the full faith
and credit of the United States. Treasuries are considered to have no credit risk, and are the
benchmark for interest rates on all other securities in the US and overseas. The Treasury
issues both discounted securities and fixed coupon notes and bonds.
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TREASURY BILLS. All securities issued with initial maturities of one year or less are issued as
discounted instruments, and are called Treasury bills. The Treasury currently issues three-
and six-month T-bills at regular weekly auctions. It also issues"cash management"bills as
needed to smooth out cash flows.
TREASURY NOTES. All securities issued with initial maturities of two to ten years are called
Treasury notes, and pay interest semi-annually.
TREASURY BONDS. All securities issued with initial maturities greater than ten years are called
Treasury bonds. Like Treasury notes, they pay interest semi-annually.
VOLATILITY. The rate at which security prices change with changes in general economic
conditions or the general level of interest rates.
YIELD TO MATURITY. The annualized internal rate of return on an investment which equates the
expected cash flows from the investment to its cost.
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