Item Description:
title
Authorize Investment Officer to use additional statutory investment authority relating to repurchase agreement and reverse repurchase agreements through 2025 within statutory and board-authorized limits
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Resolution:
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BE IT RESOLVED, that the Investment Officer of Hennepin County be authorized to utilize the additional investment authority set forth in Minnesota Statute 118A.07, relating to repurchase agreements and reverse repurchase agreements, through December 31, 2025, within statutory limits and in conformance with the written policies and procedures of the Office of Budget and Finance, and that the Investment Officer submit a report to the Board in 2025 on the findings of the oversight process; and
BE IT FURTHER RESOLVED, that the limit on the amount of investments owned, with maturity dates greater than 12 months, is set at 120 percent of the prior year’s average daily invested assets.
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Background:
This Board Action Request seeks the continuation of the additional investment authority described in Minnesota Statute 118A.07 which the Investment Officer uses in the safekeeping, management and investment of county deposits and funds. It requires annual authorization by the local governing body as well as the maintenance of policies and procedures and an oversight process which are documented below and in the attachments.
For more than three decades, the county's treasury practices have incorporated the use of Treasury bonds, bonds issued by government agencies, municipal bonds, collateralized deposits, repurchase agreements and reverse repurchase agreements, and high-quality bank commercial paper when useful and appropriate to the safe management of county funds.
The requested authority specifically allows the Investment Officer to enter into reverse repurchase agreements for periods beyond the 90-day term allowed without the additional authority through 2025.
Similar to past years, the requested authority follows an internal limit on amount of investments owned at 120% of the prior year's average invested assets; this is 10% below the statutory limit of 130%. This limit restricts the size of the county’s investment portfolio. It recognizes that OBF also uses the board-authorized Hennepin County commercial paper issuance program as an added cash management tool. Finally, the limit signals to financial markets that OBF manages use of available financing conservatively.
The Office of Budget and Finance has policies and procedures that define its management of county deposits and investments. They address: (1) collateralization requirements on bank deposits; (2) maturities of investments; (3) use of investments such as repurchase and reverse repurchase agreements, floating rate securities, callable and puttable securities, and interest rate swap agreements; (4) the weighted duration of the portfolio; and (5) monitoring of the credit quality of counterparties with whom OBF transacts.
OBF staff discusses markets and investment strategies with its Investment Policy Advisory Committee, a group of volunteer members from the professional community with government and financial markets experience who offer insights on risks and opportunities. At its September 23, 2024 meeting, after hearing staff presentation and holding discussion, the committee approved continuation of the county’s investment strategies, as presented.
Documentation of policies and procedures is maintained by the Office of Budget and Finance. There are control and oversight procedures to monitor investment transactions and strategy, and portfolio performance. They include internal and external auditing, credit rating agency reviews, Investment Policy Advisory Committee review, internal controls on the execution and recording of investment transactions, and monthly reporting by general accounting staff of the previously discussed limit on amounts invested.
The attachments comprise the oversight report referenced in the prior year’s resolution (23-0407). They provide details regarding the use of the additional investment authority. Exhibit I documents the proposed usage of the additional authority. Exhibit II is a report of oversight practices. Further, the Investment Officer shall report to the board in 2025 on the findings of the oversight process. Exhibit III is a summary of the current investment portfolio as of September 30, 2024 with comparisons to the prior year.
In addition to its own funds, the county’s investment portfolio includes funds of the Regional Rail Authority, Housing and Redevelopment Authority, Hennepin Healthcare System, Hennepin Health Foundation, Three Rivers Park District, and Minnesota Ballpark Authority.
recommendation
Recommendation from County Administrator: Recommend Approval