State law allows the City Council to annually adopt the Statement of Investment Policy. Thus, per the City's fiscal policies, "The City Treasurer will annually submit an investment policy to the City Council for review and adoption." The Investment Policy serves as a guideline for the investment of City and Successor Agency funds. The Brea Investment Advisory Committee annually reviews the Statement of Investment Policy for the City of Brea and the Successor Agency to the Brea Redevelopment Agency.
There have been no recent State Government code changes that are applicable and need to be reflected in the policy at this time. However, the Investment Advisory Committee (IAC), is recommending, based upon Staff's input, the following three (3) changes to the City's Investment Policy:
- Under the section titled, "Investment Instruments," Staff recommends removing "Water rights/preferred stock/common stock of a private mutual water company."
- Under the section titled, "Investment Advisory Committee - B. Composition of Committee, 2. City Council Member (selected by the City Council), Staff recommends adding "who serves as the Chair."
- Under the section titled, "Investment Advisory Committee - B. Composition of Committee, 5. Staff recommends changing from two (2) to three (3) Brea Citizens (selected by the City Council with the City Treasurer as subcommittee members).
Regarding the first change, fee-title water rights are capital assets as opposed to investments and have been correctly reported as such since their acquisition, which is consistent with the guidance provided by the Governmental Accounting Standards Board (GASB). Therefore, water rights should not be included in the City's Investment Policy. Additionally, based on the guidance provided by the GASB and concurrence of the City's auditor, Vavrinek, Trine, Day & Co., the Class "A" preferred stock and common stock in Cal Domestic Water Company have been classified as capital assets and an other non-current asset, respectively, as opposed to Other Investments. These stocks represent water rights and/or entitle the City to access water as part of the overall operation of providing water service to the community, as opposed to an investment instrument acquired and being held for the purpose of income or generating cash. Therefore, these should be removed from the City's Investment Policy.
The second and third changes involve aligning the Investment Policy with recent changes made by the City Council. On July 5, 2016, the City Council adopted Resolution 2016-055 which designates a City Council Member (selected by the City Council) as the Chair of the Investment Advisory Committee. In addition, on February 20, 2018, the City Council adopted Resolution No. 2018-011 which changed the at-large members selected by the City Council from two (2) to three (3). |