The City Council has eliminated restrictions on how much the city can invest in two types of short-term investments.
By a 5-0 vote last week, the City Council removed $500,000 limits on city investments in repurchase agreements, which are money market accounts backed by bonds, and on banker's acceptances, money market accounts based on letters of credit issued by a bank.
Dennis Danner, the city's director of finance, said he proposed the change because the former policy was too restrictive.
Under the old policy, said Danner, the city in early January had a difficult time temporarily investing nearly $7 million it withdrew from its investment portfolio to pay a legal settlement. While waiting for attorneys to reach an agreement, the city had to hold the money for three days before forwarding it to the recipient, Southern Pacific Transportation Co.
During those three days, the city was unable to invest in repurchase agreements or banker's acceptances because of the dollar limits, and certificates of deposits were unavailable because sufficient collateral could not be obtained from qualified institutions, said Danner.