General Information
New York Cooperative Liquid Assets Securities System (NYCLASS) is a short-term, highly liquid investment program, designed specifically for public-sector funds, that provides the opportunity to invest funds on a cooperative basis in short-term investments which are carefully selected to yield favorable returns while providing maximum safety and liquidiy.
Participation is available to any municipal corporation or special-purpose district empowered under New York State statute, including counties not within The City of New York, cities, towns, villages, school districts, boards of cooperative educational services, and fire districts. Also eligible are county or town improvement districts where the respective county or town is required to pledge its faith and credit for the district’s debt service.
NYCLASS is subject to the terms of the October 20, 1999, CLASS Municipal Cooperation Agreement (the Agreement), and is structured in accordance with New York State General Municipal Law (GML), Article 3-A and Article 5-G, Sections 119-n and o, and Chapter 623 of the Laws of 1998. All NYCLASS investment and custodial policies are in accordance with GML, Sections 10 and 11 (as amended by Chapter 708 of the Laws of 1992). The Agreement, as amended April 23, 2012, is between Village of Potsdam (Lead Participant) and each district and/or municipal corporation that formed the original CLASS program, or that subsequently elects to participate; all parties to the Agreement are collectively referred to as “the Participants.”
NYCLASS Governing Board
The Agreement is administered by an elected Governing Board (the Board) of fifteen members.
A Board member must be either a Participant’s Chief Fiscal Officer or another designated officer or employee of the Participant who has knowledge and expertise in financial matters.
The powers and responsibilities of the Board include:
• administering all aspects of the Agreement
• securing an Irrevocable Letter of Credit (LOC) in an amount sufficient to cover any potential losses to Participants
• entering into appropriate contracts to assist in the management of the Agreement
• monitoring compliance with the investment policy, maturity limitations, and reporting and disclosure requirements established under the Agreement
• testing the investments made pursuant to the Agreement, at least once a month, for sensitivity to changes in interest rates
• disclosing to Participants any rating or change in rating from a nationally recognized statistical rating organization
The Board invests cooperative funds only in securities that are legal for public funds investment in New York. The Board limits these investments to Repurchase Agreements collateralized 102% with U.S. Treasury securities and agency securities back by the full faith and credit of the U.S. Government, U.S. Treasury bills and notes, collateralized bank deposits, and other U.S. Government guaranteed obligations, such as Small Business Administration pools. As of July 28, 2008, 100% of the cooperative's assets were invested in 'AAA' quality U.S. Treasury securities, Repurchase Agreements and a Collateralized Bank Deposit.
Professional services engaged by the Board
The Board enlists the services of several professionals to fulfill its administrative responsibilities: a Program Administrator, an Investment Advisor, an Independent Auditor and a Custodial Bank.
Program Administrator: Cutwater Investor Services Corp. provides the Board with various administrative services including investment advisory services, securities transaction processing, program record keeping, portfolio valuation, and other client-related services. Cutwater Investor Services Corp. maintains the LOC with Deutsche Bank. and the “AAAm” on the NYCLASS portfolio from Standard and Poor's Ratings Agency. Cutwater Investor Services Corp. serves in a similar capacity for over 5000 participants in 12 states and Puerto Rico, with over $10 billion under management.
Cutwater Investor Services Corp. as Investment Advisor, Cutwater Asset Management Corp. (an SEC-registered investment advisor), provides daily market reports and proposed investment strategies to the Lead Participant's Municipal Investment Manager who, in turn, directs investment transactions on behalf of all NYCLASS Participants. Cutwater Asset Management Corp. also performs a monthly "stress test" on the NYCLASS portfolio to determine its sensitivity to interest rate volatility.
Custodian: The Bank of New York Mellon provides third-party custody services for the NYCLASS portfolio. The Custodian is responsible for the receipt and safekeeping of all cooperatively invested NYCLASS assets, which are held in a segregated trust company institutional custody account.
Auditors: O’Connor Davies Munns & Dobbins, LLP conducts an annual independent audit of the NYCLASS program. Copies of the audit are distributed to all Participants and the New York State Comptroller.
Program Objectives
Besides investing public-sector funds only in securities legally permitted under New York law, NYCLASS offers the additional strength of its AAAm rating (S&P), as well as the security of an annual audit by an independent outside audit firm (see above). To further ensure safety, portfolio investments are carefully balanced to correspond with Participants’ anticipated cash flow needs, as well as to minimize the effects of market volatility.
Several security features are also in place to protect against fraud or error. Only designated officials may conduct transactions, and funds may be wired only to previously authorized wire accounts. All conversations with the Program Administrator are recorded for accuracy and verification. As a further safety measure, an LOC, posted with the Custodian, provides funds for withdrawals, to the extent that the sales price of any securities sold is less than the amortized cost.
Liquidity
Participants may conduct transactions (deposits, withdrawals or transfers) on any normal business day. All portfolio investments are carefully selected to ensure that cash is available whenever needed. There is never a penalty for withdrawals of invested funds including all accrued interest. There are no limits on the dollar amount or number of daily transactions, except that total daily withdrawals may not exceed the total balance on deposit. There is no minimum balance requirement or transaction size.
Convenience
To make cash management simple and efficient, NYCLASS includes many features (designed by public-sector financial experts) that make it easy to access account information and simplify record keeping. Participants may make account transactions on any business day, using Cutwater Investor Services Corp.'s toll-free phone number, toll-free fax number or internet connection (Client Connection). Any transaction made with the proper notification to Cutwater Investor Services Corp. before 12:00 p.m. on a business day will be posted and, if appropriate, begin earning interest on that day; transactions made after 12:00 p.m. will be posted the next business day. All transactions are confirmed by same-day fax or email. Participants may also execute transaction notifications in advance, to anticipate important draw dates. This “pre-dating” function avoids timing problems and ensures that cash is available to meet specific payroll or other cash needs.
Participants may establish any number of NYCLASS accounts to track and parallel their own internal fund accounting structures. Although all investment and payment forms have been designed to be simple and user friendly, we can also customize account information to meet special needs. Participants may contact Cutwater Investor Services Corp.’s client service desk on any business day to get specific account information or for other assistance.
Comprehensive monthly statements provide a detailed account history, including daily account activity, transaction numbers, rate summaries, pledged collateral and a portfolio holding report.
These statements have been designed specifically to facilitate public-sector fund accounting, and to establish a clear accounting and audit trail for Participants’ investment records.
Competitive rates of return
NYCLASS Participants can benefit from the professional investment expertise provided by Cutwater Investor Services Corp. and Cutwater Asset Management Corp. Participants in the NYCLASS program can take advantage of economies of scale relative to purchasing power and transaction and clearance costs, as well as custody arrangements. Overall portfolio performance is also enhanced by the different cash flow cycles of the various Participants, effectively allowing the portfolio’s duration to be extended.
Joining NYCLASS
In order to join the NYCLASS program, Participants must approve the NYCLASS Agreement by a majority vote of their governing body. Once the Lead Participant has received and, through the Program Administrator, processed the fully executed Municipal Cooperation Agreement and Authorizing Resolution, the Custodian will be notified and participation can begin. A representative of the Program Administrator will then inform the new Participant of the program’s contribution, withdrawal and transfer procedures, establish the requisite accounts and bank wiring instructions, obtain authorized signatures, set up security arrangements, and answer any questions. The new Participant will receive a binder to hold monthly statements, as well as detailed operational instructions. Participants will also be informed from time to time of the dates and locations of regional Participant meetings where issues relevant to the governance and operations of the NYCLASS program are discussed.
