Chapter 3.05
INVESTMENT OF CITY FUNDS
Sections:
3.05.040 Authorization to invest excess or inactive moneys.
3.05.050 Determination of moneys available for investment.
3.05.070 Ethics and conflicts of interest.
3.05.080 Authorized financial dealers and institutions.
3.05.090 Authorized investment instruments.
3.05.100 Safekeeping and custody.
3.05.120 Individual or commingled funds.
3.05.140 Performance standards.
3.05.010 Policy statement.
It is the policy of the city to invest public funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands on the treasury and conforming to all Washington statutes governing the investment of public funds and applicable bond covenants. (Ord. 2005-2 § 1, 2005).
3.05.020 Scope.
This investment policy applies to all financial assets of the city as limited by RCW 35A.40.050 and 35.39.030. These funds are accounted for in the city’s comprehensive annual financial report and include:
A. General governmental funds;
B. Special revenue funds;
C. Debt service funds;
D. Enterprise funds;
E. Internal service funds;
F. Pension funds;
G. Capital improvement funds;
H. Trust funds;
I. Any new funds created by city council. (Ord. 2005-2 § 1, 2005).
3.05.030 Objectives.
The primary objectives, in order of priority, of the city’s investment activities shall be:
A. Safety. Safety of principal is the foremost objective of the city. Investments of the city shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.
B. Liquidity. The city’s investment portfolio will remain sufficiently liquid to enable the city to meet all operating requirements which might be reasonably anticipated.
C. Return on Investment. The city’s investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the city’s investment risk constraints and the cash flow characteristics of the portfolio. (Ord. 2005-2 § 1, 2005).
3.05.040 Authorization to invest excess or inactive moneys.
The city treasurer shall develop specific policies and procedures consistent with this chapter to ensure sound and prudent investment practices. The day-to-day investment authority subject to those practices is delegated to the city treasurer. See RCW 35A.42.010. (Ord. 2005-2 § 1, 2005).
3.05.050 Determination of moneys available for investment.
The city treasurer shall be responsible for determining the amount of money available in any fund of any department for investment purposes. See RCW 35A.40.050. (Ord. 2005-2 § 1, 2005).
3.05.060 Standard of care.
Investments shall be made with judgment and care – under circumstances then prevailing – which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
The standard of prudence to be used by investment officials shall be the “prudent person” and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. (Ord. 2005-2 § 1, 2005).
3.05.070 Ethics and conflicts of interest.
Officers and employees involved in the investment process shall refrain from personal business activity that could 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 city manager any material financial interests in financial institutions that conduct business within the city’s jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the city’s portfolio. Employees and officers shall subordinate their personal investment transactions to those of the city, particularly with regard to the time of purchases and sales. (Ord. 2005-2 § 1, 2005).
3.05.080 Authorized financial dealers and institutions.
The city treasurer shall maintain a list of financial institutions as required by the public deposit protection commission, authorized to provide investment services. In addition, a list shall also be maintained of approved security brokers/dealers selected by credit worthiness, who maintain an office in the state of Washington. These may include primary dealers, national dealers and regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule). No public deposit shall be made except in a qualified public depository. When services and rates are comparable, preference shall be given to dealers who pay taxes to the city of Toppenish. (Ord. 2005-2 § 1, 2005).
3.05.090 Authorized investment instruments.
Excess or inactive funds may be placed in any of the following investments:
A. Demand or investment deposits in qualified public depositaries located within the state, pursuant to RCW 39.58.080 and 39.58.130, as presently enacted or subsequently amended;
B. United States government bonds, notes, bills, certificates of indebtedness, or interim financing warrants of a local improvement district of the city of Toppenish which is within the protection of the local improvement guaranty fund law, pursuant to RCW 35.39.034, as presently enacted or subsequently amended;
C. Mutual funds and money market funds, pursuant to RCW 39.59.030, as presently enacted or subsequently amended;
D. Bonds and other obligations of a metropolitan municipal corporation pursuant to RCW 35.58.510, as presently enacted or subsequently amended;
E. Notes or bonds secured by mortgages insured by the federal agencies or corporations, pursuant to RCW 39.60.010 through 39.60.040, as presently enacted or subsequently amended;
F. Notes, bonds and debentures pursuant to RCW 39.60.050, as presently enacted or subsequently amended;
G. The Local Government Investment Pool in the State Treasury in accordance with Chapter 43.250 RCW;
H. Such other investments authorized by law and approved by ordinance or resolution of the Toppenish city council. (Ord. 2005-2 § 1, 2005).
3.05.100 Safekeeping and custody.
All security transactions entered into by the city shall be conducted on a delivery-versus-payment (DVP) basis. Securities will be held by a third-party custodian designated by the city treasurer. Investment officials shall be bonded to protect the city against loss due to possible embezzlement, malfeasance, or other defalcation. (Ord. 2005-2 § 1, 2005).
3.05.110 Diversification.
It shall be the policy of the city to diversify its investment portfolio to eliminate the risk of loss resulting from overconcentration of assets in a specific maturity, a specific insurer, or a specific class of securities. With the exception of U.S. Treasury securities and the state investment pool, no more than 20 percent shall be in banker’s acceptances and no more than 10 percent in certificates of deposit with savings and loans. With regard to banker’s acceptances, no more than 10 percent of the portfolio shall be with any one institution. With regard to certificates of deposit, no more than 33 percent of the portfolio shall be with any one financial institution. (Ord. 2005-2 § 1, 2005).
3.05.120 Individual or commingled funds.
Moneys determined to be available for investment purposes may be invested on an individual fund basis or may, unless otherwise restricted by law, be commingled within one common investment portfolio for the mutual benefit of all participating funds; provided, that if such moneys are commingled in a common investment portfolio, all income derived therefrom shall be apportioned among the various participating funds in direct proportion to the amount of money invested by each. Any excess or inactive funds not otherwise invested for the specific benefit of any particular fund may be invested for the benefit of the general fund. See RCW 35A.40.050. (Ord. 2005-2 § 1, 2005).
3.05.130 Reporting.
The finance director is charged with the responsibility of including a report on investment activity and returns with the monthly financial reports on a quarterly basis. (Ord. 2005-2 § 1, 2005).
3.05.140 Performance standards.
A. The city investment portfolio will be designed to obtain a market average rate of return during the budgetary and economic cycles, taking into account the city’s investment risk constraints and cash flow needs.
B. Market Yield. The basis used by the finance director to determine that market yields are being achieved shall be the average net earnings rate from the Washington State Treasurer’s Local Government Investment Pool. (Ord. 2005-2 § 1, 2005).