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HomeMy WebLinkAbout3035 RESOLUTION NO. :3i'1-::S5 A RESOLUTION of the City Council of the City of Bremerton, Washington, Amending a Policy for the Investment of City Funds as adopted by Resolution 2618. WHEREAS, the present investment policy ofthe City was adopted in 1997 pursuant to Resolution 2618; and WHEREAS, the City Council is desirous of updating this policy to meet changing local needs in order to provide for sound management of its financial assets; NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF BREMERTON, WASHINGTON, DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The Bremerton City Council does hereby adopt the amended City of Bremerton Investment Policy providing for the management of its financial assets to read as set forth in Exhibit A attached hereto and incorporated herein by reference. SECTION 2. Severability. If anyone or more sections, subsections, or sentences of this Resolution are held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portion of this Resolution and the same shall remain in full force and effect. SECTION 3. Effective Date. This Resolution shall take effect and be in force immediately upon its passage. APPROVED AS TO FORM: ~~~ ROG A. LU~OVICH, Ciry~- " ATTEST: ~d~ City Cler R:\Legal\Legal\Resolutions\Finance\2007 Investment Policy. doc 1 Investment Policy CITY OF BREMERTON INVESTMENT POLICY FINANCIAL POLICY INDEX EFFECTIVE DATE: 1986 Cash/Funding APPROVED 1-10-13 REVISED DATE: 7/97 Resolution # REVISION DRAFT: 9/07 1. POLICY STATEMENT: It is the policy of the City of Bremerton 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. 2. SCOPE: This investment policy applies to all financial assets of the City. These funds are accounted for in the City's Annual Financial Report and include: Funds: General Fund Special Revenue Funds Debt Service Fund Capital Project Funds Enterprise Funds Internal Service Funds Trust and Agency Funds Any new fund created by Council 3. PRUDENCE: 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 this policy and written procedures EXHIBIT A 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. 4. OBJECTIVE: The primary objectives, in priority order, ofthe City's investment activities shall be: SAFETY: Safety of principal is the foremost objective of the City. Investments of the City of Bremerton 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. LIQUIDITY: The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated. 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, consistent with the City's investment risk constraints and the cash flow characteristics ofthe portfolio. In addition to the primary objectives, it is a requirement that City investments will be in compliance with all statutes governing the investment of public funds in the State of Washington. 5. DELEGATION OF AUTHORITY: Management responsibility for the investment program is hereby delegated to the City Treasurer, who shall establish written procedures for the operation of the investment program, consistent with this investment policy. The City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. 6. 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. Empl9yees and investment officials shall disclose to the Mayor any material financial interests in financial institutions that conduct business within this 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 ofthe City of Bremerton, particularly with regard to the time of purchases and sales. 7. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS: The City Treasurer will maintain a list of financial institutions as required by the Public Deposit Cominission, authorized to provide investment services (RCW 39.58.080). In addition, a list will also be maintained of approved security broker/dealers, who maintain an office in the State of Washington. These may include "primary" dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C-31 (uniform net capital rule). No public deposit shall be made except in a qualified public depository in the State of Washington. If an advisor transacts trades on behalf on the City, the advisor's approved dealer list is acceptable. The advisor's list of dealer relationships must be provided to and preapproved by the City and a copy kept on file in the City's records. 8. AUTHORIZED INVESTMENTS: All municipal corporations in Washington State, including the City of Bremerton, are empowered by RCW 35.39.30 to invest idle cash in the specified types of securities. The following list includes allowed securities most likely to be contained in the City's core portfolio Investment deposits, including certificates of deposit, with qualified public depositories as defined in Chapter 39.58 RCW. Certificates, notes, or bonds ofthe United States, or other obligations of the United States or its agencies, or of any corporation wholly owned by the government ofthe United States. Obligations of government-sponsored corporations which are eligible as collateral for advances to member banks as determined by the Board of Governors ofthe Federal Reserve System. Banker's acceptances purchased on the secondary market. Repurchase agreements for securities listed in 2,3, and 4 above, provided that the transaction is structured so that the City of Bremerton obtains control over the underlying securities and a Master Repurchase Agreement has been signed with the bank or dealer. 9. INVESTMENT POOLS/MUTUAL FUNDS: The City is allowed to invest in the Washington State Local Government Investment Pool. The City is restricted to invest in mutual funds by State Statute, with the exception of funds that are subject to arbitrage provisions of section 148 of the federal internal revenue code. 10. COLLATERALIZATION: The City does not actively invest in repurchase agreements for short term investments. However, if a repurchase agreement is utilized, collateralization is required. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be (102%) of market value of principal and accrued interest. Collateral shall be limited to Treasury and Government Sponsored Enterprise Agency securities only, with a maximum maturity of three years. Collateral will always be held by an independent third party with whom the entity has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the entity and retained. 11. SAFEKEEPING AND CUSTODY: All security transactions, including collateral for repurchase agreements, entered into by the City of Bremerton shall be conducted on a delivery-versus- payment (DVP) basis. Securities will be held by a third party custodian designated by the City Treasurer. 12. DIVERSIFICATION: The City will diversify its investments by security type and institution. With the exception of U.S. Treasury securities and the State Investment Pool, no more than 30% ofthe City's total investment portfolio will be invested in a single security type or with a single financial institution. 13. MATURITIES: To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City will not directly invest in securities maturing more than five years from the date of purchase. However, the City may collateralize its repurchase agreements using longer-dated investments. 14. INTERNAL CONTROL: The City Treasurer shall establish a process of independent review by an external auditor. This review will provide internal control by assuring that policies and procedures are being complied with. Such review may also result in recommendations to change operating procedures to improve internal control. 15. EXTERNAL CONTROL: The City Treasurer may hire an investment advisor to provide strategy, reporting, competitive pricing and overall oversight of the investment process but the City Treasurer will retain and make all decisions as to transaction actually executed. 16. PERFORMANCE STANDARDS: The City of Bremerton investment portfolio will be designed with the objective of obtaining a market average rate of return throughout budgetary and economic cycles, commensurate with the City's investment risk constraints and cash flow needs. Overall Portfolio Benchmark: The City's investment strategy is passive. Given this strategy, the returns of the overall portfolio will be compared to the State Local Government Investment Pool. Excess Liquidity Portfolio (Core Fund) Benchmark: A market benchmark will be established based on Treasury securities with maturities of 0-3 years to manage the investments in the portfolio that consist of open market securities. This will ensure that the appropriate risk and return characteristics of the portfolio are consistent with the City's expectations. 17. REPORTING: The City Treasurer shall provide to the Mayor and City Council monthly investment reports which provide a clear picture of the status of the current investment portfolio. The management report may include comments on the fixed income markets and economic conditions, discussions regarding restrictions on percentage of investment by categories, possible changes in the portfolio structure going forward and thoughts on investment strategies. Schedules in the monthly report should include the following: A listing of individual securities held at the end of the reporting period. Anticipated maturity and final maturity of all investment holdings. Coupon, discount or earnings rate. Par value, amortized book value and market value. 18. INVESTMENT POLICY ADOPTION: The City of Bremerton investment policy shall be adopted by resolution of the City Council. The policy shall be reviewed on an annual basis by the Finance Committee and any modifications made thereto must be approved by the City Council.