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HomeMy WebLinkAboutFS 2009-09-22 Item 2E - Update - City InvestmentFROM DATE SUBJECT ISSUE BACKGROUND DISCUSSION City of Tukwila INFORMATIONAL MEMORANDUM TO Mayor Haggerton Rhonda Berry Finance and Safety Committee Shawn Hunstock, Finance Director September 15, 2009 City Investment Update Jim Haggerton, Mayor Finance Policy and Procedure 03 -17, Investment Policy, calls for quarterly investment reports to the Council Finance and Safety Committee The report is to contain an inventory of investments on hand and summary of performance Quarterly reports have not been provided to the Finance and Safety Committee for some time The City's investments have undergone a substantial change over the last two years In the summer of 2007, an average U S government agency investment, such as Fannie Mae or Freddie Mac, could be purchased with a 5 25% yield Currently such investments earn less than 1 depending on the maturity The intent of this memo is to provide some background on the changes in the City's investment portfolio, and a review of the current holdings Upon my arrival at the City a year ago, our portfolio included several investments yielding over 3 0% We purchased another investment in December of last year that yields 3 0 and since that time have had all other higher interest rate investments either mature or be called Reinvesting the money has been a challenge due to the interest rates now being offered The general consensus is that we are close to, if not at, the bottom of the investment yield curve, meaning interest rates have more than likely dropped to their lowest level and experts are now predicting a recovery some time within the next year or two The current mix of City investments includes several different certificates of deposits These deposits are insured by the Washington State Treasurer's Public Deposit Protection Commission (PDPC) After the failure of the Bank of Clark County in early 2009, the PDPC changed their rules to require 100% collateralization by participating banks and credit unions This level of collateralization insures 100% recovery of public funds on deposit or invested with participating institutions INFORMATIONAL MEMO Page 2 The current portfolio also includes two government agency investments, Federal Farm Credit Bureau and Federal Home Loan Bank. These yield 3 0% and 2 3 respectively The government agency investments are in bonds, rather than equity Equity investment in government agencies have seen a dramatic decline in value over the last year or two, but agency debt carries the implicit guarantee of the U S government. The investment rating of these bonds (AAA) is a signal of the security offered by a government backed guarantee The City's investment in the Local Government Investment Pool (LGIP) is currently at about $28 million The LGIP is an investment pool operated by the Washington State Treasurer Every county, and all cities over 10,000 in population, participate in the LGIP It provides a measure of security, liquidity and return that most cities find convenient to utilize We have made an attempt to move more money out of the LGIP given the return on that investment The LGIP earned 5 3% in August 2007 As of August 2009, money in the LGIP is earning 0 85% We have moved money out of the LGIP into other investments, such as certificates of deposit, to earn a better return on the money Realizing that the best time to buy long, in terms of maturity, is not when the market is at its lowest point, we have been judicious in selecting other investments As the market returns to its pre- recession levels, more money will be moved out of the LGIP into investments yielding a better return The City s benchmark for performance is the 90 day Treasury bill rate, currently 0 17% By virtue of the City's investment in the LGIP, we consistently earn more than the benchmark One of the items I am working on is an update to the City's investment policy In addition to other changes, the new policy will use other factors as a benchmark, such as the 6 month T -bill rate, LIBOR or another index. Security and liquidity are two cornerstones of public investing, but the third characteristic, return, should be maximized to the extent possible within the security and liquidity constraints Another change the new investment policy will provide for is a small portion, less than 20 of investments with a longer maturity of five to ten years When the market turns down, having a portfolio with some long -term investments provides a better return than just short-term investments It can be shown over the long -run that the City's cash position never falls below a certain dollar amount. A portion of this long -term cash balance should be invested longer to maximize return on the City's money RECOMMENDATION No recommendation, for Committee information only ATTACHMENTS Investment Portfolio Summary Ordinance No 1916 Finance Policy and Procedure 03 -17 C l temp \XPGrpWisellnfoMemolnvestment Review.doc Agency Issuer Washington State Local Government Investment Pool Sound Community Bank Federal Farm Credit Bureau US Bank First Savings Bank Sound Community Bank Charter Bank Sound Community Bank Federal Home Loan Bank US Bank (a) Term Purchase Investment Type (months) Date Investment Pool Money market US agency Certificate of Deposit, compensating balance Certificate of Deposit Certificate of Deposit Certificate of Deposit Certificate of Deposit US agency Certificate of Deposit, compensating balance TOTAL Investment Mix State Investment Pool US Agency Certificate of Deposit Money market (a) To maturity or call date, whichever occurs first. City of Tukwila Investment Portfolio Summary As of August 31, 2009 Various Various 12 12/15/2008 12 1/31/2009 24 5/1/2009 23 5/20/2009 24 5/26/2009 12 6/15/2009 6 8/25/2009 4 8/31/2009 Purchase Price 28 075,209 Various 500 000 Various 0 90% 3,000 000 12/15/2009 3 00% 2,500 000 1/31/2010 1 45% 2,000 000 5/1/2011 1,500 000 4/20/2011 1,500 000 5/26/2011 1 000 000 6/15/2010 999,300 2/25/2010 2,000 000 12/31/2009 43,074,509 Maturity Call Date of Total Summary 65.2% Current 6 -month treasury rate 9 3% Current State Pool rate 24 4% Blended Tukwila rate 1.2% 100 0% Yield to Maturity 0 57% 2.50% 2.22% 1 98% 1 68% 2.30% 1 45% 1 09% 0.21% 0.57% 1 09% ATTEST/AUTHENTICATED )I-444_ (f.; 6.4ne E. Cantu, CMC, City Clerk APPROVED AS4O FORM: By e/% Office of [he City Attorney FILED WITH THE CITY CLERK. eh, PASSED BY THE CITY COUNCIL. ,5 PUBLISHED .7'/q/-' EFFECTIVE DATE:.670i 0 ORDINANCE NO. /y /c, Investment Policy 4 -2000 City of Tukwila Washington Ordinance No. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, ADOPTING INVESTMENT POLICIES FOR THE CITY OF TUKWILA; SETTING RESPONSIBILITY FOR MAINTENANCE AND CHANGES; REPEALING ORDINANCE NO. 859 AS CODIFIED AT TUKWILA MUNICIPAL CODE 3.28; PROVIDING FOR SEVERABILITY; AND ESTABLISHING AN EFFECTIVE DATE. WHEREAS, the City of Tukwila established an "Investing City Funds' policy in 1974; and WHEREAS, the City desires to replace the original policy with an investment policy that meets state and national standards; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, DO ORDAIN AS FOLLOWS: Section 1 Adoption of investment policy City Administrative Policy No. 3 -17 "Investment Policy' (Attachment A), is hereby adopted and incorporated into this chapter by reference as if fully set forth herein. Section 2. Maintaining and changing policy The Finance Director is required to maintain the administrative investment policy Changes to the policy require approval of the City Council Finance and Safety Committee. Section 3. Repealer. Ordinance No. 859 as codified at TMC 3.28, is hereby repealed. Section 4. Severability If any section, subsection, paragraph, sentence, clause or phrase of this ordinance or its application to any person or situation should be held to be invalid or unconstitutional for any reason by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity or constitutionality of the remaining portions of this ordinance or its application to any other person or situation. Section 5. Effective Date. This ordinance or a summary thereof shall be published in the official newspaper of the City, and shall take effect and be in full force and effect five (5) days after passage and publication as provided by law PASSED BYTE ITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this /'i day of '7�./ -G1--, 2000. u VV \V� Steven M. Mullet, Mayor 1 Subject: INVESTMENT POLICY Effective Date: Supersedes: 5/15/00 N/A POLICY AND PROCEDURE Page 1 of 1 10 PURPOSE To estabhsh pohcy guidelines for the City's investments. 2.0 ORGANIZATIONS AFFECTED Finance Department 30 REFERENCES Ordinance No 1916 4 0 POLICY See Attached. Index: FINANCE Number 03 -17 Staff Contact: Finance Director Approved by- City of Tukwila, Washington INVESTMENT POLICY Adopted by the Tukwila City Council On May 15, 2000 Ordinance No 1916 Alan R. Doerschel, Finance Director City of Tukwila Investment Policy 1.0 Policy It is the policy of the City of Tukwila to invest public funds in a manner that will provide maximum security with the highest investment return while meeting the daily cash flow demands of the City, while conforming to all state and local statutes governing the investment of public funds. 2.0 Scope This policy applies to the investment of all public funds in the custody of the Tukwila Finance Director Funds covered by this policy include all city funds created by the Tukwila City Council, and are accounted for in the City's Comprehensive Annual Financial Report (CAFR) 2.1 Fund Types General/Current Expense Funds Special Revenue Funds Debt Service Funds Capital Project Funds Enterprise Funds Internal Service Funds Trust Funds Agency Funds 2.2 Funds relating to debt service will be invested in accordance with appropriate bond documents 3 0 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" standard and shall be applied in the context of managing an overall portfolio Investment officers acting in accordance with written procedures and the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments 1 City of Tukwila Investment Policy 4.0 Objectives The primary objectives, in priority order, of the City's Investment activities shall be. Safety Safety of the principal is the foremost objective of the investment program. 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 Liquidity The City's investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements that might be reasonably anticipated. Yield. 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 See 13 0 5.0 Authority Management responsibility of the investment program is vested in the City of Tukwila Financial Director under the express authority granted in RCW 39.29 020 5 1 The City Finance Director may appoint an Investment Officer whose responsibilities will include initiating daily transactions in the investment portfolio based on liquidity and cash flow requirements of the City 5.2 Investments relating to bond proceeds shall be made consistent with 4 0, "Objectives." 6.0 Ethics and Conflict of Interest 6 1 Officers and employees involved in the investment process recognize that the Investment portfolio is subject to public review and evaluation. The overall program will be designed and managed with a degree of professionalism that is worthy of the public trust. 6.2 Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution of the Investment program, or which could impair their ability to make impartial Investment decisions Employees and investment officials shall disclose any material financial interests in financial institutions that conduct business within this jurisdiction, and they shall further disclose any 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 regards to the timing of purchases and sales. City of Tukwila Investment Policy 7 0 Authorized Financial Dealers and Institutions 7 1 Selection of a pnmary bank to provide general banking services for Tukwila will be made by the Finance Director and approved by the City Council and Mayor 7.2 Pursuant to state statutes (RCW 39 58), the deposit of public funds and the placement of "mvestment deposits" (i.e. time deposits, money market deposit accounts and savings deposits of public funds), will be placed only with institutions approved by the Washington Public Deposit Protection Commission (PDPC) as eligible for deposit of pubhc funds. The maximum amount placed with any one depository will not exceed the net worth of the mstitution as determined by the PDPC 7.3 In addition, the Finance Director will mamtam a list of approved broker/ dealers that are authorized to provide mvestment services to the City 7 3 1 Authorized broker /dealers must maintain an office in the State of Washmgton. 7.3.2 Authorized broker /dealers will be limited to pnmary dealers or other dealers that qualify under SEC Rule 15C3 -1, the Uniform Net Capital Rule. 7.3.3 All approved firms and the individuals that represent them are required to read this policy and certify that they understand and will comply with the City's investment objectives and constramts. 7.3 4 Broker /dealers that have been selected to provide investment services to the City are required to submit an audited financial statement annually to the Finance Director, if requested. 8.0 Authorized Investments State statutes and this investment policy limit the types of securities authorized for investment by the City The principal governing statutes are RCW 39.59 and RCW 39 60 The Finance Director may further restrict eligible investments by this policy at his/her discretion. Authonzed investments include (but are not limited to) 8 1 U S Treasury Securities. 8.2 U S Agency Securities (i.e. obligations of any government- sponsored corporation eligible for collateral purposes at the Federal Reserve) 8.3 Certificates of Deposit, Money Market Deposit Accounts and savmgs deposits with qualified depositories within statutory limits as promulgated by the PDPC at the time of investment. 8 4 Bankers Acceptances (BA's) purchased on the secondary market with a rating of A- 1, P -1, its equivalent or better City of Tukwila Investment Policy 8.5 General Obligation Bonds of a state or local government which have at the tune of the investment one of the three highest credit ratings of a nationally recognized rating agency 8 6 The Washmgton State Local Government Investment Pool (LGIP) 9.0 Safekeeping and Custody 9 1 Securities purchased by the Finance Director are to be held in a custodial account m the safekeeping or trust department of a bank actmg as third party custodian for the City of Tukwila. 9.2 All secunty transactions conducted by the custodian on behalf of the City of Tukwila are to be on a delivery- versus payment (DVP) basis. 9.3 Certificates of Deposit, transaction receipts for Money Market Deposit Accounts or savings deposit accounts will be held by the Finance Director 10.0 Diversification The City of Tukwila will diversify its investments by secunty type and institution. 10 1 No more than fifty percent (50 of the City's portfoho, at the time of purchase, shall be m any single financial institution. 10.2 Except, that no more than seventy -five (75 of the City's portfolio, at the time of purchase, shall be invested m the Washmgton Local Government Investment Pool, and 10.3 No more than seventy-five percent (75 of the City's portfolio, at the time of purchase, shall be mvested m U S Treasury or Agency securities. 10 4 The City's Finance Safety Committee can authorize a vanance to 10 1, 10.2 or 10.3 pnor to purchase, if it is deemed m the best overall benefit to the City 11.0 Maturities To the extent possible, and to preclude the sale of securities that could result m a loss, mvestments will be made to comcide with anticipated cash flow require ments. 11 1 At the time of investment, a mmunum of fifty percent (50 of the portfoho will be compnsed of investments maturing or available within one year 11.2 At the time of investment, no securities or investment instruments shall have a maturity exceeding four years, except when compatible with a specific fund's investment needs. 11.3 To provide for ongoing market opportunity, investment matunties should be laddered or staggered to avoid the nsk resulting from over concen- tration of portfolio assets m a specific maturity -4- City of Tukwila Investment Policy 11 4 The average maturity of the portfolio shall not exceed two (2) years. 11 5 Any variance to 11 1, 11.2, 11.3 or 11 4 can be approved by the Finance Safety Committee prior to occurrence, and if deemed m the City's best mterest. 12.0 Internal Controls The Finance Director shall estabhsh a system of internal controls, which are subject to review by the State Auditor Such reviews may result m recommendations to change operation procedures to improve internal controls. Controls shall be designed to protect against loss of public funds due to fraud, error, misrepresen- tation or imprudent actions. 13 0 Performance Standards Benchmarks The investment portfolio will be designed to obtain an average rate of return during budgetary and economic cycles which meets or exceeds the average 90 -day Treasury bill rates for the correspondmg tune penod. This performance standard shall take into account the City's investment nsk constraints and cash flow needs. 14.0 Reporting The Finance Director will submit a quarterly report to the City's Finance Safety Committee that summanzes the current portfolio position and performance. 15.0 Investment Policy Adoption Adoption of this policy is made pursuant to the provisions of RCW 36 48 070 Approved and adopted by the City Council of the City of Tukwila this day of 2000 Glossary Accrued Interest The interest accumulated on a bond since issue date or the last coupon payment. The buyer of the bond pays the market price and accrued interest, which is payable to the seller Agency A debt security issued by a federal or federally sponsored agency Federal agencies are backed by the full faith and credit of the U.S. Government. Federally Sponsored Agencies (FSA's) are backed by each agency with a market perception that there is an implicit government guarantee. (See also Federal Agency Securities and Govemment Securities) Average Maturity A weighted average of the expiration dates for a portfolio of debt securities. An income fund's volatility can be managed by shortening or lengthening the average maturity of its portfolio. Bank Wire An electronic transfer of funds between two financial institutions. Bankers Acceptances (BA's) Bankers Acceptances generally are created on a letter of credit issued in a trade transaction, either foreign or domestic. BA's are short -term, non interest bearing notes sold at a discount and redeemed by the accepting bank at maturity for full face value. Basis Point A measure of interest rate, i.e. 1/100 of 1 percent, or .0001 Bid The indicated price at which a buyer is willing to purchase a security or commodity When selling a security a bid is obtained. (See Offer) Bond A long -term debt security or IOU, issued by a government or corporation that generally pays a stated rate of interest and retums the face value on the maturity date. Book Entry Securities U.S. govemment and federal agency securities that do not exist in definitive (paper) form; they exist only in computerized files maintained at the Federal Reserve Bank. Book Value The amount at which an asset is carried on the books of the owner The book value of an asset does not necessarily have a significant relationship to market value. Certificates of Deposit A deposit of funds, in a bank or savings and loan association, for a specified term that eams interest at a specified rate or rate formula. Credit Risk The risk that a debtor will fail to make timely payments of principal or interest when due. CUSIP Number A nine -digit alpha/numeric combination established by the Committee on Uniform Securities Identification Procedures that is used to identify publicly traded securities. Each publicly traded security receives a unique CUSIP number when the security is issued. Custodian A independent third party (usually a bank or trust company) that holds securities in safekeeping for a client (county). Delivery The providing of a security in an acceptable form to the County or to an agent acting on behalf of the County and independent of the seller The important distinction is that the transfer accomplishes absolute ownership control by the County Delivery vs. Payment (DVP) The simultaneous exchange of securities and cash. The safest method of settling either the purchase or sale of a security In a DVP settlement, the funds are wired from the purchaser's account and the security is delivered from the seller's account in simultaneous interdependent wires. Depository Bank A local bank used as the point of deposit for cash receipts. Discount The amount by which the price of a security is less than its par value. Diversification Dividing available funds among a variety of securities and institutions so as to minimize market risk. Face Value The value stated on the "face" of a bond; thus the redemption value at maturity In debt securities the term is interchangeable with "par" Federal Agency Securities Securities issued by a govemment sponsored agency These agencies were created by Congress to undertake various types of financing without tapping the public treasury In order to do so, Congress gave these agencies the power to borrow money by issuing securities. These securities are backed by the issuing agency and are not direct govemment obligations, however, there is a market perception that there is an implicit govemment guarantee. These agencies include the Federal National Mortgage Association (FnMA), the Federal Home Loan Bank System (FHLB), and the Federal Fame Credit System (FFCB). Federal Funds Short-term investments/borrowings between banks. Despite its name, these transactions are not loans to or from the federal govemment. Nor do they include any guarantee or backing from the federal government. They are called "federal funds" because the parties exchange the funds by transferring balances from the lender's account with its Federal Reserve District Bank to the borrower's account with its Federal Reserve District Bank. Federal Funds Rate The rate at which banks borrow from one another generally, as an ovemight loan. Federal Reserve System The central bank of the United States which has regulated credit in the economy since its inception in 1913 It includes the Federal Reserve Bank, 14 district banks and member banks of the Federal Reserve, and is govemed by the Federal Reserve Board. Government Securities Any debt obligation issued by the U.S. govemment, its agencies or instrumentalities. Certain securities, such as Treasury bonds and Govemment National Mortgage Association Notes (GNMA or Ginnie Maes), are backed by the U.S. Govemment as to principal and interest payments. Other securities, such as those issued by the Federal Home Loan Mortgage Corporation, or Freddie Mac, are backed by the issuing agency Liquidity Refers to the ease and speed with which an asset can be converted into cash without a substantial loss in value. Loss The excess of the cost or book value of an asset over its selling price. Local Government Investment Pool (LGIP) The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. Mark -to- Market An adjustment in the valuation of a securities portfolio to reflect the current market values of the respective securities in the portfolio This process is also used to ensure that margin accounts are in compliance with maintenance. Market Value The price at which a security is trading and could presumably be sold. Master Repurchase Agreement An agreement between the investor and the dealer or financial institution. This agreement defines the nature of the transactions, identifies the relationship between the parties, establishes normal practices regarding ownership and custody of the collateral securities during the term of the investment, provides for remedies in the event of a default by either party and otherwise clarifies issues of ownership. Maturity The date upon which the principal or stated value of an investment becomes due. Offer The indicated price at which a seller is willing to sell a security or commodity When buying a security an offer is obtained. (See Bid) Par Value The nominal or face value of a debt security• that is, the value at maturity Premium The amount by which a bond sells above its par value. Prime Rate The interest rate a bank charges on loans to its most creditworthy customers. Frequently cited as a standard for general interest rate levels in the economy Principal An amount upon which interest is charged or eamed. Qualified Public Depository A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated, for the benefit of the commission, eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit protection Commission to hold public deposits. Repurchase Agreement (REPO) A form of secured, short-term borrowing in which a security is sold with a simultaneous agreement to buy it back from the purchaser at a future date. Every transaction where a security is sold under an agreement to be repurchased is a repo from the seller/borrower's point of view and a reverse repurchase agreement from the buyer /lender's point of view Safekeeping A service to customers rendered by banks for a fee whereby all securities and valuables of all types and descriptions are held in the bank's vault for protection or in the case of book entry securities, are held and recorded in the customer's name and are inaccessible to anyone else. Securities Bonds, notes, mortgages or other forms of negotiable or non negotiable instruments. Settlement Date The day on which the payment and the security actually change hands. (See Trade Date) Spread The difference between two prices or two rates. Bankers have many different and highly specific usages of this term. For example, traders use spread to mean the difference between bid and asked prices for a security Underwriters use spread to mean the difference between the price realized by the issuer and the price paid by the investor Bank analysts use spread to mean the difference between the average rate paid on a bank's assets and the average rate paid on the bank's liabilities. In asset liability management, spread most often refers to the difference between two rates or yields. Step -Ups A form of callable security for which the coupon rate increases if the security is not called. Strips Principal and interest cash flows due from any interest bearing security can be separated into different financial instruments. This is done by a process called "stripping." Each coupon payment is separated from the underlying investment to create a separate security For example, a five -year note can be separated into 11 pieces: 10 semiannual coupon payments and the final principal payment. Each of those 11 pieces is a separate cash flow that can be purchased or sold just like a Treasury Bill. The cash flows are sold at a discount. The amount of the discount and the time until the cash flow is paid determine the investor's retum. Trade Date The day on which a buyer and seller agree upon a transaction. Third Party Safekeeping A custodian for the investor holds securities in safekeeping. Under this arrangement, the dealer or bank investment department has no access to the securities being held. Time Deposit Interest bearing deposit at a savings institution that has a specific maturity Treasury Bills Short-term obligations issued by the U S. Treasury maturities of one year or Tess. They do not pay interest but instead are basis. Treasury Bonds Long -term obligations issued by the U.S. Treasury initial maturities greater than ten years. Treasury Notes (T- Notes) Medium term obligations issued by the U.S. issued in maturities for more than one to ten years. Bills are issued for issued on a discount Bonds are issued for Treasury Notes are Yield Loosely refers to the annual return on an investment expressed as a percentage on an annual basis. For interest bearing securities, the yield is a function of the rate, the purchase price, and the income that can be eamed from the reinvestment of income received prior to maturity call, or sale. While various formulas are used to express yields in different variations, the underlying calculation is made by dividing the amount realized by the cost of the security and annualizing the result. Yield Curve A graph (x -axis time; y -axis rate) showing the relationship at a single point in time between the available maturities of a security or similar securities with essentially identical credit risk and the yields that can be eamed for each of those available maturities. Yield Curve Slope A yield curve that depicts the customary situation where long -term rates are higher than short-term rates is called an upward sloping or positive yield curve. A yield curve depicting the less common occurrence where short-term rates are higher than long -term rates is called a downwardly sloping or inverted yield curve. Yield curves also describe the amount of difference between short-term and long -term rates. When long -term rates are much higher than short-term rates, the yield curve is said to be steep. When long -term rates are virtually identical to short-term rates, the yield curve is said to be flat. Zero Coupon Bond A type of debt security that does not pay periodic interest. Zero coupon securities are bought and sold at prices that are less than the par values of the securities. The discount, or difference between the principal paid to purchase the security and the principal retumed at maturity, constitutes the investor's retum. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, ADOPTING INVESTMENT POLICIES FOR THE CITY OF TUKWILA, SETTING RESPONSIBILITY FOR MAINTENANCE AND CHANGES, REPEALING ORDINANCE NO 859 AS CODIFIED AT TUKWILA MUNICIPAL CODE 3.28, PROVIDING FOR SEVERABILITY, AND ESTABLISHING AN EFFECTIVE DA1'B. On i.h" !)d the City Council of the City of Tukwila passed Ordinance No to replace the original "Investmg City Funds" policy established m 1974 with an mveslinent policy that meets state and national standards, providing for severability; and establishing an effective date. The full text of this ordinance will be mailed without charge to anyone who submits a written request to the City Clerk of the City of Tukwila for a copy of the text. APPROVED by the City Council at its meeting of Published Seattle Times. /q/O`er 1 L L CITY OF TUKWILA SUMMARY OF ORDINANCE NO E. Cantu, CMC, City Clerk