HomeMy WebLinkAboutFS 2010-11-16 Item 2D - Report/Policy - 2010 Third Quarter Investment Report / Investment Policy 1 J s
y City of Tukwila
Jim Haggerton, Mayor
2
908'' INFORMATIONAL MEMORANDUM
TO Mayor Haggerton
Finance and Safety Committee
FROM: Peggy McCarthy, Deputy Finance Director
DATE: October 27, 2010
SUBJECT: Third Quarter 2010 Cash Investment Report and Investment Policy Update
ISSUE
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 and a
summary of performance. The September 30, 2010 Investment Report is included with this memorandum
and is discussed below.
Additionally, the Committee is being asked to review and approve the updated draft Investment Policy
which was presented at the June 22, 2010 Finance Safety Committee Meeting.
BACKGROUND
Cash Investment Report
The Cash Investment Report provides information on a) portfolio components description and
characteristics of securities and deposits held, b) portfolio performance weighted average yield of the
portfolio in comparison to benchmarks, c) compliance with investment policy in terms of investment
maturities and diversification of financial institutions and investment types, d) cash and investment
balances, and changes therein, by fund and fund group and e) investment environment and strategies.
Investment Policy
An updated version of the investment policy was presented and discussed at the June 22, 2010 Finance
Safety Committee meeting. The updated policy draft was sent to the Washington Municipal Treasurers
Association on July 7, 2010 for review and certification. However, the review and certification have not
been completed and the City has not been notified as to when this will happen. Although the original
intent was to obtain Committee approval after receiving certification, the uncertainty as to when this will
be accomplished has prompted the current request for review and approval.
DISCUSSION
Cash Investment Report
Portfolio Components Characteristics. The portfolio components remain the same as those at June 30,
2010 with no purchases or redemptions occurring during the third quarter. The Local Government
Investment Pool (LGIP) balance increased by $7.2 million due primarily to the $5.9 million bond issue
proceeds received July 31, 2010. The weighted average yield to maturity declined slightly to .72% at
September 30, 2010 from .78% at June 30, 2010 due to the increase in the LGIP balance, which has a
relatively low yield at .30 The portfolio complies with the investment policy standards with respect to
investment mix, investment maturities and diversification of financial institutions.
Fund and Fund Group Cash Investment Balances. The most significant changes in fund and fund group
balances from June 30, 2010 to September 30, 2010 occurred in the general fund with a $3.6 million
decline and in the Special Revenue and Capital Project funds with an increase of $5.9 million and $1.9
33
INFORMATIONAL MEMO
Page 2
million respectively. The increases are due primarily to receipt of $4.3 million bond proceeds into the
104 Arterial Street fund, and $1.6 million bond proceeds into the 303 General Government Improvements
fund. The decline in the general fund follows an annual cyclical pattern whereby the cash and investment
balances decrease just before the April and October real estate tax payments are due, then increase after
the payments are received. The general fund balance will benefit from the receipt of approximately $6
million of real estate tax payments due to King County October 31 and received mostly in November.
Additionally, beginning in 2011, sales tax will be allocated exclusively to the general fund with transfers
out of the general fund to other funds on an as needed basis. This will help alleviate any overfunding
situations in the other government funds.
Investment Environment and Strategies. Rates remain extremely low, especially in the short term. There
is speculation that additional quantitative easing will be undertaken by the Federal government that could
result in a further reduction in longer term rates.
At September 30, 2010, the portfolio had almost $32 million in cash and equivalents and $10 million of
investments maturing in the forthcoming 3 to 6 months. In an attempt to maximize return while
maintaining liquidity, the City plans to follow a laddered portfolio approach. Under the laddering
strategy, maturities are staggered over the allowable investment term. As each security issue matures, it
is reinvested at the long end of the portfolio.
One of the strategies contemplated for future investments, and contingent on the approval of the
investment policy update, is the purchase of taxable municipal bonds with mid range terms of 5 7 years.
These purchases could lock in rates for a longer period at more favorable interest rates. The municipal
bond yields are considerably better than the Treasury rates as demonstrated by a recent bond issuance by
the City of Tacoma. As of October 26, 2010 (bonds were issued on October 27, 2010), the anticipated
yield on the City of Tacoma 5 year bonds was 2.44% compared with the 5 year Treasury note yield which
was 1.23
Investment Policy
The June 22, 2010 investment policy draft has been updated with only one significant change. The
change is to section 11.1 which currently reads, "At the time of investment, a minimum of fifty percent
(50 of the portfolio will be comprised of investments maturing or available within one year." The
proposed change would reduce this percentage to 30% from 50 Enacting this change would free up
funds for investment in longer term, higher yielding securities without compromising cash flow needs.
Based on an analysis of monthly changes in cash and investment balances from January 2008 through
September 2010, the largest monthly decline over this period was $6.9 million and occurred in December
2008. Using this $6.9 million amount as a threshold for the minimum liquidity requirements, it can be
demonstrated that in each of the past ten years, 30% of the year -end portfolio balances exceeded this
threshold with the lowest calculated total of $8.4 million in 1999 and the highest calculated total of $14.4
in 2008. This policy change would allow the City to sufficiently fund operations but would also provide
an opportunity for increased investment earnings.
RECOMMENDATION
Cash and Investment Report Presented for Council information only.
Investment Policy Council is being asked to approve the November 2, 2010 updated Investment Policy.
ATTACHMENTS
Cash and Investment Report as of September 30, 2010
Cash and Investment Balances by Fund and Fund Group at September 30, 2010
Yield curve and Treasury Rates at 9 -30 -10
3 4 H•1lnvst1201019 -30 -10 Investment ReportlInfoMemo Invstmnt Rprt 9- 30 -10, 10 -27 -10 a.docx
INFORMATIONAL MEMO
Page 3
Cash and Investment Balances January 2008 through September 2010 -Graph
Cash and Investment Balances January 2008 through September 2010
Investment Policy draft
Laddered Investment Portfolio description
1-1:1lnvst1201019 -30 -10 Investment ReportlInfoMemo Invstmnt Rprt 9- 30 -10, 10 -27 -10 a.docx 35
36
CITY OF TUKWILA
CASH INVESTMENT REPORT
September 30, 2010
(a)
Purchase Maturity Term Par Book Yield to Annualized
Agency Issuer Investment Tyne Date Date (month; Value Balance Maturity Return
CASH CASH EQUIVALENTS
US Bank Depository Various (b) 03 1,030,486 1,030,486 0 00%
Washington State Local Investment Pool Various (b) 03 30,447,734 30,447,734 0 30% 91,343
Government Investment Pool
Sound Community Bank Money market Various (b) 03 500,000 503,260 0.20% 1,000
Total Cash Cash Equivalents 1 .03 I 31,978,220 31,981,480 0.29% 92,343
INVESTMENTS
Certificates of Deposit in order of maturity
Sound Community Bank Certificate of Deposit 03/04/2010 03/04/2011 12 5,000,000 5,028,479 0 99% 49,500
Sound Community Bank Certificate of Deposit 05/20/2009 04/20/2011 23 1,500,000 1,544,935 2.22% 33,330
First Savings Bank Northwest Certificate of Deposit 05/01/2009 05/01/2011 24 2,000,000 2,068,939 2.50% 50,000
Charter Bank Certificate of Deposit 05/26/2009 05/26/2011 24 1,500,000 1,540,216 1 98% 29,700
Sterling Bank Certificate of Deposit 02/16/2010 08/16/2011 18 250,000 251,858 1.20% 3,000
US Bank Certificate of Deposit, 02/15/2010 02/15/2013 36 3,450,000 3,480,897 1 44% 49,680
compensating balance
I 22 I 13,700,000 13,915,324 1 57% 215,210
Agencies
Federal Home Loan Bank US agency 03/23/2010 12/23/2013 (d) 36 1,000,000 1,000,000 2.08% 20,800
Federal Home Loan Bank US agency 06/10/2010 6/10/2013 (e) 36 2,000,000 2,000,000 1 00% 20,000
36 I 3,000,000 3,000,000 1 36% 40,800
Total investments 16,700,000 16,915,324 256,010
TOTAL CASH, CASH EQUIVALENTS INVESTMENTS 1 9 1 $48,678,220 $48,896,804 1 0.72% I $348,353
T
Weighted Average Maturity Months Average Yield to Maturity
Financial Institution Diversification Amount of Total Benchmarks At 9/30/10
US Bank 4,511,383 9.2% 90 -day treasury rate 0 16%
Washington State Treasury 30,447,734 62.3% 6 -month treasury rate 0 19%
First Savings Bank Northwest 2,068,939 4.2% State Pool rate 0 30%
Sound Community Bank 7,076,674 14.5%
Charter Bank 1,540,216 3 1%
Sterling Bank 251,858 0.5% Investment Mix of Total
Federal Home Loan Bank 3,000,000 6.1% Depository 2.1%
$48,896,804 100 0% State Investment Pool 62.3%
Money market 1 0%
Certificate of Deposit 28.5%
US Agency 6 1%
100 0%
(a) To maturity even though call date may occur first; maturity of liquid investments is one day
(b) No fixed maturity, funds are available within one day
(c) Annualized return based on purchase price and yield to maturity
(d) Call date is 12/23/10.
(e) Call date is 12/10/10; interest rate steps to 2% in year 2 and 3.25% in year 3
37
CITY OF TUKWILA
CASH INVESTMENT REPORT
September 30, 2010
Cash Investment Balances By Fund and Fund Group
Fund Group FD Fund Name! Cash 8, investments' Grand Total'
E uivalents
General 000 GENERAL 630,618 1,099,312 1,729,930
General 'Total 630,6 1,096,312 1,729,930
Special Revenue 101 HOTEL /MOTEL TAX 713,138 101,309 814,447
103 STREET 340,413 192,487 532,900
104 ARTERIAL STREET 6,567,948 4,303,220 10,871,168
105 CONTINGENCY 806,435 80,943 887,378
107 FIRE EQUIP CUM. RESERVE 803,391 803,391
109 DRUG SEIZURE FUND 296,447 10,118 306,564
Special: Revenue,Total r 9;527;771'; 4,688,077,° ::14,215,848
Debt Service 207 LIMITED TAX G 0 BONDS 1999 14,509 14,509
208 LIMITED TAX G.O BONDS 2000 177,250 177,250
209 LIMITED TAX G.O BONDS 2003 94,852 94,852
210 LIMITED TAX G.O REFUNDING 2003 157,041 157,041
211 LIMITED TAX G 0 REFUNDING 2008 347,433 347,433
214 LTGO 2010 Series A 33,670 33,670
215 LTGO 2010 Series B 10,488 10,488
Debt Service'Total f 835,243 835,243
Capital Project 301 LAND ACQ. REC. PARK DEVLPMNT 2,553,756 2,013,634 4,567,390
302 FACILITY REPLACEMENT 2,072,904 2,072,904
303 GENERAL GOVERNMNT IMPROVEMENTS 1,949,336 1,949,336
304 FIRE IMPACT FEES 155,929 155,929
Capital Project Total 6,731,925 ..2,013,634 8,745,559
Enterprise 400 UTILITY ON ACCT (overpayments) 8,824 8,824
401 WATER 1,326,408 3,956,817 5,283,225
402 SEWER 1,440,333 202,727 1,643,060
404 WATER /SEWER REVENUE BONDS 240,504 240,504
405 BOND RESERVE 393,547 393,547
411 FOSTER GOLF COURSE 420,515 416 420,931
412 SURFACE WATER 1,659,464 1,101,363 2,760,828
Enterprise Total.
5,489,595 5;261,124 10
Internal Service 501 EQUIPMENT RENTAL 2,561,621 1,000,000 3,561,621
502 INSURANCE 3,278,309 2,506,817 5,785,126
503 INSURANCE LEOFF I 1,374,399 202,727 1,577,126
Internal Service Total :7;244,329 3,709,544`' 10,923;873
Fiduciary 611 FIREMEN'S PENSION 1,486,915 1,486,915
640 AGENCY FUND 65,084 65,084
Fiduciary rY Total 1,551
1 551 999
Grand Total 31,981,480 16,771,890 48,75
38
CITY OF TUKWILA
CASH INVESTMENT REPORT
September 30, 2010
Closing Daily Current-- Price--
Yield Price Yield Change
Term e
09/30/2010 Today 7:30 A.M.
3mo 0.15% 0.15%
hio 019% s 0.19°A:
1Yr 0.25% 0.25%
2Yr 042% 0.5.... 0.42% 0
3Yr 0.63% 1.5 0.66% -0.5
1 1 -3
10Yr 2.51% -2 2.53% -5.5
69°i0 3 71 -12 5
5
3.5
2.5
2
1.5-
—1 9/24/2010
1- Today
0
t\CI naC''
39
-il•
D
CITY OF TUKWILA
CASH INVESTMENT REPORT
September 30, 2010
Combined Cash Investment BALANCES BY MONTH, January 2008 to September 2010
Graph
i
15,000,000
IA
14,000,000
13,000,000
1
12,000,000
1
11,000,000
10,000,000 x.,/, /I\
;6\
lifeNi
I 1 1-" -.i.:—. Z
9,000,000
8,000,000
X.. General
7,000,000 ...7
Z \i .1: :i .l. A. —ES—Special Revenue I
6,000,000
Debt Service
5,000,000
—44—Capital Project
P. --t(-- Enterprise
—i> Internal Service
4,000,000
3,000,000 Fiduciary
,.3 """t ir, S'ii• r AI7'..-- 1 „....i,.......0,,,,,s?.., i
\.1* I
*fie.....4...
1 1 1 1
(1,000,000) 1
1 I i 1 1 1 1 i
1 I i
Jan i Feb Mar Apr May! Jun i Jul AugiSep I Oct Nov( Dec Jan Feb Mar Apr May Jun Jul i Aug Sep i Oct i Nov Dec Jan 1Feb Mar Apr i May Jun Jul Aug i Sep
1 1 1
1
2008
1 2009 2010 i
1
CITY OF TUKWLA
CABH&/NVEGTNENTREP{}RT
September 30, 2010
Combined Cash Investment BALANCES BY MONTH, January 2008 to September 2010
Row Lab General Special Debt Capital Enterprise Internal Fiduciary Grand Total
Revenue Prgject SeIyk��
3D�8
Jan 6.922.805 10.188.581 1.150.686 7,269,659 9,487,679 5.617.322 1.125.080 41.701.580
Feb 0.414.509 10.382.580 1.368.828 7,318,342 10.147.588 5.804.831 1,127,264 42.663.849
Mar 6.507.048 11.014.740 1.500.012 8,443,165 11.927.738 6,732,444 1.424.208 47.640.253
Apr 5,875,611 11.090.835 1,591,341 8.339.912 12,014,846 8.840.004 1.426.223 47,185,462
May 9.272.930 11.241.906 1,747,525 7.530.416 11 6,924,497 1.480.777 50,174,016
Jun 10.404.165 11,401.736 1.486.847 7.530.921 11.200.408 6.988.205 1.482.509 50.484.881
Jul 9.480.490 11,560,451 1.648.083 7.545.952 11.774.087 7,143,712 1,478,141 50
Aug 8.378.032 11.035.654 1.806.228 7.671,487 12,312,582 7,278,931 1.479.547 50.062.461
Sep 6.870738 12,535,735 1,956121 7.746871 13 7 1,482.295 51,155,369
Oct 8.002.205 12,644,518 1,899,666 7,682,473 13.334.040 7,392,131 1,485,192 51.340.225
Nov 8.924 13.146.458 2,041,724 7.853.980 13.512.076 7.772.668 1,487,911 54.740.673
Dec 7,724,379 12.164.282 972,729 5,916,065 12,356,266 7,343,615 1.448.882 47,921,218
26 091'
Jan 5.711.O27 12.45G.U85 1 5 12.18O.48O 7.S47.647 1.471.838 47,398,372
Feb 6.868.318 12.457.803 1,259,259 5.855.804 12,391,462 7.302.881 1,542,257 47.467.565
Mar 5.477.292 12.878.702 1.382.129 5.840.311 12.548.468 7.558.943 1,493,718 47.270.623
Apr 7,435,424 12.984.302 1,492,296 5,712,739 12.728.647 7.318.106 1.524.421 48.196.026
May 8,394,698 12,976,548 1,612,370 6,275,578 12.668730 7.652,783 1 51
Jun 6.557.825 12,854,734 1.398.710 6,279,693 11,698,873 8,158,299 1,582,474 48.530.600
Jul 4,835,284 9,572,478 1,512,243 6.344.700 11,828,353 8,354,681 1.508.841 43.956.586
Aug 2.588.088 10.100.023 1.039 8 12.895.735 0.404.030 1,585,773 43.525.379
Sep 3,461,270 9.002 1.793.223 7,124,946 12.044.132 8.780.825 1.003.269 43.810.041
Oct 5.070.945 8.078.085 1.810.074 6,831,233 12,411,383 9,014,445 1.598.818 45.514.883
Nov 6 9,448,383 1.835.788 6,744,625 11.366.894 8.187.288 1.612.056 48.703.003
Dec 4,192,192 8,004,846 (243,112) 6,745,994 10,289,539 9,207,965 1,540,673 30. 738. 006
2010'
Jan 3.935.280 8.740.179 (40.284) 6.837.548 10.102.215 8.732.083 1,548,349 40.855.330
Feb 3.826.028 8,448,543 135,494 6,712,858 10.301.874 9,894,238 1,554,931 40.874.568
Mar 2,413,254 8,857,321 163.440 6.686.776 10.864.367 9,945,333 1 40.470.883
Apr 4,567,026 8.435.940 348.278 6.576.181 10.640.752 10 1.547.087 42.471.319
May 6.446.080 8.842.642 462.971 6.700.075 10.215.457 10.508.870 1,591,213 44.828.295
Jun 5,314,882 8,315,881 245,314 6 9.315.863 10,557,443 1.814.007 42.181.946
Jul 3.083.891 12 419.458 8,391,772 9,826,774 10.712.955 1.610.737 47.345.048
Aug 2.700.874 13.755.309 805.216 8.423.064 10.001.293 10.975.388 1,552,441 48.013.565
Sep 1 14.215.848 835,243 8.745.559 10.750.819 10.923.873 1.651.999 48.753.370
4 1
42
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1908
City of Tukwila, Washington
INVESTMENT POLICY
Adopted by the
Tukwila City Council
Finance and Safety Committee
Ordinance No. 1916, May 15, 2000,
As updated November 2, 2010
Shawn Hunstock, Finance Director
43
44
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.
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45
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 Delegation of Authority
Authority to manage the City's investment program is derived from Ordinance 1916,
adopted by the Tukwila City Council on May 15, 2000. 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."
5.3 Written procedures shall be established for the operation of the investment program
consistent with this investment policy.
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
46 -2
City of Tukwila
Investment Policy
and officers shall subordinate their personal investment transactions to those of the
City, particularly with regards to the timing of purchases and sales.
7.0 Authorized Financial Dealers and Institutions
7.1 Pursuant to state statutes (RCW 39.58), the deposit of public funds and the
placement of "investment 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 public funds. The maximum amount placed with any one
depository will not exceed the net worth of the institution as determined by the
PDPC.
7.2 In addition, the Finance Director will maintain a list of approved broker/ dealers that
are authorized to provide investment services to the City.
7.2.1 Authorized broker /dealers must maintain an office in the State of Washington.
7.2.2 Authorized broker /dealers will be limited to primary dealers or other dealers
that qualify under SEC Rule 15C3 -1, the Uniform Net Capital Rule.
7.2.3 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 constraints.
7.2.4 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. Authorized 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 savings 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.
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47
City of Tukwila
Investment Policy
8.5 General Obligation Bonds of a state or local government which have at the time of
the investment one of the three highest credit ratings of a nationally- recognized
rating agency.
8.6 The Washington 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 in
the safekeeping or trust department of a bank acting as third party custodian for the
City of Tukwila.
9.2 All security 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 security type and institution.
10.1 No more than fifty percent (50 of the City's portfolio, at the time of purchase,
shall be in 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 in the Washington 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 invested in U.S. Treasury or Agency securities.
10.4 The City's Finance Safety Committee can authorize a variance to 10.1, 10.2 or
10.3 prior to purchase, if it is deemed in the best overall benefit to the City.
11.0 Maturities
To the extent possible, and to preclude the sale of securities that could result in a loss,
investments will be made to coincide with anticipated cash flow requirements.
11.1 At the time of investment, a minimum of fifty percent (30 of the portfolio will be
comprised of investments maturing or available within one year.
11.2 At the time of investment, eighty percent (80 of the portfolio will be comprised of
investments maturing or available withing five (5) years and no instruments shall
have a maturity exceeding ten (10) years, except when compatible with a specific
fund's investment needs.
11.3 To provide for ongoing market opportunity, investment maturities should be
laddered or staggered to avoid the risk resulting from overconcentration of portfolio
assets in a specific maturity.
48 -4
City of Tukwila
Investment Policy
11.4 The average maturity of the portfolio shall not exceed three and one half (3 1 /2) years
or forty two (42) months.
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 in the City's best interest.
12.0 Internal Controls
The Finance Director shall establish a system of internal controls, which are subject to
review by the State Auditor. Such reviews may result in recommendations to change
operation procedures to improve internal controls. Controls shall be designed to protect
against loss of public funds due to fraud, error, misrepresentation 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 six -month Treasury bill
rates for the corresponding time period. This perforniance standard shall take into account
the City's investment risk constraints and cash flow needs.
14.0 Reporting
The Finance Director will submit a quarterly report to the City's Finance Safety
Committee that summarizes the current portfolio position and performance. These
reports shall provide an accurate and meaningful representation of the investment
portfolio, its performance versus the established benchmark, and proof of compliance
with the investment policy.
15.0 Investment Policy Adoption
Adoption of this policy is made pursuant to the provisions of RCW 36.48.070.
Adopted by the Finance and Safety Committee of the City
Council of the City of Tukwila by ordinance 1916, May 15,
2000, as updated November 2, 2010.
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Laddered Investment Portfolio
A normal ascending yield curve for fixed income securities
occurs when longer fixed income maturities have higher
yields than shorter maturities. In most instances it benefits
investors to start a ladder of approved securities extending
out monthly or quarterly. The reason for laddering and not
keeping investments all liquid is because of interest rate
risk. If the investor keeps their investments too short, rates
could fall, or if too long, rates could rise. When laddering
funds, the investor gets a total average rate that will be
above short rates given a normal ascending yield curve.
Another benefit of a laddered portfolio is it takes the
guesswork out of timing the market. As securities mature
the investor simply reinvests to the longest maturity. Over
time the investor receives the average yield of the longest
security which typically would have a higher yield than a
money market or very short -term investment. The investor
also has a steady income stream from interest and principal
payments from regularly timed maturities. The maximum
maturity and frequency of maturities can be adjusted to suit
the individual investor.
Please Note Investment products:
are not insured by the FDIC;
are not deposits or other obligations or guarantees of Piper Jaffray Companies or its affiliates; and
o are subject to investment risks, including the possible loss of principal.
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