HomeMy WebLinkAboutRes 2121 - Investment PolicyCity of Tukwila
Washington
Resolution No. V �_
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUKWILA, WASHINGTON, ADOPTING AN INVESTMENT
POLICY; AND REPEALING RESOLUTION NO. 2034
WHEREAS, the investment of public funds must comply with all applicable state and
local requirements; and
WHEREAS, a comprehensive investment policy ensures that public funds are
invested in a manner that will provide maximum security with the highest investment
return while meeting daily cash flow demands; and
WHEREAS. on December 6, 2021, the City Council adapted Resolution No. 2034
adopting an investment policy; and
WHEREAS, the City Council desires to strengthen and align the policy with prudent
and contemporary financial investment practices; and
WHEREAS, the City Council desires to implement an Environmental, Social, and
Governance (ESG) investment strategy utilizing ethical investing as a guiding principle;
and
WHEREAS, the City Council desires to incorporate climate change as a factor in
investment risk and strategy, aligning with broader sustainability goals.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Section 1. Repealer. Resolution No. 2034 is hereby repealed.
Section 2. Findings Incorporated and Adoption. The above "whereas" recitals are
adopted as findings in support of this resolution, and the City of Tukwila Investment Policy
attached hereto as Exhibit A is adopted.
Legislation: Investment Policy Page 1 of 2
Version: 6116/2025
Staff: T. Cullerton
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at
a Regular Meeting thereof this ��'-Ji( day of b , 2025.
ATTESTIAUTH E NTICATED:
�jy You -Barnet , WC, City Clerk Tosh Sharp, Cau President
APPROVED AS TO FORM BY:
Filed with the City Clerk: �� (C IV;
`) Passed by the City Council: U'
Resolution Number: ° •)-
Office of the Cityy Attorney
Attachment; Exhibit A— City of Tukwila Investment Policy - 2025
Legislation: Investment Policy Page 2 of 2
Versions 6/16/2025
Staff: T. Cullerton
City of Tukwila
Investment Policy
2025
1. Introduction ......,....... ,.........,........... .............. ......... .~_...-.,..........,...,......_.......3
2. ..^......... ........
3
3, Policy Staternent.....~... .............,......—..................~..-.............._.._....._..-...,3
4, Scope.~~.^. .... ^..___.^^^^__.—^^~...—_^__^_^....... __^_^...... ^^_.~~...^...^^.-.^~^^.,.^..3
5. Objectives ....... ................. ...........'3
A, Sa#atv.,~.,,~^_.,_.~,~^^~,,~,,,~~~,_~~,,_^.~,^,^~,_,,^,.^^_^,,,,,,^~_^~.,~~~~,,,,~,,,~4
8�, Liquidity- ,~__~_^,,^^^^,,,_,,^,^,~^^,,^,~,~^_,..,,..^,,.^~,,,~,,',,_,,~....... ^~,~~~,,,,~,,'~4
C� Return on ....... ..............~.~.....-..-~......-~-............. ~.......5
6. Standards of Care, ..........._.............. ....-,......._...-_..._............................ .~5
A� Delegation of Authority and ities....._........_....._.....__...._—...-._._..5
B.
6
C^ Ethics and Conflicts, ofInterest ..... ........ ^-..~—~......-..~~~....^~.—..._,^.~~^~^~_^'..~~�
7. Safekeeping,aindCointrolls,,,,,,,..,,,,,.,,,,,,,,,,,,.,.,. ....
A, vs. ~.^~..`....,....,..... --,^6
B, Third -Party ........ ..........
3
8, Authorized Financial
8
A, Broker/Dealers, ........
13. Investment Advisors ..... _............. ..-......~...... -........-.........._......,,._,...-.....—...�
C. ............ '^....,...........��...�
U^......~.^^..,.'��
,91. Authorized and Sultable InveGtments.......—.........-..._....—_..............-,...~.~...-.,.��
A, Authorized�����J�����............-._.._....,,,...........,..-....,...,............—...-.�
8, Sulitabl'e Investments- ...... ............ .._......... ..-_....—...._........_.,-..........~..1�
C. Bank Collateral ization..~........... ..-.................,_....-..............._.........,...—...11
D. Prohibited 1Mvestments.......... ....~-.,............... .,......`......_....~........_...-...........,.�1
10. N0vestmNe[tParaMmeters..................,...,.........-...... -...__...-...._--....._.......
12
A� .... ......^^.. ...^....... .......^..... ^.......—...- ........
12
B� Investment ...._._...........-......_............._......... .,..~................ ---
121,
C� Strategic Philosophy.^,...^...
Ill 3
��. ����ir��)����..........._.._........._....—.~..........,..-.,...,............��
12, Policy Adoption
G loissary of Terms,....^�.^�.^..~.~.��...�.,.^�.���^...�..�....`��...^�.,^�.....�..^.^.�..��.^.^��
City of Tukwila, Investment Policy 20i25 Page 2 of 118
Ft==# MN =*7
These policies are intended to be broad enough to allow the Hnance Director or authorized
designee to function properly within the parameters of responsibility and authority, yet specific
enough to adequately safe�guard the investment assets,,
=A
The City of Tukwila's investment authority is derived from RCW 35A.40.0501 and 35.39,032�, The
investment program shall be ope�ratied in conformancie with Washington Revised Statutes and
apiplicable Federal Law, All funds within the scope of this policy, are subje�ct to regulat�ions
established by the State of Washington.
nis qN, usneg-sta"ar rnanagofflcfw-�Fu
all of the City of Tulkwila's investable cash and funds. Funds must be invested prudently to assure
preservation of principail, provide needed liquidity for daily cash requirements, and' provide a
miarket rate of retuirni, All investments, must conform to federal, stat�e, and local statutes governing
the investment of public funds.
a=
(RCW 35i.39i.0�34) The city maintain's the right to separate certain funds and exclude them �frolmi
the scope of this policy ' Should bond covenants be more restrictive than this policy, fUnds shall
be invested in full compliance with those restrictions.
OEM=
All funds wil�l be invested in a manner that Is in conformance with feder6l, state and other le
requirements, In additioni, the obje�ctiv,es, in order of priority, of the Investment activities w�ill be
follows, I
City of Tukw�iia Investment Policy 210�,25 Page 3 of 18
91=
Safety of principalis the, primary objective of the City. To mitigate credit and interest rate
risk, investment decisions, shall be undertaken in a imanner that seeks to ensure
preservation of capital in the overall portfolio, To obtain tNs object�ive,, the foliowing steps
MCI be t�aken:
a
Interest raite risk, This is the risk that the market value of securities in the portfolio wW
fall due to increaises in gienerai interest rates, The city wN miitigaite the interest rate risk
by :
1 . Structuring the investment portfolio, so that securities mature to mieet c:a�s,h
reqiuire�ments, when known, for ongeling operations, thereby avoiding the need
to sell securities on the open market prior to maturity�',
Z Investing liquidity funds primarily in short-term instruments, (i,e,, investments
miatuiring in �ess than one year); and
3� Investing excess liquidity funds in a manner that is consistent with the
es,talblished risk/retum objectives of this piol'icy within the stated maximum
weighted average maturity constraint.
ONE=
lEy of Tukwiia Investment Poilicy 202i5 Page 4 of 18
The investment portfollo w0l bei structured with the objective of attaining a market rate of
ret�urn throughout economic c:ycles, commensurate with'the investment risk parameters,
and the cash flow characteristics of the portfolio.
The investment portfolio will be invested in a manner that mis RCW statutes and all
legal re�quireme,nts of the City.
MMMMM3=
The City Council, as the gioverning body of' the City, wfli retain ultimate fiduciairy
responsibility for the portfolio. The Council will designate an investment officer to
manage the investment program in accordancei with RCW sections, 35A,40,0510
35i39,iO32, 36.2�9,020 aind City! policy and wiIIII review and adopt any changes to the
investment policy,
ii. Delegation of Authority
010 1 if ilia I Kdc :1
on investment performance anid investment compliance,
v. Registered Investment Advisor
olicy 2025 Page 5 of 18
limited to advice related to the puirchaise and sale of investments ini, accord�ance with
this Investment Policy. Such advisers must be registered under the Investment
Advisers, Act of 1940i,
The standard of prudence to be used by the Finance Director or any designees in the
context of managing the overall portfolio, is the prudent �person rule enacted by State
Statute (RCW 11, 1010,020) which stat�es:
Investments will be made with judgment and care, under circurnstances then
prevailing, which persons of pruden, discretion and intelligence exercise in the
management of their own affairs not in regard to speculatiori but in regard to the,
permanent disposition of the funds considering the probable income as well as the
probable safety of the capital,
The Finance Director and authorized investment offiicers and employees who, act in
accordance with the Finance Director's written procedures and the City's, Investment
Policy,, and who exercise due difigence, sh,all be relieved of personal responsib4ity for the
credit risk or market price change of'ain investment, provided deviations from expectations
are, reported in a timely, fashion and appropriate, action is taken to control adverse
developments,
Persons authorized to invest shield not accept gifts form the institutions with which the City
places investments, Occasion4l business meals are acceptable and must be reported to
the Finance Directr and Finance Committee,
M
All trades of marketable securities will be executed (cleared and settled) on a delivery vs,
payment (DVP)i basis to ensure that securities are deposited in the City's safekeeping
U I
institution prior to the release of f nds,
City of Tukwilal Investment l'icy 2025 1 e 6 of 18
The City's Finance Director shall designate all safekeeping arrangements and an
agreement of the terms eXeCUted in writing. All securities will be recerpted and recorded
based on the terms in the cuistodial contract. The third -patty custodian shall be required
to provide a rytonthly statement to the City listing at a minimurn each specific security, book
yielld, description, maturity date,, market value, par value, purchase date, and CUSIP
number, The City will have online access through the safekeeping bank for verification of
the account holdings and transactions,
C. Performance Standards / Benchmark
The investment portfolio is, expected to provide sim,i�lar returns to, the benchmark oiver
int.erest rate cycles but may underplerform or outperform in certain periods. The City's cash
management portfolio shall be managed using as comparison for market yield of'[N�ame
a specific beinchmark, i.e. 3-Year Constant Maturity U'S Treasury lndex, 0-3 year Treasury
Index, eitc.].
D. Downgraded Securities,
The City may, from time to time, be invested in a security whose rating is dowrigraded, In
the event a rating drops, below the minimum allowed by this policy, the Finance Director
will review and recommend an, appropriate plan of action to the Council via the Finance
Committee. If the City utilizes an Investment Advisor, that Investment Advisor shall notify
the Finance Director and recommend a plan of action within one month. The City may
continue to hold a downgraded investment to maturity if a probable outcome is the
eventual realization of full vWue, rather than a realized loss if divested prior to maturity,
The Finance Director is responsib]e for establishing and maintaining an internal contro�
structure designed to ensure that the assets of: the City are protected from loss, theft or
misuse. Spontrols shall be documented in ail investment
procedures manual.
The internal contro1 struictuire shall be designed to provide, reasonable assurance that
these ob�lecfives are met The concept of reasonable assurance recoginizes that the cost
of a cointro� should not exceed' the benefits, likely to be derived and the valuation of costs
and beniefits requires estimates and juidgmienits by mianiagiement. The internal controls
shall address the following points at a minimum,
ISZML=la Investment Policy 2025 PZ011M
i, Control of collusion
iL Separ,atiDn of transaction authority from accounting, and recordkeeping
iii� Custodlial safekeeping
Iv. Avoidance of physical defivery securities of marketable securities
V. Cleardelegation of authority to subordinate staff members
vii. V\1ritten confirmabon of transacticins for Mvestmenits and wire transfers
vii. Dual authorizations of w> re transfers
viii. Staff training and
ix. Review, maintenance and rrionlitoring of security procedures both manual and
automated.
F. External Controls
The Office of the Mate AuMor requires that in accordance with Revised Code of
Washington 43,09,260, the City must undergo, annual financial examinations performed
by State Examiners, Investment management is to be included as part of the annual
independent audit to assure compliance with this !investment policy.
A. Broker/Deallers,
The Finance D14ector or designee shall maintain and review, annually a list ofall authorized'
financial institutions and broker/dealers, that are approved to, transact with the City for
investment purposes, Any firm, is efigible to make an application to the City. Additions,
and deletions to, the list will be made at the City's discretion. Ali brokerldealers and
financial instl1utions who, desire to do business -with the City must supply the Finance
Director with the fo,llowing�
i. Annual audited financial statements.
ii. Proof of FIN RA (Financial Industry Regulatory Authority) certification.
iii. Proof of registration with the State, of Washington.
iv. A completed Broker/Dealer questionnaire and; a certification of having read the
City Investment Policy.
The City may contract with an external investment advisor to, assist with the management
of the City's investment portfolio in a manner thatis consistent with the City's objectives
and this polio y. Advisors must be registered under the lnvestm,ent Advisers Act, of 11940
and must act in a non -discretionary capacity, requiring approval from the CIty prior to all
transactions.
The Finance Director or designee may utilize the investment advisor's approved
brokerldealer list in lieu of the Cdy's own approved list, The advisor must submit the
approved list to the City annually and provide updates throughout the year as, they occur.
The advisor must maintain dociumentatioln of appropriate floense and professional
credentials, of bruker/deallers on: the list. The arinuali investment advisor brokerldealer
review procedures include:
City of Tukwila Investment P0111cy 2025, Page 8 of 18
FINRA Certification check
Firm Profile
Fit rii listory
Firm, Operations
Disclosures of Arbitration Aw,ardls, Disciplinary' and Regulatory, Events
State Registration Verification
Financial review of acceptable FINRA capital requirements or lefter of cred�it for
clearing settlements,
The advisor may be authorized throiugh the contracted agreement to open accounts on
behalf of the City with the broker/dealers on the approved brolker/deal�e,r list. The City will
receive documentation directly from the brokers, for account verification and regulatory
requirements,
The City will only place funds exceeding the current FDIC insurance limits with banks
who are currently participating in the Washiington State PPC program,
Comipliance/listing with the PDPC will be verified by the Finance Director or designee
aninually.
Transactions must be executed on a competitive basis and documented, excluding
securities and int�erfund loans issued by the City of Tukwila, Competitive prices should be,
provided from at least three separate brokers, financial institutions or throiugh a national
electronic trading platform, If the purchased security is only offered by one broker, then
other securities with sirnflar structure may be used for documentation purposes, If an
Advisor handles trade executions, then they must provide the competitive documentation
as requested,
All investments of the City are limited by RCW', principally RCW 35A,40,0150 and
39.59M0,
• This policy recognizes S&P, Moody's and Fitch as the major NatioinalIy Recognized
Statistical Ratings Organizations (NRSRO),
• Minimum credit ratings and percentage limitations apply to the time of puirchase.
• All securities must be purchased on; the secondary market and may not be purchased
directly from the issuer.
• Securities rated in the broad single -A category with a negative outlook may (lot be
purchased, Portfolio holdings of corporate notes downgrad, ed to below single A and
portfolio holdings of securities rated singile A with their olutlooks changedto negative
may continue to be held. No additional purchases are permitted
City of Tukwila Investment Policy 2025 Page 91 of 18
B. Suitable Investments
U. S.Treasury Obligations: Direct obligations of the United States Treasury,.
US Agency Obligations: US Government Agency Obligations and US Government,
Sponsored Enterprises (GSEs) which may include, but are not limited to the following:'
Federal Farm Credit Banks Funding Corporation (FFC,B)., Federal Home Loan Bank
(FHLB), Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage
Corporation (FHLMC), and Tennessee Valley Authority (TVA),
Supranational Bonds: United States dollar denominated bonds, notes or other
obligations that are issued or guaranteed by supranational institutions, provided, that at
the time of investment, the institution has the United States as its largest shareholder,
These include: International Bank for Reconstruction and Development (IBRD or World
Bank); the International Finance Corporation (IFC); the Asian Development Bank (ADB)
and the Inter-American Development Bank(IA.DB).
Municipal Debt Obligations: Bonds of the State of Washington, any local government in
the State of Washington, General Obligation bonds outside the State of Washington; at
the time of investment the bonds must have one of the three highest credit ratings of a
nationally recognized rating agency. Debt of the City of Tukwila is not required to be rated„
Corporate Notes: Unsecured debt obligations purchased in accordance with the
investment policies and procedures adopted by the State Investment Board. Corporate
notes must be rated at least weak single A (A-) or better by all the major rating agencies
that rate the note at the time of purchase for inclusion in the corporate note portfolio. The
maturity must not exceed 5.5 years and the maximum duration of the corporate note
portfolio cannot exceed 3 years. The percentage of corporate notes that may be
purchased from any single issuer rated AA- or better by all major rating agencies that rate
the note is 3%, of the assets of the total portfolio, The percentage of corporate notes that
may be purchased from any single issuer rated in the broad single A (A-) category from
all the major rating agencies that rate the security is 2% of the total portfolio. The individual
country limit of non-U.S. and non-Canadian exposure is 2% of the total portfolio. The
exposure is determined by the country of domicile of the issuers of portfolio securities.
Commercial Paper: Commercial paper must be rated with the highest short-term credit
rating category of any two major Nationally Recognized Statistical Rating Organizations
(NRSROs) at the time of purchase. If the commercial paper is rated by more than two
major NRSROs, it must have the highest rating from all of them, Commercial paper
holdings may not have maturities exceeding 270 days. Any commercial paper purchased
with a maturity longer than 100 days must also have an underlying long-term credit rating
at the time of purchase in one of the three highest rating categories of an NRSRO. The
percentage of commercial paper that may be purchased from any one issuer is 3% of the.
market value of the total portfolio, Issuer constraints will apply to the combined holdings
of corporate notes and commercial paper holdings.
Certificates of Deposit: Non-negotiable Certificates of Deposit of financial institutions
which are qualified public depositories as defined by RCW 39,58,010(2) and in
accordance with the restrictions therein,
City of Tukwila Investment Policy 2025 Page 10 of 18
MIR I I � 1' 171 P 11 1 � i I RII � III I I I � III 1 11 1
Local Government Investment Pioiv stment Pool managed by the Washington
State Treasury Off ice.
Rip
iIThe City shaH not lend; securities nor directly participate in a securities lending or
reverse; repurchase program,
tes. The City shall not invest in mortgage -backed secluriti
13L The City shall not invest in Equit�ies
M The City shall not invest In Cryptocurrency
City of Tukwila Investment Policy 2025 Pagie 111 of 18
rm-11=04=4
The City will diversify the investment of ali funds by adhering to the constraints listed in
the following table. Investments in secuiritiles shaH riot, exceed the faillowinig percentages
of the total portfolio at the ti'ime of purchase.
Ratings, S&P,
Issue Type
MaXImum%
maXIMU1111%
moody' , of
Maximuim
H�oldinigs
Purr issuer
Equivalent
Maturity
NR SRO
1001�
Nonr�
N/'A
1 ears
35%
N/A
10 ear
5%,
10vears
O Outside WA
30%
5%
A-/A3 Short Term
rs
tTi TLrkwail a Debt aqig rvrvrvrvrvrvNone
N/A
N/A
AA-
2% for A.,
Corporate Notes
25%
AA+
A-/A3Short Term
5.5 year
Alfl, Wng Terrn A.
Commercial Paiper
. ............................ . .. ...... . .............................................................. . .........................................
26%
. . . . . . . ......
3%
A3
270 days
Deposits in
PICiPiCapproved
Bank Trne LD Virmos
2L_je 2o s i ts i Sa vi n
2-1 OU I %
1 (01%
banks
NIA
Deposits in
PDI?Capproved
Certificates o D�epo � it
25�%
10%
banks
5 mrs
Stato LUP
. . . . . . ..................
100%
None
. ......... ...... .
N/'A
N/a
suer constraints apply to the combined Issues In
corporate wind
commercial paiper,
hioldings,
Sort Terry RaVngMood y's - PIMIGVV'MIGI, S&P
- A-11SP-1, Rtch - Ft
Note: I nd,ivid Ua I co u ntry Ii mil t of t iion-US/nioni-C;ariadiltiri2n2% ol'tourtl,—is � ............ t9
Liquidity Funds —"bier 1
J=f Tulkwilai Investment Poky 2025, Page 12 of 18
Liquidity funds wN be defined' as those funds that are in the State LGIP City, bank
I
deposits, bank certificates of deposits or money market instruments and will be
,9vailablie, for immediate ulse.
1 -1
'nvested in authorized investments and maturity structure Rsted, below.
. . .... ............. . . ....... ......................................................
Maturity Constraints
. . ... . ... . .... . ..........
Minimum % of
Total Portfolio
Under 30 days
10%
Under I year
.......................................................................................
.............
25�%
.. ........ -.—
Under 5 years
9101%
. . . .................. . . . .
Under 10 year
100%
........ .. ....................
'Maturity Constraints
. ..........
Total Portfolio
maximum,
Welighted Avrage Maturity
2,0 years
. . . . . ............................ ................... — - - -------
Duration of Corporate Note Portfolfio
30 years
Security Structure Constraint
. ................ . .....
Total Portfolio
Callabile Agency Securities
25%
MEMTMM,TxWE=
The primary investment philosophy of the City is to irratch investment maturities with
expected cash olutflows, Secul shM generally be held untO maturity, with the following
exception&�
i, A security with a decilining credit may be sold early, to piroteict the principal val
oif the pol
iL The portfolio duration or maturity buckets should be acqusted to better refle,
the structuire of the underlying benchmark portfolio',
flL A security exchal that would improve the quaility, yield and l�arget niatuiril
of the portfolio based on market conditions,
M A sell of a security to provide for unforeseen liquidity needs.
y 202�5 Pagie 13 of 181
The Finance Director or designee shall be responsible for investment reportinig. At a
mininIUM, monifty reporting (RCW 3i5,,39.032) shaill be made available providing detailed
information on the investment portfolio,
MORM
HoWings Report including mark to market and secuirity description
'Transactions Report
Weighted Average Maturity or Duration
The portfoHo shiall be managed to obtain a fair rate of return and earnings rate that
incorporates the primary objectives of protecting the City's capital and assuring
adequate liquidity to meet casih flow needs.
?I;
to achieve market rates oif returns over long investment horizons. The purpose of a
benchmark is to aippiroipiriate,ly manage the risk in the portfolio through interest rate
cycles. The investment poirtfolio is expected to provide s,ar returns to the
benchmark over interest rate cycles but may underperform or outperform in certain
pods, The portfoHo will be positioned to first protect prin6pal and then achieve
market rates of return. The benchimark used M11 be the US treasury 0-3-year �ndeix or
US treasury 0-5-year index and comparisons will be calculated month4y and reported
q�uarterly,,
A quartedy compliance report, will be gilenerated comparing the portfolio positions to this
investment policy,
The City shall comply with all required legal provisions, and Generafly Accepted
Accounting Principies (G,AAP). The accounting principles are those contained in the
pronouncements of authofitative bodies including, but not necessarily limited to, the
Governmental Accounting Standards Board (GASB)�
Pooling of Fundti: Except for cash in, oertalin restricted and special funds, the City will
cons,oficlate balances, from ill funds to, maximize investment earnings. Investment income
will be aflocated to the various, funds based on their respective parti6paticn in the
investment program and in accordanoe with generally accepted accounting pirin6ples.
The City's lrivestment Policy shall be adopted by tfie City Council and reviewed by the, Councfl
Finance Committed as, needed but not less than every two years, This Poky has been adopted
by the City Council on , 2025.
City of Tukwila Investment Policy 2025 Page 15 of 18
Agency Securities: Government spon'sored enterpriseis of the4.'S, Government,
Bankers, Acceptances: A time draft accepted (endorsed�) by a bank or trust company, The
accepting institution guarantees payment of the biH, as well as thel issuer, BAs are short-termi
Oil
Ili �M
iW
4P 0 9
the^ overall portfolio. Having longer term investments in a portfolio wi11 stabilize the overall portfolio
interest earnings over interest rate cycles.
Investment Securities: Securities, purchasedfor an investment portfolio, as opposed to those
purchased for resale to customers.
Liquidity: The ea" at which a security can be bought or sold (converted to -cash) in the market,
A large number of buyers and sellers and a, high volume of trading activity are important
components of liquidity.,
Liquidity Component* A percentage of the total portfolio that, is dedicated to provIdling i1quidity
needs for the City.
LGIP'. Local Government Investment Pool run by the State of Washington Treasurer's office
established to help cities, with short term investments.
Mark to Mairket° Adjustment of an account or portfolio to reflect actual market price rather than
book price, purchase price or some other valuation..
Municipals: Securibes, usually bonds, issued by a state, it agencies, by cities or, other municipal,
entities. The interest on "miunis," is usually exempt from federal income taxes, and state and local
income taxes in the, state of issuance, Municipal securities may or may not, be, backed by the
issuing agency's taxation powers.
Par Vallue: The value of a security expressed as a specific dollar amount marked on, the face of
the security or the amount of money due at maturity. Par value should not be confused with,
market value.
Portfolio: A collection of securities held by an individual or institution.
Prudent Person Rule. A long-standing common-law rule that requires a, trustee who is investing
for another to behave in the same way as a prudent individual of reaisonable discretion and
inteiligence who is seeking a reasonable income and preservation ofcapitaL
Quotation or Quote: A bid to, buy or, the lowest offer to sell a security in any market at a particular
time,
Repurchase Agreement: Range in maturity from overnight to fixed time to open end. Repos,
involve a simultaneous sale of securities by a bank or government securities dealer to an investor
with an agreement for the bank or government securities dealer to repurchase the securities at a
fixed date at a specified rate of interest.
Treasury Bill (T-Bill): An obligation of the US. government with a, maturity of one year or less,.
T-bills bear no interest but are sold at a discount-
'treasury Bonds and Notes. ObIgations of the U.S. government that bear interest. Notes have
maturities of one to ten years; bonds have longer maturities.
Yie1d, The annual ratite of return on an investment, expressed as a percentage of the investment.
Income yield is obtained by dividing the current dollar income by the current market price for the
security. Net yield,, or yield l to maturity, is the current income yield minus, any premium above par
or plus any discount from par in the purchase price, with the adjustment spread over the period
from the date of'purchase to, the date of maturfty of the bond.
Yield to Maturity: The average annual yield on a security,, assuming it is, held to rnaturitya equals
to, the rate at which all principal and interest payments would be discounted to produce a present
value equal to the purchase price of the bond.
City of Tukwila Investment Policy 2025i Page 17 of llig
Ratings Tablo Long -Tor
S&P
M+C od '
Fitch
Deflinimiion
AAA
Aaa
AAA
Hiighiest credit quality
WQ
,.m... ....... ........
AA+, AA, AA
... ,,.�... .,,�.,.� a.mrrmmn
A l Aar„ A
.r.rv.rrvv ....... ,.u....,
+y „ AA-
..........., ......, ....,..... ............
Very high credit quality
....... ...............www.
+, A, -
... ......w .w.w......w
Al, A2, A3
.....ww........ �.�..
+, A, A-
....... ......................---------------------- _..i
High credlit quality
BBB+, � BBB-
Baial, BaQ, BaO
BBB+w BBB„ -
credit quality
-
Bail, Bad, Ba3
CAB+, 13113,
Non -investment grad
Ratings Table, Short-Tormm i
,.�,,....,.,
eye �..�...�......«.��.�....�...��.
.�.��..�w......., .,..�.�...�w.��..«w�.....
.�..p.�...�...�y.„.�.Definition
..
Commercial
Pupier
,,,Municipal
A-1, -1+„ S -°t+ S �
1, iG1, �Pi� IG1
1+, l
Hi hle t credit quality
111111
1 a*w w