Resolution 1338RESOLUTION NO. 1338
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
EDMONDS, WASHINGTON, ADOPTING THE INVESTMENT
POLICY AS ATTACHED HERTO.
WHEREAS, the City Council heard a brief introduction to the City's Investment Policy at the
July 14, 2015 council meeting; and
WHEREAS, the July 14, 2015 introduction focused on amending the Investment Policy to
include the Snohomish County Investment Pool as an investment option for the City; now
therefore,
THE CITY COUNCIL OF THE CITY OF EDMONDS, WASHINGTON, HEREBY
RESOLVES AS FOLLOWS:
Section 1. ADOPT THE CITY OF EDMONDS INVESTMENT POLICY. The city council
hereby adopts the following attached document:
City of Edmonds Investment Policy to read as set forth in Attachment A hereto, which is
attached hereto and incorporated herein by this reference as if set forth in full.
RESOLVED this 21St day of July, 2015.
AYOR, DAVE EARLING
ATTEST:
CI CLERK, SC ASSEY
FILED WITH THE CITY CLERK: July 17, 2015
PASSED BY THE CITY COUNCIL: July 21, 2015
RESOLUTION NO. 1338
CITY OF EDMONDS
INVESTMENT POLICY
Subject: Investment Policy
Originating Department: Finance Division
Original Policy Date: April 4, 2007
Amended July 21, 2015
Approved By: Scott James, Director, Finance & Information Services
1. Policy
It is the policy of the City of Edmonds to invest public funds in a manner which will provide
maximum security with the highest investment return while meeting the daily cash flow demands
of the City of Edmonds and conforming to all state and local statutes governing the investment of
public funds.
2. Scope
This investment policy applies to all financial assets of the City of Edmonds. These funds are
accounted for in the City's Comprehensive Annual Financial Report and include the following:
• General Fund
• Special Revenue Funds
• Capital Project Funds
• Enterprise Funds
• Trust and Agency Funds
• Retirement/Pension Funds
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,
2
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 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, 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 of Edmonds shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To obtain 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
of Edmonds to meet all operating requirements that 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, taking into
account the City's investment risk constraints and the cash flow characteristics of the
portfolio.
5. Delegation of Authority
Authority to manage the City's investment program is hereby delegated to the Finance Director
who will act as the City's Investment Officer and Treasurer. The Finance Director shall establish
written procedures for the operation of the investment program consistent with this investment
policy.
Procedures should include reference to: safekeeping, PSA master repurchase agreements, wire
transfer agreements, custody agreements and investment related banking services contracts. Such
3
procedures shall include explicit delegation of authority to persons responsible for investment
transactions. No person may engage in an investment transaction except as provided under the
terms of this policy and the procedures established by the Finance Director, whom shall act as
the City's Treasurer. The 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 may conflict with the proper execution of the investment program, or may impair
their ability to make impartial investment decisions. Employees and investment officials shall
disclose to the City Council 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 of Edmonds,
particularly with regard to the timing of purchases and sales.
7. Authorized Financial Dealers and Institutions
The Treasurer will maintain a list of financial institutions authorized to provide investment
services. In addition, a list will also be maintained of approved security broker/dealers selected
by credit worthiness. These may include "primary" dealers or regional dealers that qualify under
Securities and Exchange Commission Rule 150-1 (uniform net capital rule). No public deposits
shall be made except in qualified public depositaries as provided in Chapter 39.58 RCW.
All brokers/dealers and financial institutions who desire to do business with the City of Edmonds
must supply the Treasurer with the following:
• Audited financial statements
• Proof of National Association of Securities Dealers certification
• Certification of having read the City's investment policy
• Proof of state registration
• Copy of city and state business licenses
4
The Treasurer will conduct an annual review of the financial condition of firms. A current
audited financial statement is required to be on file for each financial institution and
broker/dealer with whom the City of Edmonds invests. Investment purchases from any
institution or broker/dealer which does not satisfy the criteria established herein must be
approved in advance by the City Council.
8. Authorized and Suitable Investments
The City of Edmonds is empowered to invest in the following types of securities:
• U.S. Government obligations, U.S. government agency obligations, and U.S. government
instrumentality obligations, which have a liquid market with a readily determinable market
value;
• U.S. Treasury securities maturing in less than ten (10) years;
■ Fully insured or collateralized certificates of deposit, and other evidences of deposit, at
qualified financial institutions that are approved by the Washington Public Deposit
Protection Commission (WPDPC).
• Banker's acceptances, and commercial paper rated in the highest tier by a nationally
recognized rating agency;
• Investment -grade obligations of state, local governments and public authorities located
within the State of Washington;
• Local government investment pools, either state -administered or through joint powers
statutes and other intergovernmental agreement legislation.
9. Collateralization
Collateralization is required on repurchase agreements. 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.
Pursuant to state statutes (RCW 35.98) 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
5
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. In accordance with PDPD regulations, such investments are 100% collateralized.
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 City and retained. The right of substitution is granted.
10. Safekeeping and Custody
All security transactions, including collateral for repurchase agreements, entered into by the City
of Edmonds shall be conducted on a delivery -versus -payment (DVP) basis. Securities purchased
by the entity will be delivered against payment and held in a custodial safekeeping account. The
Treasurer will designate a third party custodian and safekeeping receipts will evidence all
transactions.
11. Diversification
The City of Edmonds will diversify its investments by security type and institution.
11.1 No more than fifty percent (50%) of the City's portfolio, at the time of purchase, shall
be in any single financial institution.
11.2 Except that no more than seventy-five percent (75%) of the City's portfolio, at the time
of purchase, shall be invested in the Washington Local Government Investment Pool,
or the Snohomish County Investment Pool, and
11.3 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.
11.4 In calculating the City of Edmonds Investment Mix, deposits held with the City's
banking institution, will be considered.
12. Maximum Maturities
9
To the extent possible, the City of Edmonds will attempt to match its investments with
anticipated cash flow requirements.
12.1 At the time of investment, a minimum of thirty percent (30%) of the portfolio will be
comprised of investments maturing or available within one year.
12.2 At the time of investment, eighty percent (80%) of the portfolio will be comprised of
investments maturing or available within five (5) years and no investments shall have a
maturity exceeding ten (10) years, except when compatible with a specific fund's
investment needs.
12.3 To provide for on -going market opportunity, investment maturities should be laddered
or staggered to avoid the risk resulting from overconcentration of portfolio assets in a
specific maturity.
12.4 The average maturity of the portfolio shall not exceed three and one half (3 '/2) years or
forty-two months.
12.5 Any variance to 12.1, 12.2, 12.3 or 12.4 can be approved by City Council prior to
occurrence, and if deemed in the City's best interest.
Reserve and retirement funds may be invested in securities exceeding ten (10) years if the
maturity of such investments are made to coincide as nearly as practical with the expected use of
the funds.
13. Internal Controls
The Treasurer shall establish an annual process of independent review by an external auditor.
This review will provide internal control by assuring compliance with policies and procedures.
14. Performance Standards
The investment portfolio will be designed to obtain an average rate of return during budgetary
and economic cycles, consistent with the investment objectives and cash flow needs.
7
The City's investment strategy is to actively manage investment selection, maturity and yield to
maximize earnings. Given this strategy, the basis used by the Treasurer to determine
performance levels will be the six-month Treasury bill rate for non -reserve funds.
15. Reporting
The Treasurer shall provide the City Council consistent periodic reporting on a quarterly basis.
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. Quarterly reports will include, at a minimum, the following:
• A listing of individual securities held at the end of the reporting period.
• Average life and final maturity of all investments listed.
• Coupon, discount or earnings rate.
• Par value, amortized book value and market value.
• Percentage of the portfolio in each investment category.
16. Investment Policy Adoption
The City's investment policy shall be adopted by resolution of the City Council. The policy shall
be reviewed on at least a bi-annual basis by the Mayor and/or their designee, as well as the
Finance Director and any modification to the policy will be made upon approval by the City
Council.
E3