HomeMy WebLinkAbout3278Ordinance No. 3278
(Amending or Repealing Ordinances)
CFN=104 — Finance
Passed 2/6/1996
Repealing Ords 2326 & 2644 and establishing a new Chapter 3.02 entitled
"Investment Policy".
Amended by Ord. 4039
The date ['Beginning July 1, 1998"] has led to confusion This date will be deleted from cover sheets of
ordinance/resolution revision pages This cover sheet will be deleted on electronic pages only, no other
deletions or changes have been made to the document — 6/21/2012
ORDINANCE NO.
AN ORDINANCE of the City Council of the
City of Kent, Washington, repealing
Ordinances 2326 and 2644 as codified in
Chapter 3.02 of the Kent City Code and
further establishing a new Chapter 3.02
�t entitled "Investment Policy".
WHEREAS, the City currently has an investment policy
for City investments set forth in the Kent City Code; and
WHEREAS, the City Council finds that a more
comprehensive investment policy would be more desirable to better
safeguard and protect the City's investments; NOW THEREFORE,
THE CITY COUNCIL OF THE CITY OF KENT, WASHINGTON DOES
HEREBY ORDAIN AS FOLLOWS:
SECTION 1. Ordinance Nos. 2326 and 2644, as codified
in Chapter 3.02 of the Kent City Code, are hereby repealed in
their entirety.
SECTION 2. There is hereby added to the Kent City
CHAPTER 3.02. INVESTMENT POLICY.
':Code, a new Chapter 3.02, entitled "Investment Policy" to read as
follows:
Sec. 3.02.010. Policy.
It is the policy of the City of Kent to invest public
funds in a manner which safeguard and protect the principal of
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;the City's investments, provide liquidity in meeting daily cash
flow and provide the highest return possible while conforming to
all Washington statutes governing the investment of public funds.
;;Sec. 3.02.020. Investment Objectives.
A. The primary objectives, in priority order, of the
City's investment activities shall be:
1. Safety: Safety of principal is the foremost
objective of the City of Kent's Investment Policy. Investments
of the City shall be made in a manner that seeks to ensure the
preservation of the amount invested.
2. Liquidity: The City's investment portfolio
will remain sufficiently liquid to enable the City to meet all
reasonably anticipated operating requirements.
3. 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 protection of principal and State
statutes.
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B. Rate speculation will not be a major criterion for
the selection of an investment. All other criteria, including
cash flow and maturity take preference to rate expectations.
Sec. 3.02.030. Scope.
This investment policy applies to all financial assets
of the City of Kent. These assets are accounted for in funds or
fund groups as identified in the City's Comprehensive Annual
Financial Report and include:
1. General Fund
2. Special Revenue Funds
3. Debt Service Funds
4. Capital Project Funds
5. Enterprise Funds (Water, Sewerage, Golf Course)
6. Internal Services Funds
7. Trust and Agency Funds (including Firemen's Relief
& Pension Fund)
8. Any new fund created by Council, unless
specifically exempted by Council.
Sec. 3.02.040. Prudence.
A. 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
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the probable safety of capital as well as the probable income to
be derived.
B. The standard of prudence to be used by investment
!officials shall be the "prudent person" and shall be applied in
the context of managing an overall portfolio. Investment
officers acting in accordance with written procedures 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.
Sec. 3.02.050. Delegation of Authority.
The Finance Manager (or his/her designee, including the
Assistant Finance Manager, Internal Auditor and the Financial
Analyst) are investment officers of the City. The Finance
Manager shall establish written procedures for the operation of
the investment program consistent with this investment policy.
Such 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 Manager. The Finance Manager shall be responsible for
all transactions undertaken and shall establish a system of
controls to regulate the activities of subordinate officials.
The Finance Manager is authorized to determine investable
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balances in each fund and is authorized to invest such monies in
a manner consistent with this policy and applicable law, without
prior Council approval of any specific investment.
Sec. 3.02.060. Investment Committee.
An Investment Committee, will be established,
,consisting of the Finance Manager, Assistant Finance Manager,
Financial Analyst, Internal Auditor, Director of Operations, and,
appointed by the Mayor to serve a 2 -year term; a member of the
Council Operations Committee. The Committee will meet quarterly
and will be established to serve in a general review and advisory
(capacity, taking into account the City's investment objectives,
,available funds and current market conditions. In addition to
reviewing periodic reports from the Financial Analyst detailing,
but not limited to the following: market value of the portfolio,
percentages by type and institution, average life of the
portfolio and average rate of return, the Committee will also
certify the acceptability of brokers/dealers with which the City
,may do business. (See Sec. 3.02.080).
Sec. 3.02.070. Ethics and Conflicts of Interest.
Officers and employees involved in the investment
!process shall refrain from personal business activity that could
conflict with proper execution of the investment program, or
which could impair their ability to make impartial investment
!';decisions. Employees and investment officials responsible for
investment transactions shall disclose to the Mayor any material
(financial interests in financial institutions that conduct
business within this jurisdiction. They shall further disclose
any large personal financial/investment positions that could be
related to the performance of the City's portfolio. Employees
and officers shall subordinate their personal investment
transactions to those of the City of Kent, particularly with
regard to the time of purchases and sales.
Sec. 3.02.080. Authorized Financial Dealers and Institutions.
A. The Finance Manager will maintain a list of
financial institutions and security dealers authorized to provide
investment services to the City. These may include both primary
;and secondary dealers that qualify under Securities and Exchange
':Commission Rule 15C3-1 (uniform net capital rule) and investment
departments of local banks who maintain an office in the State of
Washington. In addition, the current financial statements for
each institution will be kept on file, following a review by the
City's Investment Committee, to determine financial condition and
strength and capability to fulfill commitments.
B. Institutional investment staffs shall be trained
in precautions appropriate to State of Washington local
government investment laws and required to familiarize themselves
with the City's investment objectives, policies and constraints.
Each institution so designated will sign an agreement stating
that they have received and read a copy of this investment policy
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and will offer only investments as authorized under this
document.
C. No public deposit shall be made except in a
qualified public depository located in the State of Washington.
Sec. 3.02.090. Authorized Investment Types.
A. The City of Kent, as a municipal corporation in
the State of Washington, is empowered by statute (RCW 36.29.020,
as amended, and as limited by RCW 39.58.080 as amended) to invest
in the following types of securities.
1. Investment deposits:
Certificates of Deposit, with qualified
public depositories as defined in Chapter
39.58 RCW.
2. Obligations of United States Treasury:
a. U.S. Treasury certificates, notes,
bonds, zero coupon, strips, receipts.
b. United States Treasury State and Local
Government Securities (SLGS)
specifically for debt issues related to
arbitrage.
3. Obligations of United States agencies, or of
any corporation wholly owned by the
government of the United States:
Government National Mortgage Association.
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4. Obligations of government-sponsored
corporations which are eligible as collateral
for advances to member banks as determined by
the Board of Governors of the Federal Reserve
System:
a. Federal Home Loan Bank notes and bonds
b. Federal Farm Credit Bank notes and bonds
C. Federal Home Loan Mortgage Corporation
notes and bonds
d. Federal National Mortgage Association
notes, debentures, and guaranteed
certificates of participation
e. Student Loan Marketing Association notes
and bonds
f. Resolution Funding Corporation (REFCORP)
g. Financing Corporation (FICO)
5. Bonds of the state of Washington and any
local government in the state of Washington,
which bonds have at the time of investment
one of the three highest credit ratings of a
nationally recognized rating agency.
6. General obligation bonds of a state other
than the state of Washington and general
obligation bonds of a local government of a
state other than the state of Washington,
which bonds have at the time of investment
one of the three highest credit ratings of a
nationally recognized rating agency.
7. Utility Revenue Bonds or warrants of any city
or town in the State of Washington.
8. Bonds or warrants of a Local Improvement
District which are within the protection of
the Local Improvement Guaranty Fund Law.
9. Banker's Acceptances purchased on the
secondary market, with ratings of Al/Pl.
10. State of Washington Local Government
Investment Pool.
11. Mutual Funds (only allowable for the
Fireman's Relief and Pension Fund).
B. The City will buy no structured securities, which
include those whose rates of return are derivative -based, with
the exception of securities that have a call provision prior to
maturity or those securities that have their rate of return based
on a direct relationship with the Federal Funds Rate or Treasury
Bill Rate.
C. The City will not use Repurchase Agreements as a
means of investing.
Sec. 3.02.100. Fund Investment and Interest Allocations.
Investments shall be made with excess funds and the
interest earnings will be distributed as follows: Monies
determined by the Finance Manager or subordinate to be available
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ifor investment may be invested on an individual fund basis or
may, unless otherwise restricted by law, be commingled within one
]common fund called the Treasury Account. All income derived from
Treasury Account investments shall be used for the benefit of the
,General Fund of the City. Also, funds derived from the sale of
'general obligation bonds or revenue bonds or similar instruments
iof indebtedness shall be invested, or used in such manner as the
initiating ordinances, resolutions, or bond covenants may
lawfully prescribe.
Sec. 3.02.110. Safekeeping and Custody.
All security transactions entered into by the City of
Kent shall be conducted on a delivery -versus -payment (DVP) basis.
Securities will be held in safekeeping at the City's Primary Bank
with the exception of Certificate of Deposits, State of
Washington Local Government Investment Pool, United States
Treasury SLUGS and Mutual Funds, which will be registered in the
name of the City.
Sec. 3.02.120. Diversification.
Diversification is required by the City to reduce
overall portfolio risks while attaining market average rates of
return. Diversification by institution, type of investment
security and years to maturity shall be employed to avoid over -
!concentration in any of the aforementioned areas. With the
exception of obligations of U.S. Treasury securities and the
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,State of Washington Local Government Investment Pool, no more
:than 250-. of the City's total investment portfolio will be
invested in securities offered by a single issuer.
'Sec. 3.02.130. Maturities.
A. To the extent possible, unless matched to a
specific cash flow, the City will attempt to match its
investments with anticipated cash flow requirements. Unless
matched to a specific cash flow, the City will maintain a
portfolio with an average life not to exceed 5 years. However,
the Fireman's Pension Fund and small amounts of Water, Sewer,
Insurance and General Funds are exceptions to this 5 -year rule
based on prior investment portfolio history.
B. The City may sell securities, if deemed
appropriate, to maintain liquidity. Such actions must be
initiated by the investment officer, not the brokers or dealers.
C. No transaction needs to be instituted when the
maturity or call of a security causes the average life of the
portfolio or maximum holdings per category to exceed their
limits. Any transactions after such infractions shall work
toward the return to compliance.
Sec. 3.02.140. Internal Control.
The established process of independent review will be
performed annually by the State Auditor's Office. This review
will provide internal control by assuring that policies and
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procedures are being complied with. Such review may also result
in recommendations to change operating procedures to improve
,internal control.
Sec. 3.02.150. Performance Standards.
Given that the City of Kent's investment strategy is
passive, the City's investment portfolio will be designed to
;obtain a market average rate of return equal to or greater than
lithat obtained by the State of Washington Local Government
Investment Pool. The Portfolio rate of return will be calculated
excluding U.S. Treasury SLUGS which have restricted yields due to
arbitrage requirements.
ISec. 3.02.160. Reporting.
The Financial Analyst shall submit monthly investment
reports to the City Council that summarize the portfolio's
holdings and investments by type. On a quarterly basis, the
Financial Analyst shall submit investment reports to the
Investment Committee and the City Council that summarize the
portfolio's average rate of return, market value and average
maturity.
Sec. 3.02.170. Savings Clause.
A. In the event any state or federal legislation or
regulation should further restrict instruments or institutions
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authorized by this policy, such restrictions shall be deemed to
be immediately incorporated into this policy.
B. If new legislation or regulation should liberalize
the permitted instruments or institutions, such changes shall be
available and included in this policy only after written
notification to the City Council and their subsequent approval of
said changes.
SECTION 3. Severability. If any section, sentence,
clause or phrase of this ordinance should be held to be invalid
or unconstitutional by a court of competent jurisdiction, such
invalidity or unconstitutionality shall not affect the validity
or constitutionality of any other section, sentence, clause or
'phrase of this ordinance.
SECTION 4. Effective Date. This ordinance shall take
effect and be in force thirty (30) days from and after its
passage, approval and publication as provided by law.
ATTEST:
BRENDA JAC BE CITY CLERK
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1APPROVED AS TO FORM:
ROGER LUBOVICH, CITY ATTORNEY
PASSED day of �._T� rt -u Q�t�j 1996.
APPROVED / day of % 1996.
PUBLISHED 9 day of 1996.
I hereby certify that this is a true copy of Ordinance
,No. .3a'7 & , passed by the City Council of the City of Kent,
;Washington, and approved by the Mayor of the City of Kent as
'hereon indicated.
invest.ord
-�-- (SEAL)
BRENDA JACOBE ITY CLERK
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