HomeMy WebLinkAbout4039 Ordinance No . 4039
(Amending or Repealing Ordinances)
CFN=104 - Finance
Passed 7/17/2012
Investment Policy amending Chapter 3.02
Amends Ord. 3278
The date["Begintung July 1, 19981 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, amending Chapter 3.02
of the Kent City Code entitled "Investment Policy,"
updating delegation of authority and eliminating
designated institutions for collateral advances.
RECITALS
A. The City's current investment policy for City investments, set
forth in the Kent City Code Chapter 3.02, was last amended in 1996.
B. Since 1996, the City has undergone reorganization making
amendments necessary to various titles of delegates of authority.
C. Further amendments are necessary to eliminate designated
institutions for collateral advances.
NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF KENT,
WASHINGTON, DOES HEREBY ORDAIN AS FOLLOWS:
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ORDINANCE
SECTION 1. - Amendment. Chapter 3.02 of the Kent City Code is
amended as follows:
Sec. 3.02.010. Policy. It is the policy of the city of Kent to invest
public funds in a manner w#i that safeguards and protects the principal
of the city's investments, provides liquidity in meeting daily cash flow, and
provides 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. Ci i1nvestments of the eity—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 and
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, w-h a that a persons of prudence, discretion
and intelligence would exercise in the management of ir4ote4his or her own
affairs, not for speculation, but for investment, considering 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
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responsibility for an individual security's credit risk or market price
changes, provided deviations from expectations are timely reported ifs
tingely fashien and appropriate action is taken to control adverse
developments.
Sec. 3.02.050. Delegation of authority. The finance
Fnanage it or (or his/her designee, ineluding the assistant finanee
analyst) afeis the investment
officers of the city. The finance faaffageFdirector 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
n9ana tefdLrgLtor. The finance mganagef it r shall be responsible for all
transactions undertaken and shall establish a system of controls to
regulate the activities of subordinate officials. The finance nganagefdirector
is authorized to determine investable 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 mayor (or designee),
finance fnanageF it or, assistant finanee FiganageF, finaneial analyst,
the public works director, and
a_member of the council operations committee"—who shall be appointed
by the mayor to serve a two (2) year term, a ngengbeF ef the ceuneil
which term shall run concurrently with the term of
the council president, except to the extgnt interim appointments become
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necessary. 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. The committee will review periodic
reports i clu in , but not limited to, the
following: market value of the portfolio, percentages by type and
institution, average life of the portfolio, expected cash flows, and average
rate of return_
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 wbie#i h� 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 manaW it r 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-I (uniform
net capital rule). as may be amended, and investment departments of
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local banks who maintain an office in the state of Washington. in addition,
the nt F.......eial stat....r.. nts f-eF elg stet .tier .111 be kept en F.I..
B. Institutional investment staffs shall be trained in precautions
appropriate to state of Washington local government investment laws, and
they shall be required to familiarize themselves with the city's investment
objectives, policies and constraints. Eaeh institutien se designated will sign
an agreengent stating that they have reeeived and Fead a eepy ef this
Wit:
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 Washington municipal corporation, '- thestate
is authorized by this ordinance'and empowered by statute
(including, without limitation, RCW 39.59.020, 39.59.030, 43.84.080, and
43.250.040. including all future amendments ,
and as limited by RGW 3915ffiDflg, as amended) to invest in to #ellewimg
types-efv ra ious securities, including. without limitation, the following:.-
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.
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3. Obligations of United States agencies, or of any corporation
wholly owned by the government of the United Statest, such as the
Government National Mortgage Association.
6. Fed. Fal d:..F..... w .alit Lank metes
and L......d..
D
bends
,
54. Bonds of the state of Washington and any local government in
the state of Washington, which bonds hereare rated., at the time of
investment,-enewi i (4�the three f3-)�-highest possible credit ratings
of a nationally recognized rating agency.
66. 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 4aveare ratedR at the
time of investment }�e€wi hin the three f3-}-highest credit ratings of
a nationally recognized rating agency.
q6. Utility revenue bonds or warrants of any city or town in the
state of Washington.
437. Bonds or warrants of a local improvement district wwwhthat
are within the protection of the Local Improvement Guaranty Fund Law.
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9$. Banker's acceptances purchased on the secondary market,
with ratings of Al/Pl.
409. State of Washington Local Government Investment Pool.
147Q. For the Fireman's Relief and
Pension Fund}. only. Mutual Funds.
B. The city will buy no structured securities, whieh includeing 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.
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
Fnana WdLrector ef •"- to be available for investment may be
invested on an individual fund basis or may, unless otherwise restricted by
law, be commingled within one (1) common fund called the treasury
account. All income derived from treasury account investments shall be
deposited to the funds
contributing to the common fund on a pro-rata basis. Also, funds derived
from the sale of general obligation bonds or revenue bonds or similar
instruments of indebtedness shall be invested; or used in seelitbe manner
as-described by the initiating ordinances, resolutions, or bond covenants_
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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 certificates of deposits,
and funds placed into the State of Washington Local Government
Investment Pool, United States Treasury State and Local Uniform
Governmental Securities ("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 these
afeFementiened areas. With the exception of obligations of U.S. Treasury
securities and the State of Washington Local Government Investment Pool,
no more than twenty-five (25) percent 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 five (5) years. However, the
Fireman's Pension Fund and small amounts of water, sewer, insurance and
general funds are emeeptions—teexem ttffrom this five (5) year rule based
on prior investment portfolio history.
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B. The city may sell securities, if deemed appropriate, to maintain
liquidity. Seel4These 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 conducted after se4v
+nf-Faetiervsthese occurences shall work toward they 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 compliance with
that policies and procedures_ This 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 that 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.
Sec. 3.02.160. Reporting. The finaneial finance director-
shall submit monthly investment reports te the eity ee that summarize
the portfolio's holdings and investments by type to the city investment
committee. On a quarterly basis, the Finaneial analystfinance director shall
submit investment reports
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eetmem-that summarize the portfolio's average rate of return, market value
and average maturity to the investment committee and the operations
committee.
Sec. 3.02.170. Savings-e'auseState or Federal Amendments.
pelieY.
B:—If new legislation or regulation should liberalizeamend the
permitted instruments or institutions, those changes will, sueh changes
deemed to be immediately incorporated into this policy.
SECTION 2. - Sayina . The existing eQhapter 3.02 of the Kent City
Code, which is repealed and replaced by this ordinance, shall remain in full
force and effect until the effective date of this ordinance.
SECTION 3. - Severability. If any one or more section, subsection,
or sentence of this ordinance is held to be unconstitutional or invalid, such
decision shall not affect the validity of the remaining portion of this
ordinance and the same shall remain in full force and effect.
SECTION 4. - Corrections by City Clerk or Code Reviser. Upon
approval of the City Attorney, the City Clerk and the code reviser are
authorized to make necessary corrections to this ordinance, including the
correction of clerical errors; ordinance, section, or subsection numbering;
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or references to other local, state or federal laws, codes, rules, or
regulations.
SECTION 5. - Effective Date. This ordinance shall take effect and
be in force thirty (30) days from and after its passage and publication, as
provided by law.
4SUZ � OOKE, MAYOR
ATTEST:
r
CITY LER
APPROVED AS TO FORM: -
VV"`
TOM BRUBAKER, CITY ATTORNEY
PASSED: /7 day of 12012.
APPROVED: / ( day of , 2012.
PUBLISHED: oZO day of , 2012.
I hereby certify that this is a true copy of Ordinance No. �O3
passed by the City Council of the City of Kent, Washington, and approved
by the Mayor of the City of Kent as hereon indicated.
(SEAL:),
C LE =
P.\Civll\Ordinance\InvestmentPollcyntle3.docc -
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