HomeMy WebLinkAboutResolutions - 2021-04 - Establishing a policy for the investment of city funds and repealing Resolution 2015-08, investments, - 3/2/2021City of East Wenatchee Resolution 2021-04 Page 1 of 3 Retain Resolution until no longer needed for City-business, then transfer to Washington State Archives (GS50-05A-16 Rev. 1)
City of East Wenatchee, Washington
Resolution No. 2021-04
A Resolution of the City of East Wenatchee, Washington, establishing
a policy for the investment of City funds and repealing Resolution No.
2015-08.
1. Alternate format.
1.1. Para leer este documento en otro formato (español, Braille, leer
en voz alta, etc.), póngase en contacto con el vendedor de la ciudad al
alternateformat@eastwenatcheewa.gov, al (509) 884-9515 o al 711
(TTY).
1.2. To read this document in an alternate format (Spanish, Braille,
read aloud, etc.), please contact the City Clerk at
alternateformat@eastwenatcheewa.gov, at (509) 884-9515, or at 711
(TTY).
2. Authority.
2.1. RCW 35A.11.020 and RCW 35A.12.190 authorize the City
Council to organize and regulate its internal affairs and to define the
powers, functions and duties of its officers and employees.
2.2. RCW Chapters 35A, 39 and 43 provide the City with investment
authority
3. Recitals.
3.1. The City Council of the City of East Wenatchee desires to have
City funds invested in secure depositories and maximize returns on
these investments; and
3.2. The City Council of the City of East Wenatchee desires to
develop an investment policy to guide the investment of City funds to
meet these objectives; and
3.3. The City Finance Director has recommended revisions to the
policy for investment of City funds; and
City of East Wenatchee Resolution 2021-04 Page 2 of 3 Retain Resolution until no longer needed for City-business, then transfer to Washington State Archives (GS50-05A-16 Rev. 1)
3.4. The City of East Wenatchee investment policy has been written
in accordance with the Washington Public Treasurers Association
Model Investment Policy; and
THE CITY COUNCIL OF THE CITY OF EAST WENATCHEE DO RESOLVE
AS FOLLOWS:
4. Repeal. The City Council repeals Resolution No. 2015-08.
5. Authorization. The City Council adopts the Investment Policy
attached as Exhibit A as the official policy for investment of City funds.
6. Certification. The City Council directs the Finance Director to apply
for an Investment Policy Certification by the Washington Public
Treasurers Association.
7. Severability. If a court of competent jurisdiction declares any provision in this resolution to be contrary to law, such declaration shall not affect the validity of the other provisions of this Resolution.
8. Effective date. This Resolution becomes effective immediately.
City of East Wenatchee - Investment Policy 1
CITY OF EAST WENATCHEE
INVESTMENT POLICY
Policy Statement
This Policy establishes standards and guidelines for the direction, management and
oversight for all of the City of East Wenatchee’s (“City”) investable funds. These
funds include cash for liquidity purposes, intermediate investments for ongoing
operations and long-term investments for dedicated accounts. Funds must be
invested prudently to assure preservation of principal, provide needed liquidity for
daily cash requirements, and provide a market rate of return. For purposes of the
City’s Investment Policy, safety and liquidity are higher priorities than return on
investment. All investments must conform to federal, state, and local statutes
governing the City of East Wenatchee public funds investments.
City of East Wenatchee - Investment Policy 2
TABLE OF CONTENTS
1.0 INTRODUCTION………….. .............................................................................................................. 3
2.0 GOVERNING AUTHORITY………… .................................................................................................... 3
3.0 SCOPE ....................................................................................................................................... 3
4.0 OBJECTIVES ............................................................................................................................... 3
4.1 SAFETY
4.2 LIQUIDITY
4.3 RETURN
5.0 STANDARDS OF CARE ................................................................................................................... 4
5.1 DELEGATION OF AUTHORITY
5.2 PRUDENCE
5.3 ETHICS
6.0 SAFEKEEPING, CUSTODY AND CONTROLS ......................................................................................... 5
6.1 DELIVERY VS. PAYMENT
6.2 THIRD PARTY SAFEKEEPING
6.3 INTERNAL CONTROLS
6.4 EXTERNAL CONTROLS
7.0 AUTHORIZED FINANCIAL DEALERS ................................................................................................... 6
7.1 BROKER/DEALERS
7.2 INVESTMENT ADVISORS
7.3 BANK INSTITUTIONS
8.0 AUTHORIZED AND SUITABLE INVESTMENTS ...................................................................................... 7
8.1 AUTHORIZED INVESTMENTS
8.2 SUITABLE INVESTMENTS
8.3 BANK COLLATERALIZATION
9.0 INVESTMENT PARAMETERS ........................................................................................................... 9
9.1 DIVERSIFICATION
9.2 INVESTMENT MATURITY
9.3 PROHIBITED INVESTMENTS
10.0 REPORTING REQUIREMENTS ........................................................................................................ 11
10.1 REPORTING
10.2 PERFORMANCE STANDARDS
10.3 COMPLIANCE REPORT
10.4 ACCOUNTING METHOD
11.0 INVESTMENT POLICY ADOPTION ................................................................................................... 12
12.0 GLOSSARY OF TERMS ................................................................................................................. 13
City of East Wenatchee - Investment Policy 3
1.0 INTRODUCTION
This Investment Policy defines the parameters within which funds are to be invested by the City of East
Wenatchee (City). This Policy also formalizes the framework to provide the investment authority and
constraints for the City to maintain an effective and judicious management of funds within the scope of
this Policy.
This Policy is intended to be broad enough to allow the Finance Director, or authorized designee, to
function properly within the parameters of responsibility and authority, yet specific enough to
adequately safeguard the investment assets.
• Sets out guidelines for the prudent management of the City’s funds;
• Describes realistic parameters and goals for safely investing those funds;
• Establishes expectations for generally acceptable returns at a suitable level of risk that matches
the purpose of the City's funds;
• Provides the framework within which the Finance Director will operate by setting out objectives,
guidelines, and structure that include details on the universe of permitted investments and any
restrictions of their use.
The City Council reserves the right to amend this policy as deemed necessary.
2.0 GOVERNING AUTHORITY
The City of East Wenatchee investment authority is derived from RCW Chapters 35A, 39 and 43. The
investment program shall be operated in conformance with the Revised Code of Washington and
applicable Federal Law. All funds within the scope of this policy are subject to regulations established by
the State of Washington.
The City Council has the direct authority to provide for the Finance Director or his/her designee, the
responsibility for the daily operations of the City’s investment program and activities.
3.0 SCOPE OR IDENTIFICATION OF FUNDS
This policy applies to activities of the City of East Wenatchee with regard to investing the financial assets
of all funds. The amount of funds expected to fall within the scope of this policy is $3 million to $5 million,
which include, but not limited to, operating, capital improvement, and restricted funds.
This investment policy applies to all investment transactions involving the financial assets and related
activity of all City ffunds.
4.0 OBJECTIVES
All funds will be invested in a manner that is in conformance with federal, state and other legal
requirements. The objectives, in order of priority, of the investment activities will be as follows:
4.1 Safety: Safety of principal is the primary objective of the City. Investments shall be undertaken in
a manner that seeks to ensure the preservation of capital in the overall portfolio. To obtain this
objective, funds will be diversified, utilizing highly rated securities, by investing in a variety of
City of East Wenatchee - Investment Policy 4
securities and financial institutions. The investment portfolio will be invested in a manner that meets
RCW statutes and all legal requirements of the City.
4.2 Liquidity: The investment portfolio will provide liquidity sufficient to enable the City to meet all
cash requirements that might reasonably be anticipated. Therefore, the investments shall be
managed to maintain a minimum balance to meet daily obligations.
4.3 Return on Investment: The investment portfolio will be structured with the objective of attaining
a market rate of return throughout economic cycles, commensurate with the investment risk
parameters and the cash flow characteristics of the portfolio. Nevertheless, return on investment is
a lesser objective than safety or liquidity.
5.0 STANDARDS OF CARE
5.1 Delegation of Authority:
Governing Body: The ultimate responsibility and authority for the investment of City funds resides
with the City Council who has the authority to direct the management of the City investment program.
Authority: The overall management responsibility for the investment program is hereby delegated to
the Finance Director, or designee, who shall establish written procedures for the operation of the
investment program, consistent with this investment policy. The Finance Director shall be responsible
for all transactions undertaken and shall establish a system of controls to regulate the activities of
subordinate officials.
Investment Advisor: The City may contract with an external non-discretionary investment advisor
(Advisor) to assist with the management of the City’s investment portfolio in a manner that is
consistent with the City’s objectives and this policy. Such Advisors shall provide recommendations
and advice regarding the City investment program including but not limited to advice related to the
purchase and sale of investments by this Investment Policy.
5.2 Prudence:
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 which states: Investments will 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 in regard to speculation 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 officers and employees who act in accordance with
the Finance Director’s written procedures and the City’s Investment Policy, and who exercise due
diligence, shall be relieved of personal responsibility for the credit risk or market price change of an
investment, provided deviations from expectations are reported in a timely fashion and appropriate
action is taken to control adverse developments.
5.3 Ethics:
5.3.1 Employees Involved in the City Investment Program Must Avoid Conflicts of Interest.
Association with the investment program in any capacity is considered employee involvement.
Employees must avoid personal business activity that may:
City of East Wenatchee - Investment Policy 5
• Conflict with the proper execution of the investment program.
• Impair their ability to make impartial investment decisions.
5.3.2 Employees Associated with the City Investment Program Must Disclose Certain Personal
Information to the Finance Director or his/her Designee. All disclosures shall be reported
at each Finance Committee meeting or other more appropriate times.
The disclosure should list:
• Any material interests in financial institutions that conduct business with the City.
• Any personal financial or investment positions that could influence the performance of
the City’s investment portfolio, particularly with regard to the timing of purchases and
sales.
• Any related interest or personal financial positions that could be perceived as conflict of
interest.
6.0 SAFEKEEPING, CUSTODY, AND CONTROLS
6.1 Delivery vs. Payment:
All trades of marketable securities will be executed (cleared and settled) on a delivery vs. payment
(DVP) basis to ensure that securities are deposited in the City’s safekeeping institution prior to the
release of funds.
6.2 Third Party Safekeeping:
Prudent treasury management requires that all purchased securities be bought on a delivery versus
payment (DVP) basis and be held in safekeeping by an independent third-party financial institution or
the City’s designated depository.
The Finance Director shall designate all safekeeping arrangements and an agreement of the terms
shall be executed in writing. The third-party custodian shall be required to provide a statement to the
City listing at a minimum each specific security, book yield, description, maturity date, market value,
par value, purchase date, and CUSIP number.
All collateral securities pledged to the City for certificates of deposit or demand deposits shall be held
in accordance with the State of Washington's Public Deposit Protection Commission (PDPC).
6.3 Internal Controls:
The Finance Director is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the City are protected from loss, theft or misuse. Specifics for
the internal controls shall be documented in an investment procedures manual.
The internal control structure shall be designed to provide reasonable assurance that these objectives
are met. The concept of reasonable assurance recognizes that the cost of control should not exceed
the benefits likely to be derived, and the valuation of costs and benefits requires estimates and
judgments by management. The internal controls shall address the following points at a minimum:
• Control of collusion;
• Separation of transaction authority from accounting and recordkeeping;
• Custodial safekeeping;
City of East Wenatchee - Investment Policy 6
• Avoidance of physical delivery of marketable securities;
• Clear delegation of authority to subordinate staff members;
• Written confirmation of transactions for investments and wire transfers;
• Dual authorizations of wire transfers;
• Staff training; and
• Review, maintenance and monitoring of security procedures both manual and
automated.
6.4 External Controls
The City will have an external review of the Investment Policy and procedures every three (3) years.
The City may enter contracts with third-party investment advisory firms when their services are
required.
7.0 AUTHORIZED FINANCIAL DEALERS
7.1 Broker/Dealers:
The Finance Director shall maintain and review annually a list of all authorized financial institutions
and broker/dealers that are approved to transact with the City for investment purposes. The City shall
follow GFOA best practices for evaluating and selecting financial institutions and broker/dealers.
The Finance Director or designee may utilize the investment advisor’s approved broker/dealer list in
lieu of the City’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 documentation
of appropriate license and professional credentials of broker/dealers on the list. The annual
investment advisor broker/dealer review procedures include:
a. FINRA Certification check:
i. Firm profile
ii. Firm history
iii. Firm operations
iv. Disclosures of arbitration awards, disciplinary and regulatory events
v. State Registration Verification
b. Financial review of acceptable FINRA capital or letter of credit for clearing settlements.
The Advisor may be authorized through the contracted agreement to open accounts on behalf of the
City with the broker/dealers on the approved broker dealer list.
7.2 Investment Advisors:
Advisors must be registered under the Investment Advisers Act of 1940 and must act in a non-
discretionary capacity, requiring approval from the City prior to all transactions.
7.3 Bank Institutions:
The City will only place funds, exceeding the current FDIC insurance limits, with banks who are
currently participating in the Washington State PDPC program. Compliance/listing with the PDPC will
be verified by the Advisor or designated investment officer utilizing the Washington State Treasurer’s
website.
City of East Wenatchee - Investment Policy 7
8.0 AUTHORIZED AND SUITABLE INVESTMENTS
8.1 Authorized Investments:
Eligible investments are only those securities and deposits authorized by statute (RCW 39.58, 39.59,
43.250, and 43.84.080):
Among the authorized investments are U.S. Treasury and Agency securities (i.e., obligations of any
government sponsored enterprise eligible for collateral purposes at the Federal Reserve), municipal
debt, certificates of deposit with qualified public depositories within statutory limits as promulgated
by the Washington State PDPC at the time of investment, foreign and domestic Bankers Acceptances,
Commercial Paper and the Washington State Local Government Investment Pool.
The State of Washington Local Government Investment Pool is the only government-sponsored Pool
approved for investment of funds.
• This policy recognizes S&P, Moody’s and Fitch as the major Nationally Recognized Statistical
Ratings Organizations (NRSRO).
• In the case of split ratings, where the major NRSROs issue different ratings, the lower rating
shall apply. Minimum credit ratings and percentage limitations apply to the time of purchase.
• All securities must be purchased on the secondary market and may not be purchased directly
from the issuer.
8.2 Suitable Investments:
The City is empowered to invest in the following types of securities:
US Treasury Obligations: Direct obligations of the United States Treasury.
US Agency Obligations Primary Issuers: Government Sponsored Enterprises (GSEs) – Federal
Instrumentality Securities include, but are not limited to Federal National Mortgage Association
(FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), Federal Home Loan Banks (FHLB),
and the Federal Farm Credit Banks (FFCB).
US Agency Obligations Secondary Issuers: Other US government sponsored enterprises that are less
marketable are considered secondary GSEs. They include, but are not limited to: Private Export
Funding Corporation (PEFCO), Tennessee Valley Authority (TVA), Financing Corporation (FICO) and
Federal Agricultural Mortgage Corporation, (Farmer Mac).
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 must have at a minimum rating of AA- from S&P, Aa3 from Moody’s or AA- from
Fitch.
Commercial Paper: Unsecured debt obligations of corporate issuers that are rated at least A1+ by
S&P, P1 by Moody’s and F1+ by Fitch. Must be rated by two NRSROs at the time of purchase. If the
commercial paper is rated by more than two 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 with a minimum rating of AA- by S&P, Aa3 by Moody’s or AA- by Fitch.
City of East Wenatchee - Investment Policy 8
Certificates of Deposit: Non-negotiable Certificates of Deposit of financial institutions that are
qualified public depositories as defined in RCW 39.58.010(2) and by the restrictions within.
Time Deposits and Savings Accounts Issued by Banks: Deposits in PDPC approved banks.
Banker’s Acceptance: Banker’s Acceptances generally are created based on a letter of credit issued
to finance transactions. They are used to finance the shipment of some specific goods within the
United States. They are issued by qualified financial institutions.
Local Government Investment Pool: Investment Pool managed by the Washington State Treasurer’s
Office.
8.3 Bank Collateralization:
The PDPC makes and enforces regulations and administers a program to ensure public funds
deposited in banks and thrifts are protected if a financial institution becomes insolvent. The PDPC
approves which banks and thrifts can hold state and local government deposits and monitors
collateral pledged to secure uninsured public deposits. Under RCW 39.58.240, all public treasurers
and other custodians of public funds are relieved of the responsibility of executing tri-party
agreements, reviewing pledged securities, and authorizing additions, withdrawals, and exchanges of
collateral.
9.0 INVESTMENT PARAMETERS
9.1 Diversification:
The City will diversify the investment of all funds by adhering to the constraints by issuer type in
accordance with the following table:
Table of Constraints on the Portfolio
Issue Type Maximum
% Holding
Maximum
% per Issuer Ratings S&P Ratings
Moody’s Ratings Fitch
US Treasury Obligations 100% None N/A N/A N/A
US Agency Primary
Securities FHLB, FNMA,
FHLMC, FFCB
100% 50% N/A N/A N/A
US Agency Secondary
Securities FICO, FARMER
MAC, etc.
50% 30% N/A N/A N/A
Municipal Bonds 30% 20% A- A3 A-
Commercial Paper 25% 3% A1+
Long Term AA-
P1
Long Term Aa3
F1+
Long Term AA-
Certificates of Deposit 10% 5% Deposits in PDPC
approved banks
Deposits in PDPC
approved banks
Deposits in PDPC
approved banks
Bank-Time
Deposits/Savings
Accounts
50% None Deposits in PDPC
approved banks
Deposits in PDPC
approved banks
Deposits in PDPC
approved banks
Banker’s Acceptance 5% 5% A- A3 A-
Washington LGIP 100% None N/A N/A N/A
City of East Wenatchee - Investment Policy 9
9.2 Investment Maturity:
The City will not directly invest in securities maturing more than five (5) years from the date of
purchase.
• Liquidity funds will be held in the State Pool, PDPC bank deposits, or cash matched securities.
• Exception to 5-year maturity maximum: Reserve or Capital Improvement Project monies may
be invested in securities exceeding 5 years if the maturities of such investments are made to
coincide as nearly as practicable with the expected use of the funds.
9.3 Prohibited Investments:
9.3.1 The City shall not lend securities nor directly participate in a securities lending or reverse
repurchase program.
9.3.2 The City shall not invest in:
a. Mortgage-backed securities
b. Derivative Products
c. Securities that leverage the portfolio or are used for speculation of interest rates
d. Mutual Funds
e. Repurchase Agreements
f. Reverse Agreements
10.0 REPORTING REQUIREMENTS
10.1 Reporting:
The Finance Director shall be responsible for investment reporting. At a minimum, annual reporting
shall be made to the City Council including but not limited to securities holdings, cash balances, and
market values in the investment portfolio.
Specific Requirements:
• Book Yield
• Holdings Report including mark-to-market and security description
• Transactions Report
• Weighted Average Maturity
10.2 Compliance Report
A compliance report will be generated quarterly comparing the portfolio positions to this investment
policy.
10.3 Accounting Method
The City shall comply with all required legal provisions and appropriate accounting standards. The
accounting principles are those contained in the pronouncements of authoritative bodies including
but not necessarily limited to the Governmental Accounting Standards Board (GASB).
City of East Wenatchee - Investment Policy 10
Pooling of Funds: Except for cash in certain restricted and special funds, the City will consolidate
balances from all funds to maximize investment earnings. Investment income will be allocated to
the various funds based on their respective participation in the investment program and in
accordance with appropriate accounting standards.
11.0 INVESTMENT POLICY ADOPTION
The City’s Investment Policy shall be adopted by the City Council.
The Policy shall be reviewed annually by the Finance Committee. Any modifications shall be submitted
and approved by City Council.
City of East Wenatchee - Investment Policy 11
12.0 GLOSSARY OF TERMS
Accrued Interest: The interest accumulated on a bond since issue date or the last coupon payment. The
buyer of the bond pays the market price and accrued interest, which is payable to the seller.
Agency: A debt security issued by a federal or federally sponsored agency. Federal agencies are backed
by the full faith and credit of the U.S. Government. Federally Sponsored Agencies (FSAs) are backed by
each particular agency with a market perception that there is an implicit government guarantee. (Also
see FEDERAL AGENCY SECURITIES and GOVERNMENT SECURITY)
Agency Securities: Government sponsored enterprises of the US Government.
Amortization: In portfolio accounting, periodic charges made against interest income on premium bonds
in anticipation of receipt of the call price at call or of par value at maturity.
Asset: Available property, as for payment of debts
Average Maturity: A weighted average of the expiration dates for a portfolio of debt securities. An income
fund's volatility can be managed by shortening or lengthening the average maturity of its portfolio.
Bankers’ Acceptances: A time draft accepted (endorsed) by a bank or trust company. The accepting
institution guarantees payment of the bill, as well as the issuer. BAs are short-term non-interest-bearing
notes sold at a discount and redeemed by the accepting bank at maturity for full face value.
Bank Wire: A virtually instantaneous electronic transfer of funds between two financial institutions.
Basis Point: A measure of an interest rate, i.e., 1/100 of 1 percent, or .0001.
Bid: The indicated price at which a buyer is willing to purchase a security or commodity. When selling a
security, a bid is obtained. (See Offer)
Bond: An interest-bearing security issued by a corporation, government, governmental agency, or other
body. It is a form of debt with an interest rate, maturity, and face value, and specific assets sometimes
secure it. Most bonds have a maturity of greater than one year and generally pay interest semiannually.
Broker: An intermediary who brings buyers and sellers together and handles their orders, generally
charging a commission for this service. In contrast to a principal or a dealer, the broker does not own or
take a position in securities.
Certificates of Deposit: Instruments issued by a bank specifying that a sum of money has been deposited,
payable with interest to the bearer of the certificate on a certain date.
Collateral: Securities or other property that a borrower pledges as security for the repayment of a loan.
Also refers to securities pledged by a bank to secure deposits of public monies.
Commercial Paper: Short-term, unsecured, negotiable promissory notes issued by corporations.
Current Maturity: The amount of time left until an obligation matures. For example, a one-year bill issued
nine months ago has a current maturity of three months.
City of East Wenatchee - Investment Policy 12
CUSIP: A CUSIP number identifies securities. CUSIP stands for Committee on Uniform Security
Identification Procedures, which was established under the auspices of the American Bankers Association
to develop a uniform method of identifying municipal, U.S. government, and corporate securities.
Dealer: An individual or firm that ordinarily acts as a principal in security transactions. Typically, dealers
buy for their account and sell to a customer from their inventory. The dealer’s profit is determined by the
difference between the price paid and the price received.
Delivery: Either of two methods of delivering securities: delivery vs. payment and delivery vs. receipt
(also called “free”). Delivery vs. payment is the delivery of securities with an exchange of money for the
securities.
Diversification: Dividing available funds among a variety of securities and institutions to minimize market
risk.
Duration: A measure used to calculate the price sensitivity of a bond or portfolio of bonds to changes in
interest rates. This equals the sum of the present value of future cash flows.
Full Faith and Credit: Indicator that the unconditional guarantee of the United States government backs
the repayment of debt.
General Obligation Bonds (GOs): Bonds secured by the pledge of the municipal issuer’s full faith and
credit, which usually includes unlimited taxing power.
Government Bonds: Securities issued by the federal government; they are obligations of the U.S.
Treasury; also known as “governments.”
Interest: Compensation paid or to be paid for the use of money. The rate of interest is generally
expressed as an annual percentage.
Investment Core Funds: Core funds are defined as operating fund balance and other fund balances that
exceeds the City’s daily liquidity needs. Core funds are invested out the yield curve to diversify maturity
structure in the overall portfolio. Having longer term investments in a portfolio will stabilize the overall
portfolio interest earnings over interest rate cycles.
Investment Securities: Securities purchased for an investment portfolio, as opposed to those purchased
for resale to customers.
Liquidity: The ease 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 providing liquidity 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.
City of East Wenatchee - Investment Policy 13
Mark to Market: Adjustment of an account or portfolio to reflect actual market value rather than book
price, purchase price or some other valuation.
Market Value: The market value of a security is the price at which can be sold on that date.
Maturity: The date upon which the principal or stated value of an investment becomes due.
Municipals: Securities, usually bonds, issued by a state, its agencies, by cities or other municipal entities.
The interest on “munis” 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.
Non-Discretionary Investment Advisor: Non-discretionary investment advisor services may include
investment management oversight, investment research, portfolio analysis, portfolio reporting and
portfolio recommendations based upon the specific investment policy and investment objectives of each
client. Clients must approve any such recommendations before the securities are purchased or sold in
their accounts.
Par Value: 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.
Principal: The cost of an instrument on which interest is earned.
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 reasonable discretion and intelligence who
is seeking a reasonable income and preservation of capital.
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.
Safekeeping: An arrangement under which an organization’s securities are kept in a bank vault or in the
case of book entry securities, are held and recorded in the customer’s name. Evidence of this
arrangement is a safekeeping receipt.
Secondary Market: A market where certain securities may be bought and sold at prevailing market prices
after their initial distribution but before their stated maturity date.
Treasury Bill (T-Bill): An obligation of the U.S. government with a maturity of one year or less. T-bills bear
no interest but are sold at a discount.
Treasury Bonds and Notes: Obligations of the U.S. government that bear interest. Notes have maturities
of one to ten years; bonds have longer maturities.
City of East Wenatchee - Investment Policy 14
Yield: The annual rate 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 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 maturity of the bond.
Yield to Maturity: The average annual yield on a security, assuming it is held to maturity; 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.