City Of Seattle Statement Of Investment Policy
TABLE OF CONTENTS:
It shall be the policy of the City of Seattle to manage
investments to achieve these financial objectives: To preserve
principal, while maintaining liquidity to meet the City's need for
cash and maximizing income. Investment decisions should
further the City's social policies established by ordinance or
policy resolutions of the City Council. A City social policy shall
take precedence over furthering the City's financial objectives
when expressly authorized by City Council resolution, except where
otherwise provided by law or trust principles.
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investment policy applies to all financial resources of the City
of Seattle, other than funds of The Seattle City Employees
Retirement System managed by its Executive Director or contractual
investment managers; Deferred Compensation Plan funds managed externally; and
such funds excluded by law, bond indenture or other
These funds are accounted for by
the City's Department of Executive Administration, Accounting
Services Division, as represented in the City of Seattle
Comprehensive Annual Financial Report and include:
Debt Service Funds (unless prohibited by bond
Capital Project Funds
Internal Service Funds Trust and Agency Funds
Any new Fund
created, unless exempted by the City Council
Funds held by the Office of the
State Treasurer, State of Washington and the King County
Department of Finance during tax collection periods shall be
governed by their respective investment policies, and are not
subject to the provisions of this policy.
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Investments shall be made with judgment and care
- under investment and economic 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 the probable safety of their capital as
well as the probable income to be derived.
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 under prevailing economic
conditions at the moment of investment commitments. Investment
officials, 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.
determining whether an investment official has exercised prudence
with respect to an investment decision, the determination shall be
made taking into consideration the investment of all funds over
which the official had responsibility rather than a consideration
as to the prudence of a single investment and, whether the
investment decision was consistent with the written investment
policy of the entity.
person involved in the investment process shall refrain from
personal business activities which could conflict with the proper
execution of the investment program, or which could impair their
ability to make impartial investment decisions. Investment
personnel shall disclose, during an annual examination by the
City's Ethics and Election Commission (discussed in Section 6.K
below), any material financial interest that could be related to
the performance of the City's investment portfolio.
insurance for all staff involved in the investment process shall
be required, and such requirements shall apply to those
individuals authorized to place orders to purchase or sell
investment instruments. The City's Risk Manager shall establish
specific levels of liability.
Securities shall not be purchased with trading
or speculation (such as anticipating an appreciation of capital
value through immediate changes in market interest rates) as the
dominant criterion for the selection of the security. However, as
long as the original investments can be justified by their
ordinary earning power, trading in response to changes in market
value is a requisite of ongoing portfolio management.
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4. AUTHORIZED INVESTMENTS
As contemplated in Revised
Code of Washington (RCW) 35.39.032, the Director of Executive
Administration of the City of Seattle, under the supervision of
the Mayor and consistent with policy direction given by the
Director of Finance, is authorized on behalf of the City to invest
all moneys in the City Treasury which in the judgment of the
Director are in excess of current City needs in:
A. Investment deposits with qualified
public depositories as defined in RCW 39.58.
Certificates, notes, bonds or bills of the United States, or other
obligations of the United States or its agencies, or of any
corporation wholly owned by the government of the United States.
C. Obligations of government-sponsored
enterprises which are eligible as collateral for advances to
member banks as determined by the Board of Governors of the
Federal Reserve System. (These include, but are not limited to,
Federal Home Loan Bank, Federal Home Loan Mtg. Corp., Federal Farm
Credit Bank, Federal National Mortgage Association debt
Bankers' Acceptances purchased in the secondary market and having
received the highest rating on the accepting bank’s short-term
obligations and one of the two (2) highest ratings on long-term
debt by at least two (2) nationally recognized statistical rating
organizations. Bankers' Acceptances shall not have a maturity
longer than 180 days from purchase.
Paper purchased in the secondary market and having received the
highest rating by at least two (2) nationally recognized
statistical rating organizations. Commercial Paper shall not have
a maturity longer than 180 days from purchase, and shall adhere to
the guidelines published in Attorney General of Washington Opinion
F. General obligation
bonds or warrants of this state or any other state, or general
obligation or utility revenue bonds or warrants of the City or of
any other city or town purchased in the secondary market and
having received one (1) of the two (2) highest ratings (Aaa/Aa) by
at least two (2) nationally recognized statistical rating
Agreements and Reverse Repurchase Agreements structured with
securities eligible for purchase (as defined in B through E
above), provided that a Master Repurchase Agreement has been
executed with the contra-party.
H. Public funds investment
account known as the Local Government Investment Pool (LGIP) in
the State Treasury.
I. In other
investments authorized by law.
The City may operate a securities lending
program similar to that instituted by the Washington State
Treasurer's Office and other municipal corporations in the State
The Treasury Director may
select one or more firms to provide securities lending management
services. Securities lending services will include, but not be
ensuring all loans
of coupon-bearing securities be supported by cash collateral
valued at not less than 102% of market value of the securities,
including accrued interest;
B. ensuring all loans of non
coupon-bearing securities be supported by cash collateral valued
at not less than 102% of market value of the securities, but not
to exceed par;
C. ensuring that the
investment of cash collateral be only in securities authorized in
this policy, and that the restrictions on investments found in
Sections 4 and 5 of this policy also apply to investments made by
a securities lending agent;
D. ensuring that the collateral accepted in a bonds
borrowed transaction conforms to the collateral requirements of
E. ensuring next day liquidity for all
securities on loan, as required;
F. providing indemnification against borrower
G. providing monthly accounting, performance, compliance,
and management reports.
The services of a securities lending agent
will be obtained through an evaluation of competitive proposals
submitted in response to a regularly issued Request for Proposals
Securities purchased by the agent are to be
held by the master custodian, acting as an independent third
party, in its safekeeping or trust department.
All securities transactions
are to be conducted on a delivery-versus-payment (DVP) basis only.
5. INVESTMENT OBJECTIVES
preservation of principal shall be the paramount objective of the
investment program of the City of Seattle. Investments shall be
selected in a manner that will attempt to ensure the safety of the
City's capital. This will be accomplished through a program of
diversification and maturity limitations more fully discussed
below. Proceeds from the issuance of tax-exempt debt securities
shall be invested, recorded and reported in the manner set forth
by the U.S. Treasury Department and the Internal Revenue Service
so as to preserve the tax-exempt status of the debt
Diversification will be accomplished by adhering to the following schedule:
|U.S. Treasury Bills,
Certificates, Notes and Bonds
||100% of portfolio
|U.S. Government Agency Securities
||100% of portfolio
of Deposit (2)
||25% of portfolio
10% per bank
Bankers' Acceptances (2)
||25% of portfolio
Commercial Paper (2)
||25% of portfolio
5% per issuer
Municipal Bonds or
||10% of portfolio
5% per issuer
Agreements Term and Overnight Term only
||50% of portfolio
75% of Capital
|Reverse Repurchase Agreements
||20% of portfolio
75% of Capital (4)
||25% of portfolio
||5% of portfolio
|Local Governement Investment
||50% of portfolio
(1) U.S. Government Agency Discount Notes
and Medium Term Notes maturing less than one year from date of
purchase are treated as money market instruments and shall not apply
toward maximum Agency limitations.
(2) The limitation shall
include liabilities of all types of investment instruments from any
single issuing bank or financial institution. It shall also include
securities issued separately by any subordinate bank or institution.
(3) Legal limit.
(4) Regulatory Capital as
defined in Securities and Exchange Commission Rule 15C3-1 (uniform
net capital rule).
(5)Reverse Repurchase Agreements shall not
exceed 10% of the portfolio when used expressly for cash management
purposes. When used to maximize return, the maturity shall not
exceed ninety (90) days and the securities purchased with the
proceeds of a Reverse Repurchase transaction shall closely
approximate, but not exceed, the maturity of the Reverse Repo.
(6)U.S. Government Agency REMICs, CMOs and
Pass-Thru securities shall not apply toward maximum Agency
(7)Limitation shall apply to all
derivative-based securities, whether U.S. Government Agency or
Mortgage Backed securities. Interest rates may fluctuate based on
generally recognized reference rates or the relationship of
rates, and shall specifically exclude such structures as “inverse
floaters,” “interest only” and “principal only.”
The investment program will be administered in a
manner that will ensure adequate cash flow to meet reasonably
anticipated liquidity needs. Purchases shall attempt to match, but
should not exceed, the anticipated need for the funds. To
further ensure the satisfaction of these needs, securities purchased will have
a maximum maturity no longer than fifteen (15) years, with the
exception of investments for the Fire Pension Actuarial - Administration Fund which
shall have a maximum maturity limit of the year 2018, and
the average maturity of all securities owned should be
no longer than five (5) years.
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 infraction
shall work toward returning to compliance.
The investment portfolio shall be designed with the objective of
attaining the best feasible rate of return, throughout budgetary and economic
cycles, commensurate with the investment risk constraints and the
cash flow needs of the City.
The City’s selection of
portfolio management is active as opposed to passive. Active management
uses investment strategies designed to increase portfolio value by exceeding average
rates of return normally achieved using passive management. The basis used
by the Director of Investments to determine whether market returns are being
achieved shall be a benchmark representative of the makeup of the
investment portfolio, and will be subject to change as
the structure of the portfolio changes.
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6. DELEGATION OF AUTHORITY
Seattle City Ordinance 110749, as amended, empowers
the Director of Executive Administration with the investment responsibility for the City.
There is created within the Department of Executive Administration, a Treasury Service
Division, and an Investment Section. The Director of Investments is responsible for
day-to-day investment decisions, activities and the development and maintenance of written
administrative procedures for the operation of the investment program, consistent with
The Director of Investments shall report to
the Director of Executive Administration at agreed-upon intervals, on investment activities. The Director of Finance and the
Director of Executive Administration, along with the Director of Investments, shall meet
monthly and discuss adherence to this policy, data on investments being held in the
portfolio and the returns on the City's investments during the preceding period. A
copy of the report shall be provided to the Chair of the City Council's
Finance and Budget Committee.
An Assistant to the Director of Investments will
be trained to assist and provide relief for the Director of Investments in the
day-to-day placement of investments.
The written administrative
procedures will provide for:
A. Competitive bids and offerings of
securities to be
purchased or sold.
B. Formats for monthly, quarterly and annual reports to
be provided to the Director of Executive Administration, the
Director of Finance, the Mayor and the City Council.
C. Comparison of confirmations.
of benchmarks for performance measurement.
E. Pro-ration of investment income from
to participating Funds.
F. Compliance with generally accepted
principles of the Government Accounting Standards Board.
G. Review of investment activities by the Director of
H. Review of investment activities by an
committee composed of professional investment persons located in Seattle.
I. Establishment of a system of written
designed to detect fraud, error, misrepresentation or imprudent actions.
J. Review of investment operations by the
City Auditor and
by the State Examiner.
K. Annual review of investment practices in specific areas
of interest to the City Elections and Ethics Commission.
L. A Desk Procedures Manual to include:
2. Organizations Affected
3. Legal Authority
5. Responsibilities (Job Descriptions)
6. Processing Investment Transactions
7. Eligible Security Dealers & Financial Institutions
8. Securities Descriptions
10. Bibliography & References
11. Appendices (Forms and Software Listings)
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7. SECURITY DEALERS AND
The Director of Investments will maintain a list of security dealers and financial
institutions authorized to provide investment services to the City of Seattle.
The security dealers and financial
institutions may include "primary" dealers or regional dealers
that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule) and Investment Departments of local
banks, all of which have been subjected to the following evaluation:
A. Financial condition, strength and capability to fulfill
B. Overall reputation with other dealers and investors.
C. Regulatory status of the dealer.
D. Background and expertise of the individual
Individuals representing firms doing
business with the City shall receive a copy of this policy, and shall certify that they have
read it and understand the provisions therein. A copy of such certification, along with
financial statements (both current and annual audited), shall be kept on file in the
The selection of the City's "concentration" bank (primary depository) will be made through a competitive process
involving the use of Request for Proposals (RFPs), and shall be limited to those
institutions qualifying under RCW 39.58 and having sufficient capital to support the activity of
Banks having a deposit
relationship with the City shall provide the Division with
appropriate financial statements on a timely basis.
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8. PAYMENT AND
All transactions will be accomplished with authorized security dealers and financial
institutions on a delivery-versus-payment (DVP) basis. Securities will be held at the
City's Safekeeping Agent, which shall be selected through a competitive process (RFP), or
that agent's representative in New York City, or in its' account at the Federal Reserve
Collateral will be required on Repurchase
Agreements, and shall be delivered to the City's Safekeeping Agent
as described above, or through a Triparty arrangement in which the
proper documents delineating the responsibilities of the parties
have been executed. Any required margin (the amount by which the
market value of the securities collateralizing the transaction exceeds the transaction
value) will be determined at the time of the transaction, as specified
in the Master Repurchase Agreement. Such collateral shall be revalued on a periodic
basis, in transactions that are represented as Term Repurchase Agreements, in order to maintain market
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9. POLICY ADOPTION AND
The City's Investment Policy shall be presented to the City Council Finance,
Budget Committee for review annually, and such Committee shall acknowledge any significant
Any deviation from the above
policy considerations must be confirmed by the Director of
Executive Administration and Director of Finance.
of Investments: Rod Rich
Assistant to the Director of
Investments: Kellie Craine Kellie.Craine@seattle.gov