06/11/2024 - PacketPort Orchard
Council Finance Committee
June 112024
3:00 pm-4:00 Zoom Link
Council Conference Room
https://us02web.zoom.us/m/83778957036
US: +12532050468, 8378957036#7# or +12532158782, 8378957036#7#
1) Finance Department (15 mins) Finance Director, Noah Crocker
a. Sales Tax & REET Revenue Report
2) Budget Amendment 2023-2024 (20 mins) Finance Director, Noah Crocker
a. Budget Summary Income
b. Budget Draft Staff Report
c. Budget Personnel Follow up
d. TIP 1.15 Pottery Ave Non -motorized
e. Melcher Pump Station
f. Givens Park
g. Smart Meter Project
h. SCIP#SB-South Sidney Sewer (Ruby Lift)
3) Investment Policy (20 mins)
Other Items to come before the Committee.
Schedule Next Meeting Date
Role of the Finance Committee
Finance Director, Noah Crocker
The finance committee provides oversight of city budgeting, financial planning, and financial reporting. The committee recommends long-range
financial goals along with funding strategies for the operating and capital budgets. Human resource issues requiring policy direction are brought
before the committee. The committee serves as the advisory forum for transportation and street maintenance funding, and funding relating to the
transportation benefit district.
Sales Tax Collections
Population
Summary of Budget to
Actuals -A
2022
2023
2024
Biennial
I i
Budget
Actual
5,340,000
6,865,000
6,895,000
13,760,000
7,783,763
7,719,461
3,219,613
10,939,074
Over/Under
$ 2,443,763
$ 854,461
$ (3,675,387)
$ (2,820,926)
Actuals
2022
2023
2024
Biennial
January
February
March
April
May
June
July
August
September
October
November
December
$ 543,145
626,678
524,545
548,118
665,944
682,922
668,890
742,304
707,709
693,521
730,655
649,332
$ 656,711 $
684,990
572,419
539,880
606,994
616,122
689,627
725,037
663,517
653,847
684,362
1 625,956
631,079
723,810
609,403
574,283
681,038
$ 1,287,789
$ 1,408,800
$ 1,181,822
$ 1,114,163
$ 1,288,032
$ 616,122
$ 689,627
$ 725,037
$ 663,517
$ 653,847
$ 684,362
$ 625,956
Total
$ 7,783,763
$ 7,719,461 $
3,219,613
$ 10,939,074
Percentage of Biennial
Budget Received
79 %
Actuals
Year over Year
%
Change
Change
$
(25,632)
-3.90%
$
38,820
5.67%
$
36,985
6.46%
$
34,402
6.37%
$
74,044
12.20%
$
158,619
Real Estate Excise Tax (REET) Collections
Summary of Budget to
Actuals
2022
2023
2024
Biennial
Budget
Actual
$ 1,808,000
1,945,903
$ 1,800,000
2,112,110
$ 1,600,000
502,980
$ 3,400,000
$ 2,615,090
Over/Under
$ 137,903
$ 312,110
$ (1,097,020)
$ (784,910)
108%
Actuals
2022
2023
2024
Biennial
January
February
March
April
May
June
July
August
September
October
November
December
$ 82,213
166,226
204,469
126,410
151,824
190,761
249,922
172,743
181,406
151,035
121,635
147,258
$ 81,265 $
137,211
158,612
150,287
189,577
237,539
233,708
172,573
280,056
154,352
140,293
1 176,638
107,320
104,091
139,296
152,272
$ 188,585
$ 241,302
$ 297,908
$ 302,559
$ 189,577
$ 237,539
$ 233,708
$ 172,573
$ 280,056
$ 154,352
$ 140,293
$ 176,638
Total
$ 1,945,903
$ 2,112,110 $
502,980
$ 2,615,090
Percentage of Biennial
Budget Received
77%
Actuals
Year over Year
Change
%
Change
$
26,055
32.06%
$
(33,120)
-24.14%
$
(19,316)
-12.18%
$
1,985
1.32%
$
(24,395)
-4.63%
Budget
2024 estimated
Budget vs Actual
%
based on 5yr avg
(Over/Under)
Over/Under
$ 516,190
$
114,889
22.3%
$ 620,872
$
102,938
16.6%
$ 479,509
$
129,895
27.1%
$ 461,296
$
112,986
24.5%
$ 570,567
$
110,471
19.4%
$ 566,524
#VALUE!
$ 611,506
#VALUE!
$ 642,161
#VALUE!
$ 617,092
#VALUE!
$ 606,655
#VALUE!
$ 630,537
#VALUE!
$ 572,093
#VALUE!
$ 6,895,000
$
571,180
21.57%
Budget
2024 estimated
Budget vs Actual
%
based on 5yr avg
(Over/Under)
Over/Under
$ 80,407
$
26,913
33.577
$ 122,603
$
(18,512)
-15.1%
$ 134,793
$
4,503
3.3%
$ 118,291
$
33,981
28.7%
$ 108,281
#VALUE!
$ 139,665
#VALUE!
$ 231,669
#VALUE!
$ 133,480
#VALUE!
$ 155,823
#VALUE!
$ 128,521
#VALUE!
$ 94,003
#VALUE!
$ 152,465
#VALUE!
$ 1,600,000
1 $
46,886
101%
-5%
City of Port Orchard 084
216 Prospect Street Port Orchard,1(30 87 -4 07 ORCHARD o
citvhall(�portorchardwa.gov I (360) 876-4407
www.portorchardwa.gov
Agenda Staff Report
Agenda Item No.: Business Item Meeting Date: June 11, 2024
Subject: Ordinance No. OXX-24 Amending the 2023-2024 Prepared By: Noah Crocker
Biennial Budget Including Exhibit A Personnel Finance Director
Summary: The City of Port Orchard Biennial Budget for 2023-2024 is written to capture revenue and
expenses over the fiscal period. During the biennial period, changes to the budget in both revenue and
expenditures need to be recognized by a Budget Amendment.
By this Ordinance, the City Council would amend the 2023-2024 Biennial Budget, as adopted by
Ordinance No. 046-22 and amended by Ordinance No. 018-23, 022-23, 029-23, 039-23 and 008-24
including changes to Exhibit A which identifies Salary and personnel positions of the City.
The proposed budget amendment is intended to provide the following:
1) Fund 001: Current Expense Fund
a.
Increase Sales Tax Revenue by $200,000
b.
Increase transfers out to Fund 302 for PW Shop -Schedule D Paving by $25,000
c.
Increase transfers out to Fund 302 for Givens Park $10,000 from Rec Reserve
d.
Increase transfers out to Fund 304 for TIP 1.15 Pottery Ave Non -Motorized by $331,000
e.
Increase transfers out to Fund 423 for TIP 1.15 Pottery Ave Non -Motorized by $50,000
f.
Increase expenses for ERR Purchase for a Mechanics Van by $46,000
g.
Reduce Ending fund Balance by $262,000
2) Fund 111:
Impact Fee Fund
a.
Increase transfers out to Fund 304 from TIF for TIP 1.15 Pottery Ave Non -Motorized by $338,950
b.
Increase transfers out to Fund 302 from Park Impact Fee's for Givens Park by $100,000
c.
Reduce Park Impact Fee Ending fund Balance by $100,000
d.
Reduce Transportation Impact Fee Ending fund Balance for $338,950
3) Fund 302: Capital Construction Fund
a.
Increase transfers in from Fund 111-PIF for Givens Park by $100,000
b.
Increase transfers in from Fund 001 Rec Reserve for Givens Park $10,000
c.
Increase transfers in from Fund 001 for PW Shop -Schedule D by $25,000
d.
Increase Ending fund Balance by $135,000
4) Fund 304: Street Capital Construction
a.
Increase transfers in from Fund 001 for TIP 1.15 Pottery Ave Non -Motorized by $331,000
b.
Increase transfers in from Fund 111 for TIP 1.15 Pottery Ave Non -Motorized by $338,950
c.
Increase expenses for TIP 1.15 Pottery Ave Non -Motorized by $331,000
d.
Increase expenses for TIP 1.15 Pottery Ave Non -Motorized by $338,950
5) Fund 411:
Water Operations
a.
Increase revenue of $330,000
b.
Increase transfers out to Fund 413 for TIP 1.15 Pottery Ave Non -Motorized by $137,000
c.
Increase transfers out to Fund 413 for Melcher by $431,250 (75% of $574k)
d.
Increase expenses for ERR Purchase for a Flat Bed Truck by $17,000
e.
Increase expenses for smart water meters/radio's by $200,000
f.
Increase expenses for smart water meters AMI installation, software, equipment by $500,000
g.
Reduce ending fund balance by $955,250
6) Fund 413:
Water Capital
a.
Increase transfers in from Fund 411 for TIP 1.15 Pottery Ave Non -Motorized by $137,000
b.
Increase transfers in from Fund 411 for Melcher by $431,250 (75% of $574k)
c.
Increase expenses for TIP 1.15 Pottery Ave Non -Motorized by $137,000
d.
Increase expenses for Melcher Pump Station by $551,970
e.
Reduce fund balance in Fund 413 for by $120,720
7) Fund 423:
Storm Drainage Capital
a.
Increase transfers in from Fund 001 for TIP 1.15 Pottery Ave Non -Motorized for $50,000
b.
Increase expenses for TIP 1.15 Pottery Ave Non -Motorized by $50,000
8) Fund 433:
Sewer Capital
a.
Increase revenue for SCIP#SB-South Sidney Sewer (Ruby Lift) by $750,000
b.
Increase expenses for TIP 1.15 Pottery Ave Non -Motorized by $209,000
c.
Increase expenses for SCIP#SB-South Sidney Sewer (Ruby Lift) by $50,000
d.
Increase ending fund balance in Fund 433 by $491,000
9) Fund 500:
Equipment Rental Revolving Fund
a.
Modify by changing from a replacement of a F-150 truck to a Van to be used by the Mechanics
with an increase of revenue for Facilities $46,000
b.
Modify by consolidating the two newly approved additions of F-150 trucks into one F-350
Flatbed Truck with an increase of revenue for Water by $17,000
c.
Modify by changing from a replacement of a F-150 truck to a Van to be used by the Mechanics
with an increase expense for by $46,000
d.
Modify by consolidating the two newly approved additions of F-150 trucks into one F-350
Flatbed Truck with an increase of expenses for Water by $17,000
e.
Increase expense for the purchase of a Police Vehicle by $73,000
f.
Reduce ending fund balance by $73,000
10) Exhibit A
a. Add 1 FTE for Civil Engineer 1
Recommendation:
Relationship to Comprehensive Plan:
Motion for consideration:
Fiscal Impact: Total Revenue and Expense Authority will increase by $ 2,766,200
Alternatives:
Attachments:
2023-2024 Current
Biennial Budget Ord.
2023 Adjustments
2024 Adjustments
2023-2024
2023-2024 Amended
•
Adjustments
Biennial Budget
018-23
Beginning Fund Balance
$ 71,128,012
$ -
$ -
$ -
$ -
$ 71,128,012
Revenue
$ 172,022,888
$ -
$ 555,000.00
$ 2,211,200.00
$ 2,766,200
$ 174,789,088
Expense
$ 170,003,291
$ -
$ -
$ 3,990,120.00
$ 3,990,120
$ 173,993,411
Ending Fund Balance
$ 73,147,609
$ -
$ 555,000.00
$ (1,778,920.00)
$ (1,223,920)
$ 71,923,689
2023-2024 Current
2023-2024
2023-2024 Amended
� • • • • •
2023 Adjustments 2024 Adjustments
Biennial Budget
Adjustments
Biennial Budget
Total Revenue
$ 243,150,900
$ -
$ 555,000.00 $ 2,211,200.00
$ 2,766,200
$ 245,917,100
Total Expense
$ 243,150,900
$ -
$ 555,000.00 $ 2,211,200.00
$ 2,766,200
$ 245,917,100
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 002 - City Street Fund
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 2,771,168
$ $
$
$ 2,771,168
Revenue
$ 6,207,132
$ $
$
$ 6,207,132
Expense
$ 6,836,312
$ - $
$
$ 6,836,312
Ending Fund Balance
$ 2,141,988
$ $
$
$ 2,141,988
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 003 - Stabilization Fund
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
$ $
$
$ 2,740,960
Beginning Fund Balance
$ 2,740,960
Revenue
$ 180,040
$ $
$
$ 180,040
Expense
$ -
$
$ -
Ending Fund Balance
$ 2,921,000
$
$
$ 2,921,000
Page 1
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 103 - Criminal Justice
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 647,725
$ $
$
$ 647,725
Revenue
$ 775,075
$
$
$ 775,075
Expense
$ 1,267,000
$
$
$ 1,267,000
Ending Fund Balance
$ 155,800
$
$
$ 155,800
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 104 - Special Investigative Unit
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 98,895
$ $
$
$ 98,895
Revenue
$ 8,005
$
$
$ 8,005
Expense
$ 8,000
$
$ 8,000
Ending Fund Balance
$ 98,900
$
$
$ 98,900
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 107 - Community Events
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 321,780
$ $
$
$ 321,780
Revenue
$ 227,420
$ $
$
$ 227,420
Expense
$ 252,400
$ $
$
$ 252,400
Ending Fund Balance
$ 296,800
$ $
$
$ 296,800
2023-2024 Current
Fund: 108 - Paths & Trails
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
2023-2024
2023-2024 Amended
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 13,784
$ $
$
$ 13,784
Revenue
$ 2,016
$
$
$ 2,016
Expense
$ -
$
$ -
Ending Fund Balance
$ 15,800
$
$
$ 15,800
2023-2024 Current
Fund: 109 - Real Estate Excise Tax
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
2023-2024
2023-2024 Amended
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 4,182,707
$ $
$
$ 4,182,707
Revenue
$ 3,833,093
$ $
$
$ 3,833,093
Expense
$ 5,213,485
$ $
$
$ 5,213,485
Ending Fund Balance
$ 2,802,315
$ $
$
$ 2,802,315
Page 2
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 111- Impact Mitigation Fee
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 5,304,555
$
$
$ 5,304,555
Revenue
$ 10,877,245
$ $ -
$
$ 10,877,245
Expense
$ 7,230,190
$ $ 438,950.00
$ 438,950
$ 7,669,140
Ending Fund Balance
$ 8,951,610
$ $ (438,950.00)
$ (438,950)
$ 8,512,660
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 206 - Bond Redemption Fund
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ -
$
$ -
Revenue
$ 1,797,400
$ - $ -
$
$ 1,797,400
Expense
$ 1,295,810
$ $
$
$ 1,295,810
Ending Fund Balance
$ 501,590
$ $
$
$ 501,590
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 304 - Street Capital Projects
Biennial Budget Ord.
2023 Adjustments
2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 2,299,051
$
$ -
$ 2,299,051
Revenue
$ 15,213,349
$
$ 669,950.00
$ 669,950
$ 15,883,299
Expense
$ 14,639,710
$
$ 669,950.00
$ 669,950
$ 15,309,660
Ending Fund Balance
$ 2,872,690
$
$ -
$ -
$ 2,872,690
Page 3
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 412 - Water Stabilization
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 966,406
$
$
$ 966,406
Revenue
$ 100,094
$ $
$
$ 100,094
Expense
$ -
$
$ -
Ending Fund Balance
$ 1,066,500
$ $
$
$ 1,066,500
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 413 - Water Capital
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 7,558,941
$
$ -
$ 7,558,941
Revenue
$ 15,099,859
$ $ 568,250.00
$ 568,250
$ 15,668,109
Expense
$ 12,431,900
$ $ 688,970.00
$ 688,970
$ 13,120,870
Ending Fund Balance
$ 10,226,900
$ $ (120,720.00)
$ (120,720)
$ 10,106,180
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 414 - Water Debt Service
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ -
$ -
$ -
Revenue
$ 3,096,300
$ $
$
$ 3,096,300
Expense
$ 1,840,570
$ - $ -
$ -
$ 1,840,570
Ending Fund Balance
$ 1,255,730
$ $ -
$
$ 1,255,730
Page 4
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 421- Storm Drainage Utility
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 1,410,718
$
$
$ 1,410,718
Revenue
$ 3,490,182
$ $
$
$ 3,490,182
Expense
$ 4,580,574
$ $
$
$ 4,580,574
Ending Fund Balance
$ 320,326
$ $
$
$ 320,326
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 422 - Storm Drainage Stabilization
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 542,966
$
$
$ 542,966
Revenue
$ 34
$
$
$ 34
Expense
$ -
$
$
Ending Fund Balance
$ 543,000
$
$
$ 543,000
2023-2024 Current
Fund: 423 - Storm Drainage Capital Facil
Biennial Budget Ord.
2023 Adjustments
2024 Adjustments
2023-2024
2023-2024 Amended
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 593,137
$
$ -
$ 593,137
Revenue
$ 300,063
$
$ 50,000.00
$ 50,000
$ 350,063
Expense
$ 800,000
$
$ 50,000.00
$ 50,000
$ 850,000
Ending Fund Balance
$ 93,200
$ -
$ -
$ 93,200
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 424 - Storm Drainage Debt Service
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ -
$
$ -
Revenue
$ 398,400
$ - $ -
$
$ 398,400
Expense
$ 398,350
$ $
$
$ 398,350
Ending Fund Balance
$ 50
$ $
$
$ 50
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 431- Sewer Operating
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 5,908,675
$
$
$ 5,908,675
Revenue
$ 11,397,425
$
$
$ 11,397,425
Expense
$ 12,062,934
$ $
$
$ 12,062,934
Ending Fund Balance
$ 5,243,166
$ $
$
$ 5,243,166
Page 5
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 432 - Sewer Stabilization
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 1,446,270
$
$
$ 1,446,270
Revenue
$ 100,030
$ $
$
$ 100,030
Expense
$ -
$
$
Ending Fund Balance
$ 1,546,300
$
$
$ 1,546,300
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 433 - Sewer Capital
Biennial Budget Ord.
2023 Adjustments
2024 Adjustments
Adjustments
Biennial Budget
039-23
Beginning Fund Balance
$ 5,782,756
$
$ -
$ 5,782,756
Revenue
$ 24,674,444
$
$
750,000.00
$ 750,000
$ 25,424,444
Expense
$ 16,903,900
$
$
259,000.00
$ 259,000
$ 17,162,900
Ending Fund Balance
$ 13,553,300
$
491,000.00
$ 491,000
$ 14,044,300
2023-2024 Current
Fund: 434 - Sewer Debt Service
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
2023-2024
2023-2024 Amended
Adjustments
Biennial Budget
018-23
Beginning Fund Balance
$ 558,878
$
$
$ 558,878
Revenue
$ 1,368,322
$ $
$
$ 1,368,322
Expense
$ 491,470
$ $
$
$ 491,470
Ending Fund Balance
$ 1,435,730
$ $
$
$ 1,435,730
2023-2024 Current
2023-2024
2023-2024 Amended
Fund: 500 - Equipment Rental and Revolving
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
Adjustments
Biennial Budget
018-23
Beginning Fund Balance
$ 3,990,082
$
$ -
$ 3,990,082
Revenue
$ 5,265,218
$ $ 63,000.00
$ 63,000
$ 5,328,218
Expense
$ 5,247,300
$ $ 136,000.00
$ 136,000
$ 5,383,300
Ending Fund Balance
$ 4,008,000
$ $ (73,000.00)
$ (73,000)
$ 3,935,000
2023-2024 Current
Fund: 632 - Wastewater Treatment Facil Fee
Biennial Budget Ord.
2023 Adjustments 2024 Adjustments
2023-2024
2023-2024 Amended
Adjustments
Biennial Budget
018-23
Beginning Fund Balance
$ 5,282,855
$
$
$ 5,282,855
Revenue
$ 5,052,045
$
$
$ 5,052,045
Expense
$ 2,252,000
$
$ 2,252,000
Ending Fund Balance
$ 8,082,900
$
$
$ 8,082,900
Page 6
What is the financial impact of the Personnel re -organizational
changes on the 2023-2024 Budget?
The City makes assumptions based on the currently staffed employees at the time of adoption. This
includes assumptions on salaries, benefits, longevity, overtime, etc.
When we evaluate actual activity compared to the 2023-2024 budget; there were significant movement in
personal positions (such as retires, employees leaving, timing of re -hiring).
With the personnel re -organizational changes adopted and anticipated, including the addition of 1 FTE for
a Civil Engineer I, we estimate the total impact on all city funds to be approximately an increase of
$69,000 remaining for the biennium.
6-months remaining in the 2023-2024 Budget
New Positions Added: Total Cost $837,000
Positions Pending Removal: Total Cost $768,000
Total Increase of $69,000
ORCHARD
Finance Committe
TIP 1.15 Pottery Ave Non -Motorize
0691192(
Note: This is intended to illustrate the project estimates and potential fundir
PROJECT BUDGET: USE OF FUNDS
TIP 1.15 Pottery Ave Non -Motorized Improvements - $2.5 million:
Project is addressing the sidewalk gap from Sunset to Clay near Tremont. Road diet and road widening to provide bikeable shoulders and sidewalk
improvements. Safety enhancement at Pottery Lippert Intersection and School Crossing.
Use of Funding
ROW -Consulting Services Et Purchases
$144,050
Design (Sal Et Ben)
$60,000
Construction (Sidewalk Et Pavement) SchedA
$1,017,000
Construction (Storm Drainage) Sched A
$50,000
Construction (Water Main) Sched B
$237,000
Construction (Sewer) Sched B $709,000
Miscellaneous expenses (permits) $22,950
Construction Management Services $35,000
Contingency $225,000
Total $ 2, 500, 000
■ Salaries 8 Benefits
■ ROW
■ Construction- Sched A
■ Construction -Water Sched B
■ Construction -Sewer Sched B
■ Construction Mgmt Et Misc
■ Contigency
w
PROJECT BUDGET: SOURCES OF FUNDS
TIP 1.15 Pottery Ave Non -Motorized Improvements - $2.5 million:
Project is addressing the sidewalk gap from Sunset to Clay near Tremont. Road diet and road widening to provide bikeable shoulders and sidewalk
improvements. Safety enhancement at Pottery Lippert Intersection and School Crossing.
Sources of Funding
TIP 1.15 Pottery Ave Non -Motorized Improvements - $2.5 million:
PROJECT BUDGET: SPENDING TO DATE
Project SpendingTo Date ROW -Consulting Services It Purchases
Design (Sal $ Ben)
Construction (Sidewalk Ft Pavement)
■Budget Sched A
■Spent Construction (Storm Drainage) Sched A
Construction (Water Main) Sched B
Construction (Sewer) Sched B
Miscellaneous expenses (permits)
Construction Management Services
Contingency
Total
$144,050
$60,000
$1,017,000
$50, 000
$237, 000
$709,000
$22,950
$35,000
$225,000
$ 2, 500,000
$103,700 +,
4
$38,700 `.
$0
$0
$0
$0
$10, 200
$0
$0
$152,600
$27,600
$1,017,000
$50, 000
$237, 000
4
$709, 000`
$12,750
t�t
$35,000
$225,000
$ 2, 347, 400
2
TIP 1.15 Pottery Ave Non -Motorized Improvements - $2.5 million:
2023-2024 BUDGET: EXPENSE BUDGET AMENDMENT
Category • - -
To complete the -A Budget Budget Current Budget
project staff is ROW -Consulting Services 6t $144,050 $9,050 $135,000 $0 $135,000
requesting an Purchase 1W
increase in the Design (Sal It Ben) $60,000 $0 $0 $60,000M_ $60,000
2023-2024 Construction $1,017,000 $0 $690,000 $327,000 $1,017,000
Biennial Budget ((Sidewalk EtPavement) Sched
of $1,065,950 Construction $50,000 $0 $0 $50,000 $50,000
(Storm Drainage) Sched A
Construction (Water Main) $237,000 $0 $100,000 $137,000 $237,000
Sched B
Construction (Sewer) Sched 8 $709,000 $0 $500,000 $209,000 $709,000
Miscellaneous expenses $22,950 $0 $0 $22,950 $22,950
(permits)
Construction Management $35,000 $0 $0 $35,000 $35,000
Contingency $225,000 $0 $0 $225,000 $225,000
Total $2,500,000 $9,050 $1,425,000 $1,065,950 $2,490,950
Funding Sources Project Budget" 2021-202 2023-2024 1 Budget 2023-2024
Budgeted Budgeted Amendment New Budget
Fund 001
$331,000
$0
$0
$331,000
$331,000
Fund 001-Storm Drainage
$50,000
$0
$0
$50,000
$50,000
Fund 111-Transportation Impact
Fee's(TIF)
483,000
$9,050
$135,000
$338,950
$473,950
Fund 304-WSDOT TIB Grant
$650,000
$0
$650,000
$0
$650,000
Fund 304-Interest Earned Balance
$40,000
$0
$40,000
$0
$40,000
Fund 411 to 413-Water Capital
$237,000
$0
$100,000
$137,000
$237,000
Fund 433-Sewer Capital
$709,000
$0
$500,000
$209,000
$709,000
Total
$2,500,000
$9,050
$1,425,000
$1,065,950
$2,490,950
Pottery Budget Amendment Summary
Total Sources:
Fund 001 Current Expense:
Fund 111 Impact Fee:
Fund 411 Water Operating
Fund 433 Sewer Capital:
Total Expenses:
Fund 304 Street Construction:
Fund 413 Water Capital:
Fund 423 Storm Drainage Capital:
Fund 433 Sewer Capital:
$1.065 million
$386,000
$338, 950
$137, 000
$209, 000
$1.065 million
$669, 950
$137, 000
$ 50, 000
$209, 000
� ORCHARD
Finance Committe
Metcher Pump Statio
0691192(
Note: This is intended to illustrate the project estimates and potential fundir
PROJECT BUDGET: USE OF FUNDS
Melcher Pump Station - $1.075 million:
Project is a rehabilitation of a water pump station on Melcher Ave. This project will include new mechanical equipment, pumps, controls and
generator. Additionally, it will repair the building facility such as the roof, paint and lights fixtures.
Use of Funding
Salaries l* Benefits $10,000
Design $125,000
PSE Upgrade $50,000
Miscellaneous expenses (permits) $20,000
Construction $790,000
Contingency $80,000
Total $1,075,000
■ Salaries & Benefits
■ Design
PSE Upgrade
■ Misc
■ Construction
■ Contingency
PROJECT BUDGET: SOURCES OF FUNDS
Melcher Pump Station - $1.075 million:
Project is a rehabilitation of a water pump station on Melcher Ave. This project will include new mechanical equipment, pumps, controls and
generator. Additionally, it will repair the building facility such as the roof, paint and lights fixtures.
Sources of Funds
47%
Public Works Board Loan
■ Fund 413-Water Capital
(75%)
Fund 433-Water Capital
(25%)
Melcher Pump Station- $1.075 million:
PROJECT BUDGET: SPENDING TO DATE
ect Spent To Date
90%
Salaries Et Benefits
$10,000
$2,770
$7,230
Design
i
$125,000
$115,000
$10,000
PSE Upgrade
$50,000
$ -
$50,000
Budget
■Spent Misc
$20,000
$1,925
$18,075
I
Construction
$790,000
$ -
$790,000
Contingency
$ 80,000
$-
$80,000
Total
$1,075,000
$119,695
$955,305
Melcher Pump Station- $1.075 million:
2023-2024 BUDGET: EXPENSE BUDGET AMENDMENT
To complete the
project staff is iF
requesting an
increase in the Salary aBenefits $10,000
2023 -2024 Design $125,000
Biennial Budget PSE Upgrade $50,000
of $551,970
Misc
Construction
Contingency
Total Uses
$20,000
$790,000
$80,000
$1,075,000
$0
$22,030
$0
$0
$0
$0
$22,030
L
$900MW
$10,000
$102,970
$0
$102,970
$0
$50,000
$50,000
$0
$20,000
$20,000
$397,130
$392,870
$790,000
$0
$80,000
$80,000
$501,000
$551,970
$1,052,970
$1,075,000
Funding Sources
Project Budget" 2021-202� 2023-2024 I Budget ��I 2023-2024
Budgeted Budgeted Amendment New Budget
Fund 413-Public Works Loan $500,000
$22,030
$477,970
$0
$477,970
Fund 411 to 413-Water Capital $431,250
$0
$0
$431,250
$431,250
Fund 413-Water Capital $143,750
$0
$1,000
$142,750
$143,750
Total $1,075,000
$22,030
$478,970
$574,000
$1,052,970
Melcher Pump
Budget Amendment Summary
Total Sources: $574,000
Fund 411 to Fund 413 Water Operating(75%): $431,250
Fund 413 Water CFC Capital (25%): $142,750
Total Expenses: $551,970
Fund 413 Water Capital: $551,970
� ORCHARD
Finance Co itte
Investment Polic
UO* I I *LULLI
Note: This is intended to illustrate the project estimates and potential funding
Investment Policy Proposal
Overview of Financial Institutions (City Cash Et Investments)
Kitsap Bank
Kitsap County Investment Pool (KCIP )
Local Government Investment Pool (LGIP)
Port Orchard Investment Policy
Why now?
What is it?
KITSAP BANK
► Deposits and Checking (Avg Deposits $2.5 million)
► Custodial credit risk for deposits is the risk that, in event of a failure of a de
financial institution, the city would not be able to recover deposits or would not be
recover collateral securities that are in possession of an outside party. The city's depc
certificates of deposit are mostly covered by federal depository insurance (FDIC
collateral held in a multiple financial institution collateral pool administered by the Wa
Public Deposit Protection Commission (PDPC).
► City cash held on account with Kitsap Bank doesn't earn interest instead comp
balances are maintained in lieu of payments for services rendered. Currently, the
compensating balance maintained during 2023 was approximately $2,486,413
KITSAP COUNTY INVESTMENT POOL (KCIP)
► The Kitsap County Treasurer's Office actively manages an investment portfolio of
$0.9-$1.2 billion. The investments of Kitsap County, as well as most special taxing
districts in the County, are pooled together in the Kitsap County Investment Pool
(KCIP). The Treasurer's Office invests the public's funds in accordance with all
federal, state, and local governing statutes as well as in accordance with the Kitsap
County Investment Policy.
► Oversight is provided by the County Finance Committee in accordance with RCW
36.48.070
► The City participates in the Kitsap County Investment Pool and currently has
approximately $24 million invested in the pool which is — 24% of our total funds.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP)
► The Local Government Investment Pool (LGIP) is a voluntary investment vehicle operated by the State
Treasurer.
► Over 530 local governments have participated in the pool since it was started in 1986 to provide safe,
liquid, and competitive investment options for local government pursuant to RCW 43.250 El.. The LGIP
lets local governments use the State Treasurer's resources to safely invest their funds while enjoying the
economies of scale available from a $15-26 billion pooled fund investment portfolio.
► LGIP's investment objectives are, in priority order: 1) safety of principal, 2) maintaining adequate
liquidity to meet cash flows, and 3) providing a competitive interest rate relative to other
comparable investment alternatives. LGIP offers 100% liquidity to its participants.
► The LGIP portfolio is managed in a manner generally consistent with SEC ❑ regulated Rule 2a-7 money
market funds. LGIP investment guidelines are spelled out in the LGIP Investment Policy.
► LGIP Participants include: all 39 counties in Washington state; all Washington cities with a population
greater than 10,000, and 229 cities and towns total; plus 160 special taxing districts; 30 community
colleges and universities; 7 State Agencies; and 24 other public bodies
► The City participates in the Local Government Investment Pool (LGIP) and currently has
approximately $71 million invested in the pool which is — 73% of our total funds.
Port Orchard Investment Summary
Kitsap County Investment Pool (KCIP )
$24.3 Million with an Annualized Yield 3.26%
2024 YTD Earned $320,000
Local Government Investment Pool (LGIP)
$71 million with an Annualized Yield 5.4%
2024 YTD Earned $1.6 million
Fund Allocation as of 4/30/24
qM
L 1
C
US TREASURY YIELD CURVE
This graph shows the United States Treasury interest rates for maturities ranging from 7 month to 30 years.
• The orange line is the US Treasury Curve as of last month and the blue line is today's US Treasury Curve. The yields for the various matu
two US Treasury Curves a re listed below the graph.
• Interest rates peaked and hit a 16-year high in mid -October 2023 before falling into the end of last year and early2024. Since that sharp
interest rates have run back up strongly but still remain below that high point from last year. At this point, short of further rate increase
Federal Reserve, it seems unlikely that interest rates will get back to that peak level from last year.
• The yield curve remains "inverted" with the 2-year rate above the 10-year rate as it has been continuously since July 2022. Additionally, t
Treasury is well above the 10-year which is another closely monitored yield curve inversion metric. An inverted yield curve is considered
indicator as it has historically occurred some period of time before a recession.
US Treasury Yieid Curve Rates
5.80
�6/7(202
5.60
5.40
�5�3f202=
5.20
5.00
4.80
4.60
4.40
4.20
—
1M 3M
6M 1Y
2Y V
SY 7Y
10Y
20Y
30Y
i M0
3 Mo
6 Mo
1 Yr 2 Yr 3 Yr
5 Yr
10 Yr
30 Yr
6/7/2024
5.340
5.390
5.370
5.160 4.860 4.650
4.440
4.420
4.550
5/3/2024
5.360
5.430
5.340
5.050 4.730 4.540
4,380
4.390
4,540
Difference
-0.020%
-0.040%
0.030%
0.110% 0.130% 0.110%
0.060%
0.030%
0.010%
L I
FEDERAL FUNL.01 ,.,,.
►The Federal Funds Rate is the interest rate on
overnight loans set by the Federal Open Market
Committee (FOMC) at the Federal Reserve. Rates
offered by local government investment pools
and money market funds tend to correlate with
the Federal Funds Rate. The graph below shows
the upper bound of the Federal Funds Rate range
over the last 10 years.
The FOMC held its most recent meeting on 4/30-5/1
and decided to hold the Federal Funds Rate steady in
a range of 5.25-5.50%. That was the sixth consecutive
meeting where the FOMC elected to keep the rate
unchanged. The FOMC statement continued to signal
that the committee is unlikely to raise the Federal
Funds Rate further unless inflation starts to rise
again.
Interest rates experienced a fair amount of volatility
over the last 8 months as market -based expectations
for the Federal Funds Rate shifted widely. Rates
dropped sharply into the end of 2023 as markets
began pricing in aggressive moves by the FOMC to cut
the Federal Funds Rate in 2024. Since bottoming out
in mid -January, though, rates have bounced back up
a fair amount as the market pared back those more
aggressive rate -cut expectations.
Throughout this market volatility, the FOMC remains
resolute in the stance that no cuts to the Federal
Funds Rate will occur until the Committee "has
gained greater confidence that inflation is moving
sustainably toward 2 percent."
Short-term and liquid investments like local
government investment pools and money market
funds tend to follow the Federal Funds Rate very
closely, so the path of this rate is very impactful
what public entities will earn on their liquid and
balances.
City of Port Orchard Investment Policy
► Why Now and why this policy?
The City Cash and Investment balance has grown to the level where additional
investments with longer duration would be beneficial
It is anticipated Interest rates may decline over the coming years which would reduce ou
interest earning potential.
With our own investment policy and investment program we can purchases investment
with a longer duration and lock in today's interests for the coming years
Establishing and adopting a written investment policy is a smart financial practice and
can help your jurisdiction improve its financial security. It also provides protection for
elected officials and staff by spelling out investment goals and responsibilities.
City of Port Orchard Investment Policy
Policy Statement, Policy Development, Policy Goals
It is the policy of the City of Port Orchard ("the City") to invest public funds in a manner,
which will provide the maximum security with a market rate of investment return, while
meeting daily cash flow requirements, and conforming to all state statutes governing the
investing of funds under control of the City.
This policy was developed using best practice templates from accredited associations as
well as neighboring jurisdictions including Governmental Finance Officers Association
(GFOA), Washington Public Treasurers Association (WPTA), Municipal Research Services
Center (MRSC)
This policy and investment program shall be operated in conformance with federal, state,
and other legal requirements, including RCW.
The City intends to submit the investment policy to the Washington Public Treasurers
Association (WPTA) for Certification once adopted by City Council
City of Port Orchard Investment Policy
Key Components of an Investment Policy
Scope and investment objectives
Delegation of authority and responsibilities
Authorized financial dealers and institutions
Authorized investments
Investment diversification
Performance standards
Reporting and oversight
City of Port Orchard Investment Policy
Objectives
111111- All funds will be invested in a manner that is in conformance with federal, state and
other legal requirements. In addition, the objectives, in order of priority, of the investment
activities will be as follows:
►Safety: Safety of principal is the primary objective of the City. Investments shall be
undertaken in a manner that seeks to ensure preservation of capital in the overall
portfolio. To obtain this objective, funds will be diversified, utilizing highly rated
securities, by investing among a variety of securities and financial institutions offering
independent returns.
►Liquidity: The investment portfolio will remain liquid to enable the City to meet all
cash requirements that might reasonably be anticipated. Therefore, the investments
shall be managed to maintain a balance to meet daily obligations.
Return on Investment: The investment portfolio will be structured with the
objective of attaining a market rate of return throughout budgetary and economic
cycles, commensurate with the investment risk parameters and the cash flow
characteristics of the portfolio.
City of Port Orchard Investment Policy
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
the City investment program
Finance Committee: The finance committee will directly oversee the investment
program. The committee will be responsible for updating the investment policy and
reviewing the investment portfolio.
Authority: Management responsibility for the investment program is hereby
delegated to the City Finance Director, who shall establish written procedures for the
operation of the investment program, consistent with this investment policy. The City
Finance Director shall be responsible for all transactions undertaken and shall
establish a system of controls to regulate the activities of subordinate officials.
Investment Adviser: The City may engage the services of an external investment
adviser to assist with the management of the City's investment portfolio in a manner
that is consistent with the City's objectives. Such advisers may be granted the
authority to purchase and sell investments in accordance with this Investment Policy.
Such Advisors, must be registered under the Investment Advisers Act of 1940.
City of Port Orchard Investment Policy
Authorized Investments and Maturity Constraints
Eligible investments are only those securities and deposits authorized by State Statue.
► Examples of eligible investments include:
► Obligations of the U.S. government
► Obligations of US government agencies, or corporation wholly owned by the US
government
► Eligible Municipal Bonds
Maturity of investments shall be constrained to the following:
Minimum % of Total
Maturity Constraints
Portfolio
Under30 days
10%
Under 1 year
25%
U nd er 5.5 years
100%
Maximum of Total
Maturity Constraints
Portfolio in Years
Weighted Average Maturity
2 years
Duration of Corporate Note Portfolio
3 years
Maximum%of Total
Security Structure Constraint
Portfolio
Callable Agency Securities
25%
Conclusion
►Next step is to adopt the Policy at
the 06.25.2024
ORCHARD.
City of Port Orchard
Investment Policy
City of Port Orchard Investment Policy Page 1 of 15
Policy Statement
It is the policy of the City of Port Orchard ("the City") to invest public funds in a
manner, which will provide the maximum security with a market rate of investment
return, while meeting daily cash flow requirements, and conforming to all state
statutes governing the investing of funds under control of the City.
City of Port Orchard Investment Policy Page 2 of 15
TABLE OF CONTENTS
1.0
INTRODUCTION.......................................................................................................................................4
2.0
GOVERNING AUTHORITY.........................................................................................................................4
3.0
SCOPE.......................................................................................................................................4
4.0
OBJECTIVES...............................................................................................................................
5
Safety
Liquidity
Return
5.0
STANDARDS OF CARE..................................................................................................................
5
5.1: Delegation of Authority
5.2: Prudence
5.3: Ethics
6.0
SAFEKEEPING, CUSTODY AND CONTROLS........................................................................................
6
6.1: Delivery vs. Payment
6.2: Third Party Safekeeping
6.3: Internal Controls
7.0
AUTHORIZED FINANCIAL DEALERS..................................................................................................
7
7.1: Broker/Dealers
7.2: Investment Advisors
7.3: Bank Institutions
7.4 Competitive Transactions
8.0
AUTHORIZED AND SUITABLE INVESTMENTS.....................................................................................
8
8.1: Authorized Investments
8.2: Suitable Investments
8.3: Bank Collateralization
8:4: Repurchase Agreement Collateralization
9.0
INVESTMENT PARAMETERS.........................................................................................................
10
9.1: Diversification
9.2: Investment Maturity
9.3: Prohibited Investments
10.0
REPORTING REQUIREMENTS.......................................................................................................
12
10.1: Reporting
10.2: Performance Standards
11.0
INVESTMENT POLICY ADOPTION..................................................................................................
13
12.0
GLOSSARY OF TERMS.................................................................................................................
14
City of Port Orchard Investment Policy Page 3 of 15
1.0 INTRODUCTION
The intent of this Investment Policy is to define the parameters within which funds are to be managed. In
methods, procedures and practices, the policy formalizes the framework for the City's investment
activities that must be exercised to ensure effective and judicious fiscal and investment management of
the City's funds. The guidelines are intended to be broad enough to allow the investment officer to
function properly within the parameters of responsibility and authority, yet specific enough to adequately
safeguard the investment assets.
2.0 GOVERNING AUTHORITY
The investment program shall be operated in conformance with federal, state, and other legal
requirements, including RCW.
3.0 SCOPE
This investment policy applies to all financial assets of the City. These funds are accounted for in the City's
Annual Financial Report and include:
Funds:
•
General Fund
•
Special Revenue Funds
•
Debt Service Fund
•
Capital Project Funds
•
Enterprise Funds
•
Internal Service Funds
•
Trust and Agency Funds
•
Any new fund created by Council
Pooling of Funds
Except where prohibited by statute, trust indenture, or other controlling authority, the Authority will
consolidate cash and reserve balances from all funds to maximize investment earnings and to increase
efficiencies with regard to investment pricing, safekeeping and administration. Investment income will
be allocated to the various funds based on their respective participation and in accordance with generally
accepted accounting principles.
Each group of funds will be classified based on the objectives and requirements of the designated
assets.
Liquidity
• Liquid Operating Cash Funds
• Liquid Project Funds
• Liquid Reserves
Investment Component
• Ongoing Operating Funds
• Project Funds over three-year life
• Reserves
City of Port Orchard Investment Policy Page 4 of 15
4.0 OBJECTIVES
All funds will be invested in a manner that is in conformance with federal, state and other legal
requirements. In addition, the objectives, in order of priority, of the investment activities will be as
follows:
Safety: Safety of principal is the primary objective of the City. Investments shall be undertaken in
a manner that seeks to ensure preservation of capital in the overall portfolio. To obtain this
objective, funds will be diversified, utilizing highly rated securities, by investing among a variety
of securities and financial institutions offering independent returns.
Liquidity: The investment portfolio will remain liquid to enable the City to meet all cash
requirements that might reasonably be anticipated. Therefore, the investments shall be managed
to maintain a balance to meet daily obligations.
Return on Investment: The investment portfolio will be structured with the objective of attaining
a market rate of return throughout budgetary and economic cycles, commensurate with the
investment risk parameters and the cash flow characteristics of the portfolio.
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 the City
investment program
Finance Committee: The finance committee will directly oversee the investment program.
The committee will be responsible for updating the investment policy and reviewing the
investment portfolio.
Authority: Management responsibility for the investment program is hereby delegated to the
City Finance Director, who shall establish written procedures for the operation of the
investment program, consistent with this investment policy. The City Finance Director shall
be responsible for all transactions undertaken and shall establish a system of controls to
regulate the activities of subordinate officials.
Investment Adviser: The City may engage the services of an external investment adviser to
assist with the management of the City's investment portfolio in a manner that is consistent
with the City's objectives. Such advisers may be granted the authority to purchase and sell
investments in accordance with this Investment Policy. Such Advisors, must be registered
under the Investment Advisers Act of 1940.
5.2 Prudence:
The standard of prudence to be used by the Finance Director and any designees in the context
of managing the overall portfolio is the prudent person rule which states: Investments will be
City of Port Orchard Investment Policy Page 5 of 15
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.
5.3 Ethics:
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 shall disclose to the Mayor any material financial interests in financial
institutions that conduct business within this jurisdiction, and 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 Port Orchard, particularly with regard to the time of
purchases and sales.
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:
The laws of the state and prudent treasury management require that all purchased securities
be bought on a delivery versus payment (DVP) basis and be held in safekeeping by the City,
an independent third -party financial institution, or the City's designated depository.
The City's Finance Director shall designate all safekeeping arrangements and an agreement of
the terms 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 securities pledged to the City for certificates of deposit or demand deposits shall be held
in a segregated account at the issuing financial institution that is reporting to the State's public
depository commission.
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 that shall be reviewed and updated periodically by the Investment Officers.
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 a control
City of Port Orchard Investment Policy Page 6 of 15
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
• Avoidance of physical delivery 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.
7.0 AUTHORIZED FINANCIAL DEALERS
7.1 Broker/Dealers:
The Finance Director shall maintain a list of all authorized financial institutions and
broker/dealers that are approved to transact with the City for investment purposes. Any firm
is eligible to make an application to the City and upon due consideration and approval, will be
added to the list. Additions and deletions to the list will be made at the City's discretion.
Authorized broker/dealers and financial institutions will be limited to those that meet one or
more of the following: 1) financial institutions approved by the Washington PDPC (RCW 39.58)
and meet all regulatory capital requirements, 2) primary dealers recognized by the Federal
Reserve Bank, 3) non -primary dealers qualified under SEC rule 150-1 and a certified member
of FINRA. This responsibility can be placed with the investment adviser and the approved list
should be provided to the City as updates occur.
7.2 Investment Advisors:
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 on the City investment program structure and constraints, investment strategy, and
purchase and sale of specific securities. 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. 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.
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 shall follow
GFOA best practices for evaluating and selecting financial institutions and broker/dealers.
The Advisor must maintain documentation of appropriate license and professional credentials
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of broker/dealers on the list. The annual investment advisor broker/dealer review procedures
include but are not be limited to:
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.
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 Finance Director or designated investment officer utilizing the
Washington State Treasurer's website (http://www.tre.wa.gov/government/pdpc.shtml).
7.4 Competitive Transactions:
Each transaction must be executed on a competitive basis and documented. Competitive
prices should be provided from at least three separate brokers or through a nationally online
line trading platform. When purchasing original issue instrumentality securities, no
competitive offerings will be required as all dealers in the selling group offer those securities
as the same original issue price. If an Adviser handles all trade executions then they must
provide the competitive documentation as requested.
8.0 AUTHORIZED AND SUITABLE INVESTMENTS
8.1 Authorized Investments:
All investments of the City are limited by RCW, principally RCW 35.39.030, 39.59.020 and
36.29.020.
Additional Specifications:
• 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).
• 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.
• Securities rated in the broad single -A category with a negative outlook may not be
purchased. Portfolio holdings of corporate notes downgraded to below single A and
portfolio holdings of securities rated single A with their outlooks changed to negative
may continue to be held. No additional purchases are permitted.
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8.2 Suitable Investments:
The City is empowered to invest in the following types of securities:
U.S. Treasury Obligations: Direct obligations of the United States Treasury.
US Agency Obligations: US Government Agency Obligations and Government Sponsored
Enterprises (GSEs), which may include, but are not limited to Federal National Mortgage
Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), Federal Home
Loan Banks (FHLB), the Federal Farm Credit Banks Funding Corporation (FFCB), and Tennessee
Valley Authority (TVA).
Supranational Bonds: United States dollar denominated bonds, notes or other obligations that
are issued or guaranteed by supranational institutions, provided, that at the time of investment,
the institution has the United States as its largest shareholder. These include: International Bank
for Reconstruction and Development (IBRD or World Bank); the International Finance
Corporation (IFC); the Asian Development Bank (ADB) and the Inter -American Development
Bank (IADB).
Municipal Debt Obligations: Bonds of the State of Washington and 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 one of the three highest credit ratings of a nationally
recognized rating agency.
Corporate Notes: Unsecured debt obligations purchased in accordance with the investment
policies and procedures adopted by the State Investment Board. Corporate notes must be rated
at least weak single A (A-) or better by all the major rating agencies that rate the note at the
time of purchase for inclusion in the corporate note portfolio. The maturity must not exceed
5.5 years and the maximum duration of the corporate note portfolio cannot exceed 3 years. The
percentage of corporate notes that may be purchased from any single issuer rated AA- or better
by all major rating agencies that rate the note is 3% of the assets of the total portfolio. The
percentage of corporate notes that may be purchased from any single issuer rated in the broad
single A (A-) category from all the major rating agencies that rate the security is 2% of the total
portfolio. The individual country limit of non-U.S. and non -Canadian exposure is 2% of the total
portfolio. The exposure is determined by the country of domicile of the issuers of portfolio
securities.
Commercial Paper: Commercial paper must be rated with the highest short-term credit rating
category of any two major Nationally Recognized Statistical Rating Organizations (NRSROs) at
the time of purchase. If the commercial paper is rated by more than two major 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 in one of the three
highest rating categories of an NRSRO. The percentage of commercial paper that may be
purchased from any one issuer is 3% of the market value of the total portfolio. Issuer constraints
will apply to the combined holdings of corporate notes and commercial paper holdings.
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Certificates of Deposit: Non-negotiable Certificates of Deposit of financial institutions that are
qualified public depositories as defined by RCW 39.58.010(2) and in accordance with the
restrictions therein.
Bank Time Deposits and Savings Accounts Issued by Banks: Deposits in PDPC approved banks.
Banker's Acceptance: Banker's Acceptances purchased on the secondary market.
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.
8.4 Repurchase Agreement Collateralization:
Collateral will be required on Repurchase Agreements, and will be limited to the suitable
investments listed in this policy under 5.2. Collateral shall be delivered to the City's
safekeeping agent, or through a tri-party arrangement in which the proper documents
delineating the responsibilities of the parties have been executed. A clearly marked evidence
of ownership (safekeeping receipt) must be supplied to the City and retained.
Any required overcollateralization (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. Any such
overcollateral ization shall not be less than 102% of the current market value of the collateral.
Such collateral shall be revalued on a periodic basis, but not less than weekly, in order to
maintain market protection.
The final maturity of the collateral for repurchase agreements may not exceed three years.
9.0 INVESTMENT PARAMETERS
9.1 Diversification:
It is the policy of The City to diversify its investment portfolio. Diversification is paramount to
ensure potential losses on individual investments do not exceed income generated from the
remainder of the portfolio. The City will diversify the investment of all funds in accordance
with the following table:
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Table of Constraints on the Total Portfolio
Ratings S&P,
Maximum %
Maximum %per
Maximum
Issue Type
Moody's, or
Holdings
Issuer
Maturity
Equivalent NRSRO
US Treasury Obligations
100%
None
N/A
5.5 years
US Agency Obligations
100%
35%
N/A
5.5 years
Supranational Agency Notes
10%
5%
AA- / Aa3
5.5 years
Municipal Bonds (Go only outside WA)
25%
5%
A-/A3
5.5 years
Short Term**
Corporate Notes
3%* for AA-
A- / A3
5.5 years
2%* for A-, A, A+
25%
Al / P1
Commercial Paper
3%*
270 days
Long Term A- / A3
Certificates of Deposit
20%
10%
Deposits in PDPC
5.5 years
approved banks
Bank Time Deposits/Savings
20%
None
Deposits in PDPC
N/A
approved banks
Banker's Acceptance
20%
5%
N/A
180 days
State LGIP
100%
None
N/A
N/A
*Issuer constraints apply to the combined issues in corporate and commercial paper holdings.
**Short Term Ratings: Moody's - P1/MIG1/VMIG1. S&P-A-1/SP-1, Fitch F1
9.2 Investment Maturity:
9.2.1 Liquidity Funds —Tier 1
Liquidity funds will be defined as those funds that are in the State LGIP pool, bank deposits,
bank certificates of deposits or money market instruments and will be available for immediate
use.
9.2.2 Investment Funds —Tier 2
Investment funds will be the defined as the funds in excess of liquidity requirements and
invested in authorized investments. The investments in this portion of the portfolio will have
maturities out to 5.5 Years and will be only invested in higher quality and liquid (marketable)
securities.
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Total Portfolio Maturity Constraints:
Minimum % of Total
Maturity Constraints
Portfolio
Under 30 days
10%
Under 1 year
25%
Under 5.5 years
100%
Maximum of Total
Maturity Constraints
Portfolio in Years
Weighted Average Maturity
2 years
Duration of Corporate Note Portfolio
3 years
Maximum % of Total
Security Structure Constraint
Portfolio
Callable Agency Securities
25%
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 mortgage -backed securities.
10.0 REPORTING REQUIREMENTS
10.1 Reporting:
The City's Finance Director will retain fund reporting that will be available to provide the
Finance Committee with comprehensive investment reports. The reports also will be
available upon request. Securities holdings, cash balances, and market values in the
investment portfolio will be provided to the Mayor and City Council on the month -end
reports.
Specific Requirements:
• Book Yield
• Holdings Report including mark to market and security description
• Transactions Report
• Weighted Average Maturity or Duration
10.2 Performance Standards:
The portfolio shall be managed to obtain a fair rate of return and earnings rate that
incorporates the primary objectives of protecting the City's capital and assuring adequate
liquidity to meet cash flow needs.
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For purposes of this policy, "earnings rate" will be the composite rate of both the Liquidity
and Core funds and be compared to the LGIP rate. The goal is for the total portfolio, to
generally perform better than the LGIP due to the longer weighted average maturity and
the earnings rate is expected to trend in a similar manner as interest rates change.
The investment portfolio performance may be tracked against a market index such as the
US Treasury 0-3 year index or US treasury 0-5 year index on a total return basis. This will
provide for accountability of price changes in the portfolio and help inform the strategy
related to the duration of the portfolio.
11.0 INVESTMENT POLICY ADOPTION
The City's Finance Committee shall submit any proposed revisions to the City's investment policies, which
the committee shall find advisable, for adoption by the City Council by resolution.
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12.0 GLOSSARY OF TERMS
Agency Securities: Government sponsored enterprises of the US Government.
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.
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.
See Debenture.
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.
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.
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 own 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.
Debenture: Unsecured debt backed only by the integrity of the borrower, not by collateral, and
documented by an agreement called an indenture.
Delivery: Either of two methods of delivering securities: delivery vs. payment and delivery vs. receipt
(also called "free"). Delivery vs. payment is delivery of securities with an exchange of money for the
securities.
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 a 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 Funds: Core funds are defined as operating fund balance, which 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.
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Liquidity Component: A percentage of the total portfolio that is dedicated to providing liquidity needs
for the District.
Mark to Market: Adjustment of an account or portfolio to reflect actual market price rather than book
price, purchase price or some other valuation.
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.
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.
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.
See Bid and Ask.
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.
TLGP -Temporary Liquidity Guarantee Program: Program created by the FDIC, in 2008, to strengthen the
confidence and encourage liquidity in the banking system by guaranteeing newly issued senior unsecured
debt of banks, thrifts and certain holding companies, and by providing full FDIC coverage of no -interest
bearing deposit transaction accounts, regardless of dollar amount.
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.
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.
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