036-24 - Resolution - Investment PolicyDocuSign Envelope ID: F1 EA7A83-E714-48AB-ABED-OB8B25BF94DF
RESOLUTION NO. 036-24
A RESOLUTION OF THE CITY OF PORT ORCHARD, WASHINGTON, ESTABLISHING AN
INVESTMENT POLICY FOR THE MANAGEMENT OF PUBLIC FUNDS.
WHEREAS, the City of Port Orchard has experienced growth in its operations, including an
increase in its cash and investment balances; and
WHEREAS, to the City has managed public funds in a manner that ensures safety, liquidity,
and a reasonable return on investments and values this practice; and
WHEREAS, the City desires to formalize an Investment Policy that incorporates current
practices, aligns with best practices, and adheres to all applicable federal and state statutes; and
WHEREAS, the City Council's Finance Committee reviewed the proposed Investment Policy
on June 11, 2024, and has prioritized the investment objectives as follows: 1) Safety, 2) Liquidity,
and 3) Return on Investment; and
WHEREAS, the Investment Policy has been developed using best practice templates from
the Government Finance Officers Association (GFOA), the Washington Public Treasurers Association
(WPTA), and the Municipal Research and Services Center (MRSC); and
WHEREAS, the City Council finds that adopting a best practices Investment Policy will
enhance the City's ability to manage its investments and provide better value to its citizens; now,
therefore;
THE CITY COUNCIL OF THE CITY OF PORT ORCHARD, WASHINGTON, HEREBY RESOLVES AS
FOLLOWS:
THAT: It is the intent of the Port Orchard City Council that the recitals set forth above are
hereby adopted and incorporated as findings in support of this Resolution.
THAT: The Investment Policy attached hereto as Exhibit A are hereby approved,
THAT: This Resolution shall take full force and effect upon passage and signatures hereon.
PASSED by the City Council of the City of Port Orchard, SIGNED by the Mayor and attested by
the City Clerk in authentication of such passage this 25t" day of June 2024.
ATTEST:
Brandy Wallace, MMC, City Clerk
EDocuSigned by:
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Robert Putaansuu, Mayor
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A=RCHARD m
City of Port Orchard
Investment Policy
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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.
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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
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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
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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
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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
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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 and the Kitsap County
Investment Pool are the only government -sponsored pools 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
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portfolio holdings of securities rated single A with their outlooks changed to negative
may continue to be held. No additional purchases are permitted.
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
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 3% of the total
portfolio. The individual country limit of non-U.S. and non -Canadian exposure is 3% 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.
Kitsap County Investment Pool: Investment Pool managed by the Kitsap County 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
overcollateralization 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
Issue Type
Maximum %
Holdings
Maximum % per
Issuer
Ratings S&P, Moody's, Fitch, or
Equivalent NRSRO
Maximum Maturity
USTreasury0bligations
100%
None
N/A
5years
US Agency0bligations
100%
35%
N/A
5years
Kitsap County Investment Pool
100%
None
N/A
5years
State Local Government Investment Pool
100%
None
N/A
5years
Municipal Bonds
25%
5%
A-/Aa3
5years
Corporate Notes
25%
3%
A-/ Aa3
5years
Commercial Paper
A1+/P1, Long Term AA-, Aa3, F1+
Longterm AA -
270 days
Certificates of Deposit
10%
5%
Deposits in PDPCapproved Banks
5years
Bank Time Deposits/Savings
50%
None
Deposits in PDPCapproved Banks
N/A
Ba n ker's Accepta n ce
5%
5%
N/A
180days
Supra national Agency Notes
5%
5%
AA- /Aa3
I 5years
9.2 Investment Maturity:
9.2.1 Liquidity Funds — Tier 1
Liquidity funds will be defined as those funds that are in the Kitsap County Investment Pool
(KCIP), 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 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 a quarterly basis at a
minimum.
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.
City of Port Orchard Investment Policy Page 15 of 15