Chapter 3.12
INVESTMENT POLICY
Sections
3.12.040 Delegation of authority.
3.12.050 Ethics and conflicts of interest.
3.12.060 Authorized financial dealers and institutions.
3.12.070 Authorized investments.
3.12.080 Safekeeping and custody.
3.12.120 Performance standards.
3.12.140 Investment policy review and amendment.
3.12.010 Scope.
This investment policy applies to all financial assets of the city of Des Moines. These funds are accounted for in the city’s Comprehensive Annual Financial Report and include:
(1) General Funds.
Fund 001 General fund
(2) Special Revenue Funds.
Fund 101 Street fund
Fund 102 Arterial street fund
Fund 103 Park fund
Fund 104 Revenue stabilization fund
Fund 105 Airport defense fund
(3) Debt Service Funds.
Fund 203 LTGO bond – public works
Fund 204 GO bond – police facility
Fund 205 LTGO bond – council/court
Fund 206 GO bond – library/park
Fund 207 LTGO bond – DT project
Fund 211 GO bond – new police facility
(4) Capital Projects Funds.
Fund 315 Police facility construction fund
Fund 350 Municipal capital improvement fund
(5) Enterprise Funds.
Fund 401 Marina revenue fund
Fund 402 Marina bond and interest fund
Fund 403 Marina repair and replacement fund
Fund 404 Marina depreciation and improvement fund
Fund 450 Surface water management fund
Fund 451 Surface water management capital fund
(6) Internal Service Funds.
Fund 500 Equipment rental operations fund
Fund 501 Equipment rental replacement fund
Fund 510 Computer equipment operations fund
Fund 511 Computer equipment replacement fund
Fund 515 Facility repair and replacement fund
(7) Trust Funds.
Fund 520 Self insurance trust fund
Fund 530 Unemployment trust fund
[Ord. 1144 § 4, 1995.]
3.12.020 Prudence.
(1) Investments are made with judgment and care, under circumstances then prevailing, that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
(2) The standard of prudence used by investment officials is the “prudent person rule” and it is applied in the context of managing an overall portfolio. Investment officers acting according to written procedures and exercising due diligence are relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is take to control adverse developments. [Ord. 1144 § 5, 1995.]
3.12.030 Objective.
The following primary objectives, in descending order of priority, of the city of Des Moines’ investment activities are:
(1) Safety. Safety of principal is the foremost investment objective of the city of Des Moines. Investments of the city of Des Moines are undertaken in such a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this satisfaction, diversification is required so portfolio losses on individual securities do not exceed the income generated from the remainder of the portfolio.
(2) Liquidity. The city of Des Moines’ investment portfolio shall remain sufficiently liquid to enable the city of Des Moines to meet all operating requirements that might be reasonably anticipated.
(3) Return on Investment. The city of Des Moines’ investment portfolio is designed with the objective of obtaining a market rate of return throughout budgetary and economic cycles, taking into account the city of Des Moines’ investment risk constraints and the cash flow characteristics of the portfolio. [Ord. 1144 § 6, 1995.]
3.12.040 Delegation of authority.
Management responsibility for the investment program is delegated to the finance director, who shall establish written procedures for the operation of the investment program, consistent with this investment policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person shall engage in an investment transaction except as provided under the terms of this policy and the procedures established by the finance director. The finance director is responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. [Ord. 1144 § 7, 1995.]
3.12.050 Ethics and conflicts of interest.
Officers and employees involved in the investment process shall refrain from personal business activities that could conflict with the proper execution of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the city manager any material financial interest in financial institutions that conduct business within this jurisdiction, and they shall further disclose all large personal financial or investment positions that could be related to the performance of the city of Des Moines’ portfolio. Employees and officers shall subordinate their personal investment transactions to those of the city of Des Moines, particularly regarding the time of purchases and sales. [Ord. 1144 § 8, 1995.]
3.12.060 Authorized financial dealers and institutions.
(1) The finance director shall maintain a list of financial institutions, as required by the Public Deposit Commission, authorized to provide investment services (RCW 39.58.080 as presently constituted or as may be subsequently amended). In addition, a list shall also be maintained of approved security broker/dealers selected by credit worthiness, who maintain an office in the state of Washington. These may include “primary” dealers or regional dealers that qualify under Security and Exchange Commission Rule 15C3-1 (uniform net capital rule). No public deposit is made except in a qualified public depository in the state of Washington.
(2) A current financial statement is required to be on file for each financial institution and broker/dealer in which the city of Des Moines invests. [Ord. 1144 § 9, 1995.]
3.12.070 Authorized investments.
All municipal corporations in the state of Washington, including the city of Des Moines, are empowered by RCW 36.29.020 and limited by RCW 39.58.080, both as presently constituted or as may be subsequently amended, to invest in the following types of securities:
(1) Investment deposits, including certificates of deposits, with qualified public depositories as defined by chapter 39.58 RCW as presently constituted or as may be subsequently amended.
(2) Certificates, notes or bonds of the United States, or other obligations of the United States or its agencies, or a corporation wholly owned by the government of the United States (such as the Government National Mortgage Association).
(3) Obligations of government sponsored organizations that are eligible as collateral for advances to member banks as determined by the Board of Governors of the Federal Reserve System. These include, but are not limited to, Federal Home Loan notes and bonds, Federal Farm Credit bank consolidated notes and bonds, Federal National Mortgage Association notes, debentures, and guaranteed certificates of participation.
(4) Bankers acceptances purchased on the secondary market.
(5) Repurchase agreements for the securities listed in 2, 3, and 4 above, except that the transaction is structured so that the city of Des Moines obtains control of the underlying securities and a master repurchase agreement has been signed with the bank or dealer.
(6) Washington State Investment Pool. [Ord. 1144 § 10, 1995.]
3.12.080 Safekeeping and custody.
All security transactions, including collateral for repurchase agreements, entered into by the city of Des Moines are conducted on a delivery-versus-payment (DVP) basis. Securities are held by a third party custodian designated by the finance director. [Ord. 1144 § 11, 1995.]
3.12.090 Diversification.
The city of Des Moines shall diversify its investments by security type and financial institution. With the exception of the United States Treasury securities and the State Investment Pool, no more than 25 percent of the city of Des Moines’ total investment portfolio is invested in a single security type or with a single financial institution. [Ord. 1144 § 12, 1995.]
3.12.100 Maturities.
(1) To the extent possible, the city of Des Moines shall match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow the city of Des Moines shall directly invest in securities maturing more than 18 months from the date of purchase. However, the city of Des Moines may collateralize its repurchase agreements using longer-dated investments.
(2) Reserve or capital improvement funds may be invested in securities exceeding 18 months if the maturity of such investments are made to coincide as nearly as practicable with the expected use or need of the funds. [Ord. 1144 § 13, 1995.]
3.12.110 Internal control.
The finance director shall establish a process of independent review by an external auditor. This review shall provide internal control by assuring compliance with appropriate policies and procedures. Such a review may also result in recommendations to change operating procedures to improve internal controls. [Ord. 1144 § 14, 1995.]
3.12.120 Performance standards.
(1) The city of Des Moines’ investment portfolio is designed to obtain a market average rate of return during budgetary and economic cycles, taking into account the city of Des Moines’ investment risk constraints and cash flow needs.
(2) The basis used by the finance director to determine whether market yields are being achieved is the six-month United States Treasury Bill and the average Federal Funds Rate. [Ord. 1144 § 15, 1995.]
3.12.130 Reporting.
The finance director is charged with the responsibility of submitting a report on investment activity and the returns each quarter to the city manager and the city council. [Ord. 1144 § 16, 1995.]
3.12.140 Investment policy review and amendment.
(1) The investment policy is reviewed on an annual basis by the city council.
(2) No amendment to this chapter shall be made without first holding a public hearing. Notice for such hearing shall be consistent with DMMC 17.44.030.
(3) This chapter may only be amended by a two-thirds majority vote of the entire city council. [Ord. 1144 § 17, 1995.]
3.12.150 General provisions.
(1) Identity and Accounting. Except as otherwise provided in this chapter, each fund has a separate accounting and identity from other monetary resources of the city.
(2) Sources of Moneys. Except as otherwise provided in this chapter, each fund receives moneys as part of the annual budget process of the city council.
(3) Expenditures from Funds. Except as otherwise provided in this chapter, expenditures from each fund are authorized by motion of the city council for purposes and uses consistent with law.
(4) Transfers from Funds. Except as otherwise provided in this chapter, excess moneys in a fund may be transferred by motion of the city council to another city fund that the city council, in its discretion, deems appropriate.
(5) Annual Carryover. Except as otherwise provided in this chapter, moneys that have been deposited in each fund are maintained and carried forward at the end of each budget year, including interest from investment earnings of the funds and excluding authorized expenditures. [Ord. 1144 § 18, 1995.]