Chapter 3.01
INVESTMENT POLICY
Sections:
3.01.030 Investment objectives.
3.01.040 Delegation of authority.
3.01.050 Ethics and conflicts of interest.
3.01.060 Qualified investments and institutions.
3.01.070 Authorized investments, diversity and maturity.
3.01.090 Performance guidelines and reporting.
3.01.005 Purpose.
The purpose of this chapter is to set forth the investment policy of the city. When determining an appropriate investment, the city’s finance department shall invest public funds in a manner consistent with the greatest safety and protection for the city’s investments. This chapter shall apply to the investment of all financial assets of the city. (Ord. 2610 § 2, 2008).
3.01.010 Definitions.
Unless the context otherwise requires, these definitions apply throughout this chapter:
“City” shall mean the city of Prosser, Washington.
“Finance department” shall mean the city’s finance director and his or her designees.
“Finance director” shall mean the city’s finance director.
“Fund” or “funds” shall mean that portion of the city’s financial assets not needed to conduct the day-to-day business of the city and shall exclude that portion of the financial assets the finance director determines is necessary to fill cash drawers and maintain in a bank account to pay monthly bills and payroll.
“Persons involved in the investment process” shall mean employees or officials who make discretionary decisions regarding the investment of city funds.
“Pool” shall mean the State of Washington Local Government Investment Pool. (Ord. 2610 § 3, 2008).
3.01.020 Standard of care.
The standard of care to be applied by the finance director in managing the city’s overall portfolio shall be the “prudent person rule,” which states:
Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
The finance department, acting in accordance with this chapter and exercising due diligence, shall be relieved of personal responsibility for the risk of an individual investment, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
The investment by the finance department of all of the city’s funds in the Pool shall be adequate to comply with the prudent person rule described above.
When making investments, the finance department shall act responsibly and with a degree of professionalism worthy of the public trust. (Ord. 2610 § 4, 2008).
3.01.030 Investment objectives.
The funds of the city of Prosser shall be invested in accordance with all of the laws governing the investment of municipal funds as provided for in Section 35A.40.050 of the Revised Code of Washington as now codified or as hereafter amended. The city’s investment objectives below are listed in order of importance. The funds of the city of Prosser may be pooled in accordance with state law at the time they are invested.
A. Safety. Safety of principal is the primary objective of the city’s investment program. Investments of the city shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To achieve this objective, some diversification may be required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.
B. Liquidity. The city’s investment portfolio will remain sufficiently liquid to enable the city to meet all operating and capital requirements which might reasonably be anticipated.
C. Return on Investment. The city’s investment portfolio shall be designed with the goal of attaining a market rate of return throughout budgetary and economic cycles, taking into account the city’s investment risk constraints and the cash flow characteristics of the portfolio.
D. Pool. Since the state of Washington invests its liquid assets in accordance with these objectives, investment in the Pool of all of the city’s funds shall be adequate to comply with these objectives. (Ord. 2610 § 5, 2008).
3.01.040 Delegation of authority.
The finance director is designated as the investment officer of the city and is responsible for implementing investment decisions and activities with the guidance of the mayor and city council.
The finance director may delegate the authority to persons responsible for the implementation of the investment transactions. No person may engage in an investment transaction except as provided under the terms of this chapter. The finance director will be responsible for all transactions undertaken. Prior to the execution of all transactions, the finance director will review and approve all transactions. In the event the finance director is unavailable, the mayor or city administrator will approve all transactions prior to their execution. (Ord. 2610 § 6, 2008).
3.01.050 Ethics and conflicts of interest.
All persons involved in the investment process shall refrain from personal business activities which may conflict with proper execution of this chapter, or which may impair their ability to make unbiased investment decisions. All persons involved in the investment process shall disclose to the city council any material financial interests in financial institutions that conduct business for the city, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the city’s portfolio. All persons involved in the investment process shall subordinate their personal investment transactions to those of the city, particularly with regard to the timing of purchases and sales. (Ord. 2610 § 7, 2008).
3.01.060 Qualified investments and institutions.
The finance director will maintain a list of financial institutions and security dealers authorized to provide banking and investment services to the city. The selection of the city’s bank(s) will be made by resolution of the city council from the list of qualified public depositories approved by the Washington Public Deposit Protection Commission as authorized to provide investment services pursuant to RCW 39.58.080 as now codified or as hereafter amended. Banks having a deposit relationship with the city shall provide the finance director with appropriate financial statements on a timely basis. (Ord. 2610 § 8, 2008).
3.01.070 Authorized investments, diversity and maturity.
A. Investment deposits, including certificates of deposit, with city bank(s). No more than two hundred fifty thousand dollars will be invested with any one institution.
B. All investment authorized by the following sections of the Revised Code of Washington, as now existing or as hereafter amended: RCW 35A.40.050, 39.59.020, 39.59.030, 43.84.080 and 43.250.040.
C. In the Pool. If the finance director invests all of the city’s funds into the pool, then he or she shall not be required to compare the rates available by the investment of funds by means of subsections A and B of this section.
D. It is the policy of the city to diversify its investment portfolio to eliminate the risk of loss resulting from over-concentration of assets in a specific maturity, a specific insurer, or a specific class of investments. Investment of all funds of the city into the pool shall be sufficient to meet the necessary diversification outlined in this section.
E. To the extent possible, the city of Prosser will attempt to match its investment with anticipated cash flow requirements. Unless matched to a specific cash flow, the city will not directly invest in investments having a maturity date of more than one year from the date of purchase. (Ord. 2825 § 1, 2013: Ord. 2610 § 9, 2008).
3.01.080 Internal controls.
The finance director shall establish an annual process of independent review by the State Auditor of investments made by the city and shall be reported to the city council. This review will provide internal control by assuring compliance with this chapter. In addition, the finance director shall promulgate and implement an internal control structure designed to ensure the assets of the city are protected from loss, theft, or misuse. Upon implementation, the structure shall be reported to the city council. The internal control structure shall address the following points:
A. Control of collusion;
B. Separation of transaction authority from accounting and recordkeeping;
C. Clear delegation of authority to subordinate staff members;
D. Written confirmation of wire transfers;
E. Dual authorizations of wire transfers;
F. Development of a wire transfer agreement with the lead bank. (Ord. 2610 § 10, 2008).
3.01.090 Performance guidelines and reporting.
The investment portfolio shall be designed to meet the investment objectives as outlined in this chapter. The city’s investment strategy shall lean toward conservative and passive investments. Given this strategy, the consideration of investment yields will use, as a benchmark, the average rate of return of the Pool. This performance standard shall take into account the city’s investment risk constraints and cash flow needs. Maturities of investments shall be kept relatively shorter in periods of rising interest and relatively longer in periods of declining interest rates.
The finance director is charged with the responsibility of quarterly reporting on the investment portfolio. The finance director will provide a brief report to the council regarding the current status of the portfolio, including investment activity, location and type of investment and evidence of investments acceptable to the council. (Ord. 2610 § 11, 2008).
3.01.900 Severability.
If any section, sentence, clause or phrase of this chapter should be held to be invalid or unconstitutional by a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect the validity or constitutionality of any other section, sentence, clause or phrase of this chapter. (Ord. 2610 § 12, 2008).