HomeMy WebLinkAboutResolution No. 2017-011 Replacing Resolution No. 2014-024 and Adopting Revised Financial Policies for the City RESOLUTION NO. 2017-011
A RESOLUTION OF THE CITY OF ARLINGTON REPLACING RESOLUTION NO. 2014-024
AND ADOPTING REVISED FINANCIAL POLICIES FOR THE CITY
WHEREAS, the National Advisory Council on State and Local Budgeting Practices
recommends budget practices, including the development of a series of financial policies;
and
WHEREAS the Arlington City Council has reviewed and deliberated on the
recommended revisions to the financial policies and finds that it is in the best interest of
the city to adopt financial policies;
NOW, THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF THE CITY
OF ARLINGTON:
Section 1. The "Financial Management Policies" dated June 5, 2017 are hereby
adopted as the financial policies and practices of the City.
Section 2. This resolution shall take effect immediately upon passage thereof
APPROVED by the Mayor and City Council of the City of Arlington this 5th day of
June, 2017.
CITY OF A LINGTON
R jj
Barbara Tolbert
Mayor
ATTEST:
Kristi Banfiel
City Cler
APPROVED AS TO FORM:
t� V
Ste eiffle
City Attorney
P�s
�•
IL
City of Arlington
Adopted 6/5/2017
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Table of Contents
Purpose &Objectives..............................................................................................................................5
ReservePolicies........................................................................................................................................6
RevenuePolicies.......................................................................................................................................7
ExpenditurePolicies...............................................................................................................................9
Budgetand Operating Policies.........................................................................................................10
CapitalAssets Policies and Procedures.........................................................................................13
Purchasing Policies and Procedures..............................................................................................17
Cost Allocation and Allocated Costs................................................................................................31
DebtManagement Policy....................................................................................................................33
InvestmentPolicy..................................................................................................................................35
Glossary....................................................................................................................................................39
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Purpose:
The Comprehensive Financial Management Policy assembles all of the City's financial policies
in one document.They are the tools to ensure that the City is financially able to meet its
immediate and long-term service objectives. The individual policies contained herein serve as
guidelines for both the financial planning and internal financial management of the City.
The City of Arlington is accountable to its citizens for the use of public dollars. Municipal
resources must be wisely used to ensure adequate funding for the services,public facilities,
and infrastructure necessary to meet the community's present and future needs.These
policies safeguard the fiscal stability required to achieve the City's goals and objectives.
Objectives:
In order to achieve its purpose,the Financial Management Policies have the following
objectives for the City's fiscal performance.
A. To guide the City Council and management policy decisions that have significant
impact.
B. To set forth-operating principles that minimize the cost of government and financial
risk.
C. To employ balanced and fair revenue policies that provide adequate funding for
desired programs.
D. To maintain appropriate financial capacity for present and future needs.
E. To promote sound financial management by providing accurate and timely
information on the City's financial condition.
F. To protect the City's credit rating and provide for adequate resources to meet the
provision of the City's debt obligations on all municipal debt.
G. To ensure the legal use of financial resources through an effective system of internal
controls.
H. To promote cooperation and coordination with other governments and the private
sector in the financing and delivery of services.
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Reserve Policies:
Adequate reserve levels are a necessary component of the City's overall financial
management strategy to mitigate current and future risks such as revenue shortfalls or
unanticipated expenditures. Reserve levels are also a key factor in external agencies'
measurement of the City's financial strength which results in favorable credit ratings and
access to lower cost of financing.
A. The City will strive to maintain a Mandatory General Fund Reserve with a target
balance of eight percent(8%) of the total General Fund budgeted taxes and license&
permit revenues. These operating reserves are maintained to address temporary
revenue shortfalls; payment of approved expenditures due to cash flow shortage;
reserves for expenditures deemed necessary by the Mayor and City Council;
temporary short-term inter-fund loans, and other unanticipated expenses as approved
by the City Council.An annual contribution will be budgeted from General Fund
resources as available to maintain the target reserve level.
B. The City will maintain an ending fund balance within the General Fund of an amount
equal to one month of operating expenditures. Use of any required reserves or
surplus funds will be approved by council through the budget process.
C. The City will maintain a Capital Facilities/Building Fund to provide funding for future
facilities including debt repayment, less proprietary fund projects. Contributions into
this fund will be made from available funds as identified in the adopted or amended
budget.
D. The City will maintain an Equipment Replacement Fund that will receive annual
contributions from the operating expenses of departments owning the equipment.
Contributions will be based on availability of funds as approved through the budget
process. The intent is to replace equipment at the end of the asset's useful life.
E. It shall be best practice of all enterprise funds to maintain an ending fund balance (in
operational funds) of an amount equal to or greater than one month operating
expenses or an amount as otherwise required by federal,state or other regulations
(i.e. rate studies, debt covenants).
F. Reserves that fall below the minimum standards will require a financial plan
presented to council within 60 days of the shortfall. Fund balances will be restored to
the minimum standard within a 3 year period.
G. All expenditures drawn from reserve accounts shall require prior Council approval
unless previously specifically authorized by the City Council through the budget
and/or budget amendment process.
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Revenue Policies:
The City will identify resources that are sufficient to provide for the regular and ongoing
operations associated with providing public services.
A. To the extent possible,a diversified and stable revenue system will be maintained to
shelter public services from short-run fluctuations in any one revenue source.Trends
analyzing the dependence on distinct revenue sources shall be included in the budget
documents for consideration by the Council.
B. Revenue forecasts shall be realistically estimated and based on the best information
available. The finance director is responsible for developing a policy for the collection
of revenues. The policies will include any and all collection methods allowable by
state and federal statute or otherwise provided for in Municipal Code,leases or other
agreements. If all collection efforts have been exhausted,the finance director has
authority to write off uncollectible accounts up to$2,500 and the city administrator
has authority to write off uncollectible accounts up to$5,000.Any write off in excess
of$5,000 require council approval.
C. Revenue forecasts will assess the full spectrum of resources that can be allocated for
public services. Each year the Council shall review potential sources of revenue as part
of the budget process.
D. The use of one time revenues to fund ongoing expenditures is discouraged.
E. Property taxes provide a consistent base of revenues for the City to provide public
services. The City shall levy property taxes within its statutory limit or bank the levy
capacity so the City can continue to provide a safe, economically vibrant place to live
and work.
F. Short-term (anticipated less than one year) economic downturns and temporary gaps
in cash flow: Expenditure reductions or restrictions may be imposed. Inter-fund loans
may be used to address short-term cash flow needs as authorized by Chapter 3.90 of
Arlington Municipal Code.
G. Long-term (greater than one year) revenue downturns: Revenue forecasts will be
revised. Expenses will be reduced to conform to the revised long-term revenue
forecast or revenue increases will be considered. The City will not pursue deficit
financing and borrowing to support on-going operations as a response to long-term
revenue shortfalls.
H. All potential grants shall be carefully examined for matching requirements. Some
grants may not be accepted if the local matching funds cannot be justified. Grants may
also be rejected if programs must be continued with local resources after grant funds
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are exhausted.
I. The City shall develop and maintain a comprehensive list of various fees and charges.
Fees may be set at levels sufficient to cover the entire cost of service delivery(such as
in "Enterprise Funds"), or the service may be subsidized, as Council deems
appropriate.The City will systematically review user fees and rates and consider
adjustments as necessary to take into account the effects of additional service costs
and inflation. Rate studies shall be conducted to ensure that the rates will continue to
support direct and indirect costs of operations,administration,plant maintenance,
debt service, depreciation of capital assets,and moderate system extensions. Based on
a market analysis, fees for similar services in other communities may also be
considered. The criteria used to evaluate recommended target rates (equity, cost
recovery policy, market demand, etc.) shall be included in the staff report during the
review. Such review should be scheduled periodically and be incorporated into the
budget process for possible action by the City Council.
J. The City, or Council approved board(s) or commission(s),will review contracts and
leases which result in revenues to the City. Leases and contracts will be reviewed on a
timely basis, prior to the expiration date or at least every 3 years if on a continuing
basis.
K. The City will refrain from using grants to meet ongoing service needs. Grants will be
evaluated from a financial planning perspective to ensure the City has adequate
matching funds (if applicable). Grants with a matching component,not previously
approved through the budget process, require Council approval. All other grants will
be approved by City Council through the budget amendment process and will be
reviewed to ensure compliance with state, federal and City regulations.
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Expenditure Policies:
The City will provide for a sustainable level of service by adopting a balanced budget where
ongoing resources are sufficient to support ongoing expenditures.
A. The City will only propose operating expenditures,which can be supported from on-
going operating revenues. Before the City undertakes any agreements that would
create fixed on-going expenses,the cost implications of such agreements will be fully
determined for current and future years. Capital expenditures may be funded from
one-time revenues,but the operating budget expenditure impacts of capital
expenditures will be reviewed for compliance with this policy provision.
B. Department heads are responsible for managing their budgets within the total
appropriation for their department. The finance director is responsible for oversight
of all budget expenditures and is authorized to make unilateral changes within line
item expenditures as long as the changes are within the overall budget.
C. The City will maintain expenditure categories according to prescribed accounting
standards,state statute,federal and administrative regulation. All expenditures shall
be audited and certified by the finance director or designee prior to submitting to the
City Council for approval.
D. All expenditures must be related to some public purpose and are reasonable in the
amount and nature.
E. The City will assess funds for services provided internally by other funds. The
estimated direct and indirect costs of service will be budgeted and charged to the fund
performing the service. Interfund service fees charged to recover these costs will be
recognized as revenue to the providing fund.A review of the method for determining
the amount of the interfund assessment will be reviewed periodically.
F. Emphasis is placed on improving individual and work group productivity rather than
adding to the work force. The City will invest in technology and other efficiency tools
to maximize productivity. The City will hire additional staff only after the need of such
positions has been demonstrated and documented.
G. All compensation planning and collective bargaining will focus on the total cost of
compensation,which includes direct salary,health care benefits,pension
contributions,training allowance, and other benefits of a non-salary nature,which are
a cost to the City. Collective bargaining decisions will not negatively impact the City's
efforts to maintain reserve balances in compliance with the City's reserve policy.
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Budget and Operating Policies:
The City will maintain a system of financial monitoring, control,and reporting for all
operations and funds in order to provide effective means of ensuring that overall City goals
and objectives are met.
A. Accounting Records and Reporting.
a. The City will maintain its accounting records in accordance with state and
federal regulations, which includes reyuiremecils for data relenLiun fur archival
purposes and business continuity.
b. City records will be archived and destroyed in accordance with the Washington
State Records Retention Schedule
c. The continuation of services after a disaster is critical to the success of the City.
The City must ensure that its applications, data and network resources can
continue and be appropriately accessible to users.The information technology
department is responsible for developing procedures for the security, storage,
retention and retrieval of data to ensure operations continue during and after a
disaster.
d. Budgeting, accounting and reporting will conform to the Budgeting,
Accounting and Reporting System (BARS) for Governments as prescribed by
the Washington State Auditor. Changes to the City's revenue and expense
accounts must be authorized by the finance department and will be made only
if it's in the best interest of the overall accounting system.
e. All known or suspected loss of public funds shall be reported to the State
Auditor's Office in accordance with RCW 43.09.185.
B. Auditing.The State Auditor will perform the City's financial and compliance audit in
accordance with state and federal laws. Results of the audit will be provided to the
Council in a timely manner.
C. Simplified Fund Structure.To the extent possible,the City will minimize the number of
Funds. Funds will be created and accounted for in accordance with BARS.
D. Cash Management.
a. The Finance Department will develop, maintain, and consistently seek to
improve cash management systems which ensure the accurate and timely
accounting, investment, and security of all cash assets.
b. There are several locations where monies are received by the City.Those
locations are: the Finance office,the Airport office,the Permits office,the Police
department,the Public Works office and the Cemetery office.
c. Deposits will be made every 24 hours as per RCW 43.09.240, including deposits
received from City departments by the finance department.
d. The Finance,Airport and Permits office locations all have cash drawers. These
funds are used to make change for cash payments. The amount of these cash
drawers are authorized by resolution.
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e. No change shall be given when a check is presented for payment.
f. Cash refunds are prohibited. Refunds shall be processed through the method
payment was received such as by check or credit card.
g. No one is authorized, at any time,to borrow funds from any cash drawer. Doing
so will result in discipline up to and including termination.
h. The Finance Office also has a Petty Cash Revolving Fund (Checking Account).
The Petty Cash Fund is authorized in the Arlington Municipal Code Section
3.69.This fund is used to pay very small expenditures or reimburse small
expenditures made where waiting for a payment from the normal payment
process is unreasonable. No one is authorized to borrow monies from this
Fund.
E. Budget.
a. The City's budget is part of an overall policy framework that guides the services
and functions of the City. The budget serves as a key role in that framework by
allocating financial resources to programs which implement the City's overall
vision and goals.
b. All decisions will be within the context of long-range plans (Capital Facilities
Plan, Comprehensive Plan/Capital Improvement Plan, Long Term Financial
Plan). Staff shall provide a review of the implications of budgetary proposals on
long-range plans.
c. The City will develop and maintain a ten year financial plan that estimates the
resources and expected costs over a ten year period. This planning tool will
provide the City's decision makers with an indication of long-term fiscal
impacts of current policies and budget decisions.
d. The budget shall be developed consistent with state law and in a manner which
encourages early involvement with the public and City Council.A calendar
related to budget development shall be presented to the City Council each year.
The budget will be adopted by ordinance at the fund level.
e. The budget will be developed to consider long term financial implications. The
City will strive to build a budget so that recurring expenditures are covered by
recurring revenues and a budget that supports a trend of revenues growing at a
rate equal to or greater than expenditures.
f. The Finance Department will maintain a system for monitoring the City's
budget performance.The system will provide the City Council with monthly
and or quarterly information in a timely manner on fund level resource
collections and department level expenditures.
g. Under the provisions of State Law and the City's operating procedures, the
budget may be adjusted or amended in two different ways.Adjustment of the
budget involves a reallocation of existing appropriations and does not change
the "bottom line". No City Council action is needed as State Law allows budget
adjustments to be done administratively.
h. Amendment of the budget involves an addition to or reduction of existing
appropriations. A budget amendment requires an ordinance amending the
original budget and identifies the funding sources for the incremental
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appropriations. Items that may require a budget amendment,such as an
unanticipated grant,will be approved by City Council throughout the year in
accordance with the City's procurement and expenditure policies. A formal
Budget Amendment Ordinance will be adopted by City Council no later than
December 31 of the second year of the biennium.
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Capital Assets Policies and Procedures:
A. Purpose. This policy is established to provide guidelines to ensure adequate stewardship
over City resources through control and accountability of capital assets, and to collect and
maintain complete and accurate capital assets information in the Capital Assets System.
B. Reference. Specific requirements of the Washington State Auditor's Office are contained in
Budgeting and Reporting System (BARS) which will be applied by the City as relevant. In
addition,the federal government has issued property management requirements which
apply to all governments that receive federal assistance. Each federal agency has
published a Federal Agency Implementation of the Common Rule which will be adhered
to as applicable. The policies and procedures contained in this policy are not intended to
and may not supersede federal, state or local laws.
C. Definitions
a. "Capital Assets"are defined as land,buildings,improvements,equipment,
machinery,vehicles,tools,works of art,furnishings and other improvements
costing more than$7,500 and have a useful life of more than one year.These
assets will be tracked and an inventory listing will be maintained.
b. "Control"- Being in charge of, and having the authority to manage the asset.
Having the custodial responsibility of the asset that includes,but is not limited
to the caring,keeping,safekeeping and protecting the asset.
c. "Inventory"—The process of physically confirming the existence and location of
capital assets.
d. "Small and Attractive Assets" -All assets with a cost less than $7,500 and at risk
or vulnerable to loss are considered"small and attractive assets". These assets
will be tracked and an inventory listing will be maintained. Assets considered
to be small and attractive include,but are not limited to the following;
i. Communications Equipment; both Audio and Video
ii. Optical Devices, Binoculars,Telescopes, Infrared Viewers, and Range
finders
iii. Cameras and Photographic Projection Equipment
iv. Microcomputer Systems, Laptop and Notebook Computers
v. Other data processing Accessory Equipment and Components
(Scanners, Data Displays,etc.)
vi. Office Equipment
vii. Stereos, Radios, Television Sets,Tape Recorders, DVD players,Video
Cameras and cell phones
D. Applicability. This policy applies to all departments of the City of Arlington. The term
"Department" is defined to include every city office, officer, and every department,
division, board and commission.
E. Insurance. Insurance is required for all land,building and vehicle purchases and assets
with a cost in excess of$25,000 as deemed appropriate by the finance department.
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F. Department responsibilities. Department directors are responsible for tracking, inventory
and safekeeping of all assets assigned to their department. Each department is
responsible for notifying the finance department, in writing,any assets purchased, sold,
traded,transferred,surplused,lost or stolen. The finance department is responsible for
keeping and updating the fixed asset database,coordinating the physical inventory
process and developing procedures for the safeguarding of assets.
G. Capital Outlay.All assets with a cost of$7,500 or more will be recorded as capital outlay.
Although Small and Attractive Assets (assets costing less than $7,500 do not meet the
city's capital outlay threshold, due to ease of conversion to private use,they are
considered assets for purposes of marking and identification, records keeping, and
tracking.
H. Valuation of Capital Assets. The City of Arlington reports its financial activity on a cash
basis. Expenditures for capital assets will be expensed at cost in the period the
expenditure occurred.
I. Small and Attractive Assets.
a. Small and attractive assets shall be expensed.
b. Annually each department will conduct an inventory verified by the Finance
Department on a sampling basis.
c. Small and attractive assets (even if they do not contain an asset tag) may not be
transferred,traded,sold, auctioned,gifted, surplused, or discarded without
written notice to and authorization from the Finance Department.
J. Improvement/Repair/Maintenance Expenses. Routine repair and maintenance costs will
be expensed as they are incurred.
K. Deletions.Asset deletion (assets over$7,500) may be required due to the sale of the asset,
scrapping,lost or stolen items, or involuntary conversion (fire, flood, etc). Due to the
monetary value, capital assets deleted from the capital asset system for any reason
require authorization by resolution of the City Council.
L. Disposal.
a. Disposal of capital assets may occur only after being declared surplus by
resolution of the City Council.A Public Hearing is required if the asset was
owned for Public Utility purposes.
b. Disposal will be made in whichever manner is determined to be most cost
effective for the City. This may include sale, disposal, conversion, or any other
means as approved by the City Council in the surplus declaration.
c. When original or replacement equipment acquired under a grant or sub-grant
is no longer needed for the original project or program, disposition of the
equipment will be made as follows:
i. Items of equipment with a current per-unit fair market value of less
than $7,500 may be retained,sold or otherwise disposed of with no
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further obligation to the awarding agency.
ii. Items of equipment with a current per-unit fair market value of$7,500
or more may be retained, sold or otherwise disposed of only as
authorized by the awarding agency.
iii. In the event the City is provided federally owned equipment,the City
will comply with federal requirements known as "the common rule"or
as specifically stated in the grant agreement.
M. Lost or stolen property.When suspected or known losses of capital assets or small and
attractive items occur, departments should conduct a search for the missing property and
immediately notify the finance department. The finance department will report known or
suspected losses of assets to the State Auditor's Office in accordance with RCW 43.09.185.
N. Transfers. Occasional transfers of property between departments, individuals within a
department or funds may occur. The original controlling department is accountable for all
assets in its inventory and for initiating a notice of transfer. Interdepartmental transfers
involving a proprietary fund (i.e. Surface Water) require a transfer of money. The sale
price will be fair market value with exception of a trade between departments of assets of
similar value.
0. Inventory.The Finance department is responsible for establishing procedures for the
inventory and reconciliation process.A physical inventory will be conducted at least once
every year.As coordinated by the finance department, each department will conduct a
physical inventory of the items,verifying the existence and condition of each item on the
worksheet, and making note of any additions, deletions, interdepartmental transfers,
modifications, or leases of property that are not reflected on the list.Verification of the
inventory shall be done annually by the Finance Department by performing a sampling of
the physical inventory of the items.
a. Inventory of IT (Information Technology) related items.
i. The Information Technology Department will be responsible for
inventorying all stationary items such as desktop computers,laptop
computers with docking stations, servers, printers and network
equipment.
ii. Individual departments will be responsible for inventorying all
"portable"small and attractive IT related items such as: Tablets (iPad,
Android, etc.) and mobile computers (Netbooks, Police Car computers,
Fire tablets etc.)
b. In order to ensure objective reporting of inventory items,personnel having no
direct responsibility(custody and receipt/issue authority) for the assets should
perform the physical inventory. If it is not feasible to use such personnel for all
or a part of the inventory,then those portions are; at least,to be tested and
verified by a person with neither direct responsibility for that portion of the
inventory nor supervised by the person directly responsible. Departments are
encouraged to exchange and use personnel from other departments to perform
their inventory if possible.
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P. Retaining physical inventory records.The documentation will be retained in accordance
with the Washington State Retention Records Schedule and must be retained until after
the next annual audit.
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Purchasing Policies and Procedures
A. Purpose. This policy is intended to direct the purchase of goods and services at a
reasonable cost,using an open, fair, documented and competitive process whenever
reasonable and possible. The integrity, efficiency, and effectiveness of Arlington's
procurement functions are critical elements of sound government.
B. Policy statement.
a. The City desires a fair and open process for procurement of goods and services
that is free from the potential for bias and conflict of interest. In addition,the City
desires consistent and appropriate practices for solicitations and contracting.All
procurements of goods and services shall provide the City with the best quality
and best value.All purchases are to be made within budgetary limitations and for
the purpose of the goals and objectives approved in the City's budget.Any
requested purchase that is not included in the current City budget shall be pre-
approved by the Department Director, City Administrator, or City Council,based
on allowable signing authority.All purchases made by the City shall ultimately be
approved by the City Council through the voucher approval process.
b. All City of Arlington departments shall make a good faith effort to purchase goods
within the City when they are available and suitable to City needs at a price that is
competitive. Departments are expected to procure goods and services that are of
high quality and that perform for their intended purpose,and to use good
judgment during the procurement process.
c. The Finance department is charged with developing administrative procedures to
implement this policy. Procedures should ensure the fiscal responsibility of the
City in expending resources for goods and services for City operations.The
procurement procedures of the City shall be based on guidelines provided in the
Revised Code of Washington,by the State Auditor's Office,and by Municipal
Research Services Center.
d. The purchasing procedures of this policy govern the purchase of supplies,
materials and equipment, nonprofessional and professional services,and public
works contracts.These policies authorize the City to procure goods and services
through the small works roster process as defined in Section VI.D.The small works
roster procedures are established for use by the City,pursuant to RCW 35.23.352,
35A.40.210 and Chapter 39.04 RCW. Leases of equipment or other personal
property shall follow procedures for purchase of goods,with the aggregate of lease
payments used in lieu of purchase price. Purchase or lease of real estate, franchise
agreements,and intergovernmental or inter-local agreements will be entered into
in accordance with state law.
e. Each City Department purchases specialty items unique to their function and items
that are purchased just in time to make necessary repair or to keep equipment and
amenities in safe a good working order. All department directors will make good
faith effort to utilize a central purchasing for purchases of consumable goods and
reoccurring purchases.This will enable the best value by combining orders and
purchasing in bulk on larger quantities when possible.
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C. Definitions.
a. "Architectural and engineering services" means professional services rendered by
any person, other than a City employee,to perform activities within the scope of
the professional practice of architecture (Chapter 18.08 RCW),professional
practice of engineering and land surveying(Chapter 18.43 RCW),and/or
professional practice of landscape architecture (Chapter 18.96 RCW).
b. "Contract Authorization Summary" outlines the levels at which managers,
directors, or Lhe Mayor may coniniiL Lhe Cily Lu a cuulracL.ALLached as Exhibit B.
c. "Formal competitive bid" is the process of advertising and receiving sealed written
bids from perspective vendors.The selection of the vendor is primarily based on
the lowest cost from a responsible vendor.
d. "Informal competitive quotes" are price quotes from vendors that are obtained
using a variety of mediums such as phone, fax, e-mail, or writing. Results must be
documented. The selection of the vendor is primarily based on the lowest cost
from a responsible vendor.
e. "Inter-local agreements" are the exercise of governmental powers in a joint or
cooperative undertaking with another public agency.
f. "Life cycle cost" means the total cost of an item to the City over its estimated useful
life,including costs of selection, acquisition, operation, maintenance, and where
applicable, disposal,as far as these costs can reasonably be determined, minus the
salvage value at the end of its estimated useful life.
g. "MSRC Small Works and Consultant Roster" is a shared statewide small public
works and consultant roster service managed by the Municipal Research and
Services Center of Washington used by Washington state local public agencies.The
Small Works and Consultant Roster is maintained and operated in full compliance
with state laws and purchasing requirements.
h. "Nonprofessional services" are services that are purchased by the City for which
the contractor receives specific instructions and guidance from the City and does
not meet the definition of professional services, architectural and engineering
services, or public works projects. Examples include machine repair, debt
collection services,temporary service agencies, credit card services, equipment
service agreements, auctioning services, delivery services,inspections, advertising,
etc.
i. "On-call contract" means a contract that is awarded with general provisions for the
services to be rendered.As services are to be rendered, specific task orders are
initiated that are to be completed by the contracting firm.
j. "Ordinary maintenance" is work not performed by contract and that is performed
on a regularly scheduled basis (e.g., daily, weekly, seasonally,semiannually,but not
less frequently than once per year),to service, check, or replace items that are not
broken; or work not performed by contract that is not regularly scheduled but is
required to maintain an asset so that repair does not become necessary.
k. "Prevailing Wage" is defined as the hourly wage, usual benefits and overtime, paid
in the largest city in each county,to the majority of workers,laborers, and
mechanics. Prevailing wages are established,by the Department of Labor and
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Industries, for each trade and occupation employed in the performance of public
work.They are established separately for each county, and are reflective of local
wage conditions.
1. "Professional services" are services provided by consultants that provide highly
specialized,generally one-time expertise to solve a problem or render professional
opinions,judgments or recommendations. The labor and skill involved to perform
these types of services are predominately mental or intellectual, rather than
physical or manual. Examples include graphics design,advertising, analysis,
financial expertise,accounting,artists,attorneys,bond brokers,computer
consultants,insurance brokers,economists,planners, real estate services, etc.This
term does not include architectural and engineering services.
m. "Public work," as defined in RCW 39.04.010, means a complete project, and
includes all work, construction, alteration, repair or improvement other than
ordinary maintenance, executed at the cost of the City or which is by law a lien or
charge on any City property. Public work projects include the related materials,
supplies and equipment to complete the project. For purposes of this policy,the
term"public work" may include contracts for maintenance of City facilities or real
property(i.e.janitorial services).
n. "Request for proposals (RFP)" means a process that requests interested firms to
submit a statement of their proposal for completing a project. Proposals are then
evaluated based on the idea, including originality, suitability,practicality,
expertise, etc. Proposals may be selected based on the quality of the proposal,
experience, cost, and references.
o. "Request for qualifications (RFQ)" means a process that requests interested
consultants to submit a letter of interest and a statement of their qualifications.
Consultants are evaluated upon their qualifications, expertise,and references. Cost
cannot be a consideration until after a consultant has been selected at which point
the price may be negotiated.
p. "Small works roster" is a roster of qualified contractors maintained for use in a
modified formal bid process.When the contract amount for a public works project
is within the limits set forth by RCW 39.04.155, a city may follow the small works
roster process for construction of a public work or improvement as an alternative
to formal competitive bid requirements.
q. "Small Works Roster Manual for Local Governments"is a manual prepared by the
Municipal Research&Service Center of Washington (MRSC) that contains state
laws and regulations regarding small works contracting.
r. "Sole Source" occurs when competition among potential vendors is not possible for
a particular procurement. These situations may occur when; there is clearly and
legitimately only one source capable of supplying the subject matter,when there
are special market conditions that result in only one source and in the event of an
emergency.
s. "Vendor list"means the process to award contracts for the purchase of any
materials, equipment, supplies or services in lieu of formal sealed bidding
pursuant to RCW 39.04.190.
19
D. General provisions.
a. Grant funded projects may have additional regulations required for expending
federal and state funding. The signature authority as outlined in the Contract
Authorization Summary gives authorization to sign state and federal grant
documents,the department director and/or finance director have signature
authority to sign reimbursement request documents.
b. Breaking Down or Splitting Purchases. The breaking down, or splitting, of any
purchase or contracts into units of phases for the purpose of avoiding the
maximum dollar amount is prohibited.
c. It shall be the responsibility of the Central Purchasing Coordinator and City Clerk
to ensure MRSC rosters and vendor lists are maintained,paid for and advertised as
may be required by state law.
d. Amendments and Change Orders.
i. Amendments or change orders to contracts,including inter-local
agreements,which result in the final contract amount(original contract
amount plus all change orders) in excess of purchase limits identified in
this policy may be approved:
1. By the City Administrator if the excess is 5% over the purchase
limit.
2. By the Mayor if the excess is 10% over the purchase limit.
3. By City Council if the excess is more than 10% over the purchase.
ii. Contract amendments that keep the final contract amount within
purchase limits may be administratively approved by the Department
Director within signing authority.
iii. Contract amendments that are strictly a change in contract expiration
date may be administratively approved by the Department Director.
e. Signature Authority.The Mayor may delegate his/her signature authority to other
City employees (City Administrator, Department Director, and Division Manager)
as deemed appropriate.
E. Purchase of materials,supplies or equipment.
a. Purchasing Limitations. Purchase limitations apply to the cost of individual items
or the sum of the same items purchased at the same time to fulfill a specific
business need,which are not part of a public works project as defined by RCW
39.04.010 and these policies. Cost is inclusive of sales tax, delivery charges and any
related miscellaneous charges. Limits shown and processes identified in the
Contract Authorization Summary shall be followed when authorizing the
acquisition of materials, supplies or equipment.
b. Exceptions to Purchasing Limitations (RCW 39.04.280).The Mayor is authorized to
allow open market purchases without obtaining the regularly required competitive
quotes or bids under the following conditions:
c. Special Market Conditions.When supplies or used equipment is offered at a very
favorable price and will be sold before the City will have a chance to complete the
bidding process. It is possible to procure obvious bargains through the
procurement of surplus or distress material, supplies or equipment without
20
following bidding procedures
d. Auctions. RCW 39.30.045 authorizes the City to acquire supplies, materials,and
equipment through an auction conducted by the United States or any agency
thereof, an agency of the state of Washington,a municipality or other government
agency, or any private party,without quotations or bids, if the items to be
purchased can be obtained at a competitive price.
e. Inter-local Joint Purchasing Agreements. Materials,equipment, supplies and
services maybe purchased under RCW 39.34.080 using joint purchasing
agreements with a city, county, state or other public agency where bid
requirements of this policy have been followed by the cooperating agency in
obtaining bids. Originating agency's bid process shall be vetted to assure
compliance with all applicable laws.
f. Sole Source Procurement.A contract for the purchase of materials, supplies, or
equipment may be awarded without complying with the bidding requirements of
this policy when the department director determines in writing,subject to council
approval through resolution,after conducting a good faith review of available
resources,that there is only one source of the required materials,supplies, or
equipment. The department director or his/her designee shall conduct
negotiations, as appropriate,as to price,terms,and delivery time.Sole source
purchases shall be made available for public inspection.
g. No Bids or Quotations Received.When no bids or quotations are received in
response to an invitation to bid or request for quotations, the department director
or his/her designee is authorized to procure the required item through direct
negotiations with a vendor or to rebid as the Mayor or designee deems
appropriate.
h. Emergency Procurements. Notwithstanding any other provisions of this policy,the
Mayor or designated agent may make or authorize others to make emergency
procurements of materials,supplies, equipment,or services without complying
with the requirements of this section when there exists a threat to public health,
welfare, or safety or threat to proper performance of essential functions; provided,
that such emergency procurements shall be made with such competition as is
practicable under the circumstances.A written determination of the basis for the
emergency and for the selection of the particular contractor shall be included in
the contract file.As soon as practicable, a record of each emergency procurement
shall be made and shall set forth the contractor's name,the amount and type of the
contract, and listing of the item(s) procured under the contract,which shall be
reported to the City Council at the next subsequent meeting.The City must
produce a negotiated contract for each emergency purchase within fourteen (14)
days of procurement or the work being performed.
i. RCW 39.04.280 allows waiving of competitive bidding for the purchase of
insurance and bonds.
j. Informal Competitive Quotes - Materials,Supplies or Equipment over$3,000 up to
$7,500.
i. A City representative shall make an effort to contact at least three vendors.
The number of vendors contacted may be reduced if the item being sought
21
is only available from a smaller number of vendors.When fewer than three
quotes are requested or if there are fewer than three replies, an explanation
shall be placed in the procurement file.
ii. Whenever possible, quotes will be solicited on a lump sum or fixed unit
price basis.
iii. At the time quotes are solicited,the City representative shall not inform a
vendor of any other vendor's quote.
iv. A written record shall be made by the City representative of each vendor's
quote on the materials, supplies, or equipment,and of any conditions
imposed on the quote by such vendor.
v. All of the quotes shall be collected and presented at the same time to the
appropriate designee as appropriate for consideration,determination of the
lowest responsible vendor and award of purchase.
1. Whenever there is a reason to believe that the lowest acceptable
quote is not the best price obtainable, all quotes may be rejected and
the City may obtain new quotes or enter into direct negotiations to
achieve the best possible price. In this case,the department shall
document, in writing,the basis upon which the determination was
made for the award.
k. Vendor Lists - Materials, Supplies or Equipment between$7,501 and $15,000
i. The use of vendor lists is authorized by RCW 39.04.190 and whenever
possible, requires at least 3 written, informal quotes.
ii. Vendor lists must be solicited at least twice per year in a newspaper of
general circulation.
iii. Contracts must be awarded to the lowest responsible bidder.
iv. Immediately after the award from a vendor list, all bid quotations must be
recorded and made open to public inspection.
v. At least every two months, the agency must post a list of contracts awarded
using each list, including the date,the name of the contractor,the amount of
the contract and a brief description of the items purchased.
1. Formal Competitive Bid- Materials, Supplies,or Equipment over$15,000
i. General. Unless otherwise specifically approved by the City Council, all
contracts relating to the purchase of materials, equipment, or supplies shall
be in accordance with the City budget.
ii. Invitation for Bids.An invitation for bids shall be issued which shall include
the specifications and the contractual terms and conditions applicable to
the procurement.
iii. Public Notice. Public notice of the invitation for bids shall be published at
least once in a newspaper of general circulation within the City,not less
than 13 calendar days prior to the date set forth therein for the opening of
bids,unless for good cause shown, the City Council authorizes a different
period of time.The public notice shall state the date and time of bid
opening. Bids not received by the date and time stated for bid opening will
22
not be accepted or considered.
iv. Bid Opening. Bids shall be opened publicly and recorded at the time and
place designated in the invitation for bids.
v. Withdrawal of Bids - Cancellation of Awards. Bids may be modified or the
bid may be withdrawn by written notice received in the office designated in
the invitation for bids prior to the time set for opening.After bid opening,
withdrawal of bids shall be permitted only to the extent that the bidder can
show by clear and convincing evidence presented in a sworn affidavit or
declaration submitted no later than 5:00 p.m. on the first business day after
bid opening,that a clerical mistake was made and not a mistake in
judgment,and the bid price actually intended.All decisions to permit the
withdrawal of bids after bid opening, or to cancel awards or contracts based
on bid mistakes, shall be made by the Mayor after consulting with legal
counsel.
vi. Award.The City Council shall award purchases for amounts greater than
the limits as identified in the City budget and for purchases not included in
the adopted budget.The award of bid shall be made to the lowest
responsible bidder whose bid meets the specifications and evaluation
criteria set forth in the invitation for bids.The City may reject all bids at its
discretion.
vii. All purchases of over$7,500 (including tax) will have a completed and
approved Capital Outlay Form submitted to the finance department prior to
the purchase of materials,supplies, or equipment.
viii. Lowest Responsible Vendor.The following factors, in addition to price,may
be taken into account by the City in determining the lowest responsible
vendor;these criteria shall also apply in selecting products or services
either offered with, or associated indirectly with, City programs or facilities:
ix. Any preferences provided by law to local products and vendors;
x. The ability, capacity,and skill of the vendor to perform the contract;
xi. The character, integrity, reputation,judgment,experience, and efficiency of
the vendor;
xii. Whether the vendor can perform the contract within the time specified;
xiii. The quality of performance of previous contracts or services;
xiv. The previous and existing compliance by the vendor with laws relating to
the contract;
xv. Such other information as may be secured having a bearing on the decision
to award the contract.
xvi. Life Cycle Costing. In considering the purchase of materials, equipment,
supplies,whenever there is a reason to believe that applying the "life cycle
costing" method of quote evaluation would result in the lowest total cost to
the City,first consideration shall be given to purchases with the lowest life
cycle cost which complies with the specifications.
xvii. Recycled Products. The City shall also seek to maximize purchase of
products using recycled materials and products suitable for recycling,
unless the purchase will result in an unreasonable increase in price or
23
degradation of quality or performance over comparable products.
F. Public works projects.
a. Purchasing Procedures. Procedures for any public work or improvement shall be
governed by RCW 35.23.352.At such time as the City's population exceeds twenty
thousand, purchases shall be governed by RCW 35.22.620.(RCW 35A.40.210) Cost
for a public works project includes all amounts paid for materials, supplies,
equipment, and labor on the construction of that project which is inclusive of sales
tax,unless exempted by law.
b. Purchasing Limitations.The Mayor may authorize the purchase and execution of
public works projects equal to or less than the dollar threshold for small works
projects as provided under RCW 39.04.155 as amended.
c. Competitive Bids. "Craft" or "trade" means a recognized construction trade or
occupation for which minimum wage categories are established by the Department
of Labor and Industries of the State of Washington in the locality of the City's
projects or purchases.
i. Projects for single craft or multiple crafts with a reasonably anticipated
price equal to or less than the dollar thresholds as provided under RCW
35.23.352,as amended, require a minimum of 2 -4 written quotes.All
purchases require an executed contract.
ii. Projects for single craft or multiple crafts with a reasonably anticipated
price higher than the dollar thresholds as provided under RCW 35.23.352,
as amended,up to the limits set forth by RCW 39.04.155 as amended shall
either use the small works roster or a formal competitive bid procurement
process.All purchases require an executed contract.
d. Small Works Roster. There is established for the City of Arlington a small works
roster contract award process for accomplishment of public works projects with
an estimated value threshold as provided under RCW 39.04.155, as amended.
e. Roster List.The City of Arlington shall contract with the Municipal Research and
Service Center (MRSC) annually to establish, maintain and manage a current roster
of eligible contractors from which the City may solicit bids for work on Small
Public Work Projects (Projects $300,00 and under).
f. Process. Whenever work that has received City Council approval in the current
budget, or otherwise been approved by the City Council,is sought to be
accomplished using a small works roster, a City representative shall obtain
telephone,written or electronic quotations from contractors on the appropriate
small works roster to assure that a competitive price is established and to award
contracts to the lowest responsible bidder as follows:
i. A contract awarded from a small works roster need not be advertised.
Invitations for quotations shall include an estimate of the scope and nature
of the work to be performed as well as materials and equipment to be
furnished. However, detailed plans and specifications need not be included
in the invitation. This paragraph does not eliminate other requirements for
architectural or engineering approvals as to quality and compliance with
building codes.
24
ii. Quotations shall be invited from all contractors in the appropriate category
of the small works roster.As an alternative,quotations may be invited from
at least five contractors on the appropriate small works roster who have
indicated the capability of performing the kind of work being contracted, in
a manner that will equitably distribute the opportunity among the
contractors on the appropriate roster. If the estimated cost of the work is
$150,000 or more but less than or equal to the dollar threshold for small
works projects as provided under RCW 39.04.155,as amended,the City
may choose to solicit bids from less than all the appropriate contractors on
the appropriate small works roster but must also notify the remaining
contractors on the appropriate small works roster that quotations on the
work are being sought. The City has the sole option of determining whether
this notice to the remaining contractors is made by:
1. Publishing notice in a legal newspaper in general circulation in the
area where the work is to be done;
2. Mailing a notice to these contractors; or
3. Sending a notice to these contractors by facsimile or other electronic
means.
iii. For purposes of this policy, "equitably distribute" means that the City may
not favor certain contractors on the appropriate small works roster over
other contractors on the appropriate small works roster who perform
similar services.At the time bids are solicited,the City representative shall
not inform a contractor of the terms or amount of any other contractor's bid
for the same project.
iv. A written record shall be made by the project manager of each contractor's
bid on the project and of any conditions imposed on the bid. Immediately
after an award is made,the bid quotations obtained shall be recorded, open
to public inspection, and available by telephone inquiry.
v. At least once every year,the City Clerk or his/her designee shall provide a
list of the contracts awarded under this process to the City Council and to
the general public. The list shall contain the name of the contractor or
vendor awarded the contract,the amount of the contract, a brief description
of the type of work performed or items purchased under the contract,and
the date it was awarded.The list shall also state the location where the bid
quotations for these contracts are available for public inspection.
g. Determining Lowest Responsible Bidder.Where bidders have not been
prequalified, the City shall award the contract for the public works project to the
lowest responsible and qualified bidder; provided,all bids may be rejected and the
City may call for new bids.
h. Cancellation of Invitations for Quotations or Bids.An invitation for quotations or
bids may be canceled at the discretion of the department director.The reasons
shall be made part of the contract file. Each invitation for quotations or bids issued
by the City shall state that the invitation may be canceled. Notice of cancellation
shall be sent to all parties that have been provided with a copy of the invitation.
The notice shall identify the invitation for quotations or bids and state briefly the
25
reasons for cancellation.
i. Limited Public Works Process.The City may use the limited public works process
to award public works projects as provided under RCW 39.04.155, as amended.
j. Formal Competitive Bid. For public works not using a small works roster,the
formal competitive bid process, as defined by applicable'RCW's, shall be used.
k. Bid Deposit, Performance Bond and Non-collusion Affidavit for Public Works
Improvement Projects.Whenever competitive quotes or bids are required,a
bidder may be required make a deposit in the form of a certified check or bid bond
in an amount equal to not less than five percent of the total bid,which percentage
shall be specified in the call for bids.As part of any bid submitted,the bidder shall
be required to warrant that the bid is a genuine bid, and that he/she has not
entered into collusion with any other bidder or any other person.All public works
contractors shall furnish a performance bond in an amount equal to the total
amount of the contract and an executed and notarized non-collusion affidavit on a
form approved by the City Attorney. In lieu of a performance bond on contracts of
$35,000 or less, per RCW 39.08.010,a contractor may choose to have 50 percent of
the contract retained for a period of 30 days after the date of final acceptance.
G. Contracts and Agreements for Services.
a. Purchasing Limitations. Purchase limitations apply to the cost related to the
acquisition of services to fill a specific business need. Cost is inclusive of any
required sales tax and related expenses.
i. All initial agreements with governmental agencies require council approval;
annual renewal or extension of existing contracts and agreements require
the Mayor's approval.
b. On-Call Service Contracts. On-call service contracts will be procured with the
processes identified in subsection C below. Individual task orders of on-call service
contracts shall not exceed$50,000.
c. Process.
i. Architectural, Landscape Architectural, and Engineering Services Contracts.
Procedures set forth in Chapter 39.80 RCW shall be followed for contracts
for architectural and engineering services, as defined in RCW 39.80.020.
ii. Roster. The City of Arlington shall contract with the Municipal Research and
Service Center(MRSC) to establish, maintain and manage a current roster
of eligible Architectural, Landscape Architectural and Engineering
consultants from which the City may solicit bids for contract for providing
these services.
iii. Contracts Less Than$100,000. Contracts that have an estimated cost of less
than $100,000 can be procured using an informal request for qualification
process. This process requires the City representative to develop a written
scope of the project and any criteria used to select the service provider and
then select a qualified contractor from the City's architectural,landscape
architectural, and engineering service roster. If the City representative does
not choose to use the appropriate roster,then a formal request for
qualification process must be followed.
26
iv. Contracts Greater Than $100,000. Contracts that have an estimated cost in
excess of$100,000 must use a formal request for qualification (RFQ)
process.The development of an RFQ along with the proper public
notification shall be made in accordance with procedures adopted by the
finance department in the best interest of the City; provided,however,that
the Mayor may in the following circumstances waive the RFQ process for
contracts greater than$100,000, and allow the acquisition of services from
the City's architectural,landscape architectural and engineering services
roster:
1. It is deemed in the best interest of the City to expedite the
acquisition of services; or
2. It can be demonstrated that there are sufficient consultants on the
roster that possess the required qualifications to perform the scope
of work; or
3. A consultant on the City's roster has previously provided satisfactory
service to the City,has previously provided services related to the
specific project, and has the qualifications to perform the scope of
work.
v. Contract Required.A contract is required to purchase architectural,
landscape architectural,and engineering services.
d. Professional and Nonprofessional Services (Services which are not Architectural,
Landscape Architectural, and Engineering Services).
i. Contracts Less Than$100,000. Contracts that have an estimated cost of less
than$100,000 can be procured using an informal request for proposal
process. This process requires the City representative to develop a written
scope of the project and any criteria used to select the service provider. The
City representative will use this information when selecting the contractor
to provide the services. Multiple proposals are optional and at the
discretion of the department director. If multiple proposals are used to
make a selection, a standard process must be used for obtaining all
proposals.
ii. Contracts in Excess of$100,000. Contracts that have an estimated cost in
excess of$100,000 shall be procured using a formal request for proposal
(RFP) process. The development of an RFP along with the proper public
notification shall be made in accordance with procedures adopted by the
finance department in the best interest of the City.
iii. Contract Required.A contract is required to purchase professional and
nonprofessional services.
H. Sole Source Procurement.A contract for the provision of services may be awarded
without complying with the bidding requirements of this policy when the department
director determines in writing, subject to Council approval through resolution, after
conducting a good faith review of available resources,that there is only one source of the
required services. The department director or his/her designee shall conduct
negotiations, as appropriate, as to price,terms,and delivery time. Sole source purchases
27
shall be made available for public inspection.
1. Interlocal joint purchasing agreements.
Cooperative Purchasing.The City may enter into interlocal governmental cooperative
purchasing arrangements with other public agencies similarly authorized under RCW
39.34.030 when the best interests of the City of Arlington would be served thereby.Any
cooperative purchasing agreement shall set forth fully the purposes,powers,rights,
objectives and responsibilities of the contracting parties and shall be governed by the
requirements of State law in regard to competitive bidding,when applicable.The
competitive bid process of the original jurisdiction shall substitute for Arlington's.All
interlocal joint purchasing agreements shall be presented to the City Council for prior
approval. Originating agency's bid process shall be vetted to assure compliance with all
applicable RCW's.
J. Real property acquisition.
a. Real Property- Mayor's Acquisition Authority.The Mayor or designee is
authorized,in the following instances,to accept by gift or acquire dedications,
easements,rights- of-way,fee estates or other interests in real property for use by
or on behalf of the City or any department of the City:
i. Minor Acquisitions.Any such acquisition where the estimated value is less
than$10,000.
ii. All other real property acquisitions will be submitted to the City Council for
approval.
b. Real Property Mayor's Leasing Authority
i. The Mayor or designee is authorized to execute leases of real property on
behalf of the City where the term of the lease does not exceed one year and
the consideration does not exceed$10,000 per year as budgeted by the City
Council.
ii. A lease that exceeds the limits stated in subsection (b)(i) of this section,
shall be submitted to the council for approval.
K. Telecommunications and Data Processing Purchases. RCW 39.04.270 allows local
governments to use a competitive negotiation process when purchasing
telecommunications and electronic data processing computer equipment or software
instead of traditional competitive bidding. This alternative process requires:
a. A request for proposals must be published in a newspaper of general circulation at
least 13 days before the submission deadline.
b. The RFP must identify evaluation factors,including price.
c. Reasonable procedures for technical evaluation of the proposal must be used for
awarding the contract.
d. The contract must be awarded to the qualified bidder whose proposal is most
advantageous to the City.
e. The agency may reject all proposals for good cause and request new proposals.
28
CITY OF ARLINGTON CONTRACT AUTHORIZATION SUMMARY
Assumes all expenditures are included in adopted operating and capital improvement
budgets. If the expenditure is not adopted in operating and capital improvement budgets,
Council authorization of the budget amendment is required rn for to contract. Additionally, if
contracts/purchases are included in the adopted budget and have been approved through an
applicable committee or commission,whose authority has been granted by council through
Arlington Municipal Code,those contracts/purchases do not need separate approval by
council.
De artment Directors shall not assign signature authority to other staff.
CONTRACT TYPE DOLLAR PROCESS SIGNATURE AUTHORITY
LIMIT
Public Works
Public Works-single Under Requires a Department Director
trade or craft 1.$40,000 minimum of 2-4
written quotes.
Public Works-single $40,001 up Small works Up to $50,000 - City Administrator
trade of craft to $300,000 roster or Between $50,001 -$100,000 -Mayor
competitive bids. Over$100,001 - Council
Public Works-multi Under Requires a Department Director
trade or craft I$65,000 minimum of 2-4
written quotes.
Public Works-multi $65,001 up Small works Between$50,001 - $100,000 - Mayor
trade or craft to $300,000 roster orOver$100,001 - Council
competitive bids.
Public Works !'Over Competitive bids Council
$300,000
Materials, supplies and equipment
Materials,supplies, lBetween Requires a Department Director
equipment* $3,000 and minimum of 3
I$7,500 written or verbal
quotes
Materials,supplies, $7,501- Vendor list Department Director
equipment* $15,000
Materials,supplies, 'Over$15,000 Formal Bid Between$15,001 and$50,000 - City
equipment* Administrator
Between$50,001 - $100,000-Mayor
Over$100,001 - Council
Materials,supplies, No limit Government Bid Up to $15,000- Department Director
equipment* Between$15,001 and$50,000 - City
Administrator
Between$50,001 -$100,000 - Mayor
Over$100,001 - Council
29
CONTRACT TYPE DOLLAR PROCESS SIGNATURE AUTHORITY
l LIMIT
Maintenance &non- rofessional services
Maintenance&non- Under Anything over Up to $25,000 Department Director
professional services $50,000 $3,000 requires Between$25,001 - $50,000 City
minimum of 3 Administrator
quotes
Maintenance&non- Over Chosen from 'Between $50,001 -$100,000 - Mayor
professional services $50,000 consultant roster Over$100,001 - Council
Professional Service Contracts
On-call service Contract not Chosen from City Administrator
contracts(legal, to exceed consultant roster
human resources, $50,000
design,
development review
Non-A&E Under Chosen from Up to $25,000 Department Director
Consulting/profession$100,000 consultant roster Between$25,001 - $50,000 City
al services ;,Administrator
(comprehensive Between$50,001 - $100,000 - Mayor
planning, feasibility
studies, preliminary
design)
Non-A&E 100,001 Over$100,001 - Council
Consulting/profession More than
al services $100,001 formal
(comprehensive RFP process
planning, feasibility
studies, preliminary
design)
&E Services Under Less than Up to $25,000 Department Director
$100,000 $100,000 Chosen Between$25,001 - $50,000 City
from consultant Administrator
roster Between$50,001 - $100,000 - Mayor
A&E Services Over More than Over$100,001 - Council
$100,001 $100,000 formal
RFQ process
*All capital purchases over$7,500 require approval of Capital Outlay Request form by
Finance Director and Administration Department.
30
Cost Allocation
A. The City of Arlington desires to comply with all laws and recommendations in
calculating and receiving full cost recovery for services rendered to other funds.
B. Cost allocation is a method to identify and distribute indirect costs. Direct costs are
costs assignable to a specific objective,whereas indirect costs are costs incurred for
multiple cost objectives or not assignable to a specific cost objective without effort
disproportionate to the benefit received.
C. The Washington State Auditor's Office prescribes the accounting and reporting of local
governments in the State of Washington under the Revised Code of Washington (RCW)
Washington State law provides,at RCW 43.09.210. It states in part:
Separate accounts shall be kept for each department,public improvement,
undertaking,institution, and public service industry under the jurisdiction of every
taxing body.All service rendered by, or property transferred from, one
department, public improvement,undertaking, institution,or public service
industry receiving the same,and no department, public improvement,undertaking
institution, or public service industry shall benefit in any financial manner
whatever by an appropriation of fund made for the support of another.
The RCW does not specifically address how"full value"is to be determined.
D. RCW 35A.33.122/35A.34.205/35.33.123 states:
Administration, oversight, or supervision of utility— Reimbursement from utility
budget authorized.Whenever any code city apportions a percentage of the city
manager's, administrator's, or supervisor's time, or the time of other management
or general government staff, for administration, oversight,or supervision of a
utility operated by the city, or to provide services to the utility,the utility budget
may identify such services and budget for reimbursement of the city's current
expense fund for the value of such services.
E. The Federal Office of Management and Budget (OMB) Circular A-87
OMB Circular A-87 establishes cost principals for State, local, and Indian Tribal
Governments for determining costs for Federal Awards. Item 5 of the Circular states
that, "The principals are for determining allowable costs only." In defining allowable
costs,the Circular provides a definition of allocable costs at Attachment A, paragraph
C.3.a, "A cost is allocable to a particular cost objective if the goods or services involved
at chargeable or assignable to such cost objective in accordance with relative benefits
received."The Circular further outlines costs that are allowable for charging the
Federal government and distinguishes those that are specifically excluded from
recovery.
F. Governmental Accounting Standards Board (GASB)
GASB is the independent organization that establishes and improves standards of
accounting and financial reporting for U.S. state and local governments.While GASB is
31
not a governmental agency and does not have enforcement authority, compliance with
GASB is tested by the Washington State Auditor's Office's annual audit of the City.
Allocated Costs
A. The City's General Fund provides a variety of central services including but not limited
to; legal support,human resources,administrative functions,personnel services,
billing(utility and airport),processing accounts payable,budget and cash
management,payroll and information technology services. The City allocates these
indirect costs as follows:
a. Central services will be distributed based on a percentage of total fund
expenditures;
b. Expenditures will exclude inter-fund transfers to capital improvement and/or
reserve funds;
c. The previous year's budgeted expenditures or previous year's actual
expenditures will be used to determine each fund's percent of the City's budget
and to determine the amount to be budgeted for cost allocation;
d. At year end,the budgeted allocation will be reconciled to actual costs and
percent allocation;
e. The Transportation Benefit District(TBD) Fund is excluded as the TBD is its
own entity;
f. The Cemetery Endowment Fund is excluded because these funds are held in
trust and expenditures from the endowment fund will be captured in the
Cemetery Capital Fund.
B. It is important to maintain back-up documentation that indicates how each cost
allocation is determined and calculated.
C. The Airport is also authorized,through a Memo of Understanding with the Federal
Aviation Administration,to provide monetary support for Police and Fire/EMS
services to the Airport. This is accomplished through a survey of Police hours spent
patrolling on and around the Airport property. A new survey is to be completed
within a two year period following the last survey.
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Debt Management Policy
A. The objectives of the City's Debt Management Policy will be:
a. To reduce the use of debt so that debt service payments will be a predictable
and manageable part of the operating budget.
b. To raise capital at the lowest cost, consistent with the need to borrow. This will
be accomplished by:
i. Keeping a high credit rating (while making attempts to strengthen credit
rating)
ii. Maintaining a good reputation in the credit markets by adjusting the
capital program for regular entry to the bond market and managing the
annual budget responsibly.
B. Professional service providers (underwriters, financial advisors,bond insurer's, etc.)
may be selected through negotiation, RFQ process or City's procurement policies.
C. Debt issues will be sold on competitive basis (except when conditions make a
negotiated sale preferable) and awarded to the bidder who produces the lowest
interest cost. Revenue bonds can be issued through a negotiated sale when the issue is
unusually large, the project is speculative or complex,the issue is a refunding,or the
market is unstable.
D. The term of long-term debt issued will not exceed the life of the projects financed.
Current operations will not be financed with long-term debt.
E. Short-term borrowing will not be used for operating purposes.
F. The City will comply with its obligation to inform the Municipal Securities Rulemaking
Board through the EMMA website (Electronic Municipal Market Access) any and all
continuing disclosure documents and annual financial statements. This site is used by
the ratings agencies and investors.The City's annual audited financial report will be
sent to EMMA as soon as the State Auditor's Office issues the report.
G. The City shall strive to maintain favorable current credit ratings.
H. The City will comply with all statutory debt limitations imposed by the Revised Code
of Washington (RCW).The City of Arlington debt will not exceed an aggregated total of
7.5% of the assessed valuation of the taxable property within the City. Compliance
with state law and this policy shall be documented each year.
The following individual percentages (as defined in state law) shall not be exceeded in
any specific debt category:
General Debt 2.5% of assessed valuation
Utility Debt 2.5% of assessed valuation
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Open Space and Park facilities 2.5% of assessed valuation
I. No debt shall be issued for which the City is not confident that a sufficient,specifically
identified revenue source is available for repayment. The Finance Director shall
prepare an analytical review for this purpose prior to the issuance of any debt.
J. It shall be the policy of the City to limit bonded indebtedness to levels that permit
sufficient borrowing to support a reasonable rate of capital programming,permit a
level and pace of debt amortization within the City's ability to pay, and support the
City's credit rating objectives. It shall further be the policy of the City not to exceed
75%of City's LTGO debt limit, unless approved by the City Council.
K. Credit enhancements shall be considered with a cost/benefit analysis for each long-
term bond issue.
L. Reserve accounts shall be maintained as required by bond ordinances and where
deemed advisable by the City Council.The city shall structure such debt service
reserves so that they do not violate IRS arbitrage regulations.
M. The City will maintain debt service coverage ratios as required for any bond issues.
N. Interfund borrowing may be used where such borrowing is effective. Interfund
borrowing will be approved and authorized by the City Council.
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Investment Policy
A. Policy. It is the policy of the City of Arlington to invest its public funds in a manner
which will provide the highest investment return consistent with a high degree of
security while meeting the daily cash flow demands of the City and conforming to all
state statutes and local ordinances governing the investment of public funds. Cash
may, at the discretion of the Finance Director be invested separately by fund or be co-
mingled into a common investment portfolio and earnings from such portfolio
distributed at least quarterly. The Finance Director is authorized to manage the
investments described herein.
B. Scope. This investment policy applies to all financial assets of the City except: for
assets held in escrow and retirement funds managed by others such as state. City
financial assets are accounted for in the City's Annual Financial Report and include:
a. Funds
i. General Fund
ii. Special Revenue Funds
iii. Debt Service Funds
iv. Capital Project Funds
v. Enterprise Funds
vi. Internal Service Funds
vii. Trust Funds and Agency Funds
C. Prudence.The 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.
D. Objective. Funds of the City will be invested in accordance with the Revised Code of
Washington (RCW) 35A.40.050,the BARS manual and these policies. The primary
objectives,in order of priority, of the City's investment activities shall be as follows:
a. Legality: The City's investments will be in compliance with all statutes
governing the investment of public funds and the provisions of all applicable
bond ordinances.
b. Safety: Investments of the City shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio.To attain this
objective,diversification is required in order that potential losses on individual
securities do not exceed the income generated from the remainder of the
portfolio.
c. Liquidity: The City's investment portfolio will remain sufficiently liquid to
enable the City to meet all operating requirements,which might be reasonably
anticipated. The Finance Director shall maintain adequate liquidity by
maintaining a minimum balance in the LGIP.
d. Return on Investment: The City's investment portfolio shall be designed with
the objective of attaining a market rate of return throughout budgetary and
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economic cycles,taking into account the City's investment risk constraints and
the cash flow characteristics of the portfolio.
e. Local Institutions: Local Institutions shall be given preference when they are,
in the judgment of the Finance Director, competitive with other institutions.
E. The Finance Director's investment actions shall be governed by this policy.
F. The Finance Director shall be responsible for all transactions undertaken and shall
establish a system of cuiitruls to regulate all investment activities, and report
promptly to the Council any adverse development with any investment.
G. Ethics and Conflicts of Interest.
a. The Finance Officer 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. The Finance Officer
shall disclose to the Mayor and the Council any material financial interests in
financial institutions that conduct business with the City,and she/he shall
further disclose any personal financial/investment positions that could be
related to the performance of the City's portfolio.
b. The City's Finance Officer shall subordinate their personal investment
transactions to those of the City, particularly with regard to the time of
purchases and sales.
H. Authorized Financial Dealers and Institutions.
a. The Finance Director will maintain a list of financial institutions authorized to
provide investment services to the City of Arlington. In addition, a list will 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 US Securities
and Exchange Commission Rule 150-1 (uniform net capital rule). No public
deposit shall be made except in a qualified public depository as established by
State laws.
b. At the request of the City, financial institutions,brokers and dealers performing
investment services for the City shall provide their most recent financial
statements or Consolidated Report of Condition ("call report") for review.
1. Authorized and Suitable Investments. The City may invest in any of the securities
identified as eligible investments as defined by RCW 35A.40.050. In general,these
consist of:
a. Investment deposits (certificates of deposits) with qualified public depositories
as defined in Chapter 39.58 RCW.
b. Certificates,notes or bonds of the United States, or other obligations of the
United States or its agencies, or of any corporation wholly owned by the
government of the United States whose securities carry full faith and credit
guarantees.
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c. Obligations of government-sponsored corporations which are eligible as
collateral for advances to member banks as determined by the Board of
Governors of the Federal Reserve System.These include but are not limited to,
Federal Home Loan Bank notes and bonds, Federal Farm Credit Bank
consolidated notes and bonds, and Federal National Mortgage Association
notes.
d. Prime bankers' acceptances purchased on the secondary market. Repurchase
agreements for securities listed above.
e. The Washington Local Government Investment Pool (LGIP).
J. Collateralization.
a. Collateralization will be required on all repurchase agreements so as to
anticipate market changes and provide a level of security for all funds,the
collateral ization level will be 102% of market value of principal and accrued
interest.
b. The City chooses to limit collateral to the obligations of the United States
Government and its agencies.
c. Collateral will always be held by an independent third party with whom the
entity has a current custodial agreement(except certificates of deposits).A
clearly marked evidence of ownership (safekeeping receipt) must be supplied
to the entity and retained.
d. Certificates of deposit are delivered to and held by the Finance Director until
they mature.
K. Safekeeping and Custody.
a. All investment securities purchased by the City, including collateral on
repurchase agreements, shall be held by the City or in safekeeping by the City's
custodian bank or a third party bank trust department, acting as agent for the
City under the terms of a custody or trustee agreement executed by the bank
and by the City. The primary agent shall issue a safekeeping receipt to the City
listing the specific instrument,rate, maturity, and other pertinent information.
b. All securities transactions,including collateral for repurchase agreements
entered into by the City shall be conducted on a delivery-versus-payment
(DVP) basis. Securities will be held by a third party custodian designated by the
City Finance Director and evidenced by safekeeping receipts.
L. Diversification. The City will diversify its investments by security type and issuer.
With the exception of US Treasury and Agencies of the United States government, and
the Washington State Local Government Investment Pool, no more than 50% of the
City's total investment portfolio will be invested in a single security and no more than
25%will be invested with a single issuer.
M. Maximum Maturities.
a. To the extent possible,the City will attempt to match its investments with
anticipated cash flow requirements. Unless matched to a specific cash flow,the
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City will not directly invest in securities maturing more than five (5) years from
the date of purchase. The average maturity will be consistent with the liquidity
objective. However,the City may collateralize its repurchase agreements using
longer-dated investments not to exceed 10 years.
b. The City's reserve funds may be invested in securities not to exceed (10) years
if the maturity of such investments is made to coincide as nearly as possible
with the expected use of funds.
c. The purpose of permitting a portion of the investments to have longer
maturities is to recognize that funds may yield higher yields when invested for
longer periods of time.
N. Internal Controls.The Finance Director shall establish a system of internal controls,
which shall be reviewed annually by an external auditor. This review will provide
internal control by assuring compliance with policies and procedures.
0. Performance Standards.The City's investment portfolio will be designed to obtain a
market average rate of return during budgetary and economic cycles,taking into
account the City's investment risk constraints and cash flow needs.
P. Investment Strategy. The City's investment strategy is active.As a result, securities are
purchased and sold as it best meets the needs of the City as determined by the Finance
Director. The Finance Director will be authorized to trade before maturity if it is in the
best interest of the City to do so.
Q. Reporting. The Finance Director will determine what investment information will be
included in the monthly financial report.
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GLOSSARY
Accrued Interest:The interest accumulated on a bond since its dated date or the most recent
date to which interest has been paid by the City. The buyer of the bond pays the market price
and accrued interest,which is payable to the seller.
Agencies: Federal agency securities.
Asked:The price at which securities are offered.
Bankers'Acceptance (BA):A draft or bill or exchange accepted by a bank or trust company.
The accepting institution guarantees payment of the bill,as well as the issuer.
Bond:A long-term debt security(IOU) issued by a government or corporation. Generally
pays a stated fixed rate of interest, and returns the face value at maturity.
Book Value: The amount at which an asset is carried on the books of the owner.The book
value of an asset does not necessarily have a significant relationship to market value.
Broker:A middleman who brings buyers and sellers together for a commission paid by the
initiator of the transaction or by both sides; they do not position. In the money market,
brokers are active in markets in which banks buy and sell money and in interdealer markets.
Call Option: The right to prepay or redeem a security at a predetermined price on or after a
specified future date that is earlier than its scheduled maturity date.
Certificate of Deposit(CD):A time deposit with a specific maturity earning a specified rate
of return evidenced by a certificate. Certificates of Deposit bear rates of interest in line with
money market rates current at the time of issuance.
Collateral: Securities, evidence of deposit or other property which a borrower pledges to
secure repayment of a loan.Also refers to securities pledged by a bank to secure deposits of
public monies.
Confirmation:A document used to state and supplement in writing the terms of a
transaction which have previously been agreed to verbally.
Coupon: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder
on the bond's face value. (b)A certificate attached to a bond evidencing interest due on a
payment date (not used since 1982).
CUSIP Number (COMMITTEE OR UNIFORM SECURITIES IDENTIFICATION PROCEDURES):
An identifying number assigned to a publicly traded security.A nine-digit code is
permanently assigned to each issue and is generally printed on face of the security if it is in
physical form.
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Dealer:A dealer, as opposed to a broker,acts as a principal in all transactions,buying and
selling for his or her own account.
Delivery versus Payment: There are two methods of delivery of securities: delivery versus
payment and delivery versus receipt(also called free). Delivery versus payment is delivery of
securities simultaneously with an exchange of money for the securities. Delivery versus
receipt is delivery of securities simultaneously with an exchange of a signed receipt for the
securities.
Discount:There is "original issue discount" and "market discount." Original issue discount is
the difference between the costlprice of a security when first offered for sale to the general
public and its face value at maturity when quoted at lower than face value. Original issue
discount is treated as interest. Market discount is the difference between principal amount of
an uulslanding security (reduced by any original issue discount) and the value of that
security in the then-current market(if lower than its principal amount). If a security is
bought at a market discount and later sold at a gain,the gain is taxable income.
Diversification: Dividing investment funds among a variety of securities offering
independent returns.
Farm Credit Discount Notes and Bonds: Secured joint obligations of Farm Credit Banks
that are issued with a minimum face value of$50,000 with maturities ranging from 5 to 360
days.
Federal Credit Agencies:Agencies of the Federal Government set up to supply credit to
various classes of institutions and individuals, e.g.,S&L's,small business firms, students,
farmers,farm cooperatives,and exporters.
Federal Funds Rate: The rate of interest at which Federal funds are traded between banks.
This rate is currently pegged by the Federal Reserve through open market operations.
Federal Home Loan Banks (FHLB):The institutions that regulate and lend to savings and
loan associations.The Federal Home Loan Banks play a role analogous to that played by the
Federal Reserve Banks vis-a-vis member commercial banks.
Federal National Mortgage Association (FNMA): FNMA,like GNMA was
chartered under the Federal National Mortgage Association Act in 1938. FNMA is the
corporation's purchases include a variety of adjustable mortgages and second loans in
addition to fixed-rate mortgages FNMA's securities are also highly liquid and are widely
accepted. FNMA assumes and guarantees that all security holders will receive timely payment
of principal and interest.
Liquidity:A liquid asset is one that can be converted easily and rapidly into cash without a
substantial loss of value.
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Local Government Investment Pool (LGIP):The aggregate of all funds from political
subdivisions that are placed in the custody of the State Treasurer for investment and
reinvestment.
Market Value: The price at which a security is trading and could presumably be purchased
or sold.
Master Repurchase Agreement:A written contract covering all future transactions
between the parties to repurchase -- reverse purchase agreements that establishes each
party's rights in the transactions.A master agreement will often specify, among other things
the right of the buyer-lender to liquidate the underlying securities in the event of default by
the seller-borrower.
Maturity: The date upon which the principal or stated value of an investment becomes due
and payable.
Portfolio:A collection of securities held by an investor.
Primary Dealer:A group of government securities dealers that submit daily reports of
market activity and positions and monthly financial statements to the Federal Reserve Bank
of New York and are subject to its informal oversight. Primary dealers include Securities and
Exchange Commission (SEC) registered securities broker-dealers,banks,and a few
unregulated firms.
Principal: The stated face amount of an instrument, exclusive of accrued interest.
Prudent Person Rule:An investment standard. In some states the law requires that a
fiduciary such as a trustee may invest money only in a list of securities selected by the
state-the-so-called legal list. In other states the trustee may invest in a security if it is one
which would be bought by a product person of discretion and intelligence who is seeking a
reasonable income and preservation of capital.
Qualified Public Depositories:A financial institution which does not claim exemption from
the payment of any sales or compensating use or ad valorem taxes under the laws of this
state,which has segregated for the benefit of the Public Deposit Protection Commission
eligible collateral having a value of not less than its maximum liability and which has been
approved by the Public Deposit Protection Commission to hold public deposits.
Repurchase Agreement(RP or REPO):A holder of securities sells these securities to an
investor with an agreement to repurchase them at a fixed price on a fixed date.The security
"buyer" in effect lends the "seller" money for the period of the agreement, and the terms of
the agreement are structured to compensate him for this. Dealers use RP extensively to
finance their positions. Exception: When the Fed is said to be doing RP, it is lending money,
that is,increasing bank reserves.
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Safekeeping:A service to customers rendered by banks for a fee whereby securities and
valuables of all types and descriptions are held in the bank's vaults for protection.
Securities and Exchange Commission (SEC):Agency created by congress to protect
investors in securities transactions by administering securities legislation.
SEC Rule 15c3-1: SEC uniform net capital rule requiring brokers and dealers to maintain
certain amounts of net capital.
Treasury Bills:A non-interest bearing discount security issued by the US Treasury to finance
the national debt. Most bills are issued to mature in three months,six months or one year.
Treasury Bonds: Long-term US Treasury securities having initial maturities of more than
ten years.
Treasury Notes: Intermediate term coupon bearing U.S. Treasury securities having initial
maturities of from one to ten years.
Uniform Net Capital Rule: Securities and Exchange Commission requirement that member
firms as well as nonmember broker-dealers in securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm,including margin loans and commitments to
purchase securities, one reason new public issues are spread among members of
underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
Yield:The rate of annual income return on an investment expressed as a percentage. 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 in purchase price,with the adjustment spread over the period from
the date of purchase to the date of maturity of the bond.
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