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WHEREAS, the National Advisory Council on State and Local Budgeting Practices
recommends budget practices, including the development of a series of financial policies; ani
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 ci
to adopt financial policies; I
NOW, THEREFORE, BE IT HER-EBY RESOLVED BY THE CITY COUNCIL OF
THE CITY OF ARLINGTON:
Section 1. The "Financial Management Policies" dated May 5, 2014 are hereby adopted
as the financial policies and practices of the City. The City Council further encourages the May
to utilize such policies in preparation of the budget.
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APPROVED by the Mayor and City Council of the City of Arlington this 5'h day of
May, 2014.
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Barbara Tolbert
I LVA a ffs,
AATT "S T
Kristh aiffleld
City Clerk
Expenditure
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Capital Aomotm--.—...------.—...---..---....—..0
Purchasing ................. .......... ~'—...,.,................. 'l5
The Comprehensive Financial Management Policy assembles all of the City's financial polici
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 a
guidelines for both the financial planning and internal financial management of the City. I
resources must oe wiseiy u
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.
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In order to achieve its purpose, the Financial Management Policies have the following objective-3
for the City's fiscal performance.
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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 this
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.
Adequate reserve levels are a necessary component of the City's overall financial management
strategy and key factor in external agencies' measurement of the City's financial strength.
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 Licenses & Permits. Thes�
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 interfund 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.
1) This "reserve" shall be in addition to the maintenance of one -month operating cash
within the General Fund itself.
b. It will be the policy of the City to maintain a Capital Facilities/Building Fund to provide
funding for future facilities including debt repayment, less proprietary fund projects. The use
of any funds within the Capital Facilities/Building Fund will be as approved by the City
Council.
c. Contributions to the Mandatory General Fund Reserve and Capital Facilities/Building Funds
will be made from available funds as identified in the annual budget, or amended budget at
the end of the year. The Finance Director shall make a recommendation to the Council with
regard to transfers to reserve funds. The Council, by motion (and amending the budget by
ordinance as necessary) shall authorize the transfers, as the Council shall determine to be
appropriate at that time.
d. All expenditures drawn from reserve accounts shall require prior Council approval unless
previously specifically authorized by the City Council for expenditure in the annual budget.
Mlevenue Policies
z. 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 City will follow a vigorous policy of collecting revenues.
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
annual budget process.
d. Short-term (anticipated less than one year) economic downturns and temporary gaps in cash
flow: Expenditure reductions or restrictions may be imposed. Council may approve an
interfund loan to address temporary downturns in City revenues.
e. 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.
f. All potential grants shall be carefully examined for matching requirements. Some grants
may not be accepted if the local matching funds cannot be justified. Grantsmayalsobe
rejected if programs must be continued with local resources after grant funds are exhausted.
g. 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.
h. The City will review contracts and leases, which result in revenues to the city on a timely
basis in order to provide for careful evaluation by the City Council.
Expenditure Policies
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 curre
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. I
b. Department heads are responsible for managing their budgets within the total appropriation
for their department.
c. The City will maintain expenditure categories according to state statute and administrative
regulation.
d. 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.
e. 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 maximiri
productivity. The City will hire additional staff only after the need of such positions has
been demonstrated q.r.&4.ocu" - I
f. 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 (see page 3).
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117 Yie i Maintain a s 411HISIrIng, clintrIli, alia rep I�i ' 1 "T operations and funds in order to provide effective means of ensuring that overall Ci
goals and objectives are met.
Accounting Records The City will maintain its accounting records in accordance
with state and federal regulations. Budgeting, accounting and reporting will conform to
Budgeting, Accounting and Reporting System (BARS) for Governments as prescribed by ths
Washington State Auditor.
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.
Ca,Ji lklqqAgS�� 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. All monies received from City departments by
the Finance Department prior to the end of each business day will be deposited the same day.
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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
resolution. I
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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
wonies fro--ci Ais Fund.
Budget and Operating Policies
A. All decisions will be within the context of long-range plans (Capital Facilities Plan
Comprehensive Plan/Capital Improvement Plan). Staff shall provide a review of the
implications of budgetary proposals on long-range plans.
B. The annual 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.
C. 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.
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. Amendment of
the budget involves an addition to or reduction of existing appropriations. Initially, a motion
by the City Council is required. Amendments made to the budget throughout the year by City
Council motion will be adopted through the annual Budget Amendment Ordinance.
D. Fixed asset inventories. Accurate inventories of all physical assets, their condition, life
spans, and cost will be maintained to ensure proper stewardship of public property.
A. llurpL�st�
This policy is established to provide guidelines to ensure adequate stewardship over City resources
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capital assets information in the Capital Assets System I
B. Reference
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System (BARS) Volume 1, Part 3, Chapter 7, 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
1. "Assets" - All land, buildings, improvements, works of art and historic collections and equipment
purchased, donated, constructed, or acquired by the City.
2. "Capital Assets" — Land of any value; artwork and historic collections of any value;
improvements to buildings, their furnishings, fixtures, and furniture; equipment, machinery,
vehicles, and tools, with a value of $5,000 or more and having a useful life exceeding one year
from the date of acquisition.
3. "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.
"Inventory" — The process of physically confirming the existence and location of capital assets.
5. "Small and Attractive Assets" — small and attractive assets are those assets that are particularly at
risk or vulnerable to loss and cost less than $5, 000. Departments have discretion in defining
small and attractive assets in many instances; however, departments must include, at �1
the following assets with unit costs of $500 or more as small and attractive:
• Communications Equipment; both Audio and Video
• Optical Devices, Binoculars, Telescopes, Infrared Viewers, and Range finders
• Cameras and Photographic Projection Equipment
• Microcomputer Systems, Laptop and Notebook Computers
• Other data processing Accessory Equipment and Components (Scanners, Data Displays, etc.)
• Office Equipment
• Stereos, Radios, Television Sets, Tape Recorders, DVD players, VCRs, and Video Cameras
D. �
This policy applies to all departments of the City of Arlington. The term "Department" is defined tw
include every city office, officer, and every department, division, board and commission.
E. DepLirmwni respqnsiL)itifie.
Departments are responsible for protecting and controlling the use of City assets assigned to their
tepartment. The department head must designate one or more Department Inventory Officers to Jb
-tuzuttai-ci-tiz 9.-,#�-safeg1LM.4_ing znitzl assets 2nd. small ?.nd attracti _tb,g,,denvrtment's c.
assets. Any time an asset is added, deleted, or transferred, the Department Inventory Officer will
documentation.
F.
All assets with a cost of $5,000 or more will be capitalized. Although Small and Attractive Assets (assets
costing less than $5,000) do not meet the city's capitalization threshold, due to ease of conversion to
private use, they are considered assets for purposes of marking and identification, records keeping, and
tracking.
G. I X R itgwinp�_ � ,
Routine repair and maintenance costs will be expensed as they are incurred and will not be capitalized.
Major repairs will be capitalized if they result in betterments/improvements. To the extent that a project
replaces the "old" part of a capital asset, outlays will not be capitalized; and to the extent that the project
is betterment/improvement, outlays will be capitalized.
H. Additions
The city may acquire property via purchase, construction, donation, or lease. Capital assets shall be
capitalized and purchased from a capital outlays code (60's) as defined in the BARS Manual line of
either:
61 — Land and Land Improvements;
62 — Buildings and Structures;
63 — Other Improvements;
64 — Machinery & Equipment;
65 — Construction of Capital Assets.
When a capital asset is purchased, the department will submit a completed Asset Control form (See
attachment A.) to the Finance Department. The Finance Department will identify those assets that meet
the capitalization requirements. Finance will assign a unique inventory control number to the asset and
assign an inventory ID tag number, if applicable. When the Asset Control Sheet and ID tag are received
by the department, the department designee will immediately affix the ID tag to the asset, complete and
sign the Asset Control Sheet, and return the completed form to Finance.
Whenever feasible, each piece of property will be affixed with an inventory ID tag identifying the capital
asset as the property of the City of Arlington, and including city identification number. Departments may
determine where to place the tag on the capital asset. However, the identification and control number
should be located on the principal body of the asset, rather than a removable part. Such tag will be
removed or obliterated only when the item is sold, scrapped, or otherwise disposed of. Should the
inventory ID tag be removed or defaced, the item shall be assigned a new inventory ID tag, and the new
number recorded in the capital assets database.
Occasionally, it will be impractical or impossible to mark some inventorial capital assets according to
these standards. For example, do not tag if the capital asset:
• Is stationary in nature and not susceptible to theft (such as land, buildings, improvements other
than buildings, and leasehold improvements);
• Has a unique permanent serial number that can be used for identification, security and inventory
control (such as vehicles);
• Would lose significant historical or resale value by being tagged; or
• Would have its warranty negatively impacted by being permanently marked;
In these cases, the identification tag is not required, and the department is to apply alternative procedures
to inventory and identify such assets.
I. Deletions
Asset deletion (assets over $5,000) 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.
J. Dinjq,�,qi
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.
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.
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:
1) Items of equipment with a current per -unit fair market value of less than $5,000 may be retained,
sold or otherwise disposed of with no further obligation to the awarding agency.
2) Items of equipment with a current per -unit fair market value of $5,000 or more may be retained,
sold or otherwise disposed of only as authorized by the awarding agency.
In the event the City is provided federally owned equipment:
1) 'Title will remain vested in the federal government.
2) The City will manage the equipment in accordance with federal agency rules and procedures, and
submit an annual inventory listing.
3) When the equipment is no longer needed, the City will request disposition instructions from the
federal agency.
K. Lost or stolen . roner—
When suspected or known losses of capital assets or small and attractive items occur, departments should
conduct a search for the missing property. The search should include transfers to other divisions or
departments, storage, scrapping, conversion to another asset, etc.
If the missing property is not found:
• Notify the inventory control officer and department head.
• Have the individual deemed to be primarily responsible for the asset, as well as that individual's
supervisor, complete and sign a statement to include a description of events surrounding the
disappearance of the property, who was notified of the loss, and steps taken to locate the property.
• Finance will report known or suspected losses of assets to the State Auditor's office in
accordance with RCW 43.09.185, and a copy of the report will be provided to the Mayor and City
Administrator.
• Finance will remove the lost or stolen property from the department's inventory and accounting
records where applicable.
L. 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, which may result in a gain or a loss on sale of
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capital assets. Exception: The trade between departments of assets of similar value. As stated above "TIM
original controlling department is accountable for all assets in its inventory and for initiating a notice of
M. Modifications
Larger assets such as major pieces of equipment and many buildings are often modified to increase their
lifetime or usefulness. Modifications map include Lecartial additionc- or,.A letions.
for fire truck), or component replacement (new roof, heating system, etc.). Several vouchers may be
prepared for the modification as the work is in progress. Therefore, it is very important to notify the
Finance Department that modifications are coded as capital outlay and when it is given to accounts
or other structure reflecting what is being modified.
N. Inventory
A physical inventory will be conducted at least once every year. By February 15 1h of each year, the
Finance Department will supply each department with an inventory worksheet of all capital assets under
their control as of December 3 I't of the prior year. 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
Department by March 31" of every year. Verification of the inventory shall be done annually by the
Finance Department by performing a sampling of the physical inventory of the items.
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.
Individual departments will be responsible for inventorying all "portable" small and attractive IT related
items such as: Tablets (iPad Android- ctc.) and mobile computers (Netbooks Police Car computers Fire
tablets etc.)
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.
Written physical inventory instructions will be documented and distributed to each person participating in
the inventory process. The instructions will describe:
• How and where to record each item,
• What information to record,
• What to do when they have a question,
• What procedures to follow when they finish their assignments,
• What procedures to follow when equipment is located but not listed,
• The procedure by which the person counting the assets attests to the accuracy of the count, such
as by signing his or her name at the bottom of each inventory page, or signing a cover page for a
group of pages sorted by another method (batches, location, equipment type, etc.), and
• How to record assets not being used or in an obviously unserviceable condition.
Such information is to be used to schedule repair or disposition of such assets.
11
3. Physical inventory recong iliation
After the physical inventory count is completed, the department inventory officer is to conduct the
reconciliation process. Only when all differences have been identified and explained, is the inventory
Amfl��&W Tin�-*h,4-r!vimmcULF-Iion r-crocess:
• Search the inventory lists to determine whether inventory noted during the count as unrecorded is,
in fact, listed on another portion of the inventory.
• Enter unrecorded assets into the inventory system as soon as possible after discovery.
• If a significant number of unrecorded assets are located, a major problem with the asset recording
procedures may exist. The department inventory officer should contact the Finance Department
for assistance in deten-nining why the problem is occurring and how to correct it.
• Conduct a search in an effort to locate missing assets.
• For assets not located, follow the lost or stolen property procedures in this policy.
After the inventory is reconciled, the department inventory officer is to certify the reconciliation with a
statement and signature that it is correct and report this to the supervisor. If the certification cannot be
made, the inventory officer is to disclose that fact and the supervisor is to determine the appropriate
course of action.
4. lZetainin) ILh\ ��stjcal i! rds Liy-e—MoLy rqKo
The certification, together with the reconciliation and the inventory listing, serves as the support for the
inventory balance and for accounting adjustments, if any, and must be retained by the Finance
Department. The documentation will be retained in accordance with the approved records retention
schedules. At a minimum the asset records must be retained until after the next annual audit.
0. Small and Attractive Assets Procedures
...... . ... ..
shall be expensed and purchased from the small tools and minor equipment as
defined in the BARS manual object code (35).
All small and attractive assets shall be tracked and recorded in a database by each department in control
of those assets.
Annually each department will have the small and attractive asset inventory listing under their control
verified by the Finance Department on a sampling basis.
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without written notice to and authorization from the Finance Department.
P. Valuation of Capital Assets
AR zxy ir-Aw-dcad
location and condition for use. However expenses which do not add to the utility of an asset shall not be
capitalized. For example, expenditure to repair a piece of equipment that was damaged during shipment
should be expensed.
Values will be determined in the following manner:
1. Purchased Assets
Historical costs including taxes lei,x�daroi* ondcouor
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2. Land
The capitalized value of land includes the purchase price plus costs such as legal fees, fill, and any
excavation costs incurred to put the land in condition for its intended use. If land is acquired by gift, the
capitalized value will reflect its appraised or fair market value at the time of acquisition.
3. Vquip!!!ent
Furniture, fixtures, or other equipment should be classified as equipment. Since they are not an integral
part of a building they are not considered capital improvements. The cost for this asset type should reflect
the actual or estimated cost of the asset, including the cost of an extended maintenance/warranty contract
if the contract is purchased at the same time (or soon thereafter) as the capital asset.
4. Self -Constructed Assets
All direct costs associated with construction and management costs associated with a construction project
will be capitalized.
5. Donated Assets
Donated assets will be recorded at the fair market value at the time of acquisition plus all appropriate
ancillary costs. If the fair market value is not determinable due to lack of sufficient records, estimated cost
will be used.
Q. Lnjp.r eL I -.U), ijditures
Routine repair and maintenance costs will be expensed as they are incurred. Extraordinary repairs,
betterments or improvements will be capitalized if they increase future benefits from an existing capital
asset beyond its previously assessed standard of performance. Increased future benefits typically include
an extension in the estimated useful life of the asset or an increase in the capacity or efficiency of an
existing capital asset.
R. leplacements
For building improvements other than buildings and equipment the cost of outlays that replace a part of
another capital asset will be capitalized when the cost of the replacement is $5,000 or more and at least
10 percent of the total replacement value of the asset, or $100,000, whichever is less.
Example:
A $9,000 replacement of a heating boiler in a building having a replacement value of $120,000 would
not be capitalized. In this case $9,000 is not at least 10 percent of the building's replacement value.
Had the building's replacement value been less than $90,000, the $9,000 boiler replacement would
have been capitalized.
1. Improvement cost exceeds $5,000
2. Building cost is greater than $100,000
3. Improvement is < 10% of replacement
S. EXCEPTIONS to this policy are:
• Replacement roof coverings are not capitalized unless the replacement extends the useful life of
the building.
• Replacement floor coverings and window coverings are not capitalized.
• Costs to remodel (convert) a building to a different use, where the remodeling does not extend the
useful life of the structure itself, are not capitalized.
After replacing a part of another asset, the capitalized value and the associated accumulated depreciation
of the replaced item will be removed from the accounting records, and the costs of the replacement will
be capitalized.
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T. Ancillary Costs
N rma-
o ally, ancillary costs will be included in the cost of a capital asset. However, minor ancillary cos
not measurable at the time a capital asset is recorded, are not required to be capitalized. I
Ancillary costs for Land include:
• Legal and title fees;
• Professional fees of engineers, attorneys, appraisers, financial advisors, etc.;
• Surveying fees;
• Appraisal and negotiation fees;
• Damage payments;
• Site preparation costs; and
• Costs related to demolition of unwanted structures.
Ancillary costs for Buildings and Building Improvements include:
• Professional fees of architects, engineers, attorneys, appraisers, etc.;
• Damage payments;
• Costs of fixtures permanently attached to a building or structure;
• Insurance premiums, interest, and related costs incurred during construction; and
• Any other costs necessary to place a building or structure into its intended location and condition
for use.
For furnishings, equipment, or other capital assets;
• Transportation charges,
• Sales tax,
• Installation costs; and
Extended maintenance/warranty contracts or any other normal or necessary costs required
place the asset in its intended location and condition for use.
14
BONN
Sections:
1. Purpose.
11. Policy statement.
111. Definitions.
IV. General provisions.
V. Purchase of materials, supplies or equipment.
VI. Public works projects.
VIL Services.
VIII. Inter -local joint purchasing agreements.
IX. Real property acquisition.
1. 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.
11. 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, and will include a
completed Capital Outlay form. All purchases made by the City shall ultimately be
approved by the City Council through the voucher approval process.
31% All City of Arlington departments shall make a good faith effort to purchase goods with
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 th
perform for their intended purpose, and to use good judgment during the procurement
process. Goods and services may be purchased locally if they are less than $5.000 and
within 10% of the lowest price available outside City limits. Items that are valued over
$5,000 will be purchased on a competitive basis. I
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.
ilk
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.40.21 0 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.
111. 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
the Mayor may commit the City to a contract. Attached 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
IN
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E. Signature Authority. The Mayor may delegate his/her signature authority to other City
employees (City Administrator, Department Director, and Division ,• as
deemed appropriate.
IN
L
C. Informal Competitive Quotes - Materials, Supplies • Equipment over $3,000.
A. A City representative shall make an effort to contact at least three vendors. The
number • •• • may be reduced if the item being sought is only
available from a smaller number of vendors. When fewer than three quotes are
requested • if there are fewer than three replies, an explanation shall be placed in
the procurement file.
B. Whenever possible, quotes will be solicited on a lump sum or fixed unit price
bq.sis.
WE
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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.
F. Award. The City Council shall award purchases for amounts greater than or equ,
to the limits as identified in the City budget. The award of bid shall be made to tl
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.
G. All purchases of over $5,000 will have a completed and approved Capital Outla3
Form submitted to the finance department prior to the purchase of materials,
supplies, or equipment.
E. 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:
A. Any preferences provided by law to local products and vendors;
B. The ability, capacity, and skill of the vendor to perform the contract;
C. The character, integrity, reputation, judgment, experience, and efficiency of the
vendor;
D. Whether the vendor can perform the contract within the time specified;
E. The quality of performance of previous contracts or services;
F. The previous and existing compliance by the vendor with laws relating to the
contract;
G. Such other information as may be secured having a bearing on the decision to
award the contract.
F. 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 o
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. I
G. Recycled Products. The City shall also seek to maximize purchase of products using
recycled materials and products suitable for recycling, unless the purchase will resul'i
in an unreasonable increase in price or degradation of quality or performance over
comparable products.
VI. 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.
ff
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 • the State •i • in the locality • the City's projects •
•
a. 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, do not require the use of competitive quotes or bids.. All purchases
require an executed contract.
• Projects for single craft • multiple crafts with a reasonably anticipated price
higher than the dollar thresholds as provided under RCW 35.23.352, as amende
up to the limits set forth by RCW 39.04.155 as amended shall either use the sm
works roster or a formal competitive bid procurement process. All purchases
require an executed contract.
NN
PA
1. 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 requir
to warrant that the bid is a genuine bid, and that he/she has not entered into collusio
with any other bidder or any other person. All public works contractors shall furnis h
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
•, In lieu of a performance bond • contracts • 111, less, per RCW
39.08.010, a contractor may choose to have 50 • • the • retained • a
period of 30 days after the date of final acceptance.
VII. 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.
ii. Contracts and Agreements under $20,000 can be executed by department
directors or designee; and contracts/agreements above $20,000 can be
executed by the Mayor or designee.
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.
a. 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. It shall
be the responsibility of the Public Works Staff Accountant to ensure that the
contract with MRSC for Small Works and Consultant Rosters remains in force
and that all required fees are paid.
•, Less Than $100,000. • that have an estimated •
• less than $100,000 can be procured using an informal request for
qualification f• 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
011
I In 0101
NN69 MO.' #016WRI
roster, then a formal request for qualification process must be
followed.
f. 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:
a. It is deemed in the best interest of the City to expedite the
acquisition of services; or
b. It can be demonstrated that there are sufficient consultants on
the roster that possess the required qualifications to perform the
scope of work; or
c. 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.
3. Contract Required. A contract is required to purchase architectural,
landscape architectural, and engineering services.
ii. 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.
2. 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.
3. Contract Required. A contract is required to purchase professional and
nonprofessional services.
D. 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. To comply with
25
RCW 39.04.020, a record of sole source procurement shall be recorded with the
County Auditor that lists each contractor's name, the amount and type of each
contract, and a listing of the item(s) procured under each contract.
A. 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.
IX. 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.
9
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 budget amendment is required p1tor to contract.
CONTRACT
J,
IGNAT�l 1 � �I� �,
SIGNATURE
COUNCIL
0 CIL
C�
TYPE
LIMIT BID PROCESS
AUTHORITY
=AUTHORITY
APPROVAL
OVAL
Public Works
PublicWorks-singleWorks-single Under
No
Department
No
trade or craft $40,000
Director
Public Works- single Over
Yes
Mayor
Yes
trade of craft $40,000
J
Public Works -multi Under
No
Department
No
trade or craft $65,000
Director
Public Works -multi dv'e—r—,
Yes
Mayor
Yes
-.trade or craft - $65,000
Small Works Roster
SmallWorksRoster-up
j Under - - -------
No
Department
No
to $35,000
Director
-1$35,000
Small Works Roster-
1 Over
No
Mayor
Yes
from $35,000 up to
$35,000
$150,000
Small Works Roster-
Over
No
Mayor
Yes
from $150,000 up to
$150,000
$300,00
Materials, su lies and e ui met
a
Materials, supplies, Between
No; Requires a
Department
No
equipment $3,000 and
minimum of 3
Director*
$7,500
a uotes
Materials, supplies, Over $7,500
Yes
Mayor*
Yes
With vendor list $7,500-
No
Department
No
$15,000
Director*
With government bid Over
No
Mayor*
Yes
$15,000
Maintenance & non- rofessional services
Maintenance & non-
Under No; Anything
Department
No
professional services
$30,000 over $3,000
Director
requires a
minimum of 3
auotes
Maintenance & non-
1
Over Yes
Mayor
Yes
roL, f ssio I services
_Professional services 1
$30,000
0,000
104'rc Y require appro Kequesnorrm—ffy—f 'inance
Director and Administration Department.
27
lamcamaubla =I
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t6N_T_RACT ---
DOLLAR
SIGNATURE
COUNCIL
LIMIT
BID PROCESS
AUTHORITY
APPROVAL P!�PROVAL
--TYPE
Consulting"
Consulting/professional
Not to exceed Legal, human
Mayor
Yes
services
$50,000 resources -
(legal, human resources,
ongoing
design,
contracts;
development review
Development
services)
review, design
services -from
consultant
roster
Up to $20,000 No
Department
No
er instance
Director
Over $20,000 No
Mayor
Yes
er instance
Consulting/professional
Under $20,000 Chosen from
Department
No
services
(comprehensive planning,
I consultant
I roster
Director
feasibility studies,
_p reliin mTLt �ia d
Over $20,000 Chosen from
Mayor
Yes
consultant
roster
Consulting/professional
Under $20,000 Chosen from
Department
No
services(construction
consultant
Director
roster
-
Over $20,00 Chosen from-
--M-ayor
Yes
consultant
roster
to bidding requirements.
_W.
Cost Allocation
The Citki of Arlington desires to com'flkj, with all laws
A -
receiving full cost recovery for services rendered to other funds.
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
*bJectives or not assignable to a specific cost objective without effort disproportionate to the
benefit received.
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)
43.09.200. 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.
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.
The Federal Office of Management and Budget (OMB) Circular A-87
ONIB 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.
Governmental Accounting Standards Board (GASB)
GASVI is
financial reporting for U.S. state and local governments. While GASB is not a governmental
zgency and does not have enforcement authority, compliance with GASB is tested by the
Washington State Auditor's Office's annual audit of the City.
wo
Allocated Costs
The City has identified a variety of ways to identify and determine an appropriate percentage of
• for allocation to • using funds. These ways include;
• Number • employees (FTE's) in each fund
• • •• expenses (dollar • in each fund •' including •`• service and .•
improvements)
• Total operating revenues (dollar amounts) in each fund (not including beginning fund balances,
grant receipts • interfund transfers), and
• Number of expenditure line items used in each fund (or transactions, if available)
• Wh Percentage of Finance Dept. time is • attributable to utility •I
• Information Technology costs allocated based on number and location of computers supported
Human Resources costs allocated based on number and location of employees
The following is the plan to allocate General Fund Service costs - Administrative, Financial
(including payroll), Information Services (computer and communications), and Human
Resources to the various funds that utilize those services. One of the tasks of the Finance
Department is to manage the Utility Billing function for the Water/Sewer and Stormwater Fun
A large percentage of all Finance costs are considered to be directly related to the utility funds.
The percentages stay relatively constant but may vary each year. A time survey will be
performed each year to determine the proper allocation to the utilities. I
1) On an annual basis, the Finance Department will compile the numbers from the above
mentioned ways to determine the appropriate percentages to use in allocating General Fund
accounting and administrative costs to various funds. An average percentage rate will then
be determined.
1) • the General Fund Accounting and Utility Billing, Information Technology,
Human Resources and Payroll costs.
2) Review General Fund Legal fees to determine appropriate allocation (if needed) based on
number of employees and or billing description.
It is important to maintain back-up documentation that indicates how each cost allocation is
determined and calculated.
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 a-----l-shed tlk---, ih a survej of Police hours sj2entiatrollini on and around the Al rt
V§Z$Y-KV0J III UIM `• KY1 I I I I 11 IKE • 10 •" 8 •• ON•
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To reduce the use of debt so that debt service payments will be a predictable and manageab
part of the operating budget. i
To raise capital at the lowest cost, consistent with the need to borrow. This will be
accomplished by:
- Keeping a high credit rating (while making attempts to strengthen credit rating)
- 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.
E. Professional service providers (underwriters, financial advisors, bond insurer's, etc) may be
selected through negotiation, RFQ process or City's procurement policies.
F. Debt issues will be sold on competitive basis (except when conditions make a negotiated sa
preferable) and awarded to the bidder who produces the lowest interest cost. Revenue bon
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. I
G. 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.
1. 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.
J. The City shall strive to maintain favorable current credit ratinge
K. 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.
specific debt category:
General Debt
Utility Debt
012en S;2ace and Park facilities
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L. 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.
M. It shall be the policy of the City to limit bonded indebtedness to levels that permit sufflicient
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 debi
limit, unless approved by the City Council.
N. Credit enhancements shall be considered with a cost/benefit analysis for each long-term bor
issue.
0. 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 th(
do not violate IRS arbitrage regulations.
P. The City will maintain debt service coverage ratios as required for any bond issues.
Q. Interfund borrowing may be used where such borrowing is effective. Interfund borrowing
will be approved and authorized by the City Council.
IN
Investment Policy
01.1CY 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.
SCOPE. This investment policy applies to all financial assets of the City except: for assets he
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: i
2.1
Funds
2.1.1
General Fund
Special Revenue Funds
Debt Service Funds
Capital Project Funds
Enterprise Funds
2.1.6
Internal Service Funds
2.1.7
Trust Funds and Agency Funds
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.
LUM-1 i I it f—li tal e a
P-1111ri , r, I . .. .... !,i 11. ! if 1!11!
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follows:
-
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 requir
in order that potential losses on individual securities do not exceed the income generated from
the remainder of the portfolio. I
Liquidity: The City's investment portfolio will remain sufficiently liquid to enable the City t%3
meet all operating requirements, which might be reasonably anticipated. The Finance Direct
shall maintain adequate liquidity by maintaining a minimum balance in the LGIP. I
01
Acturn on InvestmenfFT ffe-iry 'sinvestment po o to s a •e aesigneci wi e 0 ec 17•
attaining a market rate of return throughout budgetary and economic cycles, taking into account
the City's investment risk constraints and the cash flow characteristics of the portfolio.
Local Institutions: Local Institutions shall be given preference when they are, in the judgment
of the Finance Director, competitive with other institutions.
11!11111 11irliiiit�iiii 1 1 11111 rii�1111 MMMM
istcIll• U1511• 9-9LIULC U11 III T; ON L I Itc-1 fc-d-c ff m4v�,�um- Pfliorl t-prl 'eri I
adverse development with any investment.
16r,"InIMif.
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UISUIONC L0 L11C 171dJAM U1119- L11 (OPLIMI d1ij MaLCIRUH 1111d"U'di
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.
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.
AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS. 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 15c3-1 (uniform net capital rule). No public deposit shall be made except in a
qualified public depository as established by State laws.
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.
identified as eligible investments as defined by RCW 35A.40.050. In general, these consist of -
Investment deposits (certificates of deposits) with qualified public depositories as defined in
Chapter 39.58 RCW.
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.
9M
MR-WITIR3
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.)
to anticipate market changes and provide a level of security for all funds, the collateralization
level will be 102% of market value of principal and accrued interest.
The City chooses to limit collateral to the obligations of the United States Government and its
agencies.
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.
Certificates of deposit are delivered to and held by the Finance Director until they mature.
SAFEKEEPING AND CUSTODY. 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 -,tarty bank trust de-,tartment acting—f-,,-s--,RDn•-
*f 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
[,vertinent information.
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.
QlV,1.:,RSlF1CAT1ON. 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.
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N/IAXIMIAJ MA"ll, 1.1,ZITIE'S. To the extent possible, the City will attempt to match its
investments with anticipated cash flow requirements. Unless matched to a specific cash flow, th�*
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.
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.
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.
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.
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.
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.
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city to do so.
REPORTING. The Finance Director will determine what investment information will be
included in the monthly financial report.
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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.
FNIOND: A long-term debt security (IOU) issued by a government or corporation. Generally pays
z stated fixed rate of interest, and returns the face value at maturity.
CALL OPTION: The right to prepay or redeem a security at a predetermined price on or after
specified future date that is earlier than its scheduled maturity date. I
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.
secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of
fiiublic monies.
CONFIRMATION: A document used to state and supplement in writing the terms of,"
transaction which have previously been agreed to verbally. I
Al,it'�t,,-fl-.Ta-TTffe-a—nn-u-aTr—aFe-o-T interest ffia-f-a-67-n-d—sissuer 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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selling for his or her own account.
�TITIEAT: There are two meTff6_a_soT-cFefi`WeTTo7 re ivery
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
6e 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
outstanding 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.
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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 wa
chartered under the Federal National Mortgage Association Act in 1938. FNMA is the
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fixed-rate mortgages FNMA's securities are also highly liquid and are widely accepted. FNMAJ
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 without7
sijbstantial loss of value. I
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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
purchased or sold. i
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.
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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.
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 i� 41_r_.xyNW_vh
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
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
ggreement are structured to compensate him for this. Dealers use RP extensively to finance the
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 • rendered by •„ for a fee whereby securities anAl
valuables • all types and descriptions are held in the bank's vaults for protection.
SEC RULE 156-1: SEC uniform net capital rule requiring brokers and dealers to maintain
certain • • net capitol.
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: • US Treasury securities having initial maturities • more than
ten years.
TREASURY NOTES: Intermediate term coupon bearing U.S. Treasury securities having initial
maturities • from • to ten years.
UNIFORM NET CAPITAL RULE: Securities • Exchange Commission requirement that
member firms as well as nonmember broker -dealers in securities maintain a maximum ratio of
indebtedness to liquid capital • 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
• securities, • reason new public issues are spread among members • 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 • or Yield to Maturity is the current income Yield minus any premium .r•
par • plus any discount in purchase price, with the adjustment spread • the period • the
date • purchase to the date of maturity • the bond.
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