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Home My WebLink About04/25/2023 03. Financial Policy Review and Alternative Revenue OptionsI BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 3. For Meeting of: April 25, 2023 ITEM TITLE: Financial Policy Review and Alternative Revenue Options SUBMITTED BY: Jennifer Ferrer -Santa Ines, Director of Finance and Budget* SUMMARY EXPLANATION: At its February 28, 2023 meeting, City Council directed staff to provide additional information to address the fiscal gap in the City's General Fund. At the close of 2022, the City did not meet Council's fund balance policy to maintain 16.7% in the City's General Fund reserves, which provides for general government services, including public safety, parks, streets, and organizational support of internal service departments. The 16.7% reflects two months of operational expenditures. k 111:41 T, I --III Niel A d 4 93 13 111 ZT-IN III *t] [9j;j N Is] N k Wig RECOMMENDATION: For review only ATTACHMENTS: 10 rel Public Trust and Accountability Description Upload Date Type D rpoint—Finance 4/21/2023 Cowr Memo D Memo 4/20/2023 Co Memo D 2013 Financial Policy -Exhibit A 4/20/2023 Exhibit D Updated Fund Balance Policy 4/20/2023 Backup Material D Investment Policy 4/20/2023 Backup Matedal D Procurement Manual 4/20/2023 Backup Material D Debt Policy (DRAFT) 4/20/2023 Backup Material Financial Policies • Clarify strategic intent • Fiscal compliance • Define boundaries • Support good bond ratings • Long-term perspective • Monitor, review and update Financial Policy components ➢ Reserves -General Fund and Other Funds ➢ Grants ➢ Debt ➢ Investment ➢ Economic Development ➢ Accounting and Financial Reporting ➢ Risk Management and Internal Controls ➢ Procurement ➢ Long-term Financial Planning ➢ Structurally balanced budget, Operating Budget ➢ Capital ➢ Revenues and Expenditures City of Yakima 8.3% Sales Tax Breakdown Mental 0 m 0 Where does your sales tax dollar go? 20ZZ Split between all Cities in Yakima County 4¢ Yakima Transit 5¢ Yakim IN 2023 Property Tax breakdown $9.23 per $1,000 AV Sa.,33 Yakima Scholl Bonds.. 4 ountV Eris 1.93 SM17 11 2 Yakima County Sim County Flood Control %6 1% 9 State Schaal Eel MS 17% State Schaal k Part 2 $U4 4 m Yak'ma It } 22 m 2,500 MOD City of Yakima Levy Rates 0 City of Yakima Levy Rate 0 Cfty of YaUmi Bonds Levy Rate 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2,015 2016 2017 2018 2019 2020 2021 2022 2023 m Services funded by Property Tax dollars Property Tax, $22,863,710, 9% of Total Revenues General Fund $ 8,429,468 36.9% Parks $ 3,173,716 13.9% Streets Operating $ 4,400,000 19.2% SunComm $ 1,450,000 6.3% Debt Service $ 2,268,780 9.9% Parks Capital* $ 51,212 0.2% Streets Overlay* $ 517,738 2.3% Firemen's Pension $ 800,000 3.5% Emergency Services $ 1,772,796 7.8% $ 22,863,710 *Part of Charter money Available Tax/Fee Revenue Options Type ;of Revenue YES NO Current Rate -COY Business Business & Occupation (B&O) Tax X Not imposed Admission Tax X Not imposed Impact Fees X Not imposed Utility Tax (Sewer, Solid waste, Stormwater, Water) X No limit prescribed by State or Federal Law Traffic and Parking Fines X Free parking, then fines go into effect after Time Limit expires Transportation Benefit District Sales Tax X '' Not imposed Transportation Benefit District (TBD) Vehicle tabs I X 1 1$20 vehicle license fee; can increase to $40 Other Options YES NO Notes Regional Fire Authority X Requires majority vote of participating districts Metropolitan Park District X Requires majority vote of Yakima Residents Levy Lid Lift X '' Requires majority vote of Yakima Residents Business and Occupation (B&O) Tax • Taxable event • Different classes of business • Wholesale, Manufacturing, Retail, Services • Measure of tax • Rate of Tax • Exemptions • Unrestricted Revenue 10 Admission Tax • Tax on admission charged for various facilities and events • Theatres • Dance Halls • Other activities where an admission is charged • Exemptions • Tax rate — no greater than 5% • Unrestricted Revenue 11 0 Impact Fees • Fee charged to developers to mitigate the impacts from a new development • Revenues are restricted • Cities planning under the Growth Management Act (GMA) can impose • Transportation • Parks • Fire • Spend within 10 years of receipt • Does not require voter approval Utility Tax (Water, Sewer, Solid Waste, Stormwater) • Water, 20% • Sewer, 20% • Solid Waste, 20% • Sto rmwate r,15% • No rate law limit prescribed by State/Federal 13 0 Transportation Benefit District (TBD) fees • Vehicle license fee, $20 • May increase the fee to $40 • Non -voted license fee maximum, $50 • Revenue for transportation improvements listed in a Transportation Plan Transportation Benefit District -Sales Tax • Sales tax up to .3% • .1 %may be approved by Council • .2% requires voter approval • Must have an established TBD • Impose for 10 years maximum, renewal option • Can impose longer if used for debt repayment 15 0 m Regional Fire Authority (RFA) ❑RFA Study presented to Council in 2013 and discussed again in 2021 ❑Separate taxing authority ❑Dedicated funding source for fire and emergency medical services ❑Taxes collected is directed towards the RFA versus passing through other jurisdictions ❑Requires a vote of participating Districts ❑Fire Levy -up to $1.50/$1000 Assessed Valuation (AV) Metropolitan Park District (MPD) ❑Previously presented to Council in 2012 ❑Cities can form an MPD by petition or Resolution ❑Requires voter approval ❑Dedicated funding source for parks and recreation activities ❑Taxes collected is directed towards the MPD versus passing through other jurisdictions ❑Levy -up to $.75/$1000 Assessed Valuation (AV) How much more will it cost for a Levy Lid Lift? F1 I Assessed Value Tax Rate Tax $ $875,000 3.325 $2,909.38 $875,000 2.066 $1,807.75 3.02 Daily difference Assessed Value Tax Rate Tax $ $327,000 3.325 $1,087.28 $327,000 2.066 $ 675.58 411.69r9u � � Yearly difference I i j.,. �. � iference Solid, Complete, Whole, Sound Balancing the General Fund with cuts 21 0 Reduced Spending Animation Unsteady, Fragile, Unsound, Vulnerable Decisions, Decisions m 27 FINANCE TO: Mayor and City Council FROM: Jennifer Ferrer -Santa Ines, Director of Finance and Budget DATE: April 20, 2023 RE: 2023 Council Retreat Follow-up At its February 28, 2023 meeting, City Council directed Staff to provide additional information to address the fiscal gap in the City's General Fund. At the close of 2022, The City did not meet Council's fund balance policy to maintain 16.7% in the City's General Fund reserves, which provides for general government services, including public safety, parks, streets, and organizational support of internal service departments. The 16.7% reflects two months of operational expenditures. The City has been operating with the 1 % property tax increase year over year since voters approved Initiative 747 in 2001. Meanwhile, inflation remains high and labor contracts have negotiated cost of living increases as high as 5.5%. This is no match for a 1 % increase in property tax and the volatility of sales tax collections. Past City Council have adopted financial policies that have governed the City and provided guidelines to protect the assets of the City and in compliance with State law, Yakima Municipal Code, City of Yakima Charter, and generally accepted accounting principles (GAAP). This document was last reviewed in 2013. Staff will briefly review the existing policy included in your Council packet materials as Exhibit A and recommend modifications incorporating best practices for Council to review at a future meeting. Staff presented alternative revenue options to Council in July 2022, but there has been no action. During the retreat, Staff communicated the need to establish a plan to comply with the City's fiscal reserve commitments. Budget reductions of 10% across the board for the general government services will save approximately $7.3 million, but this will not resolve the underlying deficit between available resources and the cost of maintaining current and existing levels of service provided to City of Yakima residents and community. Without additional revenue generation, the only option left is to reduce service levels. During the study session, Staff will review available options for generating additional revenue to bridge the gap between available resources and necessary expenditures to maintain existing levels of service. One single option will not fully address the structural imbalance of the General Fund. A structurally balanced General Fund is one that supports financial sustainability for multiple years into the future. 28 CITY OF Yakima FINANCIAL MANAGEMENT POLICY & STEWARDSHIP OF PUBLIC FUNDS Tony O'Rourke, City Manager Cindy Epperson, Director of Finance & Budget 129 North 2nd Street Yakima, WA 98901 29 19 MA 0910 2 to] 1 V C630 10 Introduction ................... ........ I Policy Statement Lines of Authority , .............. Yakima City Council City Manager Finance Department Department Supervisors Accounting Records and ftgrts ....................................... 2 Basis of Accounting Basis of Budget Fund Accounting Financial Reporting Audit Capital Asset Accounting Reserve Fund Balance Policies ................ 3 General Government Utility Enterprise Other Enterprise Debt Service Equipment Replacement Non -Enterprise Capital Risk Management Other Funds 30 Financial Planni. 5 5 Year Financial Planning Model .. .. .. .. .. .. .. . Budget Development .... Budget Management Revenues .................. ............................. 6 Fees and Charges Utility Rates and Capital Fees Expenditures . .. .... ......... .. ................... 7 Capital Facilities Plan ................. .... , . 7 Purchasing 9 Capital Financing and Debt Mana ament ............ .. 9 Policy on Debt Issuance and Management Long-term Borrowing Term of Debt Interim Financing Utility Improvements Debt Issue Debt Issuance Team Bond Proceeds Disclosure 31 OnOFYakima FINANCIAL MANAGEMENT POLICY & STEWARDSHIP OF PUBLIC FU Policy Statement The City of Yakima is committed to the highest standards of financial management. The City Council, City Manager, and staff will work together to ensure that all financial matters of the City are addressed with care and integrity and with the best interests of the City in mind. The City Council and staff shall comply with the guidelines set forth herein. Any recommended deviation from these policies shall be clearly identified in appropriate written documentation (e.g., staff report, resolution, or budget presentation). These policies are intended to be applied in conjunction with requirements set forth in state law, the City of Yakima Municipal Code, the City of Yakima Charter, and Generally Accepted Accounting Principles (GAAP). In the case of any conflict, the provisions of such laws, ordinances, or GAAP will control. The rules and procedures contained in this section are designed to: • Protect the assets of the City of Yakima. • Ensure the maintenance of open and accurate records of the City's financial activities. • Ensure the availability of sufficient financial resources for the City to meet both its immediate and long- term objectives. • Provide a framework of operating standards and behavioral expectations regarding fiscal matters. • Ensure fiscal compliance with federal, state, and local legal and reporting requirements. • Provide a means for the City Council to update and monitor these policies with the assistance and cooperation of the City Manager's office and the Finance Department. Lines of Authority Yakima City Council - has the authority to execute such policies as it deems to be in the best interests of the City within the parameters of federal, state, and local law. City Manager - has the authority to oversee the development of the budget, make spending decisions within the parameters of the approved budget, enter into contractual agreements, make capital asset purchase decisions, and make decisions regarding the allocation of expenses within designated parameters. Unless otherwise specified in this document, the City Manager is responsible for complying with the directives listed herein. Finance Department - has the authority to develop the budget, review the organization's financial activity, determine the allocation of investment deposits, assure that adequate internal controls are in place, and to administer the financial policies and procedures of the City. Department Supervisors - have the authority to expend City funds within approved budget authority and in accordance with procedures prescribed by the City Manager, and to recommend spending requests, within the parameters of the approved budget process, to the City Manager. The City maintains a comprehensive set of internal controls to protect the City's assets and sustain the integrity of its financial systems. Managers at all levels are responsible for implementing the City's Financial Policies, sound internal controls, and for the regular monitoring and measuring of their effectiveness. Page 1 32 Accounting Records and Reports Basis of Accounting The City's Comprehensive Annual Financial Report (CAFR) on its financial activity shall be presented in compliance with Generally Accepted Accounting Principles (GAAP) as defined by the Governmental Accounting Standards Board (GASB). • The City will establish and maintain a high standard of internal controls and accounting practices. • The accounting system will maintain records on a basis consistent with accepted standards for local government accounting and the State of Washington Budgeting, Accounting, and Reporting Systems. (BARS) Basis of Budget The City budget is presented on a modified accrual basis of accounting. Fund Accounting The City of Yakima's accounting and budgeting systems use fund accounting consistent with guidance provided by the GASB and the Washington State Auditor's Office. The funds are grouped into categories as prescribed by the State Auditor's Office and/or other regulatory authority. Funds can be created as needed by ordinance, or through the budget ordinance. The Finance Department shall assure that the status and transactions of each account and their relationship to budget authority is clear. Financial Reporting • The annual financial report shall conform to Generally Accepted Accounting Principles and be in the form of a Comprehensive Annual Financial Report (CAFR). • The CAFR shall be comprehensive, completed in a timely manner, and meet or exceed professional industry standards established by the GFOA. • The City's budget documents shall include comparisons to prior years. • Revenue and expenditure reports shall be prepared quarterly, presenting a summary of financial activity by major types of funds, and shall include a comparison of actual user versus budgeted revenues and expenditures to ensure adherence to the approved budget. • A written analysis of the City's activity in the areas of Central Receivables, Investment, and Debt shall be prepared quarterly. • All published reports will be available via the City's website. Audit The City shall commission an annual audit of the City's financial reports and related records to be conducted by the Washington State Auditor's Office, as required by state law. At the conclusion of the audit, the auditor shall be available to brief the City Council and City Manager on the financial opinion and the audit made available to the public via the City's website. Capital Asset Accounting An effective capital asset accounting system is important in managing the city's capital asset investment. • The City will maintain a schedule of individual capital assets with values in excess of $5,000 and an estimated useful life of more than one year. All items with an original value of less the $5,000, or with an estimated useful life of one year or less, will be recorded as operating expenditures. Page 2 33 • A fixed asset system will be maintained to identify all City assets and their location. • The City shall maintain a listing, outside of the capital asset system, of all computers and shall conduct a periodic physical inventory of those computers. • The City's Fleet Management Division shall maintain a Fleet Master Listing of all vehicles and other large motorized equipment (road graders, backhoes, etc.). The capital asset listing for vehicles shall be reconciled to the Fleet Master Listing at least annually. Inventory control of the City's vehicles shall be maintained through the fleet maintenance program. • Other non -infrastructure capital assets of the City shall be inventoried on a two year cycle. Reserve Fund Balance Policies The primary reason for a General Fund reserve policy is to be prepared for contingencies, but there are principle reasons for building cash reserves: Large unforeseen one-time expenditures/ expenses of an emergent nature, such as a catastrophic event, a natural/manmade disaster (e.g. earthquake, windstorm, flood, terrorist attack), or excessive liability judgments. • Economic downturn or other unanticipated events affecting revenue growth. • Reasonable cash reserves are needed to maintain favorable credit ratings. Sufficient fund balances and reserve levels are important to the long term financial stability of the City. The City shall maintain reserves required by law, ordinance, and/or bond covenants. General Government The City shall maintain reserves in the General Government Funds of at least 16.7% (or 60 days) of the total budgeted operating expenditures. This target has been met at the end of 2012. When the General Government reserve balance exceeds 16.7%, the excess may be used for one-time capital needs or may be transferred to capital reserves or risk management reserves. Utility Enterprise The City will maintain operating reserves of 60 days or 16.7% in the Water, Wastewater, Irrigation and Stormwater Operations and Maintenance Funds. This operating reserve shall be created and maintained to provide sufficient cash flow to meet daily financial needs and will be based upon total operating expenses. For budgeting purposes, operating expenses will be calculated upon the funds' total expense budgets excluding Capital transfers and the current year's debt service. The Water, Wastewater, Irrigation and Stormwater funds will maintain capital reserves to be funded on accordance with applicable capital facility plans. Each utility will strive to transfer minimum of annual depreciation expense for capital purposes (i.e. debt service principal and asset replacement). Other Enterprise Other Enterprise funds consist of Refuse, Transit and Yakima Air Terminal. • The Refuse Fund will maintain an operating reserve of 12% or 45 days. • The Transit Fund will maintain an operating reserve of 16.7% or 60 days. • The Yakima Air Terminal will maintain an operating reserve of 12% or 45 days. • These funds will strive to fund capital replacement reserves to accumulate sufficient funds to 1) match capital grants for asset replacement in accordance with capital facility planning or 2) replace assets when needed to avoid service interruption. Page 3 34 Debt Service The City shall accumulate resources sufficient to make required payments in general obligation debt service funds. Revenue Bond reserves shall be maintained in accordance with bond covenants. All debt service reserves shall be in addition to the operating and capital reserves of the utilities. Equipment Replacement • The City shall maintain an Equipment Rental Replacement Fund for all roiling stock except for transit and fire. Reserves shall be established for equipment acquisition and replacement. The reserve is established regardless of whether the equipment is acquired via lease, gift, or purchase. • Service charges paid by City departments to the Internal Service fund should include an amount to provide for replacements when required. • Transit and Fire are excluded from the Equipment Rental Replacement Fund, primarily because they own equipment purchased by grants or voted property tax measures. Reserves shall be established for equipment replacement in the respective capital funds with the long-term goal to fund at the level of annual depreciation. • Reserves for computer software and hardware will be established should the need continue beyond the estimated initial useful life. Information Technologies is currently an operating department in General Fund. In order to establish a separate reserve balance for computer technology, a separate internal service fund will be established to be funded by a fair and equitable allocation formula for all operating funds using Information Technology services. Non- Enterprise Capital Other capital funds will strive to build reserves sufficient to replace assets when needed to avoid service interruption. Excess operating reserves will be calculated at the end of each operating year, and a recommendation will be made by the Director of Finance and Budget to the City Manager to make additional transfers into capital funds. The long-term goal is to fund at the level of annual depreciation. Risk Management • The City shall maintain a liability reserve fund with a balance sufficient to fund 100% of anticipated claims reserves established by the insurance carrier in consultation with City Legal. • The Workers' Compensation self-insurance fund shall maintain a cash reserve equal to 100% of anticipated claims reserves as established by the third party claim administrator. • The Unemployment Compensation self-insurance fund shall maintain a cash reserve equal to 100% of budgeted claims and settlement expenses. • The Employees' Health Benefit self-insurance fund shall maintain a minimum cash reserve as determined by the Washington State Risk Manager's Local Government Self -Insurance Program Guidelines. Currently, this benchmark is 16 weeks or 30% of medical claims, plus 8 weeks or 15% of vision and dental claims. Other Funds Reserves shall be set through the budget process in an amount consistent with the purpose and nature of the fund. Page 4 35 Financial Planning 5 Year Financial Planning Model The City shall maintain a long-term (five-year) financial planning model. The financial planning model shall be based on the currently adopted budget, and documented assumptions, realistically expected to occur, and will be designed in such a way to permit analysis of alternative strategies. The plan shall be prepared for the General Government and such other funds as deemed necessary. Budget Development The goals of the Budget and Strategic Plan are to align the budget with the citizen priorities and provide the best value for each tax dollar. The City shall prepare a balanced budget that is consistent with state law, industry best practices, and the 5-Year Financial Plan. The annual budget links resources with operating programs and projects consistent with the City's Strategic Plan. The budget will fund recurring expenditures with recurring operating revenues. In order to facilitate and implement the budget process, the City Manager will propose an annual budget calendar at the first regular Council meeting in July. • The budget calendar will be comprehensive in nature and generally provide for a process that resembles the Best Practices as published by the Government Finance Officers Association (GFOA) and in compliance with the calendar provided in Washington State Law. • The City of Yakima's annual budget shall be prepared using the following schedule and process as a general guide: Review stakeholder input such as Annual Citizen's Survey, public forums, neighborhood meeting notes and business community communication. The City Council and City Manager will conduct a goal -setting retreat with the Department Directors updating the approved Strategic Plan, Business Plan and other policy guidance. The Director of Finance and Budget prepares the budget preparation instructions and meets with Department Directors to distribute budget instructions and discuss budget preparation. The instructions will include policy priorities, estimates of compensation adjustments, internal service and indirect charges. Departments will provide to Finance budget estimates and requests conforming to the budget instructions. The City Manager submits a proposed balanced Preliminary Budget to the City Council in conformance with state law. Balanced budget should comprise of funding recommendations for the operating and capital budgets that do not exceed the estimated resources. The City Council conducts public hearings on the proposed budget in conformance with state law. The City Council sets the City's property tax levies. The City Council adopts the final budget ordinance. The final budget document is published and posted to the City website. Page 5 36 Budget Management The City will maintain a fair and equitable system to allocate * overhead and other shared costs. The amount charged by the City for services provided under an interlocal or similar 4 agreement will include a factor to cover the city's overhead costs when appropriate. Annual appropriated budgets are adopted at the fund level within available resources (i.e. new revenue and existing reserves). Operating program appropriations not spent during the fiscal year do not automatically carry- over into the next year and may lapse at year end. Encumbrances are purchase orders, contracts, and other commitments for the expenditure of funds. Outstanding encumbrances at the end of the year can be carried forward into the next year's budget by a formal budget appropriation authorized by Council. Capital budgets are considered adopted at the project level. Capital projects are included in the annual budgeting process for the purpose of estimating cash flow requirements. Outstanding project appropriations can be carried forward into the next year's budget by the Finance Department. Budget amendments should be presented for consideration when the need arises. Council will be apprised if the proposed funding is new revenue (most commonly grant awards) or is from existing reserves within the minimum guidelines. The City Council shall approve the number of permanent City staff positions, their classification and their assignments to specific City funds when it adopts the City's Budget. The City will utilize one-time revenues only for one-time/non-recurring expenditures or to build reserves such as the capital reserve fund. The cashout of accrued leave upon separation of service from the City will be included in the appropriate operating budget if quantifiable at the time of budget development. Generally, the savings from the resulting vacancy is sufficient to fund this one-time expenditure. In cases where the current budget cannot absorb an unforeseen cashout, the City Manager may re -allocate funds or request a supplemental appropriation for Council approval. Revenues Revenue estimates shall be based on forecasting methods recommended by the Government Finance Officers Association (GFOA) and shall assess the full spectrum of resources available to finance City programs and services. The City shall consider the diversification of revenue as a strategy when developing its financial plans. The City will strive to maintain as diversified and stable a revenue system as permitted. Because revenues, especially those of the General Fund, are sensitive to both local and regional economic activities, revenue estimates provided to the City Council shall be conservative. Should an economic downturn develop that results in (potential) revenue shortfalls or fewer available resources, the City will make appropriate adjustments to its budget. The City will not use one-time revenues to support ongoing expenditures. Policy on Fees and Charges The City shall review all fees for licenses, permits, fines, rates, and other miscellaneous charges at least every two years as part of the budget process. A schedule will be established to review about half of the divisional fees each Page 6 37 budget year. User charges and fees shall be established based on a percentage of the full cost of providing the service unless otherwise provided by statute or regulation. Proposed rate adjustments, user charges, and fees shall be presented to the City Council for approval each year in the Preliminary Budget. Utility Rates and Capital Fees Utility rates should be adequate to ensure reliable, competitively priced services for our customers. Net reserves in excess of both legal requirements and minimum working cash balances should be used to minimize future rate increases by funding approved capital projects, retiring high cost debt, and augmenting fund reserves established to reduce ratepayer risk. Utility rates and capital fees shall be reviewed annually, and necessary adjustments shall be made to reflect inflation, construction needs, and avoid major rate increases. Utility rate studies shall be conducted at least every six years to update assumptions and to ensure the long-term solvency and viability of the City's Utilities. System Development Charges (SDCs') shall be established at levels to ensure that all customers seeking to connect to the City's utility systems shall bear their equitable share of the cost of both the existing system and future systems. Expenditures • Management shall ensure compliance with the legally adopted budget. Additional purchases and expenditures must comply with legal requirements for approval. Priority shall be given to expenditures that will improve productivity or public safety. • Expenditures will be accounted for in the appropriate accounts. Capital Facilities Plan The purpose of the Capital Facilities Plan is to systematically identify, plan, schedule, finance, track, and monitor capital projects to ensure cost- effectiveness as well as conformance to established policies. The City Manager will annually submit a financially balanced, multi -year comprehensive plan for review by the City Council pursuant to the timeline established in the annual budget preparation schedule. The comprehensive plan will incorporate a methodology to determine a general sense of project priority according to developed criteria. The Capital Facilities Plan shall provide: • A statement of the objectives of the Capital Facilities Plan and the relationship with the City's Strategic Comprehensive Plan, department master plans, necessary service levels, and expected facility needs. • An implementation program for each of the capital improvements that provides for the coordination and timing of project construction among various city departments. • An estimate of each project's costs, anticipated sources of revenue for financing the project, and an estimate of the impact of each project on city revenues and operating budgets. The operating impact information shall be provided for the period covered in the city's current five year Capital Facilities Plan. No capital project shall be funded unless operating impacts have been assessed and the necessary funds can be reasonably anticipated to be available when needed. • For the systematic improvement, maintenance, and replacement of the city's capital infrastructure as needed. • A schedule of proposed debt requirements. Page 7 38 All proposed capital improvement projects shall include a recommended or likely source of funding. The performance and continued use of capital infrastructure is essential to delivering public services. Deferring essential maintenance and/or asset replacement can negatively impact the condition of assets and infrastructure as well as the ability to appropriately plan for required major maintenance and replacement needs. Efforts will be made to allocate sufficient funds in the multi -year maintenance, and repair and replacement of critical infrastructure assets. The city's objective is to incorporate "Pay -As -You -Go" funding (using available cash resources) in the annual Capital Facilities Plan. This will supplement funding from other sources as such bonds, grants, and developer contributions. Private development (including residential, commercial, and industrial projects) shall pay its fair share of the capital investments that are necessary to serve the development in the form of system development charges, mitigation fees, or benefit districts. When current revenues or resources are available for capital improvement projects, consideration will be given first to those capital assets with the shortest useful life and /or to those capital assets whose nature makes them comparatively more difficult to finance with bonds or lease financing. Using cash for projects with shorter lives and bonds for projects with longer lives facilitates "intergenerational equality", wherein projects with long useful lives are paid over several generations using the project through debt service payments. The first year of the adopted capital plan will be the capital budget for that fiscal year. Staff will monitor projects in progress to insure their timely completion or to recommend appropriate adjustment to the Capital Facilities Plan as approved by Council if a project is delayed or deferred. Periodic status reports will be presented to City Council to share project progress and identify significant issues associated with a project. The City will make capital improvements in accordance with an adopted Capital Facilities Plan (CFP), which is aligned with the City's other long-range plans. The City will determine the least costly financing method for all new projects. The City will dedicate an ongoing $2 million annually for road restoration and rehabilitation. Cash Management and Investment The City will invest public funds in a manner which will provide the highest return consistent with maximum security. The City has a separate Investment Policy that governs this activity. All money collected by any officer or employee is to be transferred to the Department of Finance for deposit. The internal controls established by the Department of Finance includes: segregation, daily processing, timely deposits, and reconciliation of ledgers in a timely manner, physical security procedures, and the use of automated system resources. The City of Yakima shall process all vendor claims timely and efficiently. All payment of vendor claims shall be in accordance with Washington law and shall be adequately documented and approved. Page 8 39 Purchasing Purchasing facilitates the timely procurement of goods and services to help customers fulfill their missions by providing cost effective opportunities to purchase quality goods and services at the best value while conducting business in a legal, fair, open, and competitive manner. The City has a separate Purchasing Procedure Manual that governs this activity. Capital Financing and Debt Management Policy on Debt Issuance and Management The City shall work to maintain strong ratings on its debt including maintaining open communications with bond rating agencies concerning its financial condition. Currently Standard and Poor's has rated the City A+ for general obligation and AA- for Water / Wastewater revenue bonds. Long-term Borrowing Long-term borrowing shall be confined to capital investments or similar projects with an extended life when it is not practical to be financed from current revenues. The City shall not use long-term debt to finance current operations. Term of Debt Debt payments shall not extend beyond the estimated useful life of the project being financed. To the maximum extent possible, the City will fund its capital needs on a pay-as-you-go basis. Interim Financing With Council approval, interim financing of capital projects may be secured from the debt financing market place or from other funds through an Interfund loan as appropriate in the circumstances. Utility Improvements Financing of utility improvements will be consistent with the utility master plans, Council rate policies, and other factors in order to balance the effect of major improvements on utility rates. System development charges, grants, and low interest loans to fund capital projects shall be used when possible. Overall, the utilities should maintain a debt -to -equity ratio of 60/40. The City shall strive to maintain minimum debt service "coverage" in accordance with bond covenants. Debt Issue The City shall strive to use special assessment, revenue, or other self-supporting bonds in lieu of general obligation bonds. Long-term general obligation debt shall be utilized when necessary to acquire land or capital assets based upon a review of the ability of the City to meet future debt service requirements. The project to be financed should also be integrated with the City's long-term financial plan and Capital Facilities Plan. General obligation debt should be used when the related projects are of a benefit to the City as a whole. Every project proposed for financing through general obligation debt should be accompanied by a full analysis of the future operating and maintenance costs associated with the project. The City should avoid issuing general obligation (non -voted) debt beyond seventy percent (70%) of its general obligation debt capacity in order to maintain a reserve for emergencies. The City shall use refunding bonds where appropriate to achieve cost savings of approximately 4% net present value (NPV), to restructure its current outstanding debt, and/or improve restrictive bond conditions. Page 9 40 The City shall evaluate the best method of sale for each proposed bond issue. When a negotiated sale is used, the City shall consider using an independent financial advisor to advise the City's participants in matters such as structure, pricing, and fees. These services shall be regularly monitored by the Finance Department. Debt Issuance Team In order to effectively plan and fund the City's capital investment projects, a team will be established for each debt issuance. The staff team members shall consist of the City Manager, a Finance Department representative, and applicable department management representative(s) (related to the projects to be financed). External team members shall consist of Bond Legal Counsel and a financial advisor and/or underwriter with demonstrated experience in Washington State debt issuance when appropriate. By state law, Council is required to authorize a debt issuance. Bond Proceeds The City shall comply with IRS regulations concerning use of and reinvestment of bond proceeds. The City shall monitor and comply with IRS regulations with regard to potential arbitrage earnings. If arbitrage earnings are believed to be above amounts provided by IRS regulations, the City will set aside earnings in order to pay the appropriate amount to the federal government as required by IRS regulation. Disclosure The City shall provide full secondary market disclosure related to outstanding debt. Pension / Other Post -Employment Benefits (OPEB) Liabilities The City has pension obligations for retired police officers and firefighters hired prior to March 1, 1970. The Washington Law Enforcement Officers and Firefighters Retirement System (LEOFF 1) pays pension benefits for eligible employees working when that system was established. However, LEOFF 1 statutes call for the employing agency to cover 100% of medically necessary costs for the life of the employees working on March 1, 1970 and hired before the closing of the LEOFF 1 system in 1977. The City has contracted for actuarial studies to be done every 5 years for these benefit programs (Police and Fire pensions and medical obligations). Historically, these benefits have been funded on a "pay-as-you-go" basis, which is substantially below the actuarial determined contributions. The current Unfunded Actuarial Accrued Liability (UAAL) of LEOFF I Fire and Police pensions and post - employment medical benefits, along with post -employment benefits arising from allowing retirees to remain on the City's self -insured medical plan with the same premium as active employees total $74.9 million. The City will strive to increase its funding level of pre-LEOFF pension and LEOFF 1 medical obligations. Related Documents • Investment Policy • Procurement Manual • Interfund Loans Program - Yakima Municipal Code Page 10 41 ADMINISTRATIVE POLICIES DEPARTMENT: Finance AUTHORIZED BY: City Council EFFECTIVE DATE: 03/24/2021 ISSUE DATE: 05/1712021 SUPERSEDES: n/a The Fund Balance Policy of the City of Yakima is authorized, approved by, the City Council to: w To establish reserve objectives and parameters necessary to safeguard public funds entrusted to the City of Yakima. ~ To articulate City COUnCi|'Gintent for the governance over city finances. • To CO[D[OUDiC8te C|e@[ policy and strategy guidelines for city financial 8d[OiOiSL[GbOD. • To demonstrate to citizens, taxpayers and voters a transparent and accountable Gt8vv@mdShip plan. w To establish o fund balance target for the (38nena| Fund and on operating reserve requirement for the Enterprise Funds. GENERAL FINANCIAL GOALS TO provide a financial base sufficient h}sustain municipal services tUmaintain the social well-being and physical conditions of the City. 2. To provide a cushion for seasonal cash flow fluctuations, a financial safety net in the event of natural dieaaiern, local and regional emergencies, economic downturns, withstand local and regional economic trauma, and to respond to other unforeseen circumstances. 3. T0maintain available financial resources a8ameasure Vfthe sound fiscal condition 0fthe primary government fUnd, for consideration by bond rating agencies when evaluating the City's credit worthiness, and the governing body when making budgetary decisions. 4. To consider and provide for the needs of future generations in the Yakima community. The distinction between "Fund Balance" and "Working Capital" comes from Government Accounting Standards which require modified accrual accounting for governmental funds and full accrual accounting for enterprise funds; this policy addresses each separately. Operating Reserve, or Working C8pi18|, is the primary DleGSu[e for evaluating COOUOued creditworthiness and budgetary decisions for Enterprise Funds. 42 GENERAL FUND'S FUND BALANCE TARGET Target is to achieve and maintain a Fund Balance of at least 16.7% of the Total Expenditures, representing 2 months of annual spending. 2. Fund Balance equals Total Assets minus Total Liabilities, on the Statement of Revenues, Expenditures and Changes in Fund Balances — Government Funds in the City's Comprehensive Annual Financial Report (CAFR). 3. Financial Reporting Definitions. Governmental Accounting Standards Board (GASB) Statement 54 distinguishes fund balance classified based on the relative strength of the constraints that control the purposes for which specified amounts can be spent. Beginning with the most restrictive constraints, fund balance amounts will be reported in the following categories: a. Nonspendable fund balance — amounts that are not in a spendable form (e.g., inventory) or are legally or contractually required to be maintained intact (e.g., permanent fund principal). b. Restricted fund balance — amounts that can be spent only for the specific purposes stipulated by external parties either constitutionally or through enabling legislation (e.g., grants or donations). C. Committed fund balance — amounts that can be used only for the specific purposes determined by a formal action of the City Council. Commitments may be changed or lifted only by referring to the formal action that imposed the constraint originally (e.g., the council's commitment in connection with future construction projects). d. Assigned fund balance — amounts intended to be used by the government for specific purposes. Intent can be expressed by the City Council or by a designee to whom that governing body delegates the authority. (In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed but by definition, being account for in a separate fund, are intended to be used for the purpose of that fund). e. Unassigned fund balance — includes all amounts not contained in other classifications and is the residual classification of the general fund only. Unassigned amounts are available for any legal purpose. 4. Should City Council determine that it is prudent to mitigate current or anticipated risks (e.g., significant revenue shortfalls, natural disasters, significant economic downturns, or unanticipated expenditures), a budget amendment may be approved by City Council for current -year expenditures that decrease the General Fund's fund balance below target. 5. During every annual budget review and approval process, City Council shall consider and determine what dollar amount, or percentage of operating expenses, shall be identified in the adopted budget to add to a revenue shortfall reserve for unforeseen future circumstances. IN 43 6. If General Fund's fund balance falls below target, then the next year's budget must include projections of General Fund's fund balance levels to be considered as part of the annual budget process and the budget must include a plan to restore the General Fund's fund balance to target. 7. Cashflow rationale. The General Fund's principle sources of funds are Property Tax, Sales Tax and Utility & Franchise Taxes. The bulk of Property Taxes are received every year in April and October; Sales Tax and Utility & Franchise Taxes are received more evenly, although with some seasonality. Debt payments are disbursed mostly in June and December. ENTERPRISE FUNDS' OPERATING RESERVE TARGET Target is to maintain an Operating Reserve equivalent to 25% of total annual operating expenses. 2. Operating Reserve is Current Assets minus Current Liabilities, on the Statement of Net Position, Proprietary Funds, in the City's CAFR. 3. Unlike the general fund, which expenses long-term assets in the period purchased instead of depreciating, much of the asset value in an enterprise fund is not spendable. A large part of an enterprise fund's net position could be fixed assets which is not liquid, not a usable reserve. Whereas Fund Balance is simply akin to subtracting total liabilities from total assets, a Working Capital method of calculating Operating Reserves eliminates long- term assets and long-term liabilities from the calculation. 4. If the operating reserve is projected to fall below the target, then appropriate action, including rate increases and/or reductions in spending, will be taken to restore the reserve to the target level at the time of annual budget adoption. REPORTING & FORECASTING At time of annual audit completion, the Finance Director shall report the General Fund's fund balance and the Enterprise Funds' operating reserves to City Manager and City Council. 2. Mid -period fund balance calculations prove difficult, due to the cyclical aspect of inflows and outflows, the complex nature of one-time accruals and allocations available and completed only during year-end closing. Budgetary controls should instead be relied on during interim periods; quarterly financial revenue and expense reporting shall serve to ensure budgeted fund balance targets are on track. 3. At time of budget adoption, the Finance Department and City Manager will include forecasted General Fund's fund balance and Enterprise Funds' Operating Reserves in the material presented to City council prior to budget adoption. 3 44 POLICY GUIDANCE The accounting policies of the City of Yakima conform to Generally Accepted Accounting Principles (GAAP) and the City adopts the pronouncements of the Governmental Accounting Standards Board (GASB) as the nationally -accepted standard -setting body for establishing governmental accounting and financial reporting principles. 2. The city considers best practice advisories (whitepapers) of the Government Finance Officers Association (GFOA) to apply uniform standards and procedures of governmental finance management within the governmental accounting sector to the City's specific circumstances. 3. The responsibility for designating funds to specific classifications shall be as follows: a. Committed Fund Balance — the City Council, as the City's highest level of decision - making authority, shall establish, modify, or rescind a fund balance commitment by resolution. b. Assigned Fund Balance — the City Manager or the Director of Finance and Budget may assign fund balance to a specific purpose. 4. Order of Expenditure of Funds. When an expenditure can be charted to multiple categories of fund balance (e.g., a project is being funded partly by a grant, funds set aside by the City, and unassigned fund balance), the most restricted category will be used first, then the next -most restricted category(ies). I! 45 Investment Policy City of Yakima Adopted by City Council March 5, 2019 City of Yakima Finance Department 129 North 2nd Street Yakima, WA 98901 46 City OfYakima Investment Policy Table of Contents Purpose .......................................... 3 Policy............................................. 3 Ui Governing Authority 8. Enabling Legislation .................. 3 b. Delegation of Authority ----.3 K( Scope and Applicability .................. 4 V. Objectives a. Safety ....................................... 4 b. Liquidity .................................... 4 C. Yield ......................................... 5 V1. Prudence ........................................ 5 o. Ethics and Conflict of Interest —5 V||. Authorized Financial Dealers and Institutions ...................................... 8 VUi Authorized Investments o. Washington State Treasurer Local Government Investment Pool ......... 6 b. Agencies, Federal government - sponsored enterphseob|igadono....S n. Treasuries, Obligations ofthe U.G.. agencies, wholly -owned corporations, and aupoanotiona|a.... G d. Corporate notes .............................. 8 e. Washington State/local government bonds............................................. 7 [ Other-State/local government bonds............................................. 7 g. Same -county local government registered warrants ......................... 7 h. Bankers' acceptances .................... 7 i. Commercial paper .......................... 7 i Non-negotiable CDs -------.7 Diversification ................................ 7 Maximum Maturities ........................ 8 ingondCuntodv----- M Collateral iz@ti0n.............................. 8 Performance Standards .................. 8 a. Downgraded Securities ............. 8 Reporting and Disclosure @. Monthly ..................................... 9 b. Quarterly ................................... 9 Investment Strategy a. Buy and Hold ............................ 9 b. Segmented Portfolio ................. 9 Internal Controls ........................... 1U Review, Approval and Adoption —.1O Addenda: )(\/U. G-------------11 )(C{. Text ofWashington Statutes (RCVVG) ..-------------15 XX Text VfCity Municipal Code .......... 2O XXi Broker/Dealer Questionnaire ........ 22 XXU. Approved Broker/Dealer List ........ 25 XXUi Confirmation ofPolicy Receipt ...... 20 47 City of Yakima Investment Policy City of Yakima Department: Finance Effective Date: 03/05/2019 Policy Number: FB- 800 Authorized by: City Council Supersedes: Policy Dated 09/06/2011 Policy: Investment Policy 1. Purpose The purpose of this Policy is: • To establish investment objectives and parameters necessary to safeguard public funds entrusted to the City of Yakima, • To articulate City Council's intent for the governance over city investments • To communicate clear policy and strategy guidelines for city investment administration • To demonstrate to citizens, taxpayers and voters a transparent and accountable stewardship plan. The City's manageable cash ranges from $70 to $85 million, of which about $55 is invested in a laddered portfolio, cyclical liquidity is kept in the Washington State Treasurer's Local Government Investment Pool and operating cash is maintained in depository bank accounts. 11. Policy It is the policy of the City of Yakima to invest public funds in a manner that, giving first regard to safety, suitability and liquidity, will maximize long-term yield in conformance with State Statutes and Federal Regulations, and City Charter. 111. Governina Auth Enabling Legislation All investments shall be managed in a manner responsive to the public trust, consistent with state and local law, including the Revised Code of Washington (RCW), the City Charter and Municipal Code (RCW 39.59.020, MC 1.18.080). City Council retains governance -level fiduciary responsibility for the city investment portfolio, through the executive control of the City Manager. Delegation of Authority The City Council authorizes an Investment Committee (MC § 1.73.010) comprised of the City Manager or their designee, and Finance Director or their designee, to engage in investment - related transactions without prior approval. This policy provides for accountability and transparency to city council. Management responsibility for the investment program is delegated p. 3 of 26 48 City of Yakima Investment Policy to the Finance Director, (MC §. 1.18.080), who shall establish procedures for the operation of the investment program consistent with this investment policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions to provide adequate redundancy by properly trained and informed staff. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Director. The Director shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. All staff engaging in investment transactions shall attend public investment training. Staff shall not engage in any policy -allowed investment transaction that they cannot articulate a rationale for. Contracted Management Any external investment manager engaged to assist in the management of the city's investment portfolio will be held to the prudent investor standard of care (RCW 11.100.020). IV. Scope and Applicability The investment policy applies to all financial assets of the City of Yakima. These are accounted for in the city at Yakima's Comprehensive Annual Financial Report and include: ➢ General Fund ➢ Special Revenue Funds ➢ Capital Project Funds ➢ Enterprise Funds ➢ Internal Service Funds ➢ Trust and Agency Funds ➢ Any new fund created by Council, unless specifically exempted by Council. Investments of City Funds may be made on a pooled basis across all funds, with principal and interest apportioned for the benefit of the various participating funds or for the benefit of the general fund. (RCW 35.39.034) V. Objective The prime objectives of this City's investment activities shall be the suitability of every investment to the financial requirements of the city, considering, in priority order: ➢ Safety: Safety of principal is the foremost objective of the investment program. Investments of the City of Yakima shall be undertaken in a manner that seeks to ensure the preservation of principal in the overall portfolio. Each investment transaction shall be conducted in a manner to avoid principal loss arising from security default, institution default, broker -dealer default, safekeeping fraud, or the avoidable loss on the premature sale of an investment ➢ Liquidity: The City's investment portfolio will be structured to meet all expected obligations in a timely manner, to avoid premature sale of an investment at a loss of principal. This is to be achieved by comparing investment maturities with forecasted cash flows and maintaining sufficient liquidity for contingencies across all funds. A 3- to 5-year historical liquidity trend history, combining the city's main checking accounts, LGIP, and the investment portfolio, will clearly indicate annual seasonal low cashflows. p. 4 of 26 49 City of Yakima Investment Policy ➢ Yield, or Return on investment: The City's investment portfolio shall be designed with the objective of attaining as high a rate of return as prudently possible having first satisfied the objectives of Safety and Liquidity. VI. Prudence The standard of prudence to be used by investment officials shall be the "prudent investor standard," which, as enacted by State Statute (RCW 11.100.020), says: 1) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution. 2) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust." Investment officers acting in accordance with the written procedures and exercising due diligence shall be relieved of personal responsibility for individual security's credit risk or marketplace changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. Ethics and Conflicts of Interest Officers and employees involved in the investment process shall refrain from, or disclose, personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the City Manager any material financial interests in the financial institutions to conduct business with in this jurisdiction, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the City's portfolio. Employees and officers shall subordinate their personal investment transaction to those of the City of Yakima, particularly with regard to the time of purchases and sales. The intent of "disclosure:" an employee is unlikely to personally own a controlling interest in a security that becomes the best investment for the city such as a highly rated Microsoft or Coca- Cola medium -term note and should not have to sell their personal position in order to serve the city). Employees and officers shall refrain from, or disclose, any personal investment transactions with the same agents with whom business is conducted on behalf of the city and shall avoid, or disclose, transactions that might impair public confidence. Consistent with general City Policy, officers and employees involved in the investment process may not accept any valuable gift, favor or gratuity which is made on the basis of his or her position in the City's service. p. 5 of 26 50 City OfYakima Investment Policy Vi8'Authorized Financial Dealers and Institutions The Finance Director orhis/her designee will maintain ulist of broker/dealers, which are authorized to provide investment services. To be eligible to do business with YoNmu, o brOker/d88|ermuSt provide 8 Broker/Dealer Questionnaire that includes the following: audited fiDGOCi8| St8tGnOeDtS' CUFneOi securities -related licensing; proof Of [egiSiF@tiOO and |iC8OS8S held with the FiDGDdG| |DdUSirV RegU|@[Op/ Authority (F|NRA); proof of negiSi[8iiOD with the GtGi8 of Washington Securities Division; provide current active municipal client references; and certification Ofhaving read the Citv'Scurrent investment policy. /\Dannual review Ofthe financial condition of qualified bidders will be conducted by the Finance Director, or his/her designee. ViUU'Authorized Investments @i3Le St8tUieS permit k]C8| gOVe[ODleOLS in the SL8Le of Washington only the SDSCifiC iDVeSiDleOi9 permitted by state law, limited to the following: A. The primary investment instruments expected to be utilized in the City OfYaUkirn3'S Investment Portfolio are: )� State of Washington Local Government Investment Pool /LG|P\' the public funds investment account for investment and reinvestment by the state treasurer. RCVV 43.250.040 4- Agencies. Federal home loan bank notes and bonds, federal land bank bonds and federal national mortgage association notes, debentures and guaranteed certificates Of participation, or the Ob|i08iiOnS of any other government sponsored corporation whose obligations are or may become eligible as collateral for advances to member banks as determined by the board of governors of the federal reserve system; RCVV Treasuries. Certificotea, notes, or bonds of the United States, orother obligations of the United Sb3heS or its 8QeD[ieS' or of any 0Oq}Or@toD wholly 0VVDed by the government of the United States; or United St@U9G dollar denominated bVnd8, nVt8G. or other 0b|ig8bOnG that are issued or guaranteed by Gupn3nGU0n8| inGUtutionS, provided that, at the time Of iOmeS[[DeDt, the institution has the United Gt8heS government asits largest shareholder; RCVV39.59.040(4). 4- Corporate notes purchased on the secondary market; with o minimum credit quality rating of upper medium investment grade - at least by Standard and Poo/a. A2 by W1UOd«'S'O[AbvFitch -ODthe date Ufpurchase. RCVV39.59.U4O(8)and Washington State Investment Board Policy No. 2.05.500. B. The following secondary investment iOStRJ0eDtS are not expected to be routinely utilized in the City of Yakima's Investment Portfolio but are also authorized by State Statute and should b8disclosed and explained ODcouncil quarterly reporting: �- Bonds of the state of Washington and any local government in the state of VV3ShingtOn;"RCVV3S.5S.04O(1) �� General obligation bonds of m state other than the state of Washington and general 51 City of Yakima Investment Policy which bonds have at the time of investment one of the three highest credit ratings of a nationally recognized rating agency RCW 39.59.040 (2) ➢ Registered warrants of a local government in the same county as the government making the investment;" RCW 39.59.040 (3) -�OBankers' acceptances purchased on the secondary market. -where the issuing bank's credit rating at the time of investment is not less than one of the three highest ratings as rated by a nationally recognized rating agency and a short term credit rating at the time of investment is not less than P-1 as rated by Moody's and/or A-1 by Standard & Poor's and/or F-1 by Fitch Rating Agency. RCW 39.59.040 (6) Commercial paper purchased in the secondary market with maturities not exceeding 270 days, and with a short term credit rating at time of investment not less than A-1 by Standard & Poor's Rating Services and/or P-1 by Moody's Investors Service and/or F- 1 by Fitch Rating Agency. Furthermore, the long-term credit ratings of the issuer at the time of investment shall not be less than one of the three highest ratings as rated by a nationally recognized rating agency. RCW 39.59.040 (7) and Washington State Investment Board Policy No. 2.05.500 ➢ Non -Negotiable Certificates of deposit with financial institutions qualified by the Washington Public Deposit Protection Commission. (RCW 39.58.130) Prohibited Investments Equities (stocks), Collateralized mortgage obligations, Money market mutual funds, Inverse Floaters, Negotiable Certificates of Deposit, Repurchase and Reverse Repurchase Agreements and any investment type not expressly permitted by City Council in this policy are not eligible investments for the City. IX. Diversification Investments in securities shall not exceed the following percentages of the portfolio at time of purchase: Washington State's Local Government Investment Pool 100% Government Sponsored Agency Securities 100%, (40% per issuer) Treasury Securities 100% Corporate notes - 15%, (the lesser of 2% or $1 million per issuer) Bankers Acceptances 15% Commercial Paper 15%, (the lesser of 2% or $1 million per issuer) Same-State/Local Securities 15%, (the lesser of 2% or $1 million per issuer) Certificates of deposit 10%, (the lesser of 2% or $1 million per issuer) Other-State/Local Securities 5%, (the lesser of 2% or $1 million per issuer) Same -county local government issuer — only by city council resolution Staggered maturities are to be a component of the diversified investment strategy, employed to minimize reinvestment risk due to rate fluctuations building a reasonably laddered maturity schedule. p. 7 of 26 52 City of Yakima Investment Policy X. Maximum Maturities ➢ The average maturity of the portfolio will not exceed 2.5 years. (For the purposes of this calculation, the maturity date of callable securities will be the final maturity date). ➢ The expected and final maturity of any security will ordinarily not exceed 5-years; however, up to 10 % of the portfolio may be invested in securities with maturities of up to eight (8) years and the rationale will be disclosed on the next following quarterly treasury report. XI. Safekeeping and Custody Security transactions entered into by the City of Yakima shall be conducted on a delivery -versus - payment (DVP) basis. Securities will be held by third party custodian designated by the Finance Director, or his/her designee, and evidenced by safekeeping reports which will be reconciled monthly to the portfolio. Third -party custodial reports shall be required monthly, to list, at a minimum, each individual security, CUSIP, purchase date, cost, market value, par value, and maturity date. XII. Collateral ization State statute (RCW 39.58) requires that all deposits of public funds be made with qualified public depositaries, protected through the actions of the Public Deposit Protection Commission (PDPC), comprised of the State Treasurer, Governor and Lieutenant Governor. State law requires that all deposits of public funds over and above federally insured amounts (including Certificates Of Deposit) be collateralized in accordance with regulations of the PDPC. All collateral is held by the PDPC. The PDPC ensures public funds deposited in banks are protected should a financial institution become insolvent. The names of authorized public depositaries may be found at: https:Htre.wa.gov/pdpc-banks/ XIII. Performance Standards Benchmark. The City's cash management portfolio shall be managed using a comparison object of the yield of LGIP, the Washington State Treasurer -administered local governmental investment pool which is typically the next investment choice for available cash if not invested for longer. The City portfolio will have a longer average maturity than the 60- to 90-day average portfolio of the benchmark so it will be less volatile. This means it can be expected that the city portfolio's average yield will be trail the benchmark's yield in times of rising interest rates and lead the benchmark's yield in times of falling interest rates. Downgraded Securities. The city may, from time to time, be invested in a security whose rating is downgraded. In the event a rating drops below the minimum allowed by this policy, the Finance Director will review and recommend an appropriate plan of action to the City Manager and City Council. If the city utilizes an Investment Advisor, that Investment Advisor shall notify the city and recommend a plan of action within one month. The city may continue to hold a downgraded investment to maturity p. 8 of 26 53 City of Yakima Investment Policy if a probable outcome is the eventual realization of full value, rather than a realized loss if divested prior to maturity. XIV. Reporting Monthly Reports The Finance Director shall make a monthly report of all investment transactions to the city council. (RCW 35.39.032) Quarterly Reports. The Finance Director shall prepare a quarterly investment report to City Manager and City Council that provides a summary of the current investment portfolio and the individual transactions executed to show holdings and activities during the reporting period conform to the investment policy. The report should include the following: ➢ An asset listing showing par value, cost and market value, type of investment, issuer, days to maturity and interest rate of each security; ➢ Average days to maturity of the portfolio; ➢ Maturity distribution of the portfolio and distribution by type of investment. ➢ Credit quality of portfolio holdings; and, ➢ Average weighted yield to maturity of portfolio on investments ➢ Performance comparison to benchmark XV. INVESTMENT STRATEGY Buy and Hold. As a strategy, the City of Yakima's investments will not be actively traded, meaning that no attempt to "buy low and sell high" or "time the market" will be made. Investments purchased with the intent of providing investment income shall be intended to be held to maturity, relying on following a prudent course of action for income rather than predicting market direction. Securities may be sold before they mature if market conditions present an opportunity for the City to capture a benefit or to avoid a risk but the strategy will be primarily buy -and -hold. Portfolio Segmenting. In keeping with the priorities of Safety, Liquidity then Yield, the first considerations of investing will be the immediate operational needs and scheduled disbursements of capital expenditures and debt service payments. ➢ The Safety Segment of the Portfolio is held primarily in the State LGIP. This will allow for seasonal fluctuations, primarily the April/October inflows of Property Tax and outflows of capital projects. ➢ The Liquidity Segment of the portfolio is held primarily in the City's depository bank, and will be maintained at adequate levels to ensure availability. ➢ This Yield Segment of the portfolio is the portion of the city's cash reserves which, based on historical analysis, long-term budgetary planning or council -approved reserve policy, will not be subject to seasonal spending and can be invested comfortably long-term. This segment is invested in a laddered portfolio comprised of Agencies, Treasuries and other authorized investments. p. 9 of 26 54 City of Yakima Investment Policy XVI. Internal Controls The Office of the State Auditor requires that in accordance with Revised Code of Washington 43.09.260, the City of Yakima must undergo annual financial examinations performed by State Examiners. Investment management is to be included as part of the annual independent audit to assure compliance with this investment policy. XVI1. Investment Policy Review, Approval and Adoption The City of Yakima investment policy shall be adopted by resolution of the City Council. The policy shall be reviewed annually by the Finance Director and any significant modifications must be approved by the City Council. p. 10 of 26 55 City of Yakima Investment Policy Addendum: Glossary Accrued Interest— Interest earned but not yet received. Active Investment Management — the active trading of securities, selling prior to maturity and purchasing secondary issues, in an effort to earn higher portfolio yield by the continual monitoring of financial markets, spreads and pricing opportunities of individual securities. Requires substantially more staff time than passive investing. (see also Passive Investment Management) Agencies — (See Government Sponsored Entities) Entities chartered by Congress, such as: Fannie Mae (FNMA) Freddie Mac (FHLMC), Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB). These entities carry an implicit guaranty of the federal government. Amortization — a mathematical calculation that pays off a balance evenly while at the same time adding interest for every period. Asked — The price at which securities are offered. Bankers' Acceptance (BA) — A draft, or bin of goods, or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. Bid — The price offered for securities. Broker— A broker brings buyers and Sellers together for a commission paid by the initiator of the transaction or by both sides; he does not hold a position. In the money market, brokers are active in markets in which banks and institutional investors buy and sell bills, notes or bonds and in interdealer markets. Bullet (Non -callable Bond) — a bond issue in which all of its outstanding principal amount may not be redeemed before maturity by the issuer, therefore assuring interest earnings through to the end maturity date. Callable Bond — a bond issue in which all or part of its outstanding principal amount may be redeemed before maturity by the issuer Certificate of Deposit (CD) — a deposit of funds for a specified period of time that earns interest at a specific interest rate. Collateral — Securities, evidenced by a 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 moneys. Comprehensive Annual Financial Report (CAFR) — The independently -audited annual report for the City of Yakima. It includes entity -wide financial statements as well as financial statements for major funds and fund types, notes to the financial statements and required schedules. Certificates of Deposit (CD) — A time deposit with specific maturity and interest rate evidenced by a certificate. p. 11 of 26 56 City of Yakima Investment Policy Commercial Paper — Unsecured short-term corporate obligations with maturities less than 270 days. Coupon — (a) The annual rate of interest that a bond's issuer promises to pay the bondholder as a percentage of the bond's face value. Custody— (Safekeeping) A service to customers rendered by banks for a fee whereby securities are held by an independent third party for protection from fraud or theft. Dealer — A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for their own account. Delivery versus Payment (DVP) —Delivery of securities with a simultaneous exchange of money for the securities used in conjunction with a third -party custodian to assure integrity of the exchange and to prevent fraud or misdirection, similar to an escrow process in real estate. (Delivery versus receipt is a delivery of securities with an exchange of a signed receipt for the securities.) Discount — The difference between the cost price of a security and its value at maturity when quoted at lower than its face value. A security selling below original offering price shortly after sale is also considered to be at a discount. This can be the normal mathematically equalizing of the stated rate of an investment with prevailing market rates. Discount Securities — Non -interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, U.S. Treasury and AgeRGy bills. Diversification — Dividing investment funds among a variety of securities offering independent returns and credit quality. Federal Credit Agencies — Agencies of the Federal government and guaranteed by the full faith and credit of the US Government set up to supply credit to various classes of institutions and individuals, e.g., Ginnie Mae, Sallie Mae, Tennessee Valley Authority. Fannie Mae — The trade name for the Federal National Mortgage Association (FNMA), a U.S. GSE (government -sponsored entity). Farmer Mac — The trade name for the Federal Agricultural Mortgage Corporation (FAMC), a GSE (government -sponsored entity). Federal Funds Rate — The target rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Open Market Committee. Federal Open Market Committee (FOMC) — Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member while the other presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve funds target rate and guidelines regarding purchases and sales of Governments Securities in an open market as a means of the influencing the volume of bank credit and money supply in the economy. p. 12 of 26 57 City OfYakima |OV8Stnl8rt Policy Federal Reserve System —The central bank of the United States created by Congress and consisting of seven rngnober Board of Governors in Washington, DC. There any 12 Region Banks and about 57O0commercial banks that are members cfthe system. Federal Deposit Insurance C0q}OyGtiOn (FDIC) —A Federal Agency that iOSUFeS bank deposits, currently capped 8t$25O.000dollars per deposit. Financial Industry Regulatory Authority, Inc. - a private CO[pO[@bOD that 8CtS GS @ self - regulatory organization (SRO). F|NRA is the successor to the National Association of Securities Dealers, Inc. (NASD) and the member nygu|gUnn, enforcement and arbitration operations of the New York Stock Exchange. Freddie MaC—The trade D8Dle for the Federal Home LU8D K8Odo8ge C0[pO[3UOO (FHLK4C). G GGE(gOwSrnrnent-Sp0nS0nSd8nUtv). G/nn/eMae—the trade name for the Government National Mortgage Association (GNMA), a GSE (govern nnent-sponsoredenUty). Government Sponsored Entities 8GSE; —(^Aoenoios'') Entities chartered byCongress, such as: Fannie Mae (FNMA) Freddie K4ac(FHLyNC). Federal Home Loan Hank/FHLB\. Federal Farm Credit Bank (FFCB). These entities carry an implicit guaranty of the federal government. h7tem*s/ Rate F7isk— the risk associated with declines or rises in interest rate that cause on investment in a fixed -income security to increase or decrease in market value. Investment Committee — Comprised of the City Manager and Finance Director or their designees. The committee is authorized to make investments of city funds, as authorized by law, and, at any time, to liquidate investments, and to engage in all such transactions without prior consent of city council, but subject tOinvestment policy reporting requirements. Leverage - |DC[e8SiDg the output compared to the input. In iDVeSL0eDtS. @ negative application VVOU|d be multiplying the yield OD investable funds by investing using borrowed funds in addition t0cash onhand; the risk is that when a loss is experienced, the borrowed funds must be repaid in full, multiplying the loss i0the investor. Liquidity — A liquid asset is one that can be converted easily and rapidly into cash L/quiditvRisk— the risk that an ODdtv (i.e. the city) may be UO8b|e to meet short term financial demands due tothe inability to convert investments to cash without loss of principal and/or interest income. Market Risk— the risk that the value of @ security will rise Or decline as G n8Su|t Of changes in market conditions, typically interest rates. Market Value —The price at which o security is trading and could presumably be purchased or sold. Maturity — the date upon which the principal of an investment is due and paid. New Issue — An investment 8vRi|8b|8 at the time Of issuance, and therefore not subject to the secondary market that would involve competitive bidding or price uncertainty. 58 City of Yakima Investment Policy Non -callable Bond (Bullet) — a bond issue in which all of its outstanding principal amount may not be redeemed before maturity by the issuer, therefore assuring interest earnings through to the end maturity date. Par Value — (face value) the amount of principal that must be paid at maturity. Passive Investment Management- investing methodically, managing primarily diversification and maturities, with the intention of holding to maturity rather than seeking to make gains through market price fluctuations. Principal - the original sum of money put into an investment at time of purchase. Reinvestment Risk - the risk that the proceeds from the payment of principal and interest would have to be reinvested at a lower rate than the original investment. This is a risk of all investments regardless of maturity date or call feature because of the uncertainty of future interest rates. Call features increase reinvestment risk because of the added uncertainty; issuers typically call their bonds in a declining interest rate environment. Safekeeping — A service to customers rendered by banks for a fee whereby securities and valuables of an types and descriptions are held in the bank's vaults for protection. Secondary Market — A market made for the purchase and sale of outstanding issues following the initial distribution. SEC Rule 15C3-1 — See uniform net capital rule. Securities and Exchange Commission — Agency created by Congress to protect investors in securities transactions by administering securities legislation. Treasury Bills — A non -interest bearing discount security issued by the U.S. Treasury to finance the National Debt. The above most bills are issued to mature in three months, six months, or one year. Treasury Bond — Long-term U.S. Treasury securities having initial maturities of more than 10 years. Treasury Notes — Intermediate term coupon bearing U.S. Treasury securities having initial maturities of from one to ten years. Yield — the rate of annual income return on investment, expressed as a percentage. (A) income yield is obtained by dividing the current dollar income by the face value of the security. (B) net yield or yield to maturity is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. p. 14 of 26 59 City of Yakima Investment Policy Addendum — Text of Washington Statutes (RCW) Governing Investments of Public Funds by Local Governments RCW 11.100.020 Management of trust assets by fiduciary. 1) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution. 2) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust. 3) Among the circumstances that a trustee shall consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries: a) General economic conditions; b) The possible effect of inflation or deflation; c) The expected tax consequences of investment decisions or strategies; d) The role that each investment or course of action plays within the overall portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property; e) The expected total return from income and the appreciation of capital; f) Other resources of the beneficiaries; g) Needs for liquidity, regularity of income, and preservation or appreciation of capital; and h) An asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries. 4) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets. 5) A trustee may invest in any kind of property or type of investment consistent with the standards of this section. 6) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise. RCW 35.39.030 Excess or inactive funds —Investment. Every city and town may invest any portion of the moneys in its inactive funds or in other funds in excess of current needs in: (1) United States bonds; (2) United States certificates of indebtedness; (3) Bonds or warrants of this state; (4) General obligation or utility revenue bonds or warrants of its own or of any other city or town in the state; (5) Its own bonds or warrants of a local improvement district which are within the protection of the local improvement guaranty fund law; and (6) In any other investments authorized by law for any other taxing districts. RCW 35.39.032 Approval of legislative authority —Delegation of authority —Reports. No investment shall be made without the approval of the legislative authority of the city or town expressed by ordinance: PROVIDED, That except as otherwise provided by law, the legislative authority may by ordinance authorize a city official or a committee composed of several city officials to determine the amount of money available in each fund for p. 15 of 26 60 City of Yakima Investment Policy investment purposes and make the investments authorized as indicated in RCW 35.39.030 as now or hereafter amended and the provisions of RCW 35.39.034, without the consent of the legislative authority for each investment. The responsible official or committee shall make a monthly report of all investment transactions to the city legislative authority. The legislative authority of a city or town or city official or committee authorized to invest city or town funds may at any time convert any of its investment securities, or any part thereof, into cash. RCW 35.39.034 Investment by individual fund or commingling of funds —Investment in United States securities — Validation. Moneys thus determined available for this purpose may be invested on an individual fund basis or may, unless otherwise restricted by law be commingled within one common investment portfolio for investment. All income derived from such investment shall be apportioned and used for the benefit of the various participating funds or for the benefit of the general or current expense fund as the governing body of the city of [or] town shall determine by ordinance or resolution: PROVIDED, That funds derived from the sale of general obligation bonds or revenue bonds or similar instruments of indebtedness shall be invested, or used in such manner as the initiating ordinances, resolutions, or bond covenants may lawfully prescribe. Any excess or inactive funds on hand in the city treasury not otherwise invested, or required to be invested by this section, as now or hereafter amended, may be invested by the city treasurer in United States government bonds, notes, bills, certificates of indebtedness, or interim financing warrants of a local improvement district which is within the protection of the local improvement guaranty fund law for the benefit of the general or current expense fund. All previous or outstanding investments of city or town funds for the benefit of the city's or town's general or current expense fund which have been or could be made in accordance with the provisions of this section, as now or hereafter amended, are declared valid. RCW 39.58.020 Public funds —Protection against loss. All public funds deposited in public depositaries, including investment deposits and accrued interest thereon, shall be protected against loss, as provided in this chapter. RCW 39.58.030 Public deposit protection commission —State finance committee constitutes —Proceedings. The Washington public deposit protection commission shall be the state finance committee. The record of the proceedings of the public deposit protection commission shall be kept in the office of the commission and a duly certified copy thereof, or any part thereof, shall be admissible in evidence in any action or proceedings in any court of this state. RCW 39.58.050 Collateral for deposits —Segregation —Eligible securities. (1) Every public depositary shall complete a depositary pledge agreement with the commission and a trustee, and shall at all times maintain, segregated from its other assets, eligible collateral having a value at least equal to its maximum liability and as otherwise prescribed in this chapter. Eligible securities used as collateral shall be segregated by p. 16 of 26 City OfYakima Investment Policy deposit with the depoaitan/a trustee and shall be doadv designated as security for the benefit ofpublic depositors under this chapter. (2) Securities eligible as collateral shall be valued at market value, and the total market V8|US of securities pledged in 8CCOPd8OQe with this chapter Sh@|| not be reduced by VViihd[@VV@| or SUbStiiUUOn of securities except by prior 8UthO[iz@bOD' in writing, by the COrnOliSSiOD. (9)The public depositary shall have the right tUmake substitutions Uf@Dequal O[greater amount ofeligible securities atany time. (4) The income from the securities which have been segregated as collateral shall belong tOthe public depositary without restriction. (5) Each of the following enumerated daaaea of aeuuritiea, providing there has been no default in the payment of principal or interest thereon, shall be eligible to qualify as COU8i8[8|: (@) Certific8L8s, notes or bonds of the United States, or other Ob|ig8UunS of the United States Orits agencies, Or0fany corporation wholly owned bythe government Ofthe United States; (b) 8tete, nountv, nnuninipa|, or school district bonds or warrants of taxing districts of the state ofWashington orany other state ofthe United States, provided that such bonds and warrants shall be only those found to be within the limit of indebtedness prescribed by law for the taxing district issuing them and tobegeneral obligations; (c) The obligations Of any United States government -sponsored corporation xvhOS8 ub|igubuna are or may become eligible as collateral for advances to member banks as determined bythe board ofgovernors ofthe federal reserve system; (d) Bonda, notea, orother securities or evidence of indebtedness constituting the direct and general obligation ofofederal home loan bank orfederal reserve bank; (e) Revenue bonds of this state or any authority, board, commission, committee, or similar agency thereof, and any municipality or taxing district of this state; (f) Direct and general obligation bonds and warrants of any oity, tovvn, nountv, school district, port district, or other political subdivision Of any state, having the pOVve[ to levy general taxes, which are payable from general advalorem taxes; (g) Bonds issued by public utility districts as authorized under the pn3ViSi0OS of Title 54 R{}VV, as now O[hereafter amended; (h) Bonds of any city of the state Of VVR8hiDgtVD for the p8yDlRDt of which the 8Dtin8 [eVeOUeS of the Cih/'S water system, power and light system, or both, |eSS 08iDteD8DCe and operating cootn, are irrevocably pledged, even though such bonds are not general obligations ofsuch city. (0) In addition to the securities enumerated in this section, the commission may also accept as collateral a letter of credit from a federal home loan bank or a federal reserve bank on behalf of a public depositary, naming the commission as beneficiary. Such letters are not subject tU 8 completed depositary pledge agreement. AS such, the C000iSSiOD must act @Gthe safekeeping agent for letters 0fcredit. (7) A public depositary may also segregate such bonds, securities, and other obligations as are designated to be authorized security for public deposits under the laws of this state. (8) The commission may determine by rule or resolution whether any security, whether or not enumerated in this section, is or Sho|| n8rnoin eligible as collateral when in the commission's judgment itiadesirable ornecessary todoso. RCW3S.50.135 Limitations ODdeposits. Notwithstanding RCVV 39.58.130. (1)aggregate deposits received by public depositary 62 City of Yakima Investment Policy percent of the value of the depositarys net worth, nor (2) shall the aggregate deposits received by any public depositary exceed thirty percent of the total aggregate deposits of all public treasurers in all depositaries as determined by the commission. However, a public depositary may receive deposits in excess of the limits provided in this section if eligible collateral, as prescribed in RCW 39.58.050, are pledged in an amount equal to one hundred percent of the value of deposits received in excess of the limitations prescribed in this section. RCW 39.59.010 Definitions. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter. (1) "Bond" means any agreement which may or may not be represented by a physical instrument, including but not limited to bonds, notes, warrants, or certificates of indebtedness, that evidences an obligation under which the issuer agrees to pay a specified amount of money, with or without interest, at a designated time or times either to registered owners or bearers. (2) "Local government" means any county, city, town, special purpose district, political subdivision, municipal corporation, or quasi -municipal corporation, including any public corporation, authority, or other instrumentality created by such an entity. (3) "State" includes any state in the United States, other than the state of Washington. RCW 39.59.020 Authorized investments —Local government authority. (1) Local governments in the state of Washington are authorized to invest their funds and money in their custody or possession, eligible for investment, in investments authorized by this chapter. (2) Nothing in this section is intended to limit or otherwise restrict a local government from investing in additional authorized investments if that local government has specific authority to do so. RCW 39.59.040 Authorized investments —Bonds, warrants, certificates, and other investments. Any local government in the state of Washington may invest in: (1) Bonds of the state of Washington and any local government in the state of Washington; (2) General obligation bonds of a state and general obligation bonds of a local government of a state, which bonds have at the time of investment one of the three highest credit ratings of a nationally recognized rating agency; (3) Subject to compliance with RCW 39.56.030, registered warrants of a local government in the same county as the government making the investment; (4) 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; or United States dollar denominated bonds, notes, or other obligations that are issued or guaranteed by supranational institutions, provided that, at the time of investment, the institution has the United States government as its largest shareholder; p. 18 of 26 63 City of Yakima Investment Policy (5) Federal home loan bank notes and bonds, federal land bank bonds and federal national mortgage association notes, debentures and guaranteed certificates of participation, or the obligations of any other government sponsored corporation whose obligations are or may become eligible as collateral for advances to member banks as determined by the board of governors of the federal reserve system; (6) Bankers' acceptances purchased on the secondary market; (7) Commercial paper purchased in the secondary market, provided that any local government of the state of Washington that invests in such commercial paper must adhere to the investment policies and procedures adopted by the state investment board; and (8) Corporate notes purchased on the secondary market, provided that any local government of the state of Washington that invests in such notes must adhere to the investment policies and procedures adopted by the state investment board. RCW 43.250.040 Authority of official to place funds in the public funds investment account --Investment of funds by state treasurer --Degree of judgment and care required. If authorized by statute, local ordinance, resolution, or other appropriate official action, the state treasurer, a government finance official or financial officer or his or her designee, or authorized tribal official, may place funds into the public funds investment account for investment and reinvestment by the state treasurer in those securities and investments set forth in RCW 43.84.080 and chapter 39.58 RCW. The state treasurer shall invest the funds in such manner as to effectively maximize the yield to the investment pool. In investing and reinvesting moneys in the public funds investment account and in acquiring, retaining, managing, and disposing of investments of the investment pool, there shall be exercised the judgment and care under the circumstances then prevailing which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of the funds considering the probable income as well as the probable safety of the capital. p. 19 of 26 64 City of Yakima Investment Policy Addendum — Text of City Municipal Code 1.73.010 Investment committee created —Authority. There is created an investment committee composed of the city manager and the city's director of finance and his/her designees as may be assigned by the city manager and/or the director of finance from time to time. The committee is authorized to make investments of city funds, as authorized by law, and, at any time, to convert investments, or any part thereof, into cash, and to engage in all such transactions without the consent of the city council being first obtained for each such transaction. 1.73.020 Officers of investment committee. The city manager is appointed as chairman of the investment committee to preside at all meetings thereof; provided, that the city manager shall designate some other member of the investment committee as chairman thereof to preside at any meeting from which the city manager may be absent. The finance director, or her designee, is appointed as secretary of the investment committee, and shall maintain a record of the minutes of each meeting of the investment committee, together with a record of all strategy decisions. 1.73.030 Meetings of investment committee. The investment committee shall meet at least semi-annually, at a time designated by the city manager. Additional meetings may be called by the city manager, from time to time, as he deems necessary or desirable for the best interests of the city; provided, the function of the investment committee is deemed to be continual so that the city manager may direct that any two members of the committee may perform functions of the investment committee at any time without a special meeting being called for that purpose. 1.73.040 Report to city council. The finance director shall submit to the city council a quarterly report of all investment transactions of the city of Yakima during the quarter. The report shall be in writing, and shall be submitted to the city council at a regular city council meeting. 1.18.080 Department of finance and budget. The department of finance and budget, under the general direction of the director of finance and budget, shall perform the responsibilities and duties generally described as follows: 1) Financial Services. Under the supervision of the financial services manager, this office shall: a) Compile estimates for the annual budget; b) Maintain a general accounting system for the city government and exercise budgetary control over all expenditures by offices and departments; c) Perform internal audits of all city financial affairs; d) Prepare a monthly report of the fiscal activities of all funds for the preceding month and such other reports as may be required by the city manager; e) Determine the structure and operational characteristics of all accounting systems used in the city government; p. 20 of 26 W City of Yakima Investment Policy f) Maintain control and a running inventory of all fixed assets of the city; g) Maintain a uniform utility accounting system for the water and sewer utilities as required by state law; h) Be responsible for the receipt, custody and disbursement of all city funds, all local improvement district funds, and other trust funds, keeping accurate accounts of all collections and disbursements for each fund; i) Be the custodian of all city investments and bank collateral, investing idle funds as may be prudent and lawful, - Prepare and submit all financial statements and reports required by law; k) Prescribe the times at and manner in which monies received by the several offices and departments of the city shall be paid into the treasury or deposited in a bank, 1) Make deposits of city funds in banks in the manner prescribed by law, m) Purchase and sell bonds for the benefit of local improvement district funds and the local improvement district guaranty fund; n) Maintain and supervise a risk management program covering city buildings, equipment and personnel; o) Maintain an office for the purpose of receiving all money paid as bail for nonmoving traffic violation citations; p) Perform such other services as may be required by law or by the director of finance and budget. p. 21 of 26 66 City of Yakima Investment Policy Addendum — Broker/Dealer Questionnaire The Central Washington city of Yakima, incorporated in 1886, provides a full range of municipal services, including general government, public safety (police and fire), streets, community development, planning and zoning, code enforcement, airport, cemetery, parks and recreation, and municipal services such as water treatment, wastewater, refuse and public transit. Roughly 800 employees serve about 93,000 residents covering about 70 square miles with an annual operating budget of around $250 million. The City's manageable cash ranges from $70 to $85 million of which about $55 is invested principally in GSE medium term notes with remaining liquidity maintained in the Washington State Treasurer's Local Governmental Investment Pool LGIP. The City has adopted a written Investment Policy that regulates the standards and procedures used in its cash management activities. The most current policy is publicly available on the city website and should be reviewed prior to completing this form. Firm Name: Year Founded: Corporate office address: Telephone #s: Principal, Managing Director or Partner: Name Title Direct phone E-mail address Is your firm a broker (does not own securities being offered Is your firm a dealer (does own securities being offered)? _ Local office address: Please attach a bio or resume of the primary and secondary representatives covering this account, including securities -related employment history, licensing, certificates, complaints, disciplinary action, arbitration, litigation: Primary Representative: Name Title Direct phone E-mail address Secondary Representative: Name Title Direct phone E-mail address p. 22 of 26 M City OfYakima Investment Policy Provide proof of registration with State of Washington Provide proof of Financial Industry Regulatory Authority (F|NRA) Provide documentation that your firm iaqualified under SEC rule 15C3-1 (Uniform Net Capital RU|8) Provide most recent audited financials |Syour firm iSexamined by and subject torules and regulations of: FDIC SEC NYSE Comptroller ofCurrency Federal Reserve Gyatarn List three current, active, comparable, municipal client references: Entitv Name Contact Address Phone /E-mail EnU1VName Contact Address Phone /E-mail Entitv Name Contact Phone / E-mail Oattached ONA 11 attached ii NA Eli attached ONA El attached 10 NA What market sectors are you and your firm currently involved? (Please feel free to provide additional information regarding specialization in any of the following market sectors). Firm Involvement US Treasuries UGAgency Bonds Washington State Bonds Municipal Bonds Corporate Bonds CDAR8 Cornnneroio| Paper (]the[ Broker Involvement Please provide your normal custody and delivery process, including specific banking What was your firm's total volume in US Government and agency securities trading last year? p.23of2O 68 City OfYakima Investment Policy Has this firm, or the representatives assigned to this account, been subject to a regulatory agency, state or federal investigation for alleged improper, disreputable, unfair or fraudulent activities related to the sale of securities or rnunay market instruments that neuu|&ad in u SUSpeDSiOO or censure? U `/eS (attached) O NO Is there OUiStGDdiDg litigation which VVOU|d [O@te[i@||y affect your financial stability? O Yes (attached) U No [}0you provide any fixed income research and economic commentary? O Yes (attached) O NO Describe the precautions taken by your firm to protect the interests of the public when dealing with @ |OC8| public entity. O Attached O NA Has any client sustained a loss on a securities transaction engendered from a misunderstanding or misrepresentation of the risk characteristic of a financial instrument by your firm? O Yes (attached) O NO Please confirm that you are: (1) familiar with the Revised Code of Washington (RCW) Sections 39.59.010 et al. (2) have read, understand and agree to comply with the provisions of City of Yakima's current investment policy by signing below. Name: Y0g: Nome: Title: Name: Title: Signature: Date: Signature: Date: Signature: Date: p.24of20 69 City of Yakima Investment Policy Approved Broker/Dealer List (Pending) This revision of the City's Investment Policy institutes a Broker/Dealer Questionnaire process. This page will list those that have submitted complete BDQs and are approved qualified firms. p. 25 of 26 70 City OfYakima Investment Policy Addemdumn—AckmomrVedgenmentmf Receipt/Adherence tmCurrent Policy City OfYakima requires 8Oannual certification from authorized Financial Dealers and Institutions Of having read the CU[ReOi investment policy. It is the iOh9Ot of the City of Yakima to pnO-@Ctim9|y contact current existing fiD8DCi8| iDEtitUb0OS 8DDU8||y' or at any change in the Sih/S iDm8StDl8rt policy, and to nl@iO[8iD the CU[Ren[ investment policy on iheCity'S pUb|iCVVebSit8. This is t3acknowledge receipt Ofthe City 0fYakim@'Scurrent Investment Policy adopted bvCity Council OnO3/05/2O19. Entity name: Name: Signature: Please sign and submit via mail or email to: City OfYakima 129North 2»,Street, Finance Department Yakima, WA 88801 Title: Date: Current staff contact information iSavailable Onthe City VVebSdH: httpS://wVVVV.y@kiOO@VVG.QOV/SerYiQeS/fiDGDCe/ p.28of20 R Approved: 9122120 City of Yakima Administrative Code ADM 3-500 Effective 0912212020 72 Contents MISSION/VISION/GOALS ............. ................... ............ __........ ................ ,...,.......... .............. ,............ ............ 3 1. CITY PURCHASING DIVISION CODE OF ETHICS..............................................................................4 11. REQUISITION APPROVAL LIMITS AND SIGNATURE AUTHORITY....................................................6 III. PURCHASE ORDERS.....................................................................................................................6 IV. GRANT & FEDERAL FUNDING......................................................................................................7 V. CONTROLLED COMMODITIES......................................................................................................8 VI. HOW TO PURCHASE MATERIALS, SUPPLIES, EQUIPMENT (Unrelated to Services, A&E or Construction/Public Work).................................................................................................................8 VII. HOW TO PURCHASE CONSTRUCTION (Public Work) ACTIVITIES: ................................................. 14 Vill. HOW TO PURCHASE ARCHITECT AND ENGINEERING SERVICES: .................................................. 20 IX. HOW TO PURCHASE ORDINARY OR "PURCHASED" SERVICES: .................................................... 20 X. HOW TO PURCHASE PROFESSIONAL SERVICES: .......................................................................... 20 XI. HOW TO PURCHASE PERSONAL SERVICES: ................................................................................. 21 XII. HOW TO LEASE: ........................................................................................................................ 21 XII1. HOW TO DECLARE AN EMERGENCY: .......................................................................................... 22 XIV. HOW TO DECLARE A SOLE SOURCE (or Single Source): ............................................................... 24 XV. DISPOSAL OF SURPLUS PROPERTY.............................................................................................26 XVI. TRADE-INS................................................................................................................................26 XVII.CAYENTA PROCEDURES.............................................................................................................27 XVII1. FREIGHT............................................................................................................................27 XIX. DEFINITIONS.............................................................................................................................29 City of Yakima Procurement Procedure Manual - Policy ADM 3-500 2 73 Welcome to Purchasing I MISSION • Use a cooperative, collaborative approach in understanding customers' needs while helping to expedite purchasing processes. • Ensure processes are consistent, timely, efficient, seamless and promote legal compliance and fiscal responsibility. • Provide easy to use tools and accessible information which allows customers to provide services to the public. • Provide service in a professional, knowledgeable and respectful manner. • Look for opportunities to be innovative and resourceful. • Ensure public funds are responsibly spent in a transparent and fair manner. Purchasing facilitates the timely procurement of goods and services to help customers fulfill their !' missions by providing cost effective opportunities to purchase quality goods and services at the best value while conducting business in a legal, fair open, and competitive manner. • Maintain and expand relationships with vendors and purchasing organizations, and promote fair and equitable opportunities for vendors. • Educate City departments on the services provided by Purchasing and their legal requirements and obligations. • Develop seamless procurement processes and procedures that comply with each jurisdiction's legal requirements. • Develop and utilize cost-effective methods for purchasing using best management practices and technological tools, where appropriate. • Maximize the effectiveness and efficiency of administrative policies, internal operations and public information. • Create and maintain a positive and cooperative culture that respects employees, customers and vendors. • Hire and retain professional, well trained, and knowledgeable employees. Quality eie, Responsible Public Procurement City of Yakima Procurement Procedure Manual - Policy ADM 3-500 3 74 1. CITY PURCHASINGDIVISION The public must have confidence in the integrity of its government. The purpose of this Code of Ethics is to apply and give guidance to all Purchasing Division employees so that they may conduct themselves in a manner which will be compatible with the best interest of themselves and of the City of Yakima. Proper operation of the City Purchasing Division requires that: ➢ Actions of Purchasing Division employees be impartial and fair. ➢ Government decisions and policies be made in the proper channels of government structure. ➢ Public employment not be used for personal gain. ➢ Purchasing Division employees may neither solicit, accept, nor agree to accept any gratuity for themselves, their families or others that results in their personal gain which may affect their impartiality in making decisions on the job. Discounts or concessions realistically available to the general population, items received that do not result in personal gain, and samples to the City used for general City use are examples of items that are not gratuities. Personal judgment should be used and questions regarding particular problems/events should be referred to the employee's manager. Goals: ➢ To protect and enhance the reputation of the City of Yakima and its employees. ➢ To treat all citizens equally with courtesy and impartiality, and refrain from granting any special advantage to any citizen beyond what is available to all citizens. ➢ To give efficient, productive, and economic service to the public. ➢ To avoid real or potential conflicts between private and public duties, remembering that the public interest must be the principal concern. ➢ To keep confidential all information acquired by reason of one's position, which may be used for personal or financial gain for the employee or other persons. ➢ To refrain from securing special privileges or exemptions for one's self or other persons that are not available to all citizens. ➢ To avoid receiving, soliciting or otherwise obtaining anything of value that is greater than nominal intrinsic value from any other public official, employee or citizen which is intended to influence the performance of official duties. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 4 ER ➢ To disclose to the appropriate authority the nature and extent of any financial or personal interest in a City contract, legislation, or in any type of transaction involving the City when participating in the development of or giving an official opinion on the matter. Purchasing Division Employees shall: Certify, in writing, that they have read and understand this policy. Non-compliance may result in disciplinary action, per the Civil Service rules at the discretion of City Management. " aj Main Line:509-575-6093 Maria .Mayhue jal(imawa.Eov Acting Procurement Manager 509-575-6094 Linda.Kuntz akimawa. ov Purchasing Assistant (509) 249-6863 Susan.Knotts@yakimawa.gov Buyer 2 509-575-6095 Christina. Pacer@yakimawa.gov Buyer 1 509-576-6696 City of Yakima Procurement Procedure Manual - Policy ADM 3-500 76 s REQUISITION APPROVAL LIMITSAUTHORITY See "City of Yakima ADM 2-200" on ICE for Delegation of the City Manager's Authority to approve requisitions (which are routed automatically through Cayenta) and sign contracts. Department Heads and Division Managers DO NOT have the authority to sign contracts UNLESS the City Council has delegated authority over to you via Resolution. Only the City Manager (or authorized designee) has the authority to sign contracts. See Definitions Section "XIX" to determine what constitutes a "Contract". I11. PURCHASE ORDERS Only Purchasing has the authority to produce and sign official Purchase Orders for the City of Yakima. If you need a hardcopy of a PO for any dollar amount (some vendors require a hardcopy, even for a $100 purchase), contact Purchasing and we will print one out, sign, scan and email it to you. A. WHICH TYPE OF PURCHASE ORDER TO USE There are several different types of PO's. Choose which one is right for you: 1) Direct PO's — Reserved for the use of Equipment Rental & Water Storekeepers, and Purchasing Buyers. Cayenta Department Buyers do not have the authority to use Direct PO's. 2) Direct Pays — Are to be used only for: a. Subscriptions (e.g. magazine, newspaper, dues, etc. — not software). b. Utility bills (power, sewer, garbage, phone, water, etc.). c. Credit Invoices. d. Employee reimbursement for tools, uniforms, boots, and CDL's. e. Pension Payments NOTE: For unusual circumstances and exceptions, contact the Finance Director. 3) Blanket PO's - Not allowed as of 1/1/18. Blankets do not work in Cayenta as intended. If this changes, we will let you know. 4) Regular PO's (PREFERRED). PR's go through the MLA process and get turned into regular PO's. 5) Reverse Regular PO -A regular PO with the quantity set as the dollar amount and the dollar amount set as "ONE", therefore they are reversed. Partial receiving against the PO may be done as invoices are received throughout the year and your PO will show a remaining balance. MLA is only done once. Funds are encumbered upon PO creation. 6) Do not use a PO when it makes more sense to use a PCard. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 6 m I FEDERAL FUNDING Are you trying to procure something involving any type of grant or federal funding? STOP! Purchases or Work that have received a grant or federal funding may not be covered by this manual. These types of purchases often have their own procurement requirements. Contact Purchasing for advice on how to proceed. We will review the procurement section of your specific grant and guide you on what steps to take next. When spending Federal Funding, the City complies with and has a separate policy for "Uniform Administrative Requirement, Cost Principals, and Audit Requirements for Federal Awards", published in Title 2 of the Code of Federal Regulations, (2 CFR 200), specifically 2 CFR 200.318 through 200.6. ALL GRANTS ARE DIFFERENT, so one size does not fit all. Some grants simply require you to use your own procurement rules, while others require you to insert their contracting clauses into your contract. Whether funding is City, State, or Federal, we are required to follow the most restrictive regulations. According to Procurement Guidance for Recipients and Subreci ients Under 2 C.F.R Part 200 (Uniform Rules): Direct Conflicts Between the Federal Procurement Standards and the Procurement Standards Applicable to [Non -Federal Entities] NFEs Other Than States. The Federal procurement standards are relatively brief. They only address certain, limited procurement concepts and do not address all possible procurement issues. Where the Federal procurement standards do not address a particular area of procurement, FEMA expects the NFE to apply local, state, and/or tribal procurement standards or regulations — whichever applies to the particular NFE. However, where a direct conflict exists between a Federal procurement standard and a local, state and/or tribal procurement standard or regulation, FEMA expects the NFE to apply the more restrictive procurement standard. When you're ready to enter your requisition into Cayenta, note the type of funding, e.g. Federal/FTA/FAA/FEMA/COPS/CDBG, etc., in the Subject Field of the requisition, using the project number assigned by City Finance, in order to ensure that Purchasing is notified and complies with appropriate Federal regulations. Yakima Transit Only: When utilizing LOCAL funds, this manual applies. When utilizing Federal Transit Agency (FTA) funding, all procedures shall conform to applicable Federal law, including, but not limited to: 49 CFR Part 18 (repealed 12/26/2014), 2 CFR Parts 200 and 1200 and Federal Transit Administration (FTA) Circular 4220.1F, "Third Party Contracting Guidance". Yakima Transit has their own Procurement Manual to use for FTA funded procurements. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 7 78 V. CONTROLLED COMMODITIES The following items require approval from designated people (NO MATTER WHAT THE DOLLAR AMOUNT) They are: ➢ Anything Technology Services is requested or required to install, connect, service, maintain or support such as computers and related equipment, fax machines, printers, scanners and copiers, cell phones, telephone equipment, software or systems - IT Manager. ➢ All Fleet Purchases — Fleet & Facilities Manager ➢ Furniture, Office Supplies, On -Call Repair Contracts, or anything else on a master contract that Purchasing has let that serves multiple divisions. IMATERIALS,IEQUIPMENT (Unrelated to Services, r Construction/Public Work) It is the Division Managers/Department Heads responsibility to appoint who shall make purchases for their department on the City's behalf under the quote limits that do not require Purchasing involvement. Only authorized purchases used to conduct City business, consistent with the Cities Strategic Priorities and state and local laws that are within predetermined budgets are allowed. All local governments in Washington are subject to the state's Conflicts of Interest statute (Chapter 42.23 RCW ). Generally, municipal officers are prohibited from having financial interests in contracts made by or under the officer's supervision or for the benefit of their office. RCW 42,23.020(2defines "municipal officer" rather broadly and basically means any city employee acting on behalf of the City. Violating these rules can bring serious penalties, including monetary fines, nullification of contracts, and possible forfeiture of employment. Common sense can be a good guide in this area of the law, but sometimes gray areas can create confusion and uncertainty. If you are concerned about a specific situation, consult with Legal. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 8 79 A. THRESHOLDS Per RCW 39.04.190, Purchasing advertises for the "vendor list" procedure, enabling quotes to be obtained between $10,000 and $49,999. All dollar limits include freight, handling, and set-up cost, plus appropriate sales tax. If there will be a trade-in, the dollar limit is of the gross purchase, not the net purchase after trade-in. B. HOW TO REQUEST A VENDOR NUMBER A fillable Vendor Number Request form can be found on ICE. Fill in the form and provide it to Accounts Payable along with a completed W-9. If the vendor is a City employee there is no need for the W-9 form. C. PAYMENTS Specify where to send an invoice at time of order. lV Notify vendor that the PO number lust be on all invoices. All questions regarding payments should be directed to the Accounts Payable Division of Finance. D. PCARD (VISA) A PCard is an alternate way to pay for something. All procurement policies still apply. For PCard procedures, see Administrative Code 3-400 on ICE. E. TRAVEL & REIMBURSEMENT POLICY ADM 1-1900 is available on ICE. F. EMPLOYEE RECOGNITION, BUSINESS MEETINGS & BREAKROOM SUPPLIES POLICY ADM 1-725 is available on ICE. G. PROCEDURE TO OBTAIN INFORMAL ($10,000to $49,999) QUOTES (Purchasing involvement required): City of Yakima Procurement Procedure Manual - Policy ADM 3-500 9 IE Department/Division personnel may obtain informal quotes (phone or written) using the Quote Form provided on ICE. DEPARTMENT/DIVISION PERSONNEL DO NOT HAVE THE AUTHORITY TO CONFIRM (PLACE) THE ORDER within this dollar range. This is done b Purchasin after reviewin the uotes unless urchasin has iven ou s ecific written instructions otherwise. If your quote is of a complex nature, let Purchasing obtain the quotes for you to ensure everything is apples -to -apples; otherwise: 1) Division contacts three vendors for quotations. Be sure technical information defines acceptable quality and ensure vendors are quoting on equal and comparable items. All vendors must be provided the same information. If one vendor offers an acceptable alternate, new quotes must be requested, using the alternate specifications. 2) The City will not pay for any technical information from the vendor. If the information is to be shared with other vendors, it must be stated so up front. If you use a vendor's technical information without their approval, you may find yourself in a legal tangle. 3) On -site demonstrations or delivery of preview/trial merchandise should be arranged with the Purchasing Division beforehand. Just because you have received a demonstration of someone's product, does not mean you will be able to buy it. Competition may still be required. 4) Complete the "Quotation Form" found on ICE. Obtain freight pricing (FOB Destination), if not indicated by vendor. Include vendor contact information in case we need to get ahold of them. 5) Enter a requisition into Cayenta. Use a buyer ID of a Purchasing Division employee as assigned and indicate recommended vendor on your requisition form. Route Quotation forms to Purchasing. 6) Vendor selection is made by Purchasing on the recommendation of the requesting division personnel, considering price, quality and product availability. 7) Purchase order is issued and order is confirmed by Purchasing, unless 8) Quote documentation is attached to purchase order and filed in Purchasing for auditing and document retention. (QUOTE FORM IMAGE BELOW. FILLABLE FORM CAN BE FOUND ON ICE.) City of Yakima Procurement Procedure Manual - Policy ADM 3-500 10 a City ofYates / Yakuna County QUOTATION FOR N01 AN ORDER �, qcpioniwaaaus pumhmocepan.oatksuotaGt rho uQo% $75-m3, PLEASE REFER TO THIS QUOTEIREQUISTION * ON ALL CORRESPONDENCE @ vo:doE Nana. i I ceowpv— vaiutv . ......... OREM= Date I 71a -I r, pnvquoted "'. frm f--,J �3'0&'Y omm Prices quoted are to be friaght induded or arm freight arimunt Is to be fisted We are not reoponsibie for faxed items " Motned on three.. H. PROCEDURE FOR FORMAL BIDS or RFP's - Over $49,999 (Purchasing involvement required): Sealed Bids/RFP's are required whenever the cost of materials, supplies, equipment, or ordinary services exceeds $50,000 Per Article V1. Section 6 of the Yakima City Charter. Purchasing must be involved in the formal process and will help you determine whether a Bid or RFP is warranted. Responsibilities for the Bidding/RFP process are shared by Purchasing and the Division. Responsibilities are as follows: 1) Division's Duties in the Bidding/RFP Process a. Determine the need. b. Notify the Finance Department regarding any budget transfers or amendments needed to cover funding. c. Contact Purchasing to discuss your project. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 11 82 d. Complete Cayenta requisition using Buyer ID of the Purchasing Buyer who has been assigned your project. FOR AUDIT: Purchasing may allow you to place the order yourselves, once the contract has been set up. If you don't receive this instruction, assume Purchasing must place the order. In the Subject Field of the header section of the PR, notate the name and number of the contract that you are using, (e.g. bid number, state contract number, sole source, etc.). Verify that the vendor is charging you the correct price. Not identifying which existing contract the item(s) are covered under may result in an Improper Purchase Procedure inquiry being sent to your Department Head. e. Route technical specifications, as well as a list of potential vendors, to Purchasing. (Do not alter our BID/RFP template.) f. Perform final review of technical specifications and be prepared to answer technical questions from vendors. Any information that needs to be disseminated to all vendors shall be done as an addendum issued by Purchasing. If applicable, attend pre -bid meeting and answer technical questions. g. AWARD: After bids have been opened, recommend award on form provided. Bid must be awarded for the most responsive bid from a responsible bidder. If recommendation for award is being made to anyone other than the low bidder, attach memo stating specific reasons why the low bid is not acceptable. RFP's are awarded to the vendor who scored the most points on predetermined evaluation criteria. Don't reveal status of vour recommendation to the vendor. Refer vendors with questions to Purchasing. h. POOR PERFORMANCE? When things go wrong, don't remain silent! Contact Purchasing and let us remedy the problem. Remember to DOCUMENT, DOCUMENT, DOCUMENT! Even if you have had on -going problems with a vendor, we will have a very hard time canceling a contract or not awarding them a new contract, unless we have proper documentation of the problem. 2) Purchasing's Duties in the Bidding Process a. Receive technical specifications from division. b. Assemble bid package and check for legalities. c. Route to division for final review. d. Arrange pre -bid conference, if applicable, to invite bidders to discuss bid requirements and specifications. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 12 83 e. Establish bid opening date and place ad in newspaper. f. Distribute bid packages to vendors and maintain accurate vendor records. g. Conduct bid opening with Clerk. h. Tabulate bids and verify responsiveness. i. Review recommendation of award. j. If Purchasing agrees with division's recommendation, bid is routed to City Manager for approval. k. Place the order. I. Administer bid for the life of the contract (e.g. price increases, lapses in insurance coverage, bonding, prevailing wage, etc.). 3) SPLITTING UP ITEMS TO AVOID A BID? NOT LEGAL! a. Issuing several PO's under the bid/quote threshold to avoid a competitive process is against state law. b. Combine the total of foreseen identical items purchased at the same time or similar items (or items that are used together) within a calendar years' time, in which the cost exceeds bid/quote threshold or when it is determined by Purchasing that volume discounts can be obtained by combining City-wide usage, (e.g. office supplies, laundry services, janitorial paper products, etc.). 4) ALTERNATIVES TO BIDDING: a. Inter -Governmental Cooperative Purchases RCW 39.34.030 permits governmental agencies to utilize other entities' contracts without going to bid. Contact Purchasing to determine if "interlocal" purchasing is feasible for your division's particular need. The following criteria must first be met: ➢ There must be an Interlocal Purchasing Agreement, approved by Council and signed by both parties, on file in Purchasing. ➢ It must be a current contract with interlocal language included. ➢ It must have been advertised on the entity's web page and competitively bid. ➢ The government entity, and the vendor, must be willing to share their contract pricing. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 13 84 ➢ A complete copy of the contract must have been reviewed by Purchasing. Purchasing will set up a bid file and track as if it were our own bid process. ➢ If one-time purchase, Purchasing will place the order. If ongoing, Department may request permission to order themselves. b. Purchases at Auctions, per RCW 39.30,045 c. An Emergency has been declared (see Section X111) d. Alternative Public Work Processes (E.G. GCCM, Design Build, JOC). See Engineering for more information. e. Sole Source (see Section XIV) I. HOW 1 (Public II Dollar thresholds of when competition is required are summarized below. It is the Division Managers'/Department Heads' responsibility to appoint who shall order work for their department on the City's behalf under the quote threshold. Is it Maintenance or Repair? 1) Maintenance is defined as keeping existing facilities and components in good, usable, operational condition. 2) Repair fixes facilities or parts/components that are already broken and is always a public work. A. "LIMITED PUBLIC WORK" Is your project between $10,000 and $34,999? The City uses a streamlined process for work within this dollar range, as allowed by RCW 39.04.155. Contact Purchasing first to discuss the process! *We may have an on -call contract that any department can use, saving you time and money. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 14 Eli B. THRESHOLDS for Public Works (This is State Law): C. HOW MANY QUOTES DO I HAVE TO GET WHEN USING THE SMALL WORKS ROSTER (SWR) FOR CONSTRUCTION (non-A&E) — RCW 39.04? ➢ <$10,000: Competition not required, though you still need to obtain a certificate of insurance and pay prevailing wages. ➢ $10K to $34,999: Solicit electronic or written quotations from 3 contractors in applicable category of SWR (work with Purchasing). ➢ $35,000 - $150,000: Solicit electronic or written quotations from 5 contractors in applicable category of SWR (work with Engineering). ➢ $150,000 - $349,999: Solicit electronic or written quotations from ALL contractors in applicable category or solicit from 5 contractors and notify ALL (Work with Engineering). ➢ >$350,000: Must use Formal Bid Process above Small Works Roster limits (work with Engineering). CLICK HERE FOR MRSC'S "Small Works Roster: A guide for Washington's Local Governments". City of Yakima Procurement Procedure Manual - Policy ADM 3-500 15 86 D. PROCEDURE FOR "LIMITED PUBLIC WORK" per RCW 39.04.155J3) 10,000 to $34,999 Purchasing Involvement Required. Contact Purchasing first to discuss the process! *We may have an on -call contract you can use. ➢ For Limited Public Work ($10K to $34,999), it is no longer possible to just meet contractors at your work site, give then the run-down on what you need done and ask for quotes. State Law has changed such that now contractors must be handed a packet of information ahead of time with requirements about Responsible Bidder's Criteria, Prevailing wage, Insurance, and some general protective clauses. o From ICE you can download the Limited Public Works Invitation to Quote Packet that is ready to customize and be given to contractors. They can fill out this information and return it to you with their quote. o From ICE you can download the required Certificate of Insurance Sample. ➢ Department utilizes Small Works Roster at www.mrscrosters. 1 to download a bidders list based on selected trade(s) (obtain sign -in ID and password from Purchasing). A quick user guide can also be found on ICE. ➢ Department solicits at least 3 quotes (can notify all on roster). ➢ Department arranges pre -bid conference, if applicable, to invite contractors to discuss technical specifications and view site. ➢ Department routes requisition and paperwork through Purchasing for confirmation. ➢ No advertisement required. ➢ Bid Bonds Optional. ➢ Payment/Performance Bonds Can Be Waived. ➢ Retainage Can Be Waived. ➢ Prevailing Wage Intents/Affidavits required. ➢ Insurance required. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 16 Mi E. DISADVANTAGED AND MINORITY VENDORS In June 1983, Council passed Resolution No. D-4816, Women and Minority Business Enterprise Policy. It is the policy of the City of Yakima that women and minority business enterprises shall have the maximum opportunity to participate in the performance of work relating to the City's activities. To this end, the City is committed to take all necessary and reasonable steps in accordance with state and federal rules and regulations to ensure women and minority business enterprises are given the maximum opportunity to compete for and to perform contracts. Is Yakima Transit updated its DBE Goal October 2016. The entire Program and Goal Methodology can be found in Section 3.3 of the Transit Procurement Manual found on ICE. A Public Notice and link to the DBE Program may be found on the City's Purchasing webpage HERE. INSURANCE/LICENSES/PREVAILING WAGES When hiring anybody to do anything for the City, there are multiple requirements that need to be met. 1. Certificates of Insurance Before any contractor is allowed to work on City property (no matter the dollar amount of the work), contact Purchasing to determine if a Certificate of Insurance is required. If required, the contractor must furnish the City with a Certificate of Insurance, naming the City of Yakima as primary & noncontributory additional insureds with an additional attached endorsement. The $2million commercial/$2million auto certificate of insurance sample can be found on ICE. Certificates of Insurance are a complex issue, so please contact Purchasing! We will happily discuss Insurance requirements and what the limits of coverage should be, according to how much risk is involved (Insurance requirements are determined by the City Legal Department). Purchasing now tracks ALL certificates of insurance that the City receives. 2. Responsibility Criteria for Contractors: Worksheet for Contractors found on ICE a. Washington State Contractor's License/Federal Registration —It is unlawful for the City to hire anyone to do construction work on our property that does not have a valid State of Washington Contractor's License - Period. If someone is not properly licensed, DO NOT HIRE THEM. You may look up a Contractor, Electrician or Plumber at: htts:/Jsecure.ini.waoyverify b. Department of Revenue Business Records Database: City of Yakima Procurement Procedure Manual - Policy ADM 3-500 17 88 Go to: hops://dor.wa.govj and click "look up a business" in the "I want to..." window. c. Verify Workers' Compensation Premium Status: httpsa//secure.ini.wa. ov/verify d. Check for debarment: State of as in ton Federal Debarment It is unlawful to hire any firm to do business with the City/County that is not registered and in good standing with the US Government. You can check the status of an entity so see if they have been debarred MERE. Print out the resulting page (even if no records were found) and file it with your paperwork for audit. ...or call Purchasing and we will look them up for you. 3. City of Yakima Business License A City of Yakima Business License is also required for any business working inside the City limits. The contractor may contact the Building Permits Division at 575-6121 for more information or click this LINK. 4. Prevailing Wage Requirements Chapter 39.12 RCW is the Washington State Public Works Act, also known as the Prevailing Wage Law. This law requires that workers be paid certain hourly wages for all public work and public service maintenance contracts, NO MATTER WHAT THE DOLLAR AMOUNT! Click HERE for the State's booklet on Prevailing Wage. This Prevailing Wage law was enacted to protect the employees of contractors performing public works construction/maintenance from substandard earnings, and to preserve local wage standards. The Department of Labor and Industries administers the law; the Attorney General prosecutes violators; and the State Auditor ascertains if our policies, practices and procedures meet the requirements of the law. Owner/Operators that do not have any employees do not need to pay themselves prevailing wages; however, they do still need to file Intents and Affidavits with the Department of Labor and Industries and specify on form in the space provided that they are Owner/Operator. EXAMPLES Public Work is all work, construction, alteration, repair or improvement that the City has performed at its expense. It includes, but is not limited to: ➢ Demolition ➢ Remodeling City of Yakima Procurement Procedure Manual - Policy ADM 3-500 18 89 ➢ Renovation ➢ Painting ➢ Road Construction ➢ Utilities Construction ➢ Offsite prefabrication of ducts, liners & steel products for Public Work ➢ Production & delivery of gravel, rock, concrete & asphalt (to a construction site (not to a stockpile) Any worker, laborer or mechanic performing public work must be paid prevailing wages. It does not usually apply to work that is clerical, executive, administrative or professional (grant funded projects may be an exception). DIVISION RESPONSIBILITIES TO ENSURE PREVAILING WAGE LAW IS FOLLOWED: 1) Prior to Getting an Estimate or a Quote — Notify the contractor that they are to pay prevailing wages. The contractor may obtain more information from the Department of Labor and Industries (see link to booklet above). They may also contact Purchasing at 509 575-6093 and we will provide them with a copy of the most recent wage rates listing for Yakima County. The list can also be obtained online at: https:Zlsecure.ini.wa.gov/wagelookup/ 2) After a contractor has been selected — The contractor is required to file a "Statement of Intent to Pay Prevailing Wages" with the Department of Labor and Industries PRIOR TO STARTING WORK. Most contractors file online at: htt : www.lni,wa. ov TradesLicensin PrevWa e default,as There is a fee that the contractor will have to Pay L & I, and the completed Intents are also available online. Note: The contractor must insert the City Purchase Order number in the contract number box on the form. 3) After the workis completed —The contractor must also file an "Affidavit of Wages Paid" with the Department of Labor and Industries. There is another fee that the contractor will have to pay to L & I (L & I has waived the fee for work <$750.00), and completed Affidavits are also available online. Note: The contractor must insert the City Purchase Order number in the contract number box on the form. Final payment must not be released by the City until certified intents and affidavits have been posted as approved by L&I on their website. Call Purchasing if you need help looking them up. 4) FOR PROJECTS BETWEEN $10,000 and $35,000 Purchasing will take care of all the above requirements utilizing the "Limited Public Works" process, per RCW 39.04ASS(31, City of Yakima Procurement Procedure Manual - Policy ADM 3-500 19 90 III. HOW TO PURCHASE ARCHITECTISERVICES: A & E's are hired following the rules in RCW 39.80. City Departments must follow the "Contracting for Architects and Engineers Manual" available on Purchasing's ICE page. IX. HOW TO PURCHASE ORDINARY"' SERVICES: "Ordinary/Purchased Services" are those provided by vendors for routine, necessary and continuing functions of a local agency, mostly relating to physical activities. Ordinary services are usually bid through Purchasing, because there is so much competition available. There are lots of ordinary services that require prevailing wages - - Check with Purchasing. ➢ Repetitive, routine, or mechanical in nature; — following established or standardized procedures o Contribute to the day-to-day business operations o Completion of assigned and specific tasks. o Decision -making is routine or perfunctory in nature o May require payment of prevailing wages ➢ Examples include: o Delivery/courier service o Landscaping o Building maintenance (janitorial) o Herbicide application service o Recycling/disposal/litter pickup service o Vehicle inspection, lubricating and repair services o HVAC system maintenance service (without repair) PROFESSIONALX. HOW TO PURCHASE SERVICES: "Professional Service Contract" means an agreement with an independent contractor for providing professional services to the City. The City does not provide direction to the provider other than the circumstances that are stated in the terms of the contract. There is not a state law requiring Professional Service Contracts over $50,000 to be bid, however it is the City Manager's discretion to direct Professional Services to be bid/quote through Purchasing when the total cost in a calendar years' time exceeds $50,000. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 20 m The Legal Department must review and the City Manager must sign all Professional Service Contracts, regardless of dollar amount. Examples: ➢ Medical and Dental ➢ Legal Services ➢ Management Consulting ➢ Accounting and Auditing ➢ Real Estate Broker I. HOW TO PURCHASE PERSONAL SERVICES: A "Personal Service Contract" is an employment contract with an independent contractor for providing personal services to the City. Personal Service means hiring a consultant to provide professional or technical expertise to accomplish a specific study, project, task or other work statement according to RCW 39.29.006. It is the City Manager's discretion to direct Professional Services to be bid/quote through Purchasing when the total cost in a calendar years' time exceeds $50,000. The Legal Department must review and the City Manager must sign all Personal Service Contracts, regardless of dollar amount. Examples: ➢ Artistic Designs ➢ Class Instructions for Parks Division Activities ➢ Referees 11. HOW TO LEASE: 1. Bids are not required on equipment leases, however Legal must review and the City Manager must approve all equipment leases. Leasing is usually the most expensive way to finance a purchase. Contact Finance to see if an "Internal Lease Option" will allow you to achieve a reduced monthly payment. a. Legal Review — Send to Legal for review. b. Fiscal Approval - Review proposals with the Finance Dept. prior to budgeting the expense. Lease -to -own purchases are to be budgeted and accounted for as if the total expense is to be incurred when the item is purchased. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 21 92 c. Lease Approval - City Manager must approve all Equipment Leases and may opt to send lease to Council for approval if he so desires. d. To exercise the purchase option of a lease, route to the City Manager for approval. 2. Lease vs. Rent: Leasing is generally used for mid to long-term contracts. Renting is usually a short-term solution that is more casual. If you are confused on if you need a contract, contact Legal. III. HOW TO DECLARE AN EMERGENCY: Emergency situations are basically a single source and must follow the procedures below. The city must follow fiscal approval limits as set forth in ADM Policy 2-200 available on the Human Resources ICE page. When a true "Disaster" is declared, refer to Yakima Municipal Code Chapter 6.06.010. Emergency purchases occur when an emergency situation arises that was unforeseen and must be remedied immediately. Examples: Acts of God, (i.e. flood damage); machinery that is critical to the operation of the City and rendered out of service. City procedure to obtain an Emergency Purchase Order: 1. Division recognizes an emergency situation has developed. a) Division estimates cost to correct the emergency. b) Division identifies potential vendor/contractor to perform service/supply materials. (DON'T FORGET PREVAILING WAGES AND INSURANCE R PUBLIC WORKS ... they still apply!) 2. Division staff obtains appropriate verbal approval from Division Manager and/or Department Director. 3. Division initiates remedy to emergency (contacting vendor/contractor). 4. Division contacts Purchasing the next business day to obtain a preliminary "Emergency Purchase Order Number" and initiates the "Emergency Purchase Order Justification form", found on ICE, after -the -fact (image included on next page). a) The form will require the vendor/contractor name, reason for emergency, materials and/or work required, and anticipated costs. Route for Signatures. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 22 93 5. Division Requisitioner enters requisition into CAYENTA, with the words "Emergency PO NO. " in the PR Subject Field. (Failure to do this may result in an "Improper Purchase Procedure" sent to your Division Manager, since the person auditing will not know if this was an approved purchase). Contact Purchasing and provide them with the Requisition number. 6. Once the Emergency PO Justification form is fully signed, return to Purchasing for logging and safekeeping for auditing purposes. 7. Emergencies over $50,000 must be ratified (after -the -fact) by City Council via Resolution. NOTE: Division Managers will receive an annual report to review emergency purchase requests received from their division. (EMERGENCY FORM BELOW. FILLA6LE FORM FOUND ON ICE) City of Yakima Procurement Procedure Manual - Policy ADM 3-500 23 94 City of Yakima Emergency Purchase Order Justification Requestor Name: Yaw Departntent'Division, Requester Phone: Requasition (PR) Nurnber- Requested Vendoc Cost, Estimate (incl. TAX): 1. WMistheemergenrysituabon? Describe damages of loss of property or essental sepaces that 2- What laborandior materials are reWired'? Attacb a copy of yaN quote or estirnate- 3, Did vendor quote prevailing wages, ff applicable ie.g- repairs, consaudicn, maintenance)? 4- Was vendor infonned of the Intent and Affidavit filirg mqumemerft vAth L&P STATEMENT OF NEED: Please comptete entire form and forward to Purchasing, X|V HOW TO DECLARE A SOLE SOURCE (or Single Source): PURCHASING INVOLVEMENT REQUIRED. Onacase bvcase basis, the bid orquote requirement may be waived and a sole/single source purchase approved, in accordance with There should be careful deliberation before going tn a so|e/sinQ|esnurce asthis type of purchase eliminates competition and tends todrive upprices. Authority to Approve Sole/Single Source Purchases City Manager ............................................. Over $1U,0X}0to City of Yakima Procurement Procedure Manual - Policy ADM 3-500 24 9R A sole source is where there is only ONE supplier of the product or service. A single source is where the vendor is "one vendor amongst others", when other competitive sources may be available. A sole/single source purchase may be approved if one or more of the following conditions are met: 1. Standardization or compatibility to existing City standard or to existing equipment, inventory, systems, data, programs or service. 2. Licensed or patented product with only one dealer (and the license or patent is paramount to your procurement). 3. Only authorized Service Provider, Repair and/or Warranty Services, e.g. warranty may be negated if you let someone else work on it. 4. Unique design: Requires unique features that are essential, aesthetic requirements, or not practical to match to existing design or equipment. Document the unique specifications that are needed, which will drive the research in finding a product that fits the specific needs of your department. 5. Special Market conditions: Can be used to purchase items at auction (RCW 39.30.045) or other items that are offered at a very favorable price and will be sold before an entity will have a chance to complete the bidding process (e.g. a flood is coming and you must obtain sandbags immediately) or perhaps funds must be expended immediately, or there is a critical delivery date. NOTE: Any sole/single source utilizing Federal Grant money must also include 1) Written responsibility determination for the successful contractor and; 2) Basis for contract price (Cost Price Analysis — Contact Purchasing for form). Each Grantee must evaluate and state its justification for the contract cost or price. A. Procedure to obtain sole source purchase approval: 1. Call Purchasing first to discuss. Purchasing can often offer alternatives to sole/single sourcing, (e.g. piggybacking contracts, etc.). 2. Fill out the Sole/Single Source Justification Form found on ICE (shown below) and forward to Purchasing for recommendation. If time allows, Purchasing will publish a "Notice of Intent to Sole/Single Source" in the Yakima Herald Republic and online, following existing rules for advertising bids. Council approves over $50,000. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 25 96 3. Enter a requisition into Cayenta and use Buyer ID of the Purchasing Division employee who has been assigned the project. State "sole/single source" in the Subject Field of the Purchase Requisition (PR). 4. If over $50,000 Division initiates a Resolution, supported by the necessary information justifying a sole/single source exists and routes to the Legal Department. Department attaches Sole Source Justification Form to Resolution and uploads into NOVUS. 5. Once approved, Purchasing will place the order, unless Purchasing has given written permission for the division to order it themselves" City of Yakima/Yakima County t SOLE/SINGLE SOURCE JUSTIFICATION Revised January 2A18 Your Mama Vuar OeperinxeovllDirsmn Ynar Phane ESSIU.rtron Number Requa tVanaaa Cast Estimate Ql-1 n9 TAKI venaaca aaareaa City, State f. E1P Venom a -mays & W .-te Vendor Contact Name : Veecdor Phane 3. ARE FEDERAL FUNDS BEING USED? OYES C— If Fcae I E n are bang .used a Caafl Pass A—lys a Pr - re4r+119 Sole Sinuses, ML3 aian he at[adhea IS- C51Y fCa DtY P+mrt..s g M rvvent toefmrml: Y. W�Iva{.e yenpurmhaainp? desarabepraa n[, servme. ar ayatenx: &ttachall mfarmeNna jQuatas; aic:l: Iaw ei jilrle reasons far Sol.source. �Cheak1l b-1.1- Batt apply tart'y ur sale stiracu sRUbB n grid attach arty rasuful documents to INshfy da,..1u snores. LbR U you ardba,d; what they said avid hbw you —rifled their accnmcy. I.I Cnmpattb1Uy15tanderdaahnn to -a aM1,1 oanty..ad.. 1, tin eaiatang a,,,Upment; vento-ry, sY t,,,..dM,, pray - e. D—be Etat eff ftlb find other sources {attesh docameniatlon eg Intemet ScmenshWs, etc.{c I.1 Palantad Produrtr. Ahacfi aoeumentatwn to canfim Pmpnety(Pafent Xetter, a{c_ianadesc Iwhy tlhe Pafertfed teal I are tM caB b Ymmr operaturn:. =AuNinn RERffivice Fro der, Regtaamg th Wa nS, I Sd,,S r . AP&ch pmMrrr rrr�arry Gdiifi fM MANUFNCTGTER (moklhevindar) aanTiumihpfhim rs arty one UealareeRhaezed'to F, our' U1brI1d I9 d q Ires: temp ka m th t'. t 1. eEfi q - t tp 3Tto macrh lm a iatarg aea�9t, or eavptmani ©orbroent fine unwoa epae.reatroaaaras are needea wN. ar,s,a Bha ieaearchmS�ad ng ape©dact Ae[fis tlrveapecific neetla Myour aepadment. Explain why tM1asa'. ieaouraare.crRcal to your mperetain. is written v"eR tu¢aYton atta[Eted] ;"'YES ("`.Rp Ve _ I Ila Ck�iat- inn Page l nr z ® DISPOSAL t Spe aN 3A r& d I C b ed b y ha rle t ct (RCW 333UU45) tine Reins th t re alFe dot ey f y N P ce and tall h kd baUa. rti tity bill ha b la piesi. eh bddm9P I g nand usa mg avn inw tabta tibag dately), :ar my nne sappH meet bSi pad delivery date {Ces.ri a why the I,Eirvery date ib caica3 sad Vial ,Rods to find athor aaPpl— la meet the deft:_ rydatc.}. Mb, R—I Desodba 3. ks this producVsamee available onlYthraaRh orre vendor? `YES r N. l Yes; atMch tivcv mcentabme lhaisuPDart% the acreesan9 Pmcxsa Ygu Pertamred b cwrvfirm,. {e.9.IMzmet Screenshota, ek:) 4. Fa this aama hmepra'cdeeoF r YES - NO If NO, e Phnm 5: W1iYii ihrs a.salesovrce vert6oYt (.ltl tRre scary) S: What eifarta vx [ab reaade fltf asstire — C .I ddunky is race�xmg the iawesi or tieat prise po-saable? OescrR end atUiCfradocvmeartsfrowungd ed[9entle:. .STATEMENT Of NEEMCONFLICT OF INTER — My d,nm n� recta ,ad,bb, fotsol aarce is b,,ed vpon en nbIlbbW review If gaod(aervice Leong abep—and appears to bI,. the beat mtereal mf the CiydCemexty, I know or nv bbbr,d of mteraat: n my pact or Bersapal mva6veavedtmanY waYwrlh this reAnest.No- gratd s, favor,: orcvmpromising ..1b. ibanpiece MeitYuerhiars my Perrum:®I f�e q-.ttw!h paetia— brairva,b,-b t.SIbIb, m arris6s atfa ppo en a deciding:tlrrluence ap mY regrcest to sage socarce airs Purdtase wpuen lheve are. dihei known'supplaeea to exact_ Sigerefura of ReRuealer De{a Slgnelvre at CJo mbb M—ger Data Sig ature..ar OepartneMHead date Sigaahv at approval by Pasch a, f9aaager Date IMMUS APpru by Execodve Oats Tease complete entire form and forward to Purchasing. Refer to Disposal of Surplus Property Policy available in the Administrative Code Book, Policy No. 3- 100 found on Human Resource's ICE page. 1.TRADE-INS City of Yakima Procurement Procedure Manual - Policy ADM 3-500 26 m Trade -Ins are allowed on new purchases if approved by Purchasing in advance. Trade -Ins must be negotiated, documented at "Fair Market Value" by the Division, and declared surplus ahead of time (through Purchasing) by the City Manager if under $15,000 and City Council if over $15,000. Fair Market Value can be obtained by finding comparable units that have been sold at online auctions, e.g. www.publicsurplus.com; www.Ebay.com; www.rockanddirt.com; www.ironi)lanet.com or other online sources such as Edmonds.com, Kelley Blue Book, or NADA. Also, www.govdeals.com is a good place to find auction results for comparables. Trade -Ins may also be requested ahead of time in the Bid Specifications as a "Guaranteed Buy Back". Work with Purchasing if you would like to consider this option. IL CAYENTA PROCEDURES City employees can visit ICE on the intranet to view Cayenta Procedures and Guides. Illy FREIGHT 1. Shipping Terms Whenever you are shipping an item that will incur freight charges, always request that it be shipped FOB destination, freight prepaid. What this means is that the vendor you ordered the merchandise from owns ffllv,!M� Tide Transfe _.. ..... ... De tin t' n Tone Tranr: 11� t t �eoaer•s 'ea�co� tAF it until it reaches your door and there won't be a separate invoice for freight. If anything should happen to the merchandise during shipping, the vendor (not the City) is responsible for filing the claims with the carrier. FOB determines at what point the ownership transfers. If an item is FOB origin, the City owns the merchandise from the point of shipping while it is in transit. Freight prepaid or collect refers to who is responsible for paying shipping charges - the City or the seller. 2. Receiving Freight It is the responsibility of the individual who signs for UPS or Carrier's delivery receipt to properly receive all cartons they are signing for. Anyone who accepts and signs for receipt of goods, acknowledges that the item was received and accepted as delivered. a. Get what you sign for City of Yakima Procurement Procedure Manual - Policy ADM 3-500 27 98 1) Confirm the package or carton is being delivered to the proper location. 2) Verify the number of cartons, crates or pieces is correct according to quantities on the packing slip. 3) Sign the delivery slip legibly so that we can track who did the receiving. 4) Open packages and verify order is correct. 3. Damaged Cartons a. Visible Damage Any person receiving freight must make a notation on the Carrier's delivery receipt of apparent damage to packages. State the specific type of damage on the delivery receipt and obtain the driver's signature (not just initials) on your copy of the receipt. b. Concealed Damage If the shipment of goods received showed no sign of damage upon receipt, but damage to the contents is found upon opening, concealed damage exists. 1) Call the Carrier immediately upon discovery of the damage and request an inspection. Notate the date and the person contacted. 2) Notify the vendor to file a claim. 3) All shipping cartons should be retained for inspection on any damage. 4) When making a request for an inspection, advise the Carrier whenever possible on the value of the damaged goods. If the value is less than $50.00, most carriers will frequently waive inspection. Indicate person contacted on the claim form. 5) When an inspection is made, specific damages should be notated by both parties and signed by both on the inspection report. Send report to the vendor. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 99 DEFINITIONS Acknowledgment -- A form used by a vendor to advise a purchaser that his order has been received. It usually implies acceptance of the order. ARO -- After receipt of order. As Is -- A term indicating that goods offered for sale are without warranty or guarantee. The purchaser has no recourse on the seller for the quality or condition of the goods. Bill of Lading -- A carrier's contract and receipt for goods by which he agrees to transport from one place to another and to deliver to a designated person. Capital Outlay -- Fixed assets of which the value exceeds $5,000 including freight and tax. Cash Discount -- A discount offered to the City to encourage payment of an invoice on or before its due date. Change Order -- Purchaser's written authority to the supplier to modify or add to a purchase order. Change orders are created by Purchasing (other than Capital Improvements). Contract — A contract is a legally binding and enforceable agreement between two or more parties stating the terms and conditions for an exchange of something of value (usually money, goods, or services) between the parties. A contract can take many different forms, ranging from major, heavily negotiated written contracts to a simple PO or telephone order for goods or services. Legal should be contacted if there is uncertainty as to the need for a written contract and how to go about it. Only the City Manager of the City of Yakima has the authority to sign contracts UNLESS they have delegated their authority over to an individual via approved Resolution. Controlled Commodity -- Items which may fall under the quote dollar limit that require approval from designated people, e.g. office products, communication equipment and computer equipment. Emergency Purchases -- Emergency purchases occur when an emergency situation arises that was unforeseen and must be remedied immediately. Expediting -- Attempt to reduce the contractually agreed upon delivery time of a product. F.O.B. (Free (or Freight) on Board) -- The stated F.O.B. point is usually the location where title to the goods passes from the seller to the buyer. The seller is liable for transportation charges and the risks of loss or damage to the goods up to the point where title passes to the buyer. The buyer is liable for such charges and risks after passing of title. Lead Time -- The period of time from date of ordering to the date of delivery which the buyer must reasonably allow the vendor to prepare goods for shipment. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 29 100 Ordinary Services — The furnishing of labor, time, or effort by a contactor or vendor, not involving the delivery of any specific end product, other than reports that are incidental to the required performance or general service work performed such as backhoe, landscape, Janitorial, window washing, repairs to things other than personal property, training, surveys, etc. Packing List -- A document which itemizes in detail the contents of a particular package or shipment. Payment Discount -- See Cash Discount. Personal Service Contract — An employment contract with an independent contractor for the rendering of personal services to the City. The City Manager must sign all Personal Service Contracts. Prepaid -- Transportation charges that have been or are to be paid at the point of shipment. Professional Service Contract -- An agreement with an independent contractor for the rendering of professional services to the City. The City does not provide direction to the provider. The City states a goal and objective and the provider, under his own direction, accomplishes the goal. Public Work -- A project including all work, construction, alteration, repair or improvement other than ordinary maintenance executed at the cost of the City. Request For Proposals -- Similar to the formal bid process, except that factors other than price are used to award the contract. Sealed Bid (Formal Bid) -- An advertised solicitation for a requirement in which the cost exceeds the $50,000 bid limit. The bids are opened during a public opening. Specification -- A clear, complete, and accurate statement of the technical requirements descriptive of a material, an item, or a service. Standardization -- When it is necessary to standardize to one type of item because of uniformity or interchangeable parts issues. Authorization for standardization is obtained from Purchasing. Visible Damage -- Broken cartons, crushed or wet cartons, or markings which indicate that the shipment of goods may have received rough treatment in transit with consequent damage to the contents. City of Yakima Procurement Procedure Manual - Policy ADM 3-500 30 CITY OF YAKIMA DEBT POLICY City of Yakima Debt Policy 102 TABLE OF CONTENTS SECTION I. INTRODUCTION SECTION II. GOVERNING PRINCIPLES SECTION III. ROLES AND RESPONSIBILITIES 3 SECTION IV. PROFESSIONAL SERVICES 4 SECTION V. TRANSACTION -SPECIFIC POLICIES 6 SECTION VI. COMPLIANCE POLICIES 8 SECTION VI1. OTHER POLICIES 9 City of Yakima Debt Policy 103 City of 1/4& 6>r ADMINISTRATIVE POLICIES Policy Number: XX- xxx Effective Date: 01/01/2023 Purpose and Overview Authorized by: City Council Supersedes: New Policy Section I. Introduction • To set fourth comprehensive guidelines for the issuance and management of all City financings; • To establish debt objectives and parameters necessary to safeguard the City's fiscal health and sustainability; • To articulate the City Council's intent for the structure of debt issuance, governance over City debt and long-term planning; • To communicate clear policy and strategy guidelines for City debt administration; • To assure all debt complies with statutes and regulatory requirements; and • To demonstrate to citizens, taxpayers and voters a transparent and accountable stewardship plan. Adherence to this Policy is essential to ensure that the City issues debt prudently and cost effectively, maintains a sound debt position, and protects the credit quality of its obligations. Section 11. Governing Principles In the issuance and management of debt, the City shall comply with the Constitution of Washington State (the "State") and with all other legal requirements imposed by federal, state, and local laws, rules and regulations, as applicable. The following section highlights the legal framework of the debt issuance. Governing Law State Law - The City may contract indebtedness as provided for by chapter 35.22 RCW and the City Charter, Article XII, Section 1. General obligation indebtedness secured by and payable from City tax revenues is subject to the debt limitations in RCW 39.36.020 and Article VIII of the State Constitution. Indebtedness secured by and payable from enterprise revenues (e.g., revenue bonds) or from special assessments are not subject to constitutional or statutory limitations. The City shall issue and sell bonds evidencing indebtedness in accordance with chapter 39.46 RCW, and shall issue and sell refunding bonds in accordance with chapter 39.53 RCW. 104 City of Yakima Debt Policy Federal Laws, Rules and Regulations - The City shall issue and manage debt in accordance with applicable federal laws, rules, and regulations, including the Internal Revenue Code of 1986, as amended (the "Code"), the Securities Act of 1933, and the Securities Exchange Act of 1934, together with proposed, temporary and final regulations promulgated, and official public guidance published, under these laws, as applicable. The City has instituted and shall comply with its separate policies and procedures relating to its obligations under the Code and securities laws in connection with its obligations. Local Laws and Regulations - The City shall issue and manage debt in accordance with the limitations and constraints imposed by local rules and regulations, including the City Charter and City Municipal Code. Permitted Debt by Type Subject to changes in State law, the City may legally issue debt using only the debt instruments described below: Unlimited Tax General Obligation Bonds — The City is authorized to issue Unlimited Tax General Obligation Bonds under State law, subject to City Council approval and approval of the voters within the jurisdiction of the City as required by law. Unlimited Tax General Obligation Bonds may be issued for any capital purpose approved by the voters, other than the replacement of equipment. Limited Tax General Obligation Bonds — The City is authorized to issue Limited Tax General Obligation Bonds under State law, subject to City Council approval. Limited Tax General Obligation Bonds may be issued under State law for any lawful City purpose. Revenue Bonds — The City is authorized to issue revenue bonds under State law, subject to City Council approval. Revenue bonds may be issued to finance construction or improvements to facilities of enterprise systems operated by the City in accordance with the Capital Improvement Program and are generally payable from the enterprise. No taxing power or general fund pledge is provided as security. Unlike general obligation bonds, revenue bonds are not subject to the City's statutory debt limitation nor is voter approval required. Short Term Debt — The City is authorized to issue short term debt under State law, including bond anticipation notes or other evidences of indebtedness, subject to City Council approval. Special Assessment Bonds/LID Bonds — The City is authorized to issue special assessment bonds, including but not limited to local improvement district bonds under chapter 35.22 RCW, subject to City Council approval after appropriate formation of a special assessment district. Special assessment bonds represent debt that is repaid by the property owners who benefited from the capital improvement through annual assessments paid to the City. Local Option Capital Asset Lending ("LOCAL") Program Debt — The City is authorized to enter into financing contracts with the Office of the State Treasurer under chapter 39.94 RCW and the LOCAL program, subject to City Council approval. W 105 City of Yakima Debt Policy Public Works Trust Fund ("PWTF") Loans — The City is authorized to enter into loan agreements with the Public Works Board under chapter 43.155 RCW, subject to City Council approval. Purpose for Borrowing The City shall issue long-term debt solely for the purpose of financing or refinancing the cost of design, acquisition and/or construction of long-lived capital projects or to refund outstanding debt. Debt can be used to equalize the cost of a capital need over the useful life of the capital item. Long-term debt will not be used to support current operations. Limitations on Debt Issuance Legal Debt Limits — The State Constitution and RCW 39.36.020 limit the City's ability to incur indebtedness based on a percentage of the assessed valuation of the taxable property within the City at the time the debt is incurred. Specifically, the City's unlimited tax general obligation indebtedness (subject to 60% voter approval) is limited to 2.5 percent of the City's assessed value for general purposes, with an additional 2.5 percent of assessed value for certain utility purposes and an additional 2.5 percent of assessed value for open space, park facilities and capital facilities associated with economic development. Accordingly, the City's total general obligation indebtedness for all purposes may not exceed 7.5 percent of the City's assessed valuation. Within the 2.5 percent of assessed value for general purposes, the City may, without voter approval, incur general obligation indebtedness in an amount not to exceed 1.5 percent of assessed value. In calculating the City's legal debt limit, the City will consult with its legal advisors to determine whether particular obligations are to be treated as debt within the statutory and constitutional limits. Ethical Standards Governing Conduct The City's officers and elected officials will adhere to standards of conduct as stipulated by the following: • Adopted City policies, ordinances, and resolutions and the City Code; • Code of Ethics for Municipal Officers Act, chapter 42.23 RCW; and • Applicable federal laws, rules and regulations. Section 111. Roles and Responsibilities Legislative Authority — It is the responsibility of the City Council to: • Approve this Debt Policy; • Approve projects to be financed; • Adopt ordinances authorizing the issuance of indebtedness and, if appropriate, designate authority to approve the final sale to a designated representative within the parameters for delegation under chapter 39.46 RCW; and 3 106 City of Yakima Debt Policy Approve budgets sufficient to provide for the timely payment of principal and interest on all debt. Director of Finance & Budget Authority - Primary responsibility for debt management is delegated to the Director of Finance & Budget or designee, with City Manager oversight. The Director of Finance & Budget or designee shall be responsible for the following: Overall Debt Management • Apply and promote prudent fiscal practices; • Maintain a current database with all outstanding debt; • In consultation with the City Attorney, municipal advisor, and bond counsel, determine the most appropriate debt instrument for a proposed sale; Determine and inform the City Council of the debt capacity; Provide for the issuance of debt at the lowest possible cost and risk; • Provide for the issuance of debt at appropriate intervals and in reasonable amounts as required to fund approved capital expenditures; • Monitor opportunities to refund debt and recommend such refunding as appropriate; • Comply with all terms, conditions and disclosure required by the legal documents governing the debt issued, including policies and procedures relating to City debt; Provide for the distribution of pertinent information to rating agencies; • Comply with all Internal Revenue Service (IRS), Securities and Exchange Commission (SEC), and Municipal Securities Rulemaking Board (MSRB) rules and regulations governing the issuance of debt; Provide for the timely payment of principal of and interest on all debt, ensure that the fiscal agent receives funds for payment of debt service on or before the payment date; and • Distribute to the "Electronic Municipal Market Access" (EMMA) system information regarding financial condition and affairs at such times and in the form required by law, regulation, City policies and procedures, and general practice, including Rule 15c2-12 regarding continuing disclosure. Debt Issuance • Recommend to the City Council the type of debt to issue and the manner of sale of debt; • Assist bond counsel with drafting an ordinance for submission to the City Council that authorizes debt and establishes parameters for the issuance and sale of such obligations; Develop a financing structure for a particular bond issue that minimizes the cost and risk to the City, within the parameters set by the authorizing ordinance/resolution; and Provide for and participate in the preparation, review, and approval of offering documents and disclosure documents. Section IV. Professional Services Professional Services The Director of Finance & Budget shall procure professional services as necessary to execute financing transactions and to advise on non -transaction related work. Such professional services may include those provided by municipal advisors, legal counsel (bond, disclosure and tax counsel) and underwriters (collectively, the "Finance Team"), as well as other service providers, U 107 City of Yakima Debt Policy such as rating agencies, trustees or escrow agents, verification agents, printers, arbitrage rebate calculation firms, bidding agents, and credit enhancement providers. Selection Process - The selection of financial and legal professionals to assist the Director of Finance & Budget in carrying out financing programs must be consistent with procurement procedures required by federal, state or local law, or by local policy. If not required by federal, state or local law or policy, the Director of Finance & Budget may elect to use a competitive bid process involving a Request for Proposals (RFP), Request for Qualifications (RFQ), or similar process. Appointment of Municipal Advisor - The Director of Finance & Budget may select a municipal advisor (or advisors) to assist in the issuance and administration of all debt if sufficient in-house expertise is not available. The firm(s) the City selects as municipal advisor will provide a full range of advisory services in connection with the City's financing programs, and must be duly registered under applicable MSRB rules. A municipal advisor under contract with the City will not purchase or sell any City debt. The Director of Finance & Budget shall monitor the services provided by the municipal advisor. Appointment of Bond Counsel - Bond counsel renders an opinion on the legality and validity of an offering of debt, the security for the offering, and whether and to what extent interest on the debt is exempt from federal income tax. All debt issued by the City shall be accompanied by a written opinion by legal counsel affirming that the City is authorized to issue the proposed debt, that the City has met all federal, state, and local legal requirements necessary for issuance and, where applicable, a determination of the proposed debt's federal income tax status. This approving opinion and other documents relating to the issuance of debt shall be prepared by a nationally recognized legal firm with extensive experience in public finance and tax issues, significant operations in the State and experience with State law. The firm selected as bond counsel may be engaged to provide the full range of legal services require in connection with a) the issuance and delivery of particular bond issues and b) on -going legal services for the City financing programs, including advising the City on compliance with regulatory requirements. The City Manager or Director of Finance & Budget shall submit to the City Council a recommendation for the appointment of bond counsel(s). The recommendation shall be accompanied by an evaluation of options and a justification for the recommended course of action. The Director of Finance & Budget shall monitor the services rendered by the bond counsel(s). A bond counsel under contract with the City will not simultaneously represent any other party involved in the City's financing, unless the City provides a written waiver of the conflict in writing. Appointment of Disclosure Counsel ("Disclosure Counsel") — In order to comply with federal securities laws in connection with disclosure to investors, the City may retain the services of a disclosure counsel. Disclosure counsel advises on federal securities laws and at the conclusion of certain debt, will deliver a letter to the City addressing federal securities laws. The City may 5 108 City of Yakima Debt Policy appoint bond counsel to provide the services of disclosure counsel, or appoint separate disclosure counsel, at its discretion. Appointment of Underwriters - If the City Council approves a negotiated sale under Section V below, the City shall select an underwriter(s). The primary role of the underwriter in a negotiated sale is to market the debt to investors and purchase the debt from the City. The City's selection of underwriters may be based upon a competitive evaluation of proposals submitted in response to a Request for Proposals. Criteria used in the appointment of qualified underwriters shall include, but not be limited to: • Demonstrated ability serving on financial transactions with similar complexity to the transaction being planned; • Demonstrated ability to structure a debt issue efficiently and effectively; • Demonstrated ability to sell debt to institutional and retail investors; • Demonstrated ability to put capital at risk; • Experience and reputation of assigned personnel; and • Fees and expenses. Prior to starting work on a particular financing, the underwriter shall provide a complete and detailed list of all proposed fees and expenses, including, but not limited to takedown, management fees, and itemized not -to -exceed underwriting expenses to be paid by the City. The underwriting expense component must be discussed and reviewed by the Director of Finance & Budget prior to the day of pricing and finalized and approved on or before the day of pricing. The Director of Finance & Budget with assistance from the independent municipal advisor, if applicable, shall monitor the services rendered by the underwriter(s). Appointment of Arbitrage Rebate Calculation Firm — The City shall, when deemed necessary, procure the services of an arbitrage rebate calculation firm. The purpose of the arbitrage rebate calculation firm is to provide arbitrage rebate compliance services in accordance with the Code. Criteria used in the appointment of a qualified arbitrage rebate calculation firm shall include, but not be limited to: • Firm's qualifications and experience in providing arbitrage rebate calculation services; • Staff qualifications, tax expertise, and experience; • Demonstrated ability to provide timely reports; and • Cost of services. In selecting an arbitrage rebate calculation firm, the City may seek advice from its bond counsel and/or municipal advisor. Section V. Transaction -Specific Policies Method of Sale for Public Sales The Director of Finance & Budget shall select a method of public sale that is most likely to achieve the lowest cost of borrowing while considering both short-range and long-range implications for M 109 City of Yakima Debt Policy taxpayers and ratepayers, based on a thorough analysis of the relevant rating, security, structure, market conditions, and other factors pertaining to the proposed issue. Competitive Bid Method - Debt issued on a competitive bid basis will be sold to the bidder offering the lowest true interest cost to the City, subject to the terms of the notice of sale. Negotiated Sale Method — When market conditions or special complexity or other features of a debt issuance may cause the debt issuance to be less suited for sale by the competitive bid method, the City may issue debt on a negotiated basis to one or more underwriters. If the City sells debt on a negotiated basis, the negotiations of terms and conditions shall include, but not be limited to, prices, interest rates, yields, priority of orders, and underwriting or remarketing fees. The Director of Finance & Budget, with the assistance of its municipal advisor, shall evaluate the terms offered by the underwriting team. Evaluations of prices, interest rates, yields, and fees shall include prevailing terms and conditions in the marketplace for comparable issuers. If the City includes more than one underwriter in the negotiated sale of debt, the Director of Finance & Budget shall establish appropriate levels of underwriting liability and the method of allocating compensation among the members of the underwriting group. The City shall require a post -sale analysis and reporting for each negotiated bond sale. The underwriter shall perform such analysis and provide a final pricing book by the day of the closing. A post -sale analysis will include, but not be limited to: • Summary of the pricing, including copies of the actual pricing wires; • Results of comparable bond sales in the market at the time of the City's pricing; • Historic comparisons to Municipal Market Data indexes -- day of sale basis; and • Details of orders and allotments. No debt issue will be sold on a negotiated basis without the participation of an independent registered municipal advisor. Method of Sale for Direct Purchases When deemed appropriate to minimize the costs and risks of the City's debt issue, including to facilitate a debt issuance of small size or having other characteristics which may cause the debt issuance to be less suited to sale in a public offering, whether by competitive bid or negotiated sale, the Director of Finance and Budget may recommend to the City Council that the debt be sold directly to a purchaser. Purchasers may include banks, the State through its lending programs, the federal government through its lending programs, or other direct purchasers. Debt Structural Elements Maturity — The City shall issue debt with an average maturity that is not longer than the weighted average reasonably expected economic life of the assets being financed. In any case, the City shall not issue debt with a maturity longer than 30 years unless approved by the City Council. 7 EM City of Yakima Debt Policy Debt Service Structure - Unless otherwise justified, in consultation with Bond Counsel, Underwriter and/or Financial Advisor, debt service should be structured on a level or declining repayment basis. Refunding bonds issued to achieve interest cost savings should typically be structured to produce approximately level savings in each fiscal year. Unless otherwise justified, debt shall not have capitalized interest. If appropriate or required by applicable bond covenants, debt service reserve funds may be used. Coupon Type — Unless otherwise justified, in consultation with Bond Counsel, Underwriter and/or Financial Advisor, long-term debt will be sold with maturities paying interest on a periodic basis. Redemption Features - For each transaction, the Director of Finance & Budget shall evaluate the costs and benefits of call provisions. Maturity Structure — The City's long-term debt may include serial and term bonds. Unless otherwise justified, term bonds should be sold with annual mandatory redemption requirements. Tax -exemption — Unless otherwise justified, the City shall issue its debt on a tax-exempt basis. Bond Insurance — For each transaction, the Director of Finance & Budget may evaluate the costs and benefits of bond insurance or other credit enhancements. Section VI. Compliance Policies Issuance and Post -Issuance Tax Compliance Policies and Procedures The Director of Finance & Budget or designee, in consultation with bond counsel and other members of the Professional Services Team, as appropriate, shall adopt comprehensive compliance policies and procedures to ensure that the City complies with applicable federal, State, and contractual requirements regarding the tax status of bonds, notes and other debt, both at the time of issuance and post -issuance, as necessary to maintain the tax exemption for tax- exempt debt. The policies and procedures shall provide for monitoring of whether requirements of the federal arbitrage regulations and the restrictions of the federal private activity bond regulations applicable to the investment and use of proceeds of tax-exempt bond issuances, as well as the facilities financed with those proceeds, are being properly observed. Arbitrage Liability Management Because of the complexity of arbitrage rebate regulations and the severity of non-compliance penalties, the Director of Finance & Budget shall solicit the advice of bond counsel and other qualified experts regarding arbitrage rebate calculations. The Director of Finance & Budget shall, when deemed necessary or when required, contract with a qualified third -party for preparation of the arbitrage rebate calculation. The Director of Finance & Budget or designee shall maintain an internal record -keeping system for tracking investments and expenditures of bond proceeds. Issuance and Post -Issuance Disclosure Policies and Procedures The Director of Finance & Budget or designee, in consultation with its bond counsel and other members of the Financing Team, as appropriate, shall adopt comprehensive policies and WE City of Yakima Debt Policy procedures relating to the City's disclosure obligations. These include (i) the preparation, vetting/review and approval of official statements for all public offerings of its securities that must be delivered to the underwriter for distribution to potential and actual purchasers and that set forth the terms of the securities and information regarding the City; (ii) compliance with continuing disclosure obligations entered into by the City pursuant SEC Rule 15c2-12 that require the City to provide certain annual financial information and event notices to the public; and (iii) ensuring that if and when the City provides information that can reasonably be expected to be relied on by the financial market, that such information is not inaccurate or misleading. The City has committed to provide or cause to be provided, either directly or through a designated agent, annual disclosure reports and notices regarding the occurrence of certain events specified by the SEC. These reports and notices will be submitted to the MSRB through EMMA. Investment of Proceeds General - The City shall comply with all applicable federal, State, and contractual restrictions regarding the investment of bond proceeds, including the City's Investment Policy. This includes compliance with restrictions on the types of investment securities allowed, restrictions on the allowable yield of some invested funds as well as restrictions on the time period over which some bond proceeds may be invested. Arbitrage Compliance - The City will comply with arbitrage requirements on invested tax- exempt bond proceeds. The Director of Finance & Budget shall consult with bond counsel, and, if necessary, an arbitrage rebate consultant regarding which actions are necessary to comply with the arbitrage restrictions and arbitrage rebate requirements of the Code. Refunding Escrow - Unless otherwise justified and deemed necessary Director of Finance & Budget shall utilize United States Treasury Securities State and Local Government Series (SLGS) for investments held in a refunding escrow. Section VII. Other Policies Rating Agencies The Director of Finance & Budget in consultation with its municipal advisor, shall manage relationships with the rating analysts assigned to the City's credit, using both informal and formal methods to disseminate information. Refunding Savings Thresholds The City will consider refinancing debt to achieve savings as market opportunities arise, and conduct refunding in accordance with the Refunding Bond Act, chapter 39.53 RCW. Refunding may occur on a current basis (within 90 days of the call date of the bonds to be refunded) or an advance basis (90+ days before the call date of the bonds to be refunded). Unless otherwise justified, an "advance refunding" transaction (including on a taxable basis or a tax-exempt basis if authorized by law) will require a minimum present value savings of four percent of the principal amount of the refunded debt. I 112 City of Yakima Debt Policy Derivative Products The City will not use derivative products unless permitted by law, and only after adoption of a swap or derivative policy by the City Council. The City will not use derivative products without an analysis by an independent municipal advisor. The City will not use derivative products for the purpose of speculation. Evaluating the Impact of Capital Program Spending The Director of Finance & Budget shall evaluate the impact of capital program spending, operations and maintenance costs, and debt service on its financial condition. Debt Policy Review The Director of Finance & Budget or designee shall review and update this debt policy, as necessary, but not less than once every five years. Ful