Resolution _________________

A RESOLUTION adopting revised investment policies for the City of Seattle and superseding Resolution 30346.

WHEREAS, on August 6, 2001, the Council adopted Resolution 30346, adopting and updating investment policies of the City of Seattle; and

WHEREAS, on July 26, 2010, the Council passed Ordinance 123361, relating to certain functions of the Executive branch of City government; creating a City Budget Office and a Department of Finance and Administrative Services; establishing the duties of the new office and department; abolishing the Department of Finance, Fleets and Facilities Department, and the Department of Executive Administration and reassigning certain functions performed by those departments at that time; and

WHEREAS, on November 14, 2011, the Council adopted Resolution 31337 relating to, among other things, a review of certain City banking and investment practices to ensure the use of responsible financial institutions; and

WHEREAS, the Executive and the Council are committed to ensuring that the City's cash pool is not invested in corporations and other entities whose primary business is the production of fossil fuels, in support of the City's commitment to greenhouse gas reductions and in light of the dangers of such holdings becoming "stranded assets" as the region and the nation respond to the threat of climate change; and

WHEREAS, the City Council urges the Seattle City Employees' Retirement System Board of Administration to work towards divestment from fossil fuel holdings; and

WHERAS, the City Council and the Mayor are committed to high standards of financial management, and adopting and periodically updating financial policies are important steps toward assuring consistent and rational financial management; and

WHEREAS, the City Council and Mayor have reviewed the City's investment policies and wish to update and reaffirm them; NOW, THEREFORE,

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEATTLE, THE MAYOR CONCURRING, THAT:

Section 1. Resolution 30346 is hereby superseded in its entirety, and the policies attached as Exhibit A to this Resolution are hereby adopted.

Adopted by the City Council the ____ day of ____________________, 2014, and signed by me in open session in authentication of its adoption this________ day

of ______________________, 2014.

_________________________________

President ___________of the City Council

THE MAYOR CONCURRING:

_________________________________

Edward B. Murray, Mayor

Filed by me this ____ day of ________________________, 2014.

____________________________________

Monica Martinez Simmons, City Clerk

(Seal)

Exhibit A: City of Seattle Investment Policies

Exhibit A1: Investment Income Distributions

George Emerson FAS City Investment Policies RES March 13, 2013 Version #8

Exhibit A

City of Seattle Investment Policies

It is the intent of the Council and Mayor that the City's Investment Policies address the investment authority of the Director of Finance and Administrative Services ("Director"), the principles that will guide the Director in his or her investment decisions, and the City's reporting requirements related to investments. These investment policies supplement and are adopted by City Council resolution pursuant to and consistent with Seattle Municipal Code Chapters 3.39 and 5.06, and chapter 35.39 RCW, which provisions shall control to the extent these policies may be inconsistent. These policies should be reviewed and updated on a five-year cycle, with the next update scheduled for 2018.

Policy 1. Funds. The Director, under the supervision of the Mayor, is authorized on behalf of the City to invest all City funds in the City Treasury. The Director of Finance, in consultation with the Director, the City Budget Director, and the Chair of the Finance and Budget Committee of the City Council, may in his or her discretion:

a. Determine which City funds will participate within the common investment pool (cash pool) and which funds will be invested on an individual basis.

b. Apportion earnings and losses to those funds participating in the cash pool. Earnings from investments will be distributed in a manner consistent with those listed on Exhibit A1; any remainder will be allocated to the General Subfund unless otherwise directed by law. Earnings will be apportioned as a pro-rata share using average daily balances of funds under management for the month interest earnings, gains, or losses are realized.

c. Maintain and update Exhibit A1 as necessary and provide to Council on an annual basis.

Policy 2. Investments. The Director is authorized to invest City Treasury funds, which in his or her judgment are in excess of current City needs, in securities and other investments authorized by the Revised Code of Washington and other applicable law. The Director is further authorized to convert any investments within the City Treasury into cash.

Policy 3. Financial Objectives. It will be the financial objective of the City's investments to follow three principles, in order, as listed below:

a. Safety of Principal. Investments will be undertaken to ensure the preservation of capital. It is the City's intention to hold investments to maturity. Market forces, including such factors as changes in economic conditions, interest rates, or credit quality, will affect the value of securities. Variations in market value will result in unrealized gains or losses. The portfolio's investment strategy may dictate that it is in the City's best interest to sell a security prior to maturity at a potential gain or loss of investment principal.

b. Liquidity. The City's investment portfolio will remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated.

c. Yield. The cash pool will then be structured with the objective of earning a market rate of return.

Policy 4. Social Policies. A City social policy will take precedence over furthering the City's financial objectives when expressly authorized by City Council ordinance or resolution, except where otherwise provided by law or trust principles. In managing its investments, the City shall seek opportunities to conduct business with institutions, that by their charter, seek to benefit the common good and do not solely pursue maximum profit.

When two or more investment institutions offer essentially the same maturity, yield, quality and liquidity, it will be the intent of the City to give priority to:

a. The institution based in Seattle, then

b. Other financial institutions in the State of Washington, and then

c. Other financial institutions.

Policy 5. Fossil Fuel Divestment. Consistent with the provisions of Policy 4, the City will not use its cash pool to purchase investment securities from corporations and other ventures whose primary business is the production of fossil fuels. The Director will exercise reasonable diligence and best practices in the determination of which business entities engage primarily in fossil fuel production.

Policy 6. Securities Lending. The Director may enter into one or more contracts with the custodial banks or financial institutions holding the City's securities for the lending of all or part of these securities to earn additional investment revenue or fees from such loans.

Policy 7. Reporting and Data Requirements. The Director shall file a monthly report with the City Council on the performance of cash pool investments for the preceding month and fiscal year-to-date. Each monthly report shall include, but not be limited to, a discussion of:

a. The current investment market;

b. Any material change to the City's investment portfolio and practices;

c. The City's investment return as compared to the City's benchmark return, which shall be the rate of return used by the City Council when estimating investment earnings for the purpose of adopting the current year's budget;

d. The average maturity of the cash pool's investments; and

e. Investment income earned for the investment portfolio.

On at least a quarterly basis, the report will also include, as an attachment, a list of the contents of the City's investment portfolio and the current status of interfund loans.

Policy 8. Statement of Investment Policy. The Director will establish and maintain a "Statement of Investment Policy" with further detail on the management of City investments, including but not limited to investment standards and objectives.

Policy 9. Investment Procedures Manual. The Director will establish and maintain an Investment Procedures Manual for the guidance of City investment staff.

George Emerson FAS City Investment Policies RES EXH A March 18, 2014 Version #7

Exhibit A to FAS City Investment Policies RES

Exhibit A1: Investment Income Distributions