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VIRGINIA BEACH CITY COUNCIL
Virginia Beach, Virginia
March 2, 2021
Mayor Dyer called to order the CITY COUNCIL MEETING in the Virginia Beach Convention Center,
Suite 5, on Tuesday,March 2, 2021, at 2:00 P.M
Council Members Present:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, John D. Moss, Aaron R. Rouse, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Louis R.Jones
2
ITEM#71319
Mayor Robert M. Dyer entertained a motion to permit City Council to conduct its CLOSED SESSION,
pursuant to Section 2.2-3711(A), Code of Virginia, as amended,for the following purpose:
PUBLICLY-HELD PROPERTY: Discussion or consideration of the,
acquisition of real property for public purpose; or of the disposition of
publicly-held property, where discussion in an open meeting would
adversely affect the bargaining position or negotiating strategy of the
public body pursuant to Section 2.2-3711(A)(3).
• Princess Anne District
• Beach District
• Lynnhaven District
PUBLIC CONTRACT: Discussion of the award of a public contract
involving expenditure of public funds, and discussion of terms or scope of
such contract, where discussion in an open session would adversely affect
the bargaining position or negotiating strategy of the public body pursuant
to Section 2.2-3711(A)(29)
• Dome Site
SECURITY MATTERS: Discussion of reports or plans related to the
security of any governmental facility, building or structure, or the safety
of persons using such facility, building or structure pursuant to Section
2.2-3711(A)(19)
• Juvenile Detention Center
PERSONNEL MATTERS: Discussion, consideration, or interviews of
prospective candidates for employment, assignment, appointment,
promotion, performance, demotion, salaries, disciplining or resignation
of specific public officers, appointees or employees of any public body
pursuant to Section 2.2-3711(A)(1)
• Council Appointments: Council, Boards, Commissions,
Committees, Authorities, Agencies and Appointees
*Council Member Moss stepped out during the Publicly Held Property-Beach District and Public
Contract-Dome Site discussions (2:05 P.M. —2:43 P.M.)
March 2, 2021
3
ITEM#71319
(Continued)
Upon motion by Vice Mayor Wood, seconded by Council Member Abbott, City Council voted to proceed
into CLOSED SESSION at 2:03 P.M.
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, John D. Moss, Aaron R. Rouse, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Louis R.Jones
Closed Session 2:03 P.M. —4:26 P.M.
March 2, 2021
4
ITEM#71320
After the CLOSED SESSION, Mayor Robert M. Dyer RECONVENED the INFORMAL SESSION, in
the Virginia Beach Convention Center, Suite 5, on Tuesday, March 2, 2021, at 4:26 P.M.
Council Members Present:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M Dyer,
Barbara M. Henley, John D. Moss, Guy K Tower, Rosemary Wilson,
Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Louis R Jones
Aaron R Rouse—left after Closed Session-ill
March 2, 2021
5
CITY COUNCIL LIAISON REPORTS
ITEM#71321
4:26 P.M.
Council Member Moss advised he attended the recent Military Economic Development Advisory Committee
(MEDAC)meeting and received briefings on the Naval Air Station Oceana development plan and maritime
industry. Council Member Moss advised the maritime industry reported a shortage of 8,000 trades in the
labor force. Council Member Moss advised if anyone is interested in the maritime industry, there is a lot
of employment opportunities as well as apprenticeship programs available.
Council Member Moss advised he requested the Committee develop a list of essential needs, in increments
of$250,000, to renovate and preserve critical housing in the fortunate event the City receives federal
stimulus funding. Council Member Moss complimented the Committee and staff for doing a great job.
March 2, 2021
6
CITY COUNCIL LIAISON REPORTS
ITEM#71322
(Continued)
Council Member Berlucchi advised he attended the annual joint meeting with the Community Services and
Social Services Advisory Boards last week regarding their strategic plan. Council Member Berlucchi
complimented Human Services leadership, Aileen Smith, Director, Deidra Bolden, Deputy Director of
Social Services and Angela Hicks,Deputy Director of Behavioral Health Development Services, as well as
their staff and all of the volunteer Board Members for their hard work, adding, the City is in great hands.
March 2, 2021
7
CITY COUNCIL LIAISON REPORTS
ITEM#71323
(Continued)
Council Member Berlucchi advised the Human Rights Commission (HRC) received a briefing from Cal
Bain, Virginia Beach Public Defender's Office, regarding pay parity for Public Defenders. Council
Member Berlucchi advised the briefing was well received by the Commission who has an established base-
line and avenues to advocate for this issue. Council Member Berlucchi complimented members of the HRC,
as well as volunteers who serve on HRC's Sub-Committees, expressing his appreciation for their great
work.
March 2, 2021
8
CITY COUNCIL LIAISON REPORTS
ITEM#71324
(Continued)
Council Member Wilson advised she attended the Southside Network Authority (SNA) meeting last week
where the Authority voted to issue several Request for Proposals (RFPs) which will include build-out,
operations, marketing of the broadband ring and turnkey with the public private sector. Council Member
Wilson advised she contacted Council Members for feedback prior to attending however, she was out voted
four(4) to one (1).
March 2, 2021
9
CITY COUNCIL LIAISON REPORTS
ITEM#71325
(Continued)
Mayor Dyer advised he attended a job fair yesterday hosted by Global Technical Systems (GTS) in their
new Headquarters facility for members of the Seatack Community. Mayor Dyer advised the turn out was
lower than expected however, he was pleased to see seven (7)people were hired. Mayor Dyer added, if
anyone has the opportunity to take a tour of the facility, it is very impressive.
Mayor Dyer added, he was also able to take a tour of the new South Building at the Virginia Aquarium and
Marine Science Center and believes it is another gem in the City worth visiting.
March 2, 2021
10
CITY COUNCIL COMMENTS
ITEM#71326
4:34 P.M.
Council Member Moss referenced a recent newsletter by the Lake Smith Terrace Civic League regarding
concerns of additional through traffic caused by the proposed traffic light to be installed on Independence
Boulevard, requesting staff to keep him updated on public input.
Council Member Jones also requested to be included on updates.
Vice Mayor Wood recommended contacting City Staff for information pertaining to traffic lights, as they
will study the proposed intersection and can provide a significant amount of information such as the number
and causes of accidents, within their report.
March 2, 2021
11
CITY COUNCIL COMMENTS
ITEM#71327
(Continued)
Council Member Henley advised the final report from the Dewberry Study is available and recommended
Council Members review the analysis which has a great deal of very good information.
March 2, 2021
12
CITY COUNCIL COMMENTS
ITEM#71328
(Continued)
Council Member Moss advised the City was not approved for federal funding to complete the Sea Level
Rise Study with cost participation and suggested the City consider funding the study to have a timely
response that could be included with the Stormwater Bond Referendum.
March 2, 2021
13
AGENDA REVIEW SESSION
ITEM#71329
4:41 P.M.
BY CONSENSUS, the following shall compose the Legislative CONSENT AGENDA:
H. ORDINANCES/RESOLUTIONS
1. Resolution to ADOPT a Revised Policy re investment of City Funds
2. Resolution to APPROVE a contract extension between the Virginia Beach Community Services
Board and the Commonwealth of Virginia re mental health, developmental and substance use
disorder services
3. Ordinance to SUPPORT the 2021 Ignite Seminar Series and Disparity Forum and
APPROPRIATE $2,325 from General Fund Balance to Municipal Council re offset expenses
(Requested by Council Member Wooten)
4. Ordinance to RESCIND the previous award offranchises to Bird Rides, Inc., Neutron Holdings,
Inc., Skinny Labs, Inc., and VeoRide, Inc., and DIRECT the City Manager to resolicit proposals
for such franchises
5. Ordinance to EXTEND the provisions of the Ordinance previously adopted on March 31, 2020
re ensure continuity of government during the COVID-19 Disaster
6. Ordinance to EXTEND the Sunset Date to April 5, 2022, re residential permit parking in the
Historic Cavalier Shores Neighborhood
7. Ordinance to AUTHORIZE a grant of up to $150,000 from the City Council Special Pandemic
and Vaccine Support Reserve to the Oceana Volunteer Fire Department,Inc., re the purchases of
a fire support vehicle, and AUTHORIZE donation of a truck(Requested by City Council)
8. Ordinance to APPROPRIATE$6,948.10 to the FY2020-21 Emergency Medical Services(EMS)
Operating Budget re reimburse auction proceeds to the Plaza Volunteer Rescue Squad,Inc.
H. ORDINANCES/RESOLUTIONS:
ITEM#3 WILL BE CONSIDERED SEPARATELY
ITEM#6 WILL BE CONSIDERED SEPARATELY
March 2, 2021
14
AGENDA REVIEW SESSION
ITEM#71329
(Continued)
BY CONSENSUS, the following shall compose the Planning CONSENT AGENDA:
I. PLANNING
1. QUAN LE for a Conditional Use Permit re short term rental at 1612 Tallwood Manor Court
DISTRICT 1 - CENTERVILLE
2. JONATHAN WEST for a Conditional Use Permit re short term rental at 4814 Lake Drive
DISTRICT 4—BAYSIDE
3. ALFRED NICOLL for a Conditional Use Permit re short term rental at 113 55th Street, Unit A
DISTRICT 5—LYNNHAVEN
4. KAREN AND JOE ALLEN/OLD HICKORY INVESTMENTS, LLC for a Conditional Use
Permit re short term rental at 1361 Goose Landing DISTRICT 6—BEACH
5. BAO LO for a Conditional Use Permit re short term rental at 619 25`h Street DISTRICT 6 —
BEACH
6. WILLIAM JOSEPH WRIGHT, JR.for a Conditional Use Permit re short term rental at 911
Pacific Avenue, Unit B DISTRICT 6—BEACH
7. D AND D CREATIONS,LLC I DANIEL AND KELLIE JO DAVID REVOCABLE TRUST for
a Conditional Use Permit re short term rental at 2621 Highland Meadows Way DISTRICT 7—
PRINCESS ANNE
I. PLANNING ITEMS:
ITEM#1 WILL BE CONSIDERED SEPARATELY
ITEM#2 WILL BE CONSIDERED SEPARATELY
ITEM#3 WILL BE CONSIDERED SEPARATELY
ITEM#4 WILL BE CONSIDERED SEPARATELY
ITEM#5 WILL BE CONSIDERED SEPARATELY
COUNCIL MEMBER HENLEY WILL VOTE NAY ON ITEM#6
COUNCIL MEMBER MOSS WILL VOTE NAY ON ITEM#6
ITEM#7 WILL BE CONSIDERED SEPARATELY
Recess 4:46 P.M. —5:59 P.M.
March 2, 2021
15
FORMAL SESSION
VIRGINIA BEACH CITY COUNCIL
MARCH 2,2021
6:00 P.M.
Vice Mayor Wood called to order the FORMAL SESSION of the VIRGINIA BEACH CITY COUNCIL
in the Virginia Beach Convention Center, Suite 5, on Tuesday, March 2, 2021, at 6:00 P.M
Council Members Present:
Jessica P.Abbott, Michael F. Berlucchi, , Barbara M. Henley, Louis R
Jones, John D. Moss, Guy K Tower, Rosemary Wilson , Vice Mayor
James L. Wood and Sabrina D. Wooten
Council Members Absent:
Mayor Robert M. Dyer—stepped out to receive vaccination
Aaron R Rouse-left after Closed Session-ill
INVOCATION: Council Member Jones
PLEDGE OFALLEGL4NCE TO THE FLAG OF THE UNITED STATES OF AMERICA
Council Member Rosemary Wilson DISCLOSED that she is a real estate agent affiliated with Howard
Hanna Real Estate Services("Howard Hanna"),who's Oceanfront Office is located at 303 34`h Street Suite
102, Virginia Beach, VA 23451. Because of the nature of realtor and real estate agent affiliation, the size
of Howard Hanna, and the volume of transactions it handles in any given year, Howard Hanna has an
interest in numerous matters in which she is not personally involved and of which she does not have
personal knowledge. In order to ensure her compliance with both the letter and the spirit of the State and
Local Government Conflict of Interests Act(the "Act'), it is her practice to thoroughly review the agenda
for each meeting of City Council for the purpose of identifying any matters in which she might have an
actual or potential conflict. If, during her review of the agenda for any given meeting of the Council, she
identifies a matter in which she has a `personal interest,"as defined in the Act,she will file the appropriate
disclosure letter to be recorded in the official records of the City Council. Council Member Wilson
regularly makes this disclosure. Her letter of February 20, 2018 is hereby made part of the record.
March 2, 2021
16
Council Member Rosemary Wilson also DISCLOSED she has a personal interest in Dixon Hughes
Goodman and receives income from the firm as a result of her late husband's employment. The income is
proceeds from the sale of his partnership interest,paid out over an extended period of time. She is not an
employee of Dixon Hughes Goodman, does not have any role in management of the company and does is
not privy to its client list. However, due to the size of Dixon Hughes Goodman and the volume of
transactions it handles in any given year,Dixon Hughes Goodman may have an interest in matters of which
she has no personal knowledge. In that regard, she is always concerned about the appearance of
impropriety that might arise if she unknowingly participates in a matter before City Council in which Dixon
Hughes Goodman has an interest. In order to ensure her compliance with both the letter and spirit of the
State and Local Government Conflict of Interests Act (the "Act'), it is her practice to thoroughly review
each City Council agenda to identify any matters in which she might have an actual or potential conflict.
If,during her review of an agenda,she identifies a matter in which she has a `personal interest",as defined
by the Act, she will either abstain from voting, or file the appropriate disclosure letter with the City Clerk
to be included in the official records of City Council. Council Member Wilson's letter of June 2, 2015 is
hereby made a part of the record.
March 2, 2021
17
ITEM— VLE
CERTIFICATION
ITEM#71330
Upon motion by Council Member Wilson, seconded by Council Member Moss, City Council CERTIFIED
THE CLOSED SESSION TO BE IN ACCORDANCE WITH THE MOTION TO RECESS
Only public business matters lawfully exempt from Open Meeting
requirements by Virginia law were discussed in Closed Session to which
this certification resolution applies.
AND,
Only such public business matters as were identified in the motion
convening the Closed Session were heard, discussed or considered by
Virginia Beach City Council.
Voting: 8-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Barbara M. Henley, John D.
Moss, Guy K. Tower,Rosemary Wilson, Vice Mayor James L. Wood and
Sabrina D. Wooten
Council Members Abstaining:
Louis R.Jones
Council Members Absent:
Mayor Robert M. Dyer
Aaron R. Rouse—left after Closed Session
*Council Member Moss stepped out during the Publicly Held Property-Beach District and Public
Contract-Dome Site discussions (2:05 P.M. —2:43 P.M.)
March 2, 2021
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RESOLUTION
CERTIFICATION OF CLOSED SESSION
VIRGINIA BEACH CITY COUNCIL
WHEREAS: The Virginia Beach City Council convened into CLOSED SESSION,pursuant to the
affirmative vote recorded in ITEM#71319 Page 3 and in accordance with the provisions of The Virginia
Freedom of Information Act; and,
WHEREAS:Section 2.2-3712 of the Code of Virginia requires a certification by the governing body
that such Closed Session was conducted in conformity with Virginia law.
NOW, THEREFORE,BE IT RESOLVED: That the Virginia Beach City Council hereby certifies
that, to the best of each member's knowledge, (a)only public business matters lawfully exempted from Open
Meeting requirements by Virginia law were discussed in Closed Session to which this certification resolution
applies; and, (b) only such public business matters as were identified in the motion convening this Closed
Session were heard, discussed or considered by Virginia Beach City Council.
A nda arnes, M
City Clerk March 2, 2021
18
ITEM— VLF.1
MINUTES
ITEM#71331
Upon motion by Council Member Moss, seconded by Council Member Wilson, City Council APPROVED
the MINUTES of the SPECIAL SESSION of February 9, 2021
Voting: 9-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Barbara M. Henley, Louis R.
Jones, John D. Moss, Guy K. Tower, Rosemary Wilson, Vice Mayor
James L. Wood and Sabrina D. Wooten
Council Members Absent:
Mayor Robert M. Dyer
Aaron R. Rouse
March 2, 2021
19
ITEM— VLF.2
MINUTES
ITEM#71332
Upon motion by Council Member Moss, seconded by Council Member Jones, City Council APPROVED
the MINUTES of the SPECIAL SESSION of February 16, 2021
Voting: 9-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Barbara M. Henley, Louis R.
Jones, John D. Moss, Guy K. Tower, Rosemary Wilson, Vice Mayor
James L. Wood and Sabrina D. Wooten
Council Members Absent:
Mayor Robert M. Dyer
Aaron R. Rouse
March 2, 2021
20
ITEM— VI.G.
FORMAL SESSION AGENDA
ITEM#71333
Mayor Dyer read the Speaker Policy and advised for items where only one(1)speaker is registered, the
City Clerk will call the speaker and they will be given three (3)minutes on each item they registered to
speak.
The City Clerk called the following speaker:
Barbara Messner, P. O.Box 514, spoke in OPPOSITION on Ordinances/Resolutions H: 1, 2, 4, 5, 7 and 8
and Planning Item I: 6
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council APPROVED,BY
CONSENT,Agenda Items Ordinances/Resolutions H:1, 2, 4, 5, 7 and 8 and Planning Item I: 6
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
H. ORDINANCES/RESOLUTIONS:
ITEM#3 WILL BE CONSIDERED SEPARATELY
ITEM#6 WILL BE CONSIDERED SEPARATELY
L PLANNING ITEMS:
ITEM#1 WILL BE CONSIDERED SEPARATELY
ITEM#2 WILL BE CONSIDERED SEPARATELY
ITEM#3 WILL BE CONSIDERED SEPARATELY
ITEM#4 WILL BE CONSIDERED SEPARATELY
ITEM#5 WILL BE CONSIDERED SEPARATELY
COUNCIL MEMBER HENLEY WILL VOTE NAY ON ITEM#6
COUNCIL MEMBER MOSS WILL VOTE NAY ON ITEM#6
ITEM#7 WILL BE CONSIDERED SEPARATELY
March 2, 2021
21
ITEM— VLH.1
ORDINANCES/RESOLUTIONS
ITEM#7I334
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council ADOPTED,BY
CONSENT,Resolution to ADOPT a Revised Policy re investment of City Funds
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
1 A RESOLUTION ADOPTING A REVISED POLICY
2 FOR THE INVESTMENT OF CITY FUNDS
3
4 WHEREAS, the City Council adopted a policy for the investment of City funds on
5 May 28, 1996, and this policy was most recently updated by the City Council in 2014;
6
7 WHEREAS, the purpose of the policy is to provide for the prudent investment of
8 City funds;
9
10 WHEREAS, the City Treasurer, as custodian of City funds pursuant to Section 8.03
11 of the City Charter, is responsible for the investment of City funds;
12
13 WHEREAS, it is important that the City funds be invested in accordance,with the
14 Code of Virginia and prudent fiduciary standards; and
15
16 WHEREAS, the City Treasurer.has recommended the adoption of the attached
17 revised Investment Policy.
18
19 NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
20 VIRGINIA BEACH, VIRGINIA:
21
22 That the attached City of Virginia Beach Investment Policy is hereby adopted, and
23 the Treasurer is hereby directed to use the Investment Policy for the investment of the
24 City's funds.
Adopted by the Council of the City of Virginia Beach, Virginia, on the _ _ day
of March , 2021.
APPROVED AS TO CONTENT: APPROVED AS TO LEGAL SUFFICIENCY
City Treasurer Zrip ey's Office
CA15330
R-1
February 17, 2021
CITY OF VIRGINIA BEACH,VIRGINIA
INVESTMENT POLICY
PREAMBLE
The City Council,elected officials,appointed officers,and employees of the City of Virginia
Beach recognize their fmancial stewardship responsibilities to the citizens of Virginia Beach. A critical
area of this fmancial stewardship is the investment of the city's cash balances,for with the City Treasurer
bears primary responsibility. Recognizing the advantages of a safe and effective investment program for
the city's funds,the City Council and City Treasurer jointly acknowledge the need for and hereafter accept
this investment policy as it may be amended from time to time.
City of Virginia Beach,Virginia
Investment Policy
(Revised February 2021)
CITY OF VIRGINIA BEACH,VIRGINIA
INVESTMENT POLICY
TABLE OF CONTENTS
Page
Purpose 3
II. Scope 3
III. Objective 3
1. Safety 3
A. Credit Risk 4
B. Interest Rate Risk 4
2. Liquidity 4
3. Yield 4
IV. Standards of Care 4
1. Prudence 4
2. Ethics and Conflicts of Interest 5
3. Delegation of Authority 5
V. Safekeeping,Custody,and Program Integrity 5
1. Authorized Financial Dealers and Institutions 5
2. Internal Controls 6
3. Delivery vs.Payment(DVP) 6
4. Independent Review 6
VI. Suitable and Authorized Investments 6
1. Investment Types 6
2. Collateralization 7
3. Repurchase Agreements 7
VII. Investment Parameters 8
1. Diversification 8
2. Maximum Maturities 8
3. Competitive Bids 8
VIII. Reporting. 8
1. Methods 8
2. Performance Standards 9
3. Mark to Market 9
IX. Policy 9
1. Exemption 9
2. Amendments 9
X. GFOA Recommended Practices 9
XI. Glossary of Terms 10
Appendices:
A. Virginia Security for Public Deposits Act 15
B. Broker/Dealer Questionnaire and Certification 20
C. Investment Guidelines for Bankers'Acceptances 23
D. Investment Guidelines for Commercial Paper 25
E. Government Finance Officers'Association Recommended Practices Pertaining to Cash
Management and Investing Activities 27
F. Various Code of Virginia Provisions Pertaining to Investment of Local Government
Funds 55
2
I. PURPOSE
The purpose of this policy is to provide a guide for the actions of individuals responsible for the investment
of city funds. In general,it is the policy of the city that its funds be invested in a manner which will
provide the highest investment returns only after the goals of maximum security/safety,meeting daily cash
flow demands,and conformance with all state and local statutes governing the investment of public funds
have been met. In pursuing this objective,individuals investing city funds are to be guided by the"prudent
person rule." The prudent person rule provides that,
'Investments shall be made with judgment and care—under circumstances then prevailing—which
persons of prudence, discretion, and intelligence exercise in the management of their own affairs,
not for speculation, but for investment, considering the probable safety of capital as well as the
probable income to be derived.'
II. SCOPE
This investment policy applies to the investment activities of all cash financial assets of the government of
the City of Virginia Beach,except for assets of the employee retirement system,the employee deferred
compensation plan,funds separately invested in accordance with bond resolutions for indentures(e.g.,debt
service funds,irrevocable escrow funds established by a refunding bond issue,etc.),and funds required to
be separately invested in accordance with an escrow agreement,trust agreement,or other legally adopted
contractual arrangement. Funds subject to this policy are accounted for in the city's Comprehensive
Annual Financial Report and include:
• General Fund
• Special Revenue Funds
• Capital Project Funds
• Proprietary Funds
• Trust and Agency Funds
• Any other fund created,unless specifically exempted by this policy or by separate action of
the City Council.
Except as may be specifically noted herein,this investment policy applies to all transactions involving the
financial assets and related activities of all the foregoing funds.
Except for cash in certain restricted and special funds,the City of Virginia Beach will consolidate cash and
reserve balances from all funds to maximize investment earnings and to increase efficiencies with regard to
investment pricing,safekeeping and administration. Investment income will be allocated to the various
funds based on their respective participation and in accordance with generally accepted accounting
principles.
III. OBJECTIVE
The primary objectives,in priority order,of the city's investment activities shall be:
1. Safety
Safety of principal is the foremost objective of the city's investment program. Investments shall
be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio.
The goal is to mitigate credit risk and interest rate risk.
3
A. Credit Risk
Credit risk is the risk of loss due to the fmancial failure of the security issuer or backer.
Credit risk may be mitigated by:
• Limiting investments to the safest types of securities;
• Pre-qualifying the financial institutions,brokers/dealers,intermediaries,and advisors
with which the city will do business;and
• Diversifying the investment portfolio so that potential losses on individual securities
will be minimized.
B. Interest Rate Risk
Interest rate risk is the risk that the market value of securities in the portfolio will fall due
to changes in general interest rates. Interest rate risk may be mitigated by:
• Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations,thereby avoiding the need to sell securities on
the open market prior to maturity;and
• By investing operating funds primarily in shorter-term securities.
2. Liquidity
The investment portfolio shall remain sufficiently liquid to meet all operating requirements that
may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities
mature concurrent with cash needs to meet anticipated demands(static liquidity). Furthermore,
since all possible cash demands cannot be anticipated,the portfolio should consist largely of
securities with active secondary or resale markets(dynamic liquidity). Alternatively,a portion of
the portfolio may be placed in money market mutual funds provided that the funds are registered
under the Securities Act of the Commonwealth or the Federal Investment Co.Act of 1940,and
that the investments by such funds are restricted to investments otherwise permitted by law for
political subdivisions as set forth in the Investment of Public Funds Act,or investments in other
such funds whose portfolios are so registered,or local government investment pools which offer
same-day liquidity for short-term funds.
3. Yield
The investment portfolio shall be designed with the objective of attaining a market rate of return
throughout budgetary and economic cycles,taking into account the investment risk constraints and
liquidity needs. Return on investment is of least importance compared to the safety and liquidity
objectives described above. The core of investments is to be limited to relatively low risk
securities in anticipation of earning a fair return relative to the risk being assumed. Securities shall
not be sold prior to maturity,with the following exceptions:
• A declining credit security could be sold early to minimize loss of principal;
• A security swap which would improve the quality,yield,or target duration in the
portfolio;or
• Liquidity needs of the portfolio require that an appropriately selected security be
sold.
IV. STANDARDS OF CARE
1. Prudence
The standard of prudence to be used by the city's investment officials shall be the"prudent
person"standard and shall be applied in the context of managing an overall portfolio. Investment
officers acting in accordance with written procedures and this investment policy and exercising
due diligence shall be relieved of personal responsibility for a specific security's credit risk or
market price changes,provided negative deviations from expectations are reported in a timely
4
fashion and the liquidation or sale of such securities is carried out in accordance with the terms of
this policy.
As stated previously,the prudent person standard provides that, `Investments shall be made with
judgment and care,under circumstances then prevailing,which persons of prudence,discretion,
and intelligence exercise in the management of their own affairs,not for speculation,but for
investment,considering the probable safety of capital as well as the probable income to be
derived.'
2. Ethics and Conflicts of Interest
Officers and employees,including those involved in the City's investment process,are governed
by the State and Local Government Conflict of Interests Act. Specifically,Code of Virginia§2.2-
3103 (5)and(6)of the Act provide that no officer or employee shall:
(a) accept any money,loan,gift,favor,service,or business or professional opportunity that
reasonably tends to influence him in the performance of his official duties;or
(b) accept any business or professional opportunity when he knows that there is a reasonable
likelihood that the opportunity is being afforded him to influence him in the performance
of his official duties.
To ensure that personal investment or business transactions do not violate these provisions or any
other provision of the State and Local Government Conflict of Interests Act,officers and
employees must(1)familiarize themselves with this Act and(2)carefully scrutinize how their
personal interest may affect or be affected by the transactions that are part of the City's investment
process.
3. Delegation of Authority
The City Treasurer,who is the custodian of the City's monies pursuant to§8.03 of the Charter of
the City of Virginia Beach,shall have responsibility for the operation of the investment program.
The City Treasurer shall follow established written procedures and maintain internal controls for
the operation of the investment program in a manner consistent with this investment policy.
Procedures should include references to: safekeeping,delivery vs.payment,investment
accounting,repurchase agreements,wire transfer agreements,collateral/depository agreements,
and banking service contracts. No person may engage in an investment transaction except as
provided under the terms of this policy and the procedures established by the City Treasurer. The
City Treasurer shall be responsible for all transactions undertaken and shall establish a system of
controls to regulate the activities of subordinate officials.
V. SAFEKEEPING,CUSTODY,AND PROGRAM INTEGRITY
1. Authorized Financial Institutions and Dealers
The City Treasurer will maintain a list of financial institutions and dealers authorized to provide
investment services. Financial institutions shall be"qualified public depositories"in accordance
with provisions of the Virginia Security For Public Deposits Act(Code of Virginia§2.2-4400),as
amended(copy attached as Appendix A),and must be designated a city depository in accordance
with§ 2-226 of the City Code. In addition,the City Treasurer will also maintain a list of approved
security broker/dealers selected by creditworthiness(minimum capital requirement$10,000,000
and at least five years of operation). These may include"primary"dealers or regional dealers that
qualify under the Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule).
All financial institutions and broker/dealers who desire to become qualified bidders for investment
transactions must supply the following as appropriate:
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• Audited fmancial statements
• Proof of Financial Industry Regulatory Authority membership
• Proof of State registration
• Completed City of Virginia Beach Broker/Dealer Questionnaire(not applicable
to Certificate of Deposit counterparties)
• Certification of having read,understood,and agreed to comply with the City of
Virginia Beach's investment policy.
• Evidence of adequate insurance coverage.
An annual review of the fmancial condition and registration of qualified bidders will be conducted
by the City Treasurer.
2. Internal Controls
The City Treasurer is responsible for establishing and maintaining an internal control structure
designed to ensure that the assets of the city are protected from loss,theft,or misuse. The internal
control structure shall be designed to provide reasonable assurance that these objectives are met.
The concept of reasonable assurance recognizes that(a)the cost of a control should not exceed the
benefits likely to be derived;and(b)the valuation of costs and benefits requires estimates and
judgments by management. The internal controls shall include,but are not limited to the
following:
A.Control of collusion.
B. Separation of reconciliation from accounting/record keeping.
C. Custodial safekeeping.
D. Avoidance of physical possession and/or delivery of securities.
E. Clear delegation of authority to subordinate staff.
F. Written confirmation of telephone transactions for investments.
G. Maintenance of current contracts/agreements with the lead bank and third-party custodian.
3. Delivery vs.Payment
All security transactions,including collateral for repurchase agreements,will be executed by
delivery vs.payment(DVP). This ensures that securities are deposited in the appropriate
safekeeping institution prior to the release of funds. Securities will be held by a third-party
custodian as evidenced by safekeeping receipts with a written custodial agreement. The
safekeeping institution shall annually provide a copy of their most recent report on internal
controls(Statement on Standards for Attestation Engagements(SSAE)No. 16).
4. Independent Review
To help maintain the integrity of the investment program,the City Treasurer shall establish a
process for annual independent review by an external auditor to assure compliance with this
policy.
VI. SUITABLE AND AUTHORIZED INVESTMENTS
1. Investment Types
Consistent with the Government Finance Officers'Association(GFOA)Recommended Practice
on State Statutes Concerning Investment Practices,and as defined by state law where applicable,
the following investments will be permitted by this policy:
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• U.S.Government obligations,U.S. Government agency obligations,and U.S.
Government instrumentality obligations,in accordance with§2.2-4501 of the Code
of Virginia
• Repurchase agreements,in accordance with§2.2-4507 of the Code of Virginia
• Certificates of deposit,in accordance with§2.2-4509 of the Code of Virginia
• Savings and loan association deposits,in accordance with§2.2-4500 of the Code of
Virginia
• Prime bankers'acceptances,in accordance with§2.2-4504 of the Code of Virginia
and Appendix C(Investment Guidelines for Bankers'Acceptances)of this policy
• Prime commercial paper,in accordance with§2.2-4502 of the Code of Virginia
except as further restricted by Appendix D(Investment Guidelines for Commercial
Paper)of this policy
• Investment-grade obligations of state and local governments and public authorities,
in accordance with§2.2-4501 of the Code of Virginia
• Money market mutual funds whose portfolios consist only of domestic securities,
regulated by the Securities and Exchange Commission and as provided for in§2.2-
4508 of the Code of Virginia
• Virginia Local Government Investment Pool as provided for in§2.2-4600 et seq.of
the Code of Virginia
• Virginia Investment Pool established as a governmental trust under Section 115 of
the Internal Revenue code and by the Joint Powers Act
Consistent with the Government Finance Officers' Association(GFOA)Recommended Practice
on the Use of Derivatives by State and Local Governments,extreme caution should be exercised
in the use of derivative instruments. The City Treasurer should carefully consider the factors
outlined in the GFOA recommended practice when contemplating any derivative-type investment.
(See GFOA Recommended Practices,Appendix E).
2. Collateralization
In accordance with Virginia law(Virginia Security for Public Deposits Act, §2.2-4400 et seq.of
the Code of Virginia)and the GFOA Recommended Practice on the Collateralization of Public
Deposits,collateralization is required on all demand deposit accounts,including checking
accounts and non-negotiable certificates of deposit,and repurchase agreements. The Virginia
Security for Deposits Act adopted the concept of mutuality of responsibility,involving a cross
guarantee among all banks holding public deposits. In the event of default by one financial
institution,an assessment levied against all participating institutions will cover all uncollateralized
public deposits.
Collateral may be held by an independent third party with whom the City of Virginia Beach has a
current written custodial agreement.
(See GFOA Recommended Practices,Appendix E)
3. Repurchase Agreements
Use and collateralization of repurchase agreements should be consistent with GFOA
Recommended Practices on Repurchase Agreements.
(See GFOA Recommended Practices,Appendix E)
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VII. INVESTMENT PARAMETERS
1. Diversification
Investments are to be diversified in accordance with the provisions of this policy by:
• limiting investments to avoid over-concentration in securities from a specific
issuer or business sector(excluding U.S.Treasury securities),
• investing in securities with varying maturities,and
• continuously investing a portion of the portfolio in readily available funds such
as local government investment pools(LGIPs),money market funds or
overnight repurchase agreements to ensure that appropriate liquidity is
maintained in order to meet ongoing obligations. (See the GFOA
Recommended Practice on"Diversification of Investments in a Portfolio"in
Appendix E.
2. Maximum Maturities
Generally,the City Treasurer shall limit maximum final stated maturities of investments covered
by this policy to five years. To the extent possible,the Treasurer will attempt to match
investments with anticipated cash flow requirements. Unless matched to a specific cash flow,the
Treasurer will not directly invest in securities maturing more than five(5)years from the date of
purchase. The Treasurer shall determine the appropriate average weighted maturity of the
portfolio consistent with the investment objectives.
Reverse and escrow funds may be invested in securities exceeding five(5)years to maturity if the
maturities of such investments are made to coincide as nearly as practicable with the expected use
of funds. The investment of these types of funds shall be disclosed to the City Council including
the disclosure of appropriate time restrictions,if applicable.
3. Competitive Bids
The City Treasurer shall request competitive bids from at least(3)brokers or financial institutions
for purchases of investments,except in circumstances when the Treasurer,or his/her designee,
deem it necessary to do otherwise in order to meet certain investment goals,or when market
conditions or circumstances dictate otherwise. Competitive bids are not required for funds
invested in the state's investment pool.
VIII. REPORTING
1. Methods
The City Treasurer shall prepare an investment report at least quarterly,including a succinct
management summary that provides a clear picture of the status of the current investment portfolio
and transactions made over the last quarter. This management summary will be prepared in a
manner which will indicate whether investment activities during the reporting period have
conformed to the investment policy. The report shall be provided to the Finance Department. The
reports will be provided to the City Manager and City Council upon request. The City Council
may require additional information or clarification from the City Treasurer either orally or in
writing. The report will include the following:
• A listing of the amount and type of individual securities held at the end of the
reporting period.
8
• Unrealized gains or losses resulting from market price appreciation or depreciation
by listing the cost and market value of those securities over one-year duration that
are not intended to be held until maturity(available at fiscal year-end).
• Average weighted yield to maturity of the investment portfolio.
• Listing of investment by maturity date,to include interest rate
• The percentage of the total portfolio which each type of investment represents.
• Year-end reporting by Level input in accordance with GASB 72
2. Performance Standards
The investment portfolio will be managed in accordance with the parameters specified within this
policy. The portfolio should obtain a market average rate of return during a market/economic
environment of stable interest rates. Portfolio performance should be compared to appropriate
benchmarks on a regular basis and at least annually in one of the quarterly reports due to City
Council.
3. Mark-to Market
A statement of the market value(obtained from a reputable and independent source)of the
portfolio shall be prepared and reported to the Finance Department at least quarterly. This
statement will be provided to the City Manager and the City Council upon request. This statement
should include the market value,book value,and unrealized gain or loss on each investment in the
portfolio. This will ensure that the minimal amount of review has been performed on the
investment portfolio in terms of value and subsequent price volatility. Review should be
consistent with the GFOA Recommended Practice on Mark-to Market Practices for State and
Local Government Investment Portfolios and Investment Pools.
(See GFOA Recommended Practices,Appendix E)
IX. POLICY
1. Exemption
Any investment held at the time of adoption of this policy that does not meet the guidelines and
requirements of this policy shall be exempted from such guidelines and requirements. At maturity
or liquidation,such monies shall be reinvested only as provided by this policy.
2. Amendments
This policy shall be reviewed by the City Treasurer on an annual basis or more frequently as
necessary. Any changes must be approved by the City Council.
X. GFOA RECOMMENDED PRACTICES
The Government Finance Officers' Association(GFOA)develops and approves policy statements and
recommended practices pertaining to cash management and investment activities(see Appendix E). These
policy statements and recommended practices are intended to serve as guidelines for state and local
governments and other public bodies in the safe investment of public funds. To the extent that GFOA's
policy statements and recommended practices,as they may be amended and/or adopted from time to time,
do not conflict with applicable law,the provisions of this investment policy,or the safe,orderly,and
efficient investment of the city's funds,the City Treasurer shall incorporate them into the city's investment
program.
9
XI. GLOSSARY OF TERMS
AGENCIES: Federal agency securities.
ARBITRAGE: A technique employed to take advantage of price differences in separate markets. This
may be accomplished by purchasing a security in one market and immediately selling in another market at
a better price. As used in the context of investing public funds,arbitrage means borrowing at low tax-
exempt rates and investing in taxable instruments at higher rates. The arbitrage rebate provisions of the
1986 tax reform act govern this type of activity.
ASKED: The price at which securities are offered.
BANKERS'ACCEPTANCES(BAs): Negotiable time drafts drawn on commercial banks to fmance the
import,export,shipment and storage of goods. Bankers'acceptances are backed by the credit of the bank,
which assumes primary liability. The acceptance is further collateralized by the goods in shipment or
storage.
BASIS POINT: One-one hundredth of one percent. For example,one quarter of one percent would be
expressed as"twenty-five basis points."
BID: The price offered by a buyer of securities. (When you are selling securities,you ask for a bid.) See
Offer.
BOND: A written,interest bearing certificate of debt with a promise to pay on a specific date.
BROKER: A broker brings buyers and sellers together for a commission.
CERTIFICATE OF DEPOSIT(CD): A time deposit with a specific maturity evidenced by a certificate.
Large denomination CDs are typically negotiable.
COLLATERAL: Securities,evidence of deposit or other property which a borrower pledges to secure
repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER: Business promissory notes,with a stated date of payment,which are usually
sold at a discount and are backed by the general credit of the company. The credit of commercial paper
may be enhanced by letters of credit from one or more banks. Commercial paper is generally for terms of
less than 270 days;longer corporate obligations are referred to as notes or bonds and are subject to a greater
degree of regulation.
COMPREHENSIVE ANNUAL FINANCIAL REPORT(CAFR): The official annual report for the
City of Virginia Beach. It includes combined statements for each individual fund and account group
prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate
compliance with fmance-related legal and contractual provisions,extensive introductory material,and a
detailed Statistical Section.
COMPENSATING BALANCE: A minimum level of deposits maintained in one or more non-interest
bearing accounts at a bank to defray the costs of the banking services.
COUPON: (a)The annual rate of interest that a bond's issuer promises to pay the bondholder on the
bond's face value. (b)A certificate attached to a bond evidencing interest due on a payment date.
DEALER: A dealer,as opposed to a broker,acts as a principal in all transactions,buying and selling for
his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
10
DELIVERY VERSUS PAYMENT(DVP): There are two methods of delivery of securities: delivery
versus payment and delivery versus receipt. Delivery versus payment,or DVP,is delivery of securities
coincident with an exchange of money for the securities. Delivery versus receipt is delivery of securities
with an exchange of a signed receipt for the securities. Delivering securities DVP means that funds are not
released by the trustee until the security is delivered either in physical form or through DTC.
DERIVATIVE: A fmancial instrument created from or whose value depends on(is derived from)the
value of one or more underlying assets or indexes of asset values. The term"derivative products"refers to
instruments or features such as collateralized mortgage obligations(CMOs),interest-only(IOs)and
principal only(POs),forwards,futures,currency and interest rate swaps,options,floaters/inverse floaters,
and caps/floors/collars.
DISCOUNT: The amount or percentage at which a security sells below par value. For example,if a bond
with a$1,000 par value sells for$900,the discount is$100 or 10%.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a discount
and redeemed at maturity for full face value;e.g.,U.S.Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent
returns. Diversification is a means of reducing risk in an investment portfolio.
D.K.: "Don't know." If the delivery of a security fails because the trustee was not informed to take
delivery or because the security is delivered for a different amount than agreed upon,the trade is"DK'ed,"
meaning refused.
D.T.C.: The Depository Trust Company(DTC)of New York acts as the repository for all securities which
are electronic,as opposed to physical delivery. These include all U.S.Treasury and agency issues and
certain issues of commercial paper.
FEDERAL CREDIT AGENCIES: Agencies of the Federal Government set up to supply credit to
various classes of institutions and individuals;e.g.,S&Ls,small business firms,students,farmers,farm
cooperatives,and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION(FDIC): A federal agency that insures bank
deposits,currently up to$100,000 per deposit.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently
pegged by the Federal Reserve through open-market operations.
FEDERAL HOME LOAN BANKS(FHLB): The institutions that regulate and lend to savings and loan
associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve
Banks vis-à-vis member commercial banks.
FEDERAL NATIONAL MORTGAGE ASSOCIATION(FNMA): FNMA,like GNMA,was chartered
under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working
under the auspices of the Department of Housing and Urban Development(HUD). It is the largest single
provider of residential mortgage funds in the United States. Fannie Mae,as the corporation is called,is a
private stockholder-owned corporation. The corporation's purchases include a variety of adjustable
mortgagees and second loans,in addition to fixed-rate mortgages. FNMA's securities are highly liquid and
are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment
of principal and interest.
11
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 guidelines regarding purchases and sales of
Government Securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and
consisting of a seven member Board of Governors in Washington,D.C., 12 regional banks,and about 5,700
commercial banks that are members of the system.
FINANCIAL INDUSTRY REGULATORY AUTHORITY(FINRA): A self-regulatory organization.
FINRA is the largest non-governmental regulator for all securities firms doing business with the United
States public. It was created in 2007 by the consolidation of the regulatory operations of the National
Association for Securities Dealers(NASD)and New York Stock Exchange(NYSE).
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION(GNMA OR GINNIE MAE):
Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers,
commercial banks,savings and loan associations,and other institutions. Security holder is protected by full
faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA,or FMHM
mortgages. The term"passthroughs"is often used to describe Ginnie Maes.
JUMBO CD: A certificate of deposit of at least one hundred thousand dollars.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial
loss of value. In the money market,a security is said to be liquid if the spread between bid and asked
prices is narrol,-;and abler a transactions can be done at those quotes
LOCAL GOVERNMENT INVESTMENT POOL(LGIP): The aggregate of all funds from political
subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between
the parties to repurchase—reverse repurchase agreements that establishes each party's rights in the
transactions. A master agreement will often specify,among other things,the right of the buyer-lender to
liquidate the underlying securities in the event of default by the seller-borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes due and
payable.
MONEY MARKET: The market in which short-term debt instruments(bills,commercial paper,bankers'
acceptances,etc.)are issued and traded.
MUNICIPAL OBLIGATION: A security issued by a state or local government,public authority,or
similar entity. These obligations are generally exempt from federal income tax. Taxable municipal
obligations are issued by localities or authorities for non-public purpose projects.
OFFER: The price asked by a seller of securities. (When you are buying securities,you ask for an offer.)
See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the
open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the
volume of money and credit in the economy. Purchases inject reserves into the banking system and
stimulate growth of money and credit;sales have the opposite effect. Open market operations are an
important and flexible Federal Reserve monetary policy tool.
12
PAR VALUE: The value of a security as expressed on its face without consideration of any premium,
discount,or accrued interest. Par value is also known as"face amount"or"face value."
PREMIUM: The amount by which the price paid for a security exceeds the par value.
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALERS: Government securities dealers which submit daily reports of market activity and
positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to the
Fed's informal oversight. Primary dealers include Securities and Exchange Commission(SEC)—
registered securities broker-dealers,banks,and a few unregulated firms.
PRINCIPAL: The amount paid for a security exclusive of accrued interest.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market
price.
REPURCHASE AGREEMENT(REPO): In a repo,a holder of securities sells the securities to an
investor with an agreement to repurchase them at a fixed price on a certain date. The security"buyer"in
effect lends the"seller"money for the period of the agreement,and the terms of the agreement are
structured to compensate him for this. Dealers use repos extensively to finance their positions.
REVERSE REPO: In a reverse repo,an investor owns securities,such as a Treasury note,U.S.
government agency bond or other security,that a bank or dealer purchases under an agreement to sell back
to the investor on a specified date,at an agreed-upon interest rate. A reverse repo is the opposite or
complement to a repurchase agreement transaction—i.e.,every repo involves a reverse repo by the other
party to the transaction.
SAFEKEEPING: A service to customers rendered by third party banks for a fee whereby securities and
collateral of all types and descriptions are held by the bank for protection.
SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following their
initial sale and distribution.
SECURITIES&EXCHANGE COMMISSION(SEC): Agency created by Congress to protect
investors in securities transactions by administering securities legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
TIME DEPOSIT: A bank deposit drawing interest at intervals and having a restrictive level of
withdrawals;e.g.,a savings account.
TREASURY BILLS: A discount security issued by the U.S.Treasury to fmance the national debt. 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: A medium-term interest-bearing security issued by the U.S.Treasury to finance
the national debt.
TREASURY OBLIGATIONS: Securities representing obligations backed by the full faith and credit of
the United States. Treasury bills are short-term obligations(3 months to 1 year),treasury notes are
medium-term obligations(1 to 10 years),and treasury bonds are long-term obligations(10 to 30 years).
13
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member
firms as well as non-member broker-dealers in securities maintain a maximum ratio of indebtedness to
liquid capital of 15 to 1;also called net capital rule and net capital ratio. Indebtedness covers all money
owed to a firm including margin loans and commitments to purchase securities,one reason new public debt
issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets
easily converted into cash.
U.S.AGENCY SECURITIES: Obligations issued by agencies established by the United States
government. These obligations are regarded as being almost as risk free as direct treasury issues because
the federal government supervises and regulates the issuers and is regarded as having a moral obligation to
ensure repayment.
YIELD: The rate of annual income return on an investment,expressed as a percentage.
ZERO BALANCE ACCOUNT: A demand deposit account in which no cash balance is maintained
overnight. As checks drawn on the account are presented,the funds necessary to pay them are transferred
from a master account at the same bank. Zero balance accounts are used to control float or provide account
separation for specialized purposes.
14
APPENDIX A
Virginia Security For Public Deposits Act
15
§2.2-4400.Short title;declaration of intent;applicability.
A.This chapter may be cited as the"Virginia Security for Public Deposits Act."
B.The General Assembly intends by this chapter to establish a single body of law applicable to the pledge
of collateral for public deposits in fmancial institutions so that the procedure for securing public deposits
may be uniform throughout the Commonwealth.
C.All public deposits in qualified public depositories that are required to be secured by other provisions of
law or by a public depositor shall be secured pursuant to this chapter.Public depositors are required to
secure their deposits pursuant to several applicable provisions of law,including but not limited to§§2.2-
1813,2.2-1815,8.01-582,8.01-600, 15.2-1512.1, 15.2-1615, 15.2-2625, 15.2-6611, 15.2-6637,58.1-3149,
58.1-3150,58.1-3154,and 58.1-3158.
D.This chapter,however,shall not apply to deposits made by the State Treasurer in out-of-state fmancial
institutions related to master custody and tri-party repurchase agreements,provided that(i)such deposits do
not exceed 10 percent of average monthly investment balances and(ii)the out-of-state fmancial institutions
used for this purpose have received at least one of the following short-term deposit ratings:(a)not less than
A-1 by Standard&Poor's;(b)not less than P-1 by Moody's Investors Service,Inc.;or(c)not less than F 1
by Fitch Ratings,Inc.
1973,c. 172,§§2.1-359,2.1-361; 1984,c. 135;2000,cc.335,352;2001,c. 844;2010,cc.640,674;2020,
c.333.
§2.2-4401.Definitions.
As used in this chapter,unless the context requires a different meaning:
"Dedicated method"or"opt-out method"means the securing of public deposits without accepting the
contingent liability for the losses of public deposits of other qualified public depositories,pursuant to§2.2-
4404 and regulations and guidelines promulgated by the Treasury Board.
"Defaulting depository"means any qualified public depository determined to be in default or insolvent.
"Default or insolvency"includes,but shall not be limited to,the failure or refusal of any qualified public
depository to return any public deposit upon demand or at maturity and the issuance of an order of
supervisory authority restraining such depository from making payments of deposit liabilities or the
appointment of a receiver for such depository.
"Eligible collateral"means securities or instruments authorized as legal investments under the laws of the
Commonwealth for public sinking funds or other public funds as well as Federal Home Loan Bank letters
of credit issued in accordance with guidelines promulgated by the Treasury Board.
"Located in Virginia"means having a main office or branch office in the Commonwealth where deposits
are accepted,checks are paid,and money is lent.
"Pooled method"means securing public deposits by accepting the contingent liability for the losses of
public deposits of other qualified public depositories choosing this method,pursuant to§2.2-4403 and
regulations and guidelines promulgated by the Treasury Board.
"Public deposit"means moneys held by a public depositor who is charged with the duty to receive or
dminister such moneys and is acting in an official capacity,such moneys being deposited in any of the
following types of accounts:nonnegotiable time deposits,demand deposits,savings deposits,or any other
transaction accounts.
"Public depositor"means the Commonwealth or any county,city,town or other political subdivision
thereof,including any commission,institution,committee,board,or officer of the foregoing and any state
court.
"Qualified escrow agent"means the State Treasurer or any bank or trust company approved by the Treasury
Board to hold collateral pledged to secure public deposits.
"Qualified public depository"means any national banking association,federal savings and loan association
or federal savings bank located in Virginia,any bank,trust company or savings institution organized under
Virginia law,or any state bank or savings institution organized under the laws of another state located in
Virginia authorized by the Treasury Board to hold public deposits according to this chapter.
"Required collateral"of a qualified public depository means the amount of eligible collateral required to
secure public deposits set by regulations or an action of the Treasury Board.
"Treasury Board"means the Treasury Board of the Commonwealth created by§2.2-2415.
16
1973,c. 172, § 2.1-360; 1984,c. 135; 1987,c.718; 1996,c.77; 1998,cc.20,21;2001,c.844;2008,c. 7;
2010,cc. 640,674.
§2.2-4402.Collateral for public deposits.
Qualified public depositories shall elect to secure deposits by either the pooled method or the dedicated
method.Every qualified public depository shall deposit with a qualified escrow agent eligible collateral
equal to or in excess of the required collateral.Eligible collateral shall be valued as determined by the
Treasury Board.Substitutions and withdrawals of eligible collateral may be made as determined by the
Treasury Board.
Notwithstanding any other provisions of law,no qualified public depository shall be required to give bond
or pledge securities or instruments in the manner herein provided for the purpose of securing deposits
received or held in the trust department of the depository and that are secured as required by§6.2-1005 of
the Code of Virginia or that are secured pursuant to Title 12,§92a of the United States Code by securities
of the classes prescribed by§ 6.2-1005 of the Code of Virginia.
No qualified public depository shall accept or retain any public deposit that is required to be secured unless
it has deposited eligible collateral equal to its required collateral with a qualified escrow agent pursuant to
this chapter.
1973,c. 172,§ 2.1-362;2001,c. 844;2010,cc.640,674.
§2.2-4403.Procedure for payment of losses by pooled method.
When the Treasury Board determines that a qualified public depository securing public deposits in
accordance with this section is a defaulting depository,it shall as promptly as practicable take steps to
reimburse public depositors for uninsured public deposits using the following procedures:
1.The Treasury Board shall ascertain the amount of uninsured public deposits held by the defaulting
depository,either with the cooperation of the Commissioner of Financial Institutions,the receiver
appointed for such depository,or by any other means available.
2.The amount of such uninsured public deposits ascertained as provided in subdivision 1,plus any costs
associated with liquidation,shall be assessed by the Treasury Board first against the defaulting depository
to the extent of the full realizable market value of the collateral pledged to secure its public deposits.
3.In the event the realized value of the pledged collateral in subdivision 2 is insufficient to satisfy the
liability of the defaulting depository to its public depositors and the Treasury Board,the Treasury Board
shall assess the remaining liability against all other qualified public depositories securing public deposits
according to the following ratio:total average public deposit balance for each qualified public depository
held during the immediately preceding twelve months divided by the total average public deposit balance
for the same period held by all qualified public depositories under this section other than the defaulting
depository.
4.Assessments made by the Treasury Board in accordance with subdivision 3 shall be payable by the close
of business on the second business day following demand.Upon the failure of any qualified public
depository to pay such assessment when due,the State Treasurer shall promptly take possession of the
eligible collateral deposited with the non-paying depository's escrow agent and liquidate the same to the
extent necessary to pay the original assessment plus any additional costs necessary to liquidate the
collateral.
5.Upon receipt of such assessments and the net proceeds of the eligible collateral liquidated from the State
Treasurer,the Treasury Board shall reimburse the public depositors to the extent of the defaulting
depository's liability to them,net of any applicable deposit insurance.
1973,c. 172,§ 2.1-363; 1978,c. 14; 1984,c. 135;2001,c. 844;2009,c.64;2010,cc.640,674.
17
§2.2-4404.Procedure for payment of losses by dedicated method.
When the Treasury Board determines that a qualified public depository securing public deposits in
accordance with this section is a defaulting depository,it shall as promptly as practicable take steps to
reimburse public depositors of all uninsured public deposits using the following procedures:
1.The Treasury Board shall ascertain the amount of uninsured public deposits held by the defaulting
depository with the cooperation of the Commissioner of Financial Institutions,the receiver appointed for
such depository or by any other means available.
2.The amount of such uninsured public deposits ascertained as provided in subdivision 1,plus any costs
associated with liquidation of the eligible collateral of the defaulting depository,shall be assessed by the
Treasury Board against the defaulting depository.The State Treasurer shall promptly take possession of the
eligible collateral deposited by such depository with the depository's escrow agent,as is necessary to satisfy
the assessment of the Treasury Board and shall liquidate the same and turn over the net proceeds to the
Treasury Board.
3.Upon receipt from the State Treasurer of the eligible collateral liquidated,the Treasury Board shall
reimburse the public depositors from the proceeds of the collateral up to the extent of the depository's
deposit liability to them,net of any applicable deposit insurance.
1984,c. 135, §2.1-363.1;2001,c. 844;2009,c. 64;2010,cc. 640,674.
§2.2-4405.Powers of Treasury Board relating to the administration of this chapter.
The Treasury Board shall have power to:
1.Make and enforce regulations and guidelines necessary and proper to the full and complete performance
of its functions under this chapter;
2.Prescribe and enforce regulations and guidelines fixing terms and conditions consistent with this chapter
under which public deposits must be secured;
3.Require additional collateral,in excess of the required collateral of any or all qualified public
depositories as it may determine prudent under the circumstances;
4.Determine what securities or instruments shall be acceptable as eligible collateral,and fix the percentage
of face value or market value of such securities or instruments that can be used to secure public deposits;
5.Establish guidelines to permit banks to withdraw from the procedures for the payment of losses under§
2.2-4403 and instead be governed by the procedures for the payment of losses under§2.2-4404,consistent
with the primary purpose of protecting public deposits;
6.Require any qualified public depository to provide information concerning its public deposits as
requested by the Treasury Board;and
7.Determine when a default or insolvency has occurred and to take such action as it may deem advisable
for the protection,collection,compromise or settlement of any claim arising in case of default or
insolvency.
1973,c. 172,§2.1-364;2001,c. 844;2009,c.64;2010,cc.640,674.
§2.2-4407.Mandatory deposit of public funds in qualified public depositories.
Public deposits required to be secured pursuant to this chapter shall be deposited in a qualified public
depository.
1973,c. 172,§2.1-366;2001,c.844;2010,cc. 640,674.
18
§2.2-4408.Authority to make public deposits.
A.All public depositors are hereby authorized to make public deposits under their control in qualified
public depositories,securing such public deposits pursuant to this chapter.
B.Local officials handling public deposits in the Commonwealth may not require from a qualified public
depository any pledge of collateral for their deposits in excess of the requirements of this chapter.
1973,c. 172, § 2.1-367; 1980,c. 538,§2.1-234.5; 1998,cc.20,21;2001,c. 844;2010,cc.640,674.
§2.2-4409.Authority to secure public deposits; acceptance of liabilities and duties by public
depositories.
All qualified public depositories are hereby authorized to secure public deposits in accordance with this
chapter and shall be deemed to have accepted the liabilities and duties imposed upon it pursuant to this
chapter.
1973,c. 172,§ 2.1-368;2001,c.844;2010,cc.640,674.
§2.2-4410.Liability of public depositors.
When deposits are made in accordance with this chapter no official of a public depositor shall be personally
liable for any loss resulting from the default or insolvency of any qualified public depository in the absence
of negligence,malfeasance,misfeasance,or nonfeasance on his part or on the part of his agents.
1973,c. 172, § 2.1-370;2001,c. 844;2010,cc.640,674.
§2.2-4411.Reports of qualified public depositories.
By the tenth day after the end of each calendar reporting month or when requested by the Treasury Board
each qualified public depository shall submit to the Treasury Board an electronic report of such data
required by the Treasury Board to demonstrate that the current market value of its pledged collateral was
equal to or greater than the amount of required collateral for the previous month,certified as to its accuracy
by an authorized official of the qualified public depository.
Upon request by a public depositor,a qualified public depository shall provide a schedule detailing the
public deposit accounts reported to the Treasury Board for that depositor,as well as the amount of total
public deposits held by that depository at the close of the applicable month and the total market value of the
collateral securing such public deposits.
1973,c. 172,§ 2.1-369; 1979,c. 154;2001,c. 844;2010,cc. 640,674.
19
APPENDIX B
BROKER/DEALER QUESTIONNAIRE
AND CERTIFICATION
20
Broker/Dealer Questionnaire
Section I:
The City of Virginia Beach(hereinafter referred to as the"City")is a government operating under the laws
of the Commonwealth of Virginia. The City has adopted a written investment policy which regulates the
standards and procedures used in its cash management activities. A copy of the Investment Policy is
attached to this document.
The City maintains relationships with qualified members of the broker/dealer community who,in its
opinion,understand the needs,constraints,and goals of the City.
Section II:
1.Name of Firm:
2. Address:
3. Telephone Number(s):
4. Contact Personnel:
Name:
Title:
Name:
Title:
Name:
Title:
5. Is your firm a member of FINRA?
6. Place an'x' by each regulatory agency that your firm is examined by and/or subject to its rules and
regulations.
FDIC SEC NYSE
Comptroller of Currency Federal Reserve System
7. Have you obtained all required licenses to operate as a broker/dealer in the Commonwealth of Virginia?
8. To the best of your knowledge,have there been any`material' litigation,arbitration or regulatory
proceedings,adjudicated or settled,that your firm has been subject to within the last five years that
involved issues concerning the suitability of the sale or purchase of securities to intuitional clients or
fraudulent or unfair practices related to the sale of securities to an institutional client? If so,please describe
each such matter briefly.
9. Please provide certified audited financial statements for the past fiscal year.
21
Section III:
I hereby certify that the above information is true and correct to the best of my knowledge,that I have read
the referenced Investment Policy,that I agree to comply with the Investment Policy,and that I am
authorized to execute this request for information on behalf of my firm.
Name of Firm:
By:
Title:
Date:
22
APPENDIX C
Investment Guidelines for Bankers' Acceptances
23
City of Virginia Beach
Investment Guidelines for Bankers'Acceptances
The following terms and conditions shall apply to investment in bankers' acceptances:
1. Prime bankers' acceptances must be issued by domestic banks with a minimum long-term debt
rating of"AA"or foreign banks with a"AAA"long term debt rating by a majority of the rating
services that have rated the issuer. The short-term debt rating must be at least"Al"or equivalent
by all the rating services that rate the issuer(minimum of two ratings must be available).
2. Prime bankers' acceptances shall not exceed fifty percent(50%)of the total investment portfolio's
book value on the date of acquisition. The amount invested in any one commercial bank pursuant
to this paragraph cannot exceed fifteen percent(15%)of the book value of the portfolio on the
date of acquisition or$15,000,000.00,whichever is less.
3. Prime bankers' acceptances must be eligible for purchase by the Federal Reserve System as
required by TCA 9-4-602(a)(1). A prime bankers' acceptance must have an original maturity of
not more than two hundred seventy(270)days to be eligible for purchase and it must:
a. Arise out of the current shipment of goods between countries or within the United
States,or
b. Arise out of storage within the United States of goods under contract of sale or
expected to move into the channel of trade within a reasonable time and that are
secured throughout their life by a warehouse receipt or similar document conveying
title to the underlying goods.
24
APPENDIX D
Investment Guidelines for Commercial Paper
25
City of Virginia Beach
Investment Guidelines for Commercial Paper
The following terms and conditions shall apply to investment in commercial paper:
1. Prime commercial paper must have a maturity that does not exceed two hundred seventy(270)
days.
2. Acquisition will be monitored to assure that no more than five percent(5%)of the portfolio book
value at the date of acquisition,or$15,000,000,whichever is less,shall be invested in prime
commercial paper of a single issuing corporation. The total holdings of an issuer's paper should
not represent more than 5%of the issuing corporation's total outstanding commercial paper.
3. Purchases of prime commercial paper shall not exceed thirty-five percent(35%)of the portfolio
book value at the date of acquisition.
4. Purchases must be limited to corporations that meet the following criteria:
a. "Prime quality"is commercial paper that shall be rated by at least two of the following:
Moody's Investors Services,Inc.,within its NCO/Moody's rating of prime 1; Standard
and Poor's Inc.,within its rating of A-1;Fitch Investors Services,Inc.,within its rating of
F-1,or by their corporate successors. If the corporation has senior long-term debt,it must
have a minimum rating of"A"or the equivalent rating by at least two of the above listed
rating services.
b. The commercial paper rating must be based on the merits of the issuer or
guarantee/agreement of a non-bank corporation,and not be backed by a letter of credit or
insurance from a third party.
c. Financial information should be obtained for reference on all corporations issuing
commercial paper owned by the City of Virginia Beach.
5. Issues may be acquired from authorized broker/dealers or directly from an eligible issuer.
6. Prime commercial paper of depository institutions or of a holding company thereof shall not be
held as part of the city's investment portfolio. Investments in banks should be as a depositor
rather than as a creditor. Other fmance company commercial paper is eligible for investment
pursuant to the credit guidelines previously described.
26
APPENDIX E
Government Finance Officers' Association
Recommended Practices Pertaining to
Cash Management and Investment Activities
27
GOVERNMENT FINANCE OFFICERS ASSOCIATION RECOMMENDED PRACTICES
• Investment Policy
• Investment Program for Public Funds
• Governmental Relationships with Securities Dealers
• Establishing a Policy for Repurchase Agreements
• Monitoring the Value of Securities in Repurchase Agreements
• Collateralizing Public Deposits
• Selection and Review of Investment Advisors
• Use of Derivatives and Structured Investments by State and Local Governments for Non-Pension Fund
Investment Portfolios
• Mark-to-Market Reporting for Public Investment Portfolios
• Securities Lending Programs for Non-Pension Fund Portfolios
• Using Commercial Paper in Investment Portfolios
• Diversifying the Investment Portfolio
• Managing Market Risk in Investment Portfolios
• Local Government Investment Pools
• Using Safekeeping and Third-Party Custodian Services
• Ensuring the Safety of Reverse Repurchase Agreements
• Investment and Management of Bond Proceeds
• Using Benchmarks to Assess Portfolio Risk and Return
28
Government Finance Officers Association Recommended Practice
Investment Policy
GFOA recommends that all governments establish a comprehensive written investment policy,which
should be adopted by the governing body.
An investment policy describes the parameters for investing government funds and identifies the
investment objectives,preferences or tolerance for risk,constraints on the investment portfolio,and how
the investment program will be managed and monitored.The document itself serves as a communication
tool for the staff,elected officials,the public,rating agencies,bondholders,and any other stakeholders on
investment guidelines and priorities.An investment policy enhances the quality of decision making and
demonstrates a commitment to the fiduciary care of public funds,making it the most important element in a
public funds investment program.
GFOA recommends that all governments establish a comprehensive written investment policy,which
should be adopted by the governing body.
The investment policy should be reviewed and updated annually and should include statements on the
following:
Scope and investment objectives:Tailor the scope and investment objectives to the type of investment to
which the policy applies(e.g.,excess operating funds,bond proceeds,pension fund assets).
• Roles,responsibilities,and standards of care:Identify the roles of all persons involved in the
investment program by title and responsibility. Standards of care should include language on
prudence(i.e.,the prudent person rule),due diligence,ethics and conflicts of interest,delegation
and authority,and knowledge and qualifications.
• Suitable and authorized investments: Include guidelines on selecting investment types,
investment advisors,interest rate risk,maturities,and credit quality,along with any
collateralization requirements.
• Investment diversification: State the government's approach to investment diversification,
identifying the method that will be used to create a mix of assets that will achieve and maintain the
government's investment objectives.
• Safekeeping,custody,and internal controls:Develop guidelines to enhance the separation of
duties and reduce the risk of fraud.
• Authorized fmancial institutions,depositories,and broker/dealers:Establish a process for
creating a list of financial institutions,depositories,and broker/dealers that will provide the
primary services necessary for executing the investment program.
• Risk and performance standards: Establish one or more appropriate benchmarks against which
the portfolio should be measured and compared.
• Reporting and disclosure standards:Define the frequency of reporting to the governing body
and the government's management team.
Notes:
See the GFOA Resource Fixed Income Diversification Resource For Public Investing
References:
GFOA Sample Investment Policy
See the GFOA Resource Selecting and Managing Securities Broker-Dealers for Investing
See the GFOA Resource Fixed Income Diversification Resource For Public Investing
29
Government Finance Officers Association Recommended Practice
Investment Program for Public Funds
Governments have a fiduciary responsibility in managing their funds,including the ongoing management
and monitoring of investment activity.A government's investment program should derive from the entity's
Investment Policy.
Developing a public funds investment program is essential to effective fmancial management,and it sets
the foundation for creating protocols and internal controls,constructing and managing the portfolio,
navigating changing economic conditions,and communicating information to stakeholders.While different
types and sizes of governments require differing levels of complexity in their investment programs,all
governments need to recognize their fiduciary responsibility.Having an established public funds
investment program provides the structure to effectively set policy,make decisions,and safeguard a
government's financial assets.
GFOA recommends that all governments establish a public funds investment program by completing the
following steps:
1. Review all applicable laws and regulations—Research all applicable federal,state/provincial,and
local laws and regulations to become familiar with required parameters that may have been
established by an overlapping entity.
2. Establish an investment leadership team—The investment leadership team should provide
oversight,set policy and strategy,and identify appropriate individuals to administer the program.
Typically,this investment leadership team may include senior-level representatives from finance,
administration,risk,legal,and representatives of the governing body.This team will participate in
establishing the public funds investment program.
3. Create an investment policy—Create a written investment policy,which will be adopted by the
governing body.The investment policy documents key guidelines and expected outcomes during
the process of establishing the public funds investment program,as well as other criteria,such as
NACHA.
4. Determine the portfolio management team—Decide if the investment portfolio will be managed
using internal staff and/or if the government will engage an external investment consultant.
Governments should carefully consider if internal staff has the knowledge and ongoing training
opportunities to perform portfolio management tasks in house. When using investment
consultants(including registered investment advisors),governments should ensure that these
professionals have significant experience and expertise in public funds investing and have gone
through an appropriate vetting and selection process.
5. Establish risk and return objectives—Establish a risk profile that is consistent with the
government's risk tolerance and a process for evaluating portfolio risk and a return objective in
accord with the entity's risk tolerance,and subject to investment constraints.
6. Identify the funds being invested and develop a cash flow forecast for each—Determine which
funds will be invested and whether they are excess operating funds,bond proceeds,pension fund
assets,or some other type of funds.To establish the proper investment parameters for each
classification of funds,estimate how frequently they will be used;this will require an
understanding of cash flow requirements and preparation of an appropriate forecast.
30
Government Finance Officers Association Recommended Practice
Governmental Relationships with Securities Dealers
Government investors should follow GFOA recommendations pertaining to selecting securities dealers for
their approved vendor list,managing the relationships with the broker/dealers,and conducting investment
transactions with them.
Finance officers,treasurers and investment officers(hereafter referred to as government investors)who
manage and invest public funds place billions of dollars in the fixed-income and money markets on a daily
basis.They have a fiduciary responsibility to protect public funds,to always act in the best interest of their
entity,to maintain safety and an appropriate level of liquidity and to attain a competitive return on their
portfolio.
Generally,access to the securities markets is made through securities dealers who are registered
broker/dealers and through fmancial institutions(banks)with broker/dealer subsidiaries.The fiduciary
responsibilities of a government investor include ensuring that:
• reasonable comparisons are made to judge the appropriateness of all investments;
• securities meet the criteria established in the investment policy,including liquidity,diversity and
risk of investments;
• security transactions are made on a best execution basis through a competitive process;
• the counterparty to the transaction will fulfill all of its obligations;and,
• the securities are properly safe kept at a qualified custodial agent in a segregated account.
It is important to note that brokers/firms may have unique strengths that may provide exceptional value
within a specific category of investments,provided that you understand the security that you are
purchasing,it dovetails with your investment policy,and you are aware of the risks associated with the
transaction. A unique strength may compliment the skills and abilities of other approved brokers/firms.
Communication with broker/dealers for the purposes of discussing market conditions,reviewing
investment strategies and transacting a trade often occurs by phone,e-mail,or fax. Regardless of the
method of communicating with a broker,a government investor needs to perform due diligence on all
securities dealers prior to adding them to their list of approved brokers/dealers for transacting trades.
GFOA makes the following specific recommendations to government investors in selecting securities
dealers for their approved vendor list,managing the relationships with the broker/dealers,and conducting
investment transactions with them:
1. All securities are held in a third-party bank separate from the broker/dealer that is transacting
business.
2. Use a defined internal process to select,qualify,renew,or terminate brokers and dealers:
• Use a questionnaire,conduct an interview,and/or conduct peer references to help
determine that the broker understands the public entity's needs/objectives.
• Determine that the broker is actively involved in the market sectors utilized by the
government entity.
• Select a number of brokers suitable to the entity,allowing for appropriate
competition/service on all transactions,while limiting it to a manageable number.
• Require security brokers and dealers to comply with the Federal Reserve Bank of New
York's capital adequacy guidelines or SEC Net Capital Rule as a condition of doing
business. Obtain annual fmancial reports of the securities firm.
• Require that brokers provide written acknowledgement or certification of their review
and understanding of the government entity's investment policy to assure compliance
with its objectives,portfolio risk constraints,and investment trading requirements.
31
• Record and retain pertinent information on the firm and the individual broker including
an annual review of the Central Registration Depository(CRD®)information for both
maintained by the Financial Industry Regulation Authority(FINRA). Violations or
sanctions imposed by a regulatory agency or government should be carefully reviewed
for termination of relationship.
• Establish parameters that guide periodic review and potential termination of a broker
dealer relationship.
• Do not select or approve more broker/dealers than will be reasonably used.It is better to
develop good relationships with a small number of approved dealers than to have a long
list of firms who transact little or no business with the investing entity.
3. Due diligence on broker/dealers should include obtaining information on:
• a security dealer's experience and knowledge of public funds investing;
• all contact information for the primary contact,backup and operations staff;
• a broker's manager and supervisor;
• the financial strength of the firm;
• areas of expertise and trading activity;
• registration with FINRA and any citations;
• the names and contact information for references similar to the entity;and
• potential conflicts of interest.
4. Establish a competitive procedure for attaining reasonable market rates on investment
transactions:
• Require that all security sales be made through a competitive bid process.If possible,use
a competitive offer process on purchases as well.
• Securities sold through a selling group at a set price(usually par)or available for specific
bidding should be compared to comparable maturity securities as part of the competitive
process to determine the best relative value.
5. Require that all security transactions be settled on a delivery versus payment basis at the entity's
custodian bank to perfect ownership under a written custodial agreement.
6. Retain complete transaction documentation for audit trail purposes including trade tickets,
confirmations and safekeeping receipts.
7. Electronic trading platforms,such as Bloomberg and Tradeweb,are becoming another alternative
to competitive pricing. These platforms can provide improved transparency over competitive bids
and should be considered if cost effective for the government. It is still important to have a broker
assigned to the account on the electronic platforms so that contact can be made if necessary. The
same due diligence should be completed with all broker dealers on the electronic platforms.
8. Follow all state and entity ethics policies when dealing with all broker/dealers and investment
vendors.
References:
• Introduction to Broker-Dealers for State and Local Governments,Second Edition,Sofia
Anastopoulos,GFOA,2008.
• Investing Public Funds,Second Edition,Girard Miller with M. Corinne Larson and W.Paul Zorn,
GFOA, 1998.
• Federal Reserve Bank of New
York,www.frb.ny.gov,http://www.newyorkfed.org/markets/pridealers_listing.html.
• WWW.FINRA.GOV;http://www.nasd.com/web/idcplg?IdcService=SS_GET_PAGE&nodeld=37
0.
• Securities and Exchange Commission,www.sec.gov,VI.Financial Responsibility of Broker
Dealers,A.Net Capital Rule 15c3-1 (17 CFR 240.15c3-
1)http://www.sec.gov/divisions/marketreg/bdguide.htm#VI.
32
Government Finance Officers Association Recommended Practice
Establishing a Policy for Repurchase Agreements
Where permitted by statute and investment policy,governmental entities often enter into Repurchase
Agreements(repos)to invest funds on a short-term basis primarily to fund liquidity needs.Repos are
contractual financial transactions in which an investor(e.g.governmental entity)purchases securities from
a bank or dealer with a simultaneous contractual agreement by both parties to reverse the transaction at the
same price(plus interest)at some mutually agreed-upon future date.The parties to the agreement
(governmental entity and bank/dealer)are commonly referred to as counterparties.Repos are an integral
part of an investment program of state and local governments and provide an alternative or supplement to
local government investment pools,money market mutual funds and other money market instruments.
However,like all investments,there are associated risks with repos,one in particular is the counterparty's
credit risk. Such risk can be mitigated by the utilizing proper securitization practices.
Common Types of Repos:
• Overnight Repo: refers to a repo that goes from one business day to the next business day.These
repos have a negotiated fixed interest rate.
• Term Repo:refers to a repo agreement with a specified maturity of several days to several weeks.
Term repos can be established for up to several years when the investment policy permits.The
interest rate for the period is usually fixed.
• Open Repo:typically,has no maturity date,and renews daily until terminated by either one of the
counterparties.The interest rate adjusts daily to the overnight rate and is averaged for the period of
the repo.
• Flex Repo(flexible repurchase agreements):are often used for the reinvestment of bond
proceeds used for capital projects.These repos are often for multi-year periods associated with a
specific capital program.The flexible portion of the agreement permits multiple cash drawdowns
to fund the expenditure requirement.Governments should ensure that these investments meet the
liquidity requirements of the project and adhere to any bond covenants.
• Tri-Party Repo: occurs when a custodian(a.k.a.the tri-party agent)participates as an
intermediary between the two parties(investor and lender)of the repo.The custodian administers
and ensures the transaction occurs simultaneously and that necessary safeguards are in place to
protect the underlying securities during term of the repo.
Benefits of Repos:
• Repos are safe when properly established and monitored;
• At times,provide higher yields than other money market alternatives;
• Provide diversification to other money market investments;and
• Provides flexibility.
Risks Associated with Repos:
• The repurchase agreement with an entity's counterparty is not properly established;
• The financial strength of the counterparties and value of the collateral are not properly monitored;
• The bank or dealer cannot buy securities back when repo is closed by governmental entity.
• The collateral for the repo is not liquid or easily marketable;and
• The value of the repo is not sufficient to cover the funds invested and interest earned.
33
Mitigating the Risk:
• Execute a SIFMA Master Repurchase Agreement including additional provisions specific to the
governmental agency that is signed by a duly authorized officer with each counterparty;
• Establish financial strength criteria for counterparties and review financial statements at inception
of relationship and at least annually. Some entities will limit counterparties to primary dealers;
• Allow only highly marketable,easily priced collateral priced at a minimum of 102%and
monitoring their value at least weekly;and
• Have collateral settled delivery-versus-payment(DVP)at the entity's custodian or trustee for third-
party safekeeping.
Master Repurchase Agreement.A Master Repurchase Agreement is the contractual agreement a
governmental entity enters into with a bank or counterparty.A form of the agreement,also known as a
blanket agreement may be obtained from the website of the Securities Industry and Financial Markets
Association(SIFMA)formerly known as The Bond Market Association(TBMA).However,governmental
entities may wish to amend SIFMA's form of the Master Repurchase Agreement to suit the specificities of
their respective transactions.
A master repurchase agreement governs the repurchase transaction.An agreement should reflect the
following characteristics:
• Defines and provides detail as to the nature of the transaction;
• Identifies the relationship of the parties to the agreement;
• Establishes the parameters concerning the ownership and custody of the collateral securities for
the term of the agreement;
• May include right to substitute collateral during the term of the agreement;and
• Provides for remedies in the event of default by either party.
SIFMA has also published an optional substitution/termination provision to its Master Repurchase
Agreement that allows the repo seller(bank or dealer)to retain effective control over the purchased
securities,or the repo seller could elect to terminate the transaction prior to maturity on short notice to the
repo buyer(government entity).
Securitization Provisions.
Safekeeping:In order to protect public funds,governmental entities should ensure proper securitization
practices when utilizing repurchase agreements for investments. Safekeeping should be performed by an
independent or third-party custodian.Duties of the custodian(direct or tri-party)should be outlined in a
written safekeeping agreement.
Collateral:The underlying security of a repurchase agreement is collateral. Collateral arrangements for
repurchase agreements are short-term and liquid in nature.Typical collateral instruments are U.S.
Treasuries(e.g.U.S.Treasury bills)and governmental agency securities(e.g.Farm Credit Banks,Home
Loan Banks bonds).Governmental entities should be aware of the risk factors of the underlying collateral
instrument for the repo and refer to their respective investment policies to verify if such collateral
instruments are permissible to utilize for the repurchase transaction.The purchased securities(collateral)to
collateralize the repurchase agreement should maintain a market value in excess of the value of the
repurchase agreement(called margin,"haircut,"or over securitization).
Although governmental entities are not bound by the Financial Accounting Standards Board(FASB),
FASB Statement No.140 affects the counterparties to repurchase transactions with governments.FASB
Statement No. 140,"Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities,"generally provides that if the repo buyer(i.e.,government entity)has the right to sell or
34
substitute the securities,then the repo seller(i.e.,bank or dealer)does not have the right to substitute the
securities or terminate the contract on short notice.The repo buyer will be obligated to record both the
securities,together with any obligation to return the securities.The repo seller will be required to reclassify
the securities from a securities inventory or investment account to a securities collateral account on its
balance sheet.Accordingly,the nature of the underlying repurchase agreement may change from a buy-sell
transaction to a collateralized loan.This change of treating repurchase agreements as collateralized loans
would make them illegal for local governments in many states.
GFOA recommends that state and local government fmance officers develop policies and procedures to
ensure the safety of repos.
The following actions are recommended:
1. Government entities and investment officers should exercise special caution in selecting and
evaluating the creditworthiness of counterparties with whom they will conduct repurchase
transactions and be able to identify the parties acting as principals to the transaction.
2. Master repurchase agreements should be employed, subject to appropriate legal and technical
review.Governments using the prototype agreement developed by SIFMA should include
appropriate supplemental provisions regarding the types of securities,delivery,substitution,
margin maintenance,margin amounts,seller representations,and governing law as contained in
the GFOA-developed Considerations for Governments in Developing a Master Repurchase
Agreement.
3. Government entities'legal department should review SIFMA's optional substitution/termination
provision in its master agreement to assure no loss has incurred(e.g. in event of a default).In
jurisdictions where substitution of securities is permitted,a loss provision is provided that is
intended to place the repo buyer in the same position it would have been had the repo seller not
exercised the substitution/termination right.However,in jurisdictions where substitution is
restricted,the effect of FASB Statement No.140 may be troublesome depending on the
relationship established with the bank or dealer;the jurisdiction's position with respect to the
change in accounting treatment of the transaction;and whether the government has the ability to
avoid the restriction on substitution of purchased securities.
4. Proper securitization practices are necessary to protect the public funds invested in repurchase
agreements. Safekeeping duties should be performed by a third-party custodian in accordance with
an executed agreement.The purchased securities(collateral)to collateralize the repurchase
agreement should maintain a market value in excess of the value of the repurchase agreement
(called margin,"haircut,"or over securitization).Routine market valuing of the purchased
securities during the term of the repurchase agreement should be a mandatory practice in order to
ensure the purchased securities maintain sufficient market value to cover any default.A typical
margin requirement for a short-term repo using US Treasuries or US agency securities as collateral
is at least 102%and higher(typically 105%)for other securities.
5. Consideration should be given to restricting the allowable securities that are used for collateral.
Entities may prefer to only allow for security maturity and security types that are allowable for
direct investment under their policy.If there is a default of the counterparty,the securities held as
collateral of the repo will be owned by the entity,supporting the need to restrict the maturity and
type of security to what is allowable under policy.
35
Government Finance Officers Association Recommended Practice
Monitoring the Value of Securities in Repurchase Agreements
A repurchase agreement(repo)is a transaction between a buyer/investor(e.g.government entity)and a
seller/counterparty(e.g.bank or securities dealer)in which the counterparty sells securities to the investor
with a simultaneous agreement to buy the securities back from the investor on a future date.The securities
are repurchased,or bought back,at the same price plus the interest earned at the repo rate for the period of
the repo.U.S.Treasury Securities(Bills,Notes,Bonds)and Government Sponsored Enterprise(GSE)(e.g.
Fannie Mae,Freddie Mac)securities are the most common securities sold for repos involving government
entities.Terms for repos can be overnight(from one business day to the next business day),for a specified
number of days(term repo)or as a continuing open contract(open repo)to be closed at the request of either
ply
Public funds have used repos since the 1970s.In September 1996,the Securities Industry and Financial
Markets Association(SIFMA)formerly,The Bond Market Association,published a revised version of
its Master Repurchase Agreement,which previously had been amended in 1987.The revised agreement
includes modifications designed to reflect the expansion of the repo market,changes in the law and
"'market participants'experience in exercising liquidation and similar closeout rights in the context of
counterparty insolvency." (SIFMA Guidance Notes and Supplemental Guidance Notes).
In March of 2003,the Governmental Accounting Standards Board(GASB)published Statement No.
40,Deposit and Investment Risk Disclosures,an amendment to GASB Statement No.3,Deposits with
Financial Institutions, Investments(including Repurchase Agreements),and Reverse Repurchase
Agreements which states that government entities should briefly describe policies regarding securitization
and safekeeping for deposits and investments,including repos,that are related to the risks that must be
disclosed under this Statement No.40.
An important factor in managing the risk of default in repurchase transactions is the valuation of the
purchased securities.For the term of the repo agreement,it is common practice for the counterparty to
deliver purchased securities to the investor in a total value amount(market value plus accrued interest)that
is equal to the investor's investment plus a margin percentage. The margin percentage,typically 102%for
Treasury and GSE securities,protects the investor from a decline in the price of the purchased securities
during the time the repo transaction is in effect.The value of the securities must be monitored frequently to
ensure the market value remains at least equal to the invested amount plus margin percentage in case of
default of the counterparty.If the value of the purchased securities falls below the invested amount plus
margin percentage,then the counterparty is required to deliver additional securities to the investor upon
their request.
The frequency of the valuation depends on several factors:
• The maturity of the purchased securities,since longer maturities have greater price volatility;
• The security types,since certain securities have greater price volatility;
• Market volatility; and,
• The margin percentage that is required by the investor;the lower the margin percentage,the more
frequent the valuation of the purchased securities.
Because the investor may need to liquidate the purchased securities in the secondary market in the event the
counterparty defaults on the repurchase agreement transaction,GFOA recommends that government
entities establish a policy and procedure for monitoring the value of the purchased securities in a repo
transaction to insure that it does not drop below the value of the repo investment plus any required margin
percentage.For maximum protection,government entities should value the purchased securities in their
repo transactions to their current market price on a daily basis.At a minimum,the purchased securities
should be valued:
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• Weekly;
• Whenever there is a major increase in rates or market volatility is high;or,
• Whenever a coupon and/or principal payment on the purchased securities is wired back to the
counterparty.
In order to facilitate the determination of market value,government entities should specify the acceptable
securities for a repo transaction.Acceptable securities are those that have readily available pricing
information from a reputable,independent pricing source.The independent source of pricing should not be
a counterparty to the repo transaction and could include:
• a broker or other financial institution that was not a counterparty to the transaction,
• the custodial bank if the bank was not a counterparty to the transaction,
• publicly available publications such as the Wall Street Journal,or
• other pricing services for which a separate fee would be paid.
When valuing securities,the purchased securities are valued using their current market price plus accrued
interest to compute their total value.The total value is then compared to the repo value multiplied by any
margin percentage.If the total value of the purchased securities is less than the repo value plus the margin
percentage,then the investor/buyer should request sufficient additional securities on a same-day or next-
day basis from the counterparty to bring the total value up to the proper level.
Further discussion of repos and recommended safeguards is provided in the references listed below.Public
investors should consult their investment policy as well as state law and local ordinances for any further
restrictions or guidance on repurchase agreements and valuation of purchased securities.
References:
• GFOA Best Practice,"Establishing a Policy for Repurchase Agreements,"(2003,2006,2008 and
2010),GFOA Committee on Treasury and Investment Management
• GFOA Advisory,"Ensuring the Safety of Reverse Repurchase Agreements," (2003,2006,2008
and 2010),GFOA Committee on Treasury and Investment Management
• "Do You Know Your Repurchase Agreements as Well as You Think?"GFOA's Treasury
Management Newsletter,October 3,2009,Volume 27,Number 10.
• Introduction to Broker-Dealers for State and Local Governments, Second Edition,Sofia
Anastopoulos,GFOA,2008.
• An Introduction to Collateralizing Public Deposits for State and Local Governments,Second
Edition,M.Corinne Larson,GFOA,2006.
• Considerations for Governments in Developing a Master Repurchase Agreement, Second Edition,
GFOA Committee on Cash Management,2001.
• Investing Public Funds,Second Edition, Girard Miller with M.Corinne Larson and W.Paul Zorn,
GFOA, 1998.
• Master Repurchase Agreement,September 1996 The Securities Industry and Financial Markets
Association(SIFMA),http://www.sifma.org
• Governmental Accounting Standards Board(GASB),http://www.gasb.org
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Government Finance Officers Association Recommended Practice
Collateralizing Public Deposits
Depending on applicable state or federal law,public unit deposits may be secured by collateral or assets of
a bank or fmancial institution. In the event of the failure of the bank,the FDIC will honor the
collateralization agreement if the agreement is valid and enforceable under applicable law. The FDIC does
not guarantee,however,that the collateral will be sufficient to cover the amount of uninsured funds.As
such,although it does not increase the Insurance coverage of the public unit deposits,collateralization
provides an avenue of recovery in the unlikely event of the failure of an insured bank. FDIC insurance
covers deposits up to$250,000 for each entity. Deposits above this FDIC limit must be collateralized to
ensure the safety of public funds.
Collateralization of public deposits through the pledging of appropriate securities or other instruments(i.e.
surety bonds or letters of credit)by depositories is an important safeguard for such deposits.The amount of
pledged collateral is determined by a governmental entity's deposit level and the policy or legally required
collateral margin. Some states have established programs for the pooling of collateral for deposit of public
funds. All collateralization agreements between financial institutions and public entities must adhere to
state and federal laws,including FDIC regulations.
GFOA recommends the use of a written agreement with pledging requirements as protection for state or
local government's deposits.GFOA further recommends that governmental entities establish adequate and
efficient administrative systems to monitor such pledged collateral,including state or locally administered
collateral pledging or collateral pools.To accomplish these goals,GFOA recommends the following:
1. Governmental entities should review applicable federal,state statutes and confirm
compliance. The governmental entity should establish and follow procedures for on-going review
of collateral. In addition,a periodic report of collateral holdings and compliance with state statute
and local policy should be provided to the governing body or investment committee(or other
committees as applicable).
2. In the absence of a state program for pooling collateral,public entities should establish and
implement collateralization procedures,including procedures to monitor their collateral positions.
Monitoring informs a public entity of under collateralization,which may threaten the safety of an
entity's deposits,and overcollateralization,which may increase the cost of banking services.
Governmental entities,however,should not accept the liability for maintaining collateral levels
which is the responsibility of the financial institution.
3. Governmental entities/depositors should take all possible actions to ensure that their security
interests in collateral pledged to secure deposits are enforceable against the receiver of a failed
financial institution.
4. Governmental entities should have all pledged collateral held at an independent third-party
institution(custodian)outside the holding company of their bank and evidenced by a written
agreement between the custodian and the government. Governmental entities should know and
understand securities pledged as collateral.
5. Governments should seek a margin level of at least 100%,or as dictated by state statute. The
government should also indicate its desired margin level in its investment policy.The value of the
pledged collateral should be marked to market and reported monthly,or more frequently
depending on the volatility of the collateral pledged. Some state statutes dictate a minimum
margin level for collateral based on deposit levels.
6. Margin levels and bank balances should be monitored daily as there may be a large influx of
deposits for a short amount of time(e.g.,semi-annual/annual tax payments within the span of a
day or two).
38
7. Substitutions of collateral should meet the requirements of the collateral agreement,be approved
by the governmental entity in writing prior to release,and the collateral should not be released
until the replacement collateral has been received.
8. The public entity should require,at a minimum,monthly reporting directly from the custodian.
The custodian should warrant and be signatory to the agreement.
9. Letters of credit may be pledged in lieu of securities. The governmental entity should perform a
legal review of the terms and conditions of any letters of credit. Such letters of credit must be
issued by a federal agency or government sponsored enterprise(e.g.,Federal Home Loan Bank,
etc.)and be irrevocable.
39
Government Finance Officers Association Recommended Practice
Selection and Review of Investment Advisors
Many governments engage investment advisers for assistance in managing their non-pension fund
investment portfolios. State and local government treasury and investment managers augment their
investment programs by retaining investment advisers to perform various portfolio services,ranging from
advice-only consultation to full discretionary management.In engaging an investment adviser,a
government may benefit from professional portfolio management,risk management,potential audit
savings,and continuity in the investment function,among other benefits.Most of these engagements have
been positive.However,there have been some instances of inappropriate investment activities.The
problems and reported losses have often resulted from governments hiring an adviser before they have
clearly defined their needs,performed sufficient due diligence,and established proper controls and ongoing
oversight.
It is important for governments to take a careful and informed approach in the selection and use of
investment advisers.When hiring an investment adviser,the government must determine the level of
authority to grant the adviser.Advisory services will differ in the level of authority the government grants
the adviser and the corresponding level of involvement the government retains in the investment process.
Under a non-discretionary agreement,the adviser must obtain approval before executing any trade.All
activity must comply with the guidelines of a government's investment policy,investment objectives,
governing laws,and written or oral instructions.With a non-discretionary agreement,the government is
directly involved in investment transactions,whether to establish a comfort level with external management
or the adviser,to learn from the adviser,or for some other reason.
Under a discretionary agreement,the adviser can execute trades for the government without prior approval
on each transaction.The adviser follows the same guidelines and restrictions as a non-discretionary adviser.
With a discretionary agreement the government is less involved in the investment transactions,thus
enabling staff resources to be directed to other duties,giving the adviser the ability to execute investment
strategies more quickly,and allowing the government to hold the adviser totally responsible for the
performance in the portfolio.
Under either agreement type,the government maintains control of its investment program by establishing
the guidelines and policies to which the adviser must adhere.
GFOA recommends that state and local governments exercise caution and prudence in their selection of
investment advisers.Because fiduciary responsibility for the safety and liquidity of government funds
cannot be delegated to an investment adviser,the implementation of a safe and effective investment
program must be carefully coordinated with the adviser.
The GFOA urges state and local governments that are considering retaining an investment adviser to define
and control the procurement process and assure periodic reviews of investment advisory services.Adhering
to defined due diligence in selecting a qualified investment adviser and establishing proper controls will
help a government achieve its objectives for hiring an adviser while protecting its funds and reducing risk
to its reputation.
Within the scope of Securities and Exchange Commission(SEC)regulations,state and local laws,and any
other requirements,relationships with investment advisers should address the following:
• Identification of adviser responsibilities.Responsibilities of the investment adviser should be
identified before the selection process.During the process these should be clearly defined and
communicated.
40
• Impartial procurement.The responsible government official or the governing board should
appoint a consultant and/or internal review committee to conduct the search process. Such staff,
consultant,and/or review committee members should be independent of any interest in or
relationship with any investment advisory firm.The procurement process should be competitive
and merit based.
• On-going review.Investment advisory services should be reviewed on an on-going basis.The on-
going review,monitoring and evaluation of the investment adviser are as important as the due
diligence undertaken during the initial selection process.The responsible government official or
the governing board and/or review committee should determine the scope and frequency of such
review process.
Criteria-The responsible government official or the governing board and/or review committee should
determine the criteria to be used in the selection process.Identifying relevant criteria upfront promotes
transparency in the selection process.Assigning weightings to these criteria can create a workable method
to rank or quantify the importance of each. Criteria should include:
• the investment adviser's understanding of the government's investment program,objectives and
constraints
• the investment adviser's background,including the experience,resources,and qualifications of the
firm in general,that of the individuals assigned to handle the government's account,and the firm's
experience in managing state and local government operating funds
• the investment adviser's recommended approach to management of the portfolio: Is this approach
• appropriate for the government?
• fees and fee basis
Risk Control-As part of the procurement process and prior to a final decision on the investment adviser,
the government entity should have made decisions regarding its risk tolerance and developed corresponding
risk control requirements,including:
• the level of discretion afforded the investment adviser
• prohibitions against self-dealing for trade execution
• competitive trade execution
• trade confirmations
• delivery versus payment trade settlement
• independent third-party custody of securities(no investment adviser custody)
• timely reconciliations of trade confirmations and custodial statements
• monthly reporting that complies with industry standards and local requirements
• ongoing compliance reviews
• allowance for independent audits
Selection Process-Once the government defines the services it seeks to obtain and the criteria it will use
to make its selection,a Request for Proposal(RFP)is useful to gather information for the decision-making
process.
Information that might be part of the RFP include:
• SEC licenses
• quantitative information(e.g.,fmancial stability and performance review)
• organizational structure of firm including any business affiliations
• experience and depth of personnel in firm,including turnover and single versus team management
• reporting standards(Global Investment Performance Standards or GIPS)
• firm-specific investment philosophy and portfolio management strategies
• trading process
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• interviews with fmalists
• understanding of current or historic regulatory censure or litigation
The sources for potential candidates may include:
• references from other governments
• consultants'database(s)on investment advisory firms
• association databases
• industry reports and articles
• marketing materials
Final decisions will require an objective compilation and analysis of the results of the RFP.Most
importantly,the investment adviser and the services offered must match the needs of the particular
government entity.
Advisory Agreement-A well-constructed agreement containing specific instructions concerning objectives
and risk parameters,allowable investment instruments and strategies,and required reporting procedures is
critical to a successful outcome.After a recommendation regarding the selection of an investment adviser
has been made,the contractual agreement should include:
• scope of services
• appointment of the investment adviser and fiduciary responsibilities
• establishment of account responsibilities
• definition of accounts and custody
• defmition of discretionary or non-discretionary services with appropriate limitations
• defmition of standards(Prudent Expert)
• establishment of objectives,restrictions and benchmarks
• defmition and processing of transaction procedures in accordance with policy including brokerage
limitations
• representations by entity and investment adviser
• determination of reasonable liability insurance for errors and omissions
• establishment of invoicing and payment
• procedure for termination by either party
• specifications related to nondiscrimination in contracting and ethics rules
• certification of the government's policy by the investment adviser
• all provisions of the RFP as part of the contract
References:
• Investing Public Funds,Second Edition,Girard Miller with M.Corrine Larson and W.Paul Zorn,
GFOA, 1998.
• An Introduction to Investment Advisers for State and Local Governments,Sofia Anastopoulos,
GFOA 2007.This publication includes a sample Request for Proposal(RFP)for investment
advisory services and a sample investment advisory agreement.
• An Elected Official's Guide:Investing,second edition,Sofia Anastopoulos,GFOA,2007.
• GFOA Sample Request for Proposal for Investment Advisory Services,GFOA,2007.
42
Government Finance Officers Association Recommended Practice
Use of Derivatives and Structured Investments by State and Local Governments for Non-
Pension Fund Investment Portfolios
GFOA Advisories identify specific policies and procedures necessary to minimize a government's exposure
to potential loss in connection with its financial management activities.It is not to be interpreted as GFOA
sanctioning the underlying activity that gives rise to the exposure.
A derivative product is a financial instrument created from,or the value of which depends on(is derived
from),the value of one or more underlying assets or indices of asset values.Derivatives may include
forwards,futures,options,swaps(currency and interest rate),caps,floors,collars and rate locks.
Structured investments are fmancial instruments that are created(structured)through pooling or
redistributing assets,tranching liabilities(backed by pools of assets)and/or separating the credit risk of the
collateral assets from the originating entity.Examples of such instruments commonly used by
governmental entities may include asset backed securities,mortgage backed securities,various
collateralized obligations and credit derivatives among others.
GFOA advises state and local government fmance officers to exercise extreme caution in the use of
derivatives and structured fmance products.Governmental entities must learn about and understand the
potential risks and rewards of derivative and structured products,before deciding if they should be used.
Governments must understand fully the characteristics of these instruments and have the ability(internal
staff and expertise)to determine the fair market price and be aware of the legal,accounting,credit and
disclosure risks involved.
Governments should consider the following factors in determining whether to use derivatives and
structured investment products:
1. Legality.Governmental entities should understand that state and local laws may not specifically address
use of these products.Factors to consider include:
• the constitutional and statutory authority of the governmental entity to execute derivative contracts
or to buy structured fmance products,
• the potential for violating constitutional or statutory provisions limiting the governmental entity's
authority to incur debt resulting from the transaction,and
• the application of the governmental entity's procurement statutes specifically to derivative
transactions.
2.Appropriateness.Governmental entities must observe the objectives of principal preservation,liquidity,
and return within legally allowable investments.Judicious asset and liability management policies help
achieve these objectives while managing risk.Characteristics of some derivatives and structured investment
products that may preclude their use and make them inappropriate include high price volatility,illiquid
markets,valuation difficulties,insufficient market history,high degree of leverage,keen monitoring and
modeling system requirements,and the need for a high degree of sophistication to manage risk.
Governmental entities should be aware of all the risks associated with the use of derivatives and structured
investment products,including credit,counterparty,market,prepayment,liquidity,settlement,custodial
and operating risk.
Regarding the difficulty in valuing derivatives and structured investment products,governmental entities
should understand that there may be little or no pricing information or standardization for some derivatives
and structured investment products.Competitive price comparisons are recommended before entering into
a transaction.Even in cases of competitive pricing,because valuations of such products are based on highly
43
sensitive models and not on actual markets,changes in the underlying assumptions may severely impact
asset values.
In addition to determining legality and appropriateness,governmental entities should analyze the
materiality of a transaction to determine if it might affect a bond or other credit-related rating of such
entity.Rating agencies should be notified if required.
3.Procedures and Internal Controls.Governmental entities should establish internal controls for use of
derivatives and structured investment products to ensure that risks involved with these are adequately
managed. Such procedures should include:
• Creating an oversight board and establishing upfront criteria for use of derivatives and/or
structured securities;
• Comprehensive derivatives and structured securities policy(evidencing legal authority,listing
authorized and prohibited types of derivatives and structured investments,identifying guidelines
for counterparty selection,limiting maximum permissible amounts and specifying means of
determining such maximums);
• Review with ratings agency(ies)impact of derivatives use on governmental entity;
• Written statement of purpose and objectives for derivative use,
• Written procedures for monitoring of derivative instruments and structured investment products,
including how often they will be priced and what pricing services will be used:
• Periodic training for managers and access to technical resources to oversee derivative and
structured investments:
• Sufficiently detailed recordkeeping to allow governing bodies,auditors,and examiners to
determine if the program is functioning in accordance with established objectives.Managers
should report regularly on the use of derivatives to their governing body and appropriate
disclosure should be made in official statements and other disclosure documents:
• Reporting on derivative use in accordance with generally accepted accounting principles.Because
of the complexity of these instruments,governments should consult with public accountants at an
early point to determine if specialized reporting may be required:
• Required documentation of stress testing and scenario analysis of derivatives and structured
investment products.Every possible effort should be made to determine worst case scenarios
when using derivatives or structured products,as well as likelihood or probability of these
outcomes and the government's ability to weather them;and
• Procedures for evaluation and review on a periodic basis.
4.Role of External Parties.Governmental entities should know if their broker-dealers are merely acting
as an intermediaries or are taking a proprietary positions in derivatives or structured investment product
transactions.Possible conflicts of interest should be taken into consideration before entering into a
transaction.
Governmental entities should exercise caution in the selection of broker-dealers or investment advisers.
They should confirm that these vendors are knowledgeable about,understand and provide disclosure
regarding the use of derivatives and structured investment products,including benefits and risks.
Governmental entities are responsible for ensuring appropriate safeguards are in place when derivative or
structured investment product transactions are conducted by a third party acting on behalf of the
governmental entities.
The GFOA reiterates the need for governments to exercise extreme caution when considering
derivative products for their investment portfolio.It is important to emphasize that these instruments
should not be used for speculation.
44
Governmental entities must learn about and understand the risks and rewards of derivative and structured
investment products in order to properly evaluate and manage. Governmental entities should consider the
use of derivatives and structured investment products only when they have attained a sufficient
understanding of the products and the expertise to manage them.Certain derivative products and structured
investment products may not be appropriate for all governmental entities.
Ultimately,it is the responsibility of each governmental entity to determine what constitutes a derivative
and/or a structured investment,and what is allowable by statute and policy.
References:
• A Public Investor's Guide to Money Market Instruments, Second Edition,edited by M.Corinne
Larson,GFOA, 1994.
• GFOA Best Practice:Use of Debt-Related Derivatives and Development of Derivatives Policy,
2010,GFOA's Committee on Governmental Debt Management.
• GFOA Derivatives Checklist,2010,GFOA's Committee on Governmental Debt Management.
45
Government Finance Officers Association Recommended Practice
Mark-to-Market Reporting for Public Investment Portfolios
GFOA recommends that state and local government officials responsible for investment portfolio reporting
determine the market value of all securities in the portfolio on at least a quarterly basis. These values
should be obtained from a reputable and independent source and disclosed to the governing body or other
oversight body at least quarterly in a written report.
Market risk is significant in public investment portfolios.Due to price volatility,valuing investments at
their current price is necessary to provide a realistic measure of a portfolio's true liquidation value.Over
time,reporting standards for state and local government investment portfolios have been enhanced so that
investors,governing bodies,and the public remain informed of the current market value of the portfolio.
Regular disclosure of the value of a governmental entity's investments is an important step to furthering
taxpayer and market confidence in state and local government investment practices.The Governmental
Accounting Standards Board(GASB)has also recognized the need to report investments at fair value at
fiscal year-end.Government officials should be aware of state,local,accounting,and rating agency
requirements regarding mark-to-market practices.
GFOA recommends that state and local government officials responsible for investment portfolio reporting
determine the market value of all securities in the portfolio on at least a quarterly basis. These values
should be obtained from a reputable and independent source and disclosed to the governing body or other
oversight body at least quarterly in a written report.The independent source of pricing should not be one of
the parties to the transaction being valued and could include:
1. a broker or other fmancial institution who was not a counterparty to the transaction,
2. the custodial bank if the bank was not a counterparty to the transaction,
3. publicly available publications such as the Wall Street Journal,or
4. other pricing services for which a separate fee would be paid.
It is recommended that the written report include the market value,book value,and unrealized gain or loss
of the securities in the portfolio.
If there is a significant event in the local or national economy that might affect the value of the portfolio,
then a mid-term valuation of the portfolio should be conducted.Governments that employ a more active
portfolio management style should consider more frequent marking to market and reporting.
References:
• GASB Statement 31 and Implementation Guide,Accounting and Financial Reporting for Certain
Investment and for External Investment Pools,March, 1997.
• Investing Public Funds,Second Edition,Girard Miller with M.Corinne Larson and W.Paul Zorn,
GFOA, 1998.
• Investment Procedures and Internal Controls Guideline,GFOA,May 2003.
• Elected Official's Guide Investing, Second Edition,Sofia Anastopoulos,GFOA,2007.
46
Government Finance Officers Association Recommended Practice
Securities Lending Programs for Non-Pension Fund Portfolios
GFOA Advisories identify specific policies and procedures necessary to minimize a government's exposure
to potential loss in connection with its financial management activities.It is not to be interpreted as GFOA
sanctioning the underlying activity that gives rise to the exposure.
Only governmental entities that have the necessary expertise and resources should engage in securities
lending programs.
Where permitted by state statutes,governmental entities participate in securities lending programs as a way
of earning incremental investment income on non-pension fund assets.In securities lending programs,a
governmental entity(directly as principal or through an intermediary)lends securities such as U.S.
Treasury,agency,or government sponsored enterprise(GSE)securities,from its investment portfolio in
return for cash or non-cash collateral.If the collateral is cash it is then reinvested.The participants include
the governmental entity,the borrower and the contracted lending agent,if lending is performed through an
intermediary.
There are several counterparties to this type of transaction(govt entity,lending party,tri party,etc.).A
securities lending transaction has many of the same characteristics as a reverse repurchase transaction.In
both,securities are lent to a counter party with the governmental entity receiving collateral to be reinvested.
A major difference is that securities lending programs through an intermediary are contractual and ongoing
whereas reverse repurchase transactions are typically one-time or non-recurring.
Broker-dealers typically are the borrowers in securities lending programs.They use the borrowed securities
primarily to cover fails(the non-delivery of securities expected to be delivered on a date certain)and short
sales(the sale of securities not presently owned by the seller in order to take advantage of an expected
lower market price)and to execute arbitrage transactions.Accordingly,securities lending programs play an
important role in maintaining orderly markets.
The securities loaned are collateralized for the term of the loan and marked-to-market daily.Minimum
collateral is usually set at 102%or more.This margin reduces the lender's exposure to the borrower.The
governmental entity retains ownership of the securities including the coupons paid during the period the
securities are loaned.
Cash collateral usually has a borrowing rate less than the overnight money market funds rate.The
difference between the borrowing rate and the reinvestment rate produces a net gain in interest income and
determines the value of the trade.The resulting income is subsequently split between the participants in the
securities lending program.There are many options on reinvestment of cash collateral which should be
carefully reviewed and adopted by the government.
Because securities lending programs are not primary activities for most governmental entities and market
access may be limited,they may contract with a lending agent.l Typically,a master trust,custodial or
safekeeping bank or asset manager will act as lending agent facilitating the securities lending programs.
Typical Steps
The typical steps in establishing and operating a securities lending program are:
1. Governmental entity solicits proposals for lending agent to establish contractual limits and
requirements(collateral requirements,authorized collateral,fees).
2. Governmental entity designates portion of the portfolio to be lent through lending agent.
3. Lending agent presents portfolio to broker-dealers as available for lending.
4. Designated securities are lent through agent to approved borrower.
47
5. Collateral(for securities loan)is delivered at predetermined level to approved custodian.
6. Simultaneous to receipt of the collateral,securities are delivered to the borrower.
7. Cash collateral is reinvested in a segregated liquid transaction until the security is returned.In the
case of cash collateral,the lending agent negotiates the interest rate on the collateral paid to the
borrower of the securities,which is called the rebate rate.In the case of non-cash or securities
collateral,the lending agent negotiates a fee paid by the borrower.The governmental entity should
specify reinvestment options.
8. At the end of the loan term,borrower returns securities to governmental entity via lending agent
and simultaneously the lending agent returns collateral to borrower.
9. The difference between what is earned on the cash collateral investment and the rebate rate is the
gross spread.The lending agent retains a portion of the gross spread as its fee and credits the
remainder to the owner of the securities as negotiated between the governmental entity as the
lender and the lending agent.Payment is normally made monthly.
10. The governmental entity keeps the remaining reinvestment income.
11. The value of the collateral is marked to market daily to ensure full collateralization.
12. At the end,borrower returns securities to governmental entity via lending agent and
simultaneously the lending agent returns collateral to borrower.
Risks
While securities lending programs historically have been considered relatively low risk,there are risks and
some governmental entities have suffered significant securities lending losses.Most of these losses were
related to either default risk or maturity risk,which are discussed in more detail below.
Securities Lending Risks
• Borrower Risk.The risk that the borrower will not be able to return the borrowed funds at the end
of the loan term.Borrowers must have high credit ratings from-the rating agencies,and,more
importantly,must meet certain other fmancial criteria as specified by the lending agent and the
governmental entity in the securities lending agreement.A second aspect of counterparty risk is
that the borrower fails to provide additional collateral as required
• Concentration Risk.The lack of diversification by borrower amplifies borrower risk.
• Collateral Risk.The lender(governmental entity)does not receive sufficient or authorized
collateral to cover the market value of borrowed securities.
Reinvestment Risk
• Credit/Default Risk.The risk that the collateral investment made by the securities lending agent
either defaults or suffers a ratings downgrade putting it out of compliance with a governmental
entity's policies or results in a reduced market value or a loss to the entity.
• Interest Rate Risk.The risk that the yield on the invested collateral is less than the rebate paid to
the borrower. (The lending agent must verify the daily spread before any lending is committed.)
• Maturity Risk.The risk that the maturity of the collateral re-investment exceeds the maturity of the
loan. Inaccessibility to the cash would require the governmental entity to provide other funds not
necessarily available.
Operational Risks
These risks generally involve problems with contractual or administrative issues of the program. Clear
guidelines and requirements must be set.These may include problems with margin maintenance,
settlement,corporate actions,dividends or interest,marking to market,monitoring,billings and reporting.
Typically,a lending agreement provides that borrower's credit risk,broker-dealer default risk,and
collateral maintenance are risks undertaken by the lending agent.However,indemnification provisions
vary.The governmental entity,as lender,can demand fmal approval of acceptable counter-parties and the
48
assets available for lending.These decisions generally affect the split of the investment proceeds.Risks
typically borne by the governmental entity involve reinvestment risk.
Liquidity requirements are often accepted and guaranteed by the lending agent upon one day's notice,as
substitution by the borrower in large lending programs is easily accomplished and essentially risk-less.
Normally,the governmental entity provides one day's notice if it wishes to sell a security that is on loan.
Programs that require the governmental entity to undertake responsibility for managing the liquidity present
greater risks and require that the governmental entity place limits on the amount of the portfolio which may
be put on loan.The conditions for the term of the securities on loan and the reinvestment of the proceeds
must be carefully established by contract and strictly managed.
While investment strategies that include securities lending programs are not inherently risky when
employed judiciously with appropriate precautions and controls,GFOA urges state and local government
officials to exercise caution in their use of securities lending programs.
Only governmental entities that have the necessary expertise and resources should engage in securities
lending programs.Prior to participating in a securities lending program,government finance officers
should:
• Determine whether the entity's portfolio and ongoing strategy are appropriate to securities lending;
• Determine whether securities lending is permissible under state statute and the governmental
entity's written investment policy;
• Prepare a written securities lending cash reinvestment policy,which may be attached to or
incorporated into the entity's investment policy or exist as a stand-alone policy.The investment
restrictions in this cash reinvestment policy should be consistent with the entity's own investment
guidelines and strategy.Furthermore,the policy should include an explicit statement that the entity
may set restrictions on the reinvestment of cash collateral as market conditions change. Such
restrictions may include authorized commercial paper programs by program name,rating and/or
term and asset-liability matching requirements.This policy should be incorporated into the
contract with the securities lending agent.
• Exercise special caution in selecting and evaluating the creditworthiness of lending agents and
counterparties to the securities lending program
• Consider the lending agent's experience,technological resources,assets,borrowers base,and fee
basis
• Establish a monitoring process for reviewing the lending agent's reports for compliance and
performance,which should be done no less frequently than on a monthly basis
• Ensure independence of the audit process.
• Avoid possible counter-party risk by having all parties involved(government,lending agent,and
custodian)sign a tri-party contract.
• Require proper reporting procedures at all levels including:
• Margin compliance
• Counterparty participation
• Payment information
• Reinvestment detail
• Consider the resources and required training of staff to adequately monitor compliance with the
agreement by all parties.
Notes:
1 This advisory discusses risks and practices associated with a third-party agent securities lending program,
the most common type of securities lending program,versus a principal program. In a principal program,a
single broker-dealer or bank enters into a contract with the governmental entity and usually quotes a
guaranteed income stream to the entity or the governmental entity manages its own internal program which
49
requires considerable staff time and expertise.Principal programs thus provide the borrower with the
exclusive right to borrow from a portfolio.
References:
• Investing Public Funds,Second Edition,Girard Miller with M. Corinne Larson and W.Paul Zom,
GFOA, 1998.
• GFOA Best Practice, "Presenting Securities Lending Transactions in Financial Statements," 1998.
• GFOA Best Practice, "Repurchase Agreements&Reverse Repurchase Agreements,"2010
50
Government Finance Officers Association Recommended Practice
Using Commercial Paper in Investment Portfolios
GFOA Advisories identify specific policies and procedures necessary to minimize a government's exposure
to potential loss in connection with its fmancial management activities.It is not to be interpreted as GFOA
sanctioning the underlying activity that gives rise to the exposure.
Commercial paper(CP)is a short-term,unsecured promissory note issued by corporations typically used as
a source of working capital,receivables fmancing,and other short-term fmancing needs.CP has maturities
ranging anywhere from 1 to 270 days.Because of the short maturity,federal law exempts CP from
registration with the Securities and Exchange Commission.
As an unsecured debt issued by companies,commercial paper carries default risk for investors as compared
to U.S.Treasury or U.S.government agency or instrumentality debt.
Originally the CP market was available as a funding source to only the highest credit quality entities.
However,innovations such as liquidity programs,credit enhancements,and various special legal structures
have made CP a viable financing alternative for entities with lower credit ratings.Accordingly,while
investors traditionally relied on the financial strength of the issuing entity,increasingly investors must also
evaluate the credit support backing an issue as well as the legal structure of the issuer.
Different Structures of Commercial Paper
In addition to traditional corporate issued commercial paper,there are other types of commercial paper as
follows:
Asset backed commercial paper-Asset backed commercial paper(ABCP)programs gained popularity
partly as a response to the unsecured status of traditional commercial paper but also as a way for fmancial
institutions to more efficiently finance their receivables through off-balance sheet vehicles.With ABCP,
certain assets such as credit card receivables or auto loans and their cash flows,support a specific CP issue.
ABCP is usually sold through a conduit,a special purpose vehicle(SPV)established to facilitate the
fmancing.There are different structures for such conduits. Some SPVs pool the assets of many entities
from various industries.These multiseller ABCP programs issue CP backed by the cash flows from all the
underlying assets.The goal of such multiseller Programs is to enjoy the diversification from multiple
sellers of various industries. Single seller ABCP programs are backed by the assets of one entity,for
example a corporation.Consequently,they lack the diversification of multi-seller programs.Historically,
such ABCP may have had higher credit ratings than the seller company itself.However,such homogenous
assets may pose concentration risk.
Most ABCP programs are partially supported programs,in which the program sponsor or guarantor may
legally be obligated to cover only a certain percentage of defaults of the underlying assets or cover limited
liquidity requirements related to delinquencies of these underlying assets.There are several programs still
in existence that are fully supported,in which the program sponsor is obligated to reimburse CP investors
regardless of delinquencies or defaults except in the case of a bankruptcy of the program.
Structured investment vehicles(SIVs)-A relatively newer structure that issues CP is the structured
investment vehicle(SIV).SIV programs have evolved away from the traditional funding purpose of CP.
Some SIVs take advantage of spread differentials in fixed income securities,earning interest rate arbitrage
profits. SIVs may invest in various asset categories,some of which are difficult to value because they do
not trade on any active market.Lacking such a market,their value is based on models that are sensitive to a
number of assumptions.
51
Liquidity Notes-In addition,other variations of CP have been introduced in the market in recent years,
including extended liquidity notes(also called extendible or structured notes)in which the maturity of the
notes may extend beyond their original maturity date in the case of a default.
Other Features of Commercial Paper
Nationally recognized statistical rating organizations(NRSROs)routinely rate commercial paper issues and
regularly review the strength of the credit quality of the issue.In some instances,CP programs have been
downgraded rapidly by the NRSROs.
CP may be sold directly to investors by the issuing company(direct issued)or by the underwriting
brokerage firm(dealer placed).
Many governments invest in CP as a short-term investment for funds not immediately required,and to
provide diversification and competitive rates of return.Typically,governments purchase CP with a buy and
hold approach until maturity strategy.While a secondary market exists that can be utilized for sales prior to
maturity,there have been periods of disruption due to either issuer-specific events or as a result of a
broader market wide disruption.Changes affecting individual issues as well as the overall market
conditions can take place so quickly that investors do not have the opportunity to sell the security.For these
reasons,CP is generally less liquid than U.S.Treasury or U.S.government agency or instrumentality
obligations.
During market disruptions,investors face the scenario where issuers will be unable to issue new CP to
refinance the maturing commercial paper and the secondary market disappears.To mitigate this risk,CP is
usually backed by bank lines of credit.
State statutes vary as to the ability and limits of governments to purchase CP.
GFOA recommends that if a government chooses to use CP in its investment portfolio,it cautions
government investors to: 1)verify whether commercial paper is allowed under state statute and their
investment policy and 2)determine whether they have the expertise to understand,evaluate and monitor
commercial paper before deciding to include commercial paper as part of a diversified investment portfolio.
Government investors should regularly evaluate whether the incremental yield associated with commercial
paper justifies the additional credit and liquidity risk associated with this type of security.Governments
choosing to use CP should develop policies and procedures to manage the associated risks.Government
investors should consider:
• conducting their own ongoing financial reviews of commercial paper issuers,including
periodically reviewing balance sheet information for issuers of traditional CP as well as reviewing
monthly or quarterly pool reports for ABCP.
• diversifying by issuer,industry sector or commercial paper type
• placing limits on percentage of portfolio comprised of commercial paper
• placing limits on percentage of commercial paper issued by any one issuer,industry,or type
• restricting investments to shorter maturities that reflect the most active part of the commercial
paper market and provide the least opportunity for credit quality changes
• restricting investments in sectors or industries experiencing turmoil,volatility or changes such as
major
• regulatory or technological changes
• recognizing different types of commercial paper,such as corporate promissory notes,asset-backed
commercial paper(both multi-issuer and single-issuer programs),SIV issued ABCP(funding
paper,or extendible paper)and determining the appropriateness of each for the government's
portfolio
• limiting to first tier short-term credit ratings by two NRSROs(for example,A-1,P-1,F-1 or
better)
52
• evaluating underlying liquidity support and credit enhancements such as bank lines of credit or
insurance
• maintaining information on each commercial paper issue in the portfolio
• monitoring ratings and ratings outlook on a frequent basis
• establishing a short pre-approved list of CP programs that investment staff is limited to
purchasing,which is monitored frequently
References:
• Investing Public Funds,Second Edition,Girard Miller with M. Corinne Larson and W.Paul Zorn,
GFOA, 1998.
• Sample Investment Policy,GFOA,2003.
• An Elected Official's Guide:Investing, Second Edition,Sofia Anastopoulos,GFOA,2007.
• "Commercial Paper in Today's Credit Markets,"Treasury Management,GFOA,December 2007.
53
Government Finance Officers Association Recommended Practice
Diversifying the Investment Portfolio
GFOA recommends that state and local governments properly manage the risk in their portfolios to achieve
their investment objectives and comply with their investment constraints.
Government investors have a fiduciary responsibility to protect public funds and to prudently manage their
investments in order to achieve the investment objectives of safety,liquidity,and return.Generally,greater
risk in a portfolio increases the opportunity for higher returns.However,greater risk also increases the
volatility of the returns,which is another defmition of risk.The effective management of risk in a portfolio
is critical for achieving an entity's investment objectives.
A useful strategy for managing risk in a portfolio is through diversification.To this end,a government
should establish a target risk profile.In establishing a risk profile,an entity considers its investment
objectives and constraints,risk tolerances,liquidity requirements and the current risk/reward characteristics
of the market.The profile should be adjusted as needed to changes in any of those considerations. Such a
profile provides a framework and discipline for making individual investment decisions that manage the
risk and create the structure of a portfolio.
The government entity's risk profile,in turn,helps it determine appropriate levels of diversification.
Diversification of investments in a portfolio is based on the different types of risk-primarily interest rate
or market risk,liquidity risk and credit risk.Diversification is achieved by investing in a variety of
securities with dissimilar risk characteristics that respond differently to changes in the market.Areas where
diversification can be achieved include the maturity distribution in a portfolio(market and liquidity risk),
sector allocation(credit risk),issuer allocation(credit risk),and the structures(noncallable vs. callable)of
securities(market and liquidity risk).
GFOA recommends that state and local governments properly manage the risk in their portfolios to achieve
their investment objectives and comply with their investment constraints.GFOA further recommends the
use of diversification in a portfolio as an important strategy for managing risk.Diversification strategies
can be implemented through the following steps:
• carefully and clearly defining what the objectives safety,liquidity and return mean to the
government entity
• preparing a cash flow projection to determine liquidity needs and the level and distribution of risk
that is appropriate for the portfolio
• considering political climate,stakeholders'view toward risk,and risk tolerances
• ensuring liquidity to meet ongoing obligations by investing a portion of the portfolio in readily
available funds,such as Local Government Investment Pools(LGIPs),money market funds,or
overnight repurchase agreements
• establishing limits on positions in specific securities to protect against default risk
• establishing limits on specific business sectors
• developing strategies and guidelines for investments in single class of securities(such as
commercial paper or bankers acceptances)
• limiting investments in securities that have higher credit and/or market risks(such as derivatives)
• limiting particular structures(i.e.optionality,amortizing components,coupons,issue sizes)
• defining parameters for maturity/duration ranges
• establishing a targeted risk profile for the portfolio based on investment objectives and constraints,
risk tolerances,liquidity requirements and the current risk/reward characteristics of the market.
54
References:
• Elected Official's Guide Investing, Second Edition,Sofia Anastopoulos,GFOA,2007.
• Investing Public Funds,Second Edition,Girard Miller with M.Corinne Larson and W.Paul Zorn,
GFOA, 1998.
55
Government Finance Officers Association Recommended Practice
Managing Market Risk in Investment Portfolios
Government investors should follow GFOA recommendations with respect to managing market risk.
Fixed-income securities are investment instruments that provide a stream of cash flows in the form of
coupon and principal payments.Typically,they are issued with maturities ranging from one year to 30
years.A security's stated maturity is the date on which its final interest and principal payments are due.
There are several general structures for fixed-income securities:
• Bullet securities-the principal amount will be paid in one payment at maturity.They are issued
without any option that could cause redemption prior to the stated maturity;
• Securities with options-issued with either a call or put option that could change the stream of
cash flows.Call options give the issuer the right to redeem bonds prior to maturity in accordance
with the call schedule. Securities with call options have greater volatility than bullet securities.
Issuers of callable securities typically call these when interest rates have fallen,causing investors
to lose the higher interest rate in periods when such rates are hard to replace.Put options give the
investor the right to submit a bond for redemption prior to maturity in accordance with the rules of
the put.Buyers pay a premium for the put option.Typically,investors of putable securities"put"
these when interest rates have risen,gaining the opportunity to reinvest their principal at the then
prevailing higher market rates;and
• Amortizing securities-pay a portion of the principal with each interest payment throughout the
life of the bond(e.g.:mortgage securities,asset-backed securities).They have a stated fmal
maturity and an average maturity and can also have early redemption options.
Market risk refers to the effect that changing interest rates have on the present value of a fixed income
security and can also be referred to as interest rate risk.There is an inverse relationship between interest
rates and price.As interest rates rise,the value of a security falls.The reverse is true as interest rates fall.
The extent of price change is a function of the length of term to maturity,the structure of the security(type
of embedded options),the level of interest rates,and the size of the coupon.
Of these factors,the most important are the length of term to maturity and the structure.Generally,the
longer the maturity of a security,the greater its market risk as measured by price volatility.Longer
maturities have greater volatility because as the time to maturity increases,each change in interest rates has
a greater impact on the present value of a security.
The size of a security's coupon also affects price volatility.When analyzing securities with the same
maturity,securities with low coupons will have greater price volatility than securities with high coupons.
The security with the greatest price volatility for any given maturity is a zero coupon security.
Many government investors employ a buy-and-hold approach,so that changes in a security's market value
are never realized and the full face value of the security is received upon maturity.Despite this,market
value must be managed for three reasons:
1. The total return of the portfolio is computed and compared to the total return of the portfolio's
benchmark to evaluate portfolio performance.
2. The market value of an entity's investments must be disclosed in its annual financial report.Often
an entity will include it in more frequent reports to the governing body and public.Accordingly,
an entity must be able to understand and explain changes in the market value of its portfolio.
3. Circumstances may arise in which an entity is forced to sell a security before its maturity.In such
instances,a government entity may have to accept a loss on a security that it had never planned to
sell.Market risk is a critical risk for a government investor.Therefore,it is necessary to
56
understand fully the maturity structure of securities before investing.To ensure appropriate
liquidity and to reduce interest rate risk in operating portfolios,most state and local governments:
• Limit the maximum maturity for securities they purchase;
• Ensure that funds are available for scheduled disbursement by developing cash flow
projections and properly structuring the maturities in a portfolio according to the
expected cash flows;
• Ensure that a reasonable liquidity buffer is maintained to meet unexpected disbursements;
and
• Ensure that a security can be sold with ease and minimal cost(price disruption)to the
investor by investing in high grade,actively traded fixed-income securities
Maximum maturity and weighted average maturity limits relate directly to an entity's statute and policy
constraints,investment objectives and cash flow projections.Although setting maximum maturity
constraints may help limit the market risk in a portfolio,it is not generally considered to be the most
effective way for managing market risk and understanding the potential price volatility of either an
individual security or an entire portfolio.Maximum maturities allow the portfolio to take advantage of
longer securities and the weighted average maturity protects against over-extension of the portfolio in those
longer maturities.
A widely used measure of market risk in the investment industry is modified duration.Durations can be
obtained from professional market resources such as Bloomberg.For governments without access to these
resources,broker-dealers may send documentation of the durations.Duration is more comprehensive and
accurate in measuring market risk than the maturity of a security for two important reasons.First,duration
takes into consideration all cash flows(interest and principal payments)of a fixed-income security using
their present values.Maturity as a market risk measure only considers the principal payment of a security
using its future
value.
Second,modified duration is a multiplier that measures the approximate percentage change in the value of
a security or portfolio given a 1%(100 basis points)move in interest rates.For example,if a security has a
modified duration of 1.74 and interest rates rose by 50 basis points,the security would experience
approximately a-0.87%change in value.
With this type of price volatility analysis,a government investor can determine more accurately the amount
of market risk in a security or portfolio.
Weighted average maturity and weighted average duration in a portfolio are calculated using the maturity
and duration values of all the securities in a portfolio.Weighted average maturity allows a government to
verify compliance with investment constraints since most investment policies and state statutes have
maximum weighted average maturity limitations.Weighted average duration is considered industry wide as
an acceptable measure of market risk in a portfolio.As such,it can provide the government investor with
valuable information for managing the market risk in a portfolio.
The Governmental Accounting Standards Board(GASB)in GASB Statement No.40 requires a disclosure
of all risks associated with a government entity's portfolio,including market risk,including market rate or
interest rate risk.Weighted average maturity and weighted average duration are two of five accepted
methods for disclosing a portfolio's market risk.(A description of the other three is beyond the scope of this
Best Practice.)In accordance with the GASB fair market value reporting requirements in GASB Statement
No. 31,a government entity's portfolio could show unrealized losses or gains for any reporting period.
State and local governments should comply with state statutes pertaining to investing public funds along
with all investment policy parameters.Fixed income investing involves a certain level of market risk.
Investors should be aware of their risk tolerance and confirm that the market risk they assume is within this
tolerance level.
57
GFOA makes the following recommendations to government investors with respect to managing market
risk:
1. Develop and update cash flow projections to determine: a)the dollar amount of the portfolio that
needs to remain liquid(liquidity buffer)to meet disbursement obligations within a six-month
period(short term),b)what dollar amount is required within the next 6- 12 month period,and c)
whether there is a'core'of funds available for longer-term investing.
2. Structure the portfolio to provide sufficient liquidity for anticipated cash flow requirements by
continuously investing a portion of the portfolio in money market type investments such as local
government investment pools,money market mutual funds,overnight repurchase agreements and
money market securities. •
3. Understand fully the maturity structure of a security.Prior to purchase,the government should
confirm compliance with its investment constraints and overall investment strategy.If a security
has options associated with it such as call options,the structure of the option should be analyzed to
determine its potential impact on market risk through an analysis such as option adjusted spread
(OAS)analysis.The stated maturity date should always be used to determine compliance with
maximum maturity constraints,not any potential call dates unless an official announcement of a
call has been released.
4. Adopt weighted average maturity limitations and/or weighted average duration targets,consistent
with the government's investment objectives,constraints,cash flow needs and risk tolerances.The
weighted average maturity limitations is used to limit the liquidity and market risk in a portfolio
consistent with the constraints in the governing state statutes and the investment policy.The
weighted average duration targets can be used to manage market risk in a portfolio.
5. Do not directly invest in securities with maturities greater than the limits imposed by investment
policy.In general,the maturities in a portfolio should coincide as nearly as practicable with the
expected use of funds. Securities with maturities greater than five years should be matched to a
specific cash requirement.The government should include in its investment policy a process for
authorizing longer-term investments and for providing disclosures.
References:
• Investing Public Funds,Second Edition,Girard Miller with M. Corinne Larson and W.Paul Zorn,
GFOA,
1998.
• GFOA Sample Investment Policy,2003.
• GASB Statement No.31 and Statement No.40,www.GASB.org
58
Government Finance Officers Association Recommended Practice
Local Government Investment Pools
In many states,the state treasurer or the authorized governing board of another governmental entity(such
as a county)oversees a pooled investment fund that operates like a money market mutual fund for the
exclusive benefit of governments within the entity's jurisdiction.
Unlike mutual funds,however,local government investment pools(LGIPs)are not registered with the
Securities and Exchange Commission(SEC)and are exempt from SEC regulatory requirements because
they fall under a governmental exclusion clause.While this exemption allows pools greater flexibility,it
also reduces investor protection.Investments in these pools are not insured or guaranteed and substantial
losses have occurred in the past.
These pools typically combine the cash of participating jurisdictions and invest the cash in securities
allowed under the state's laws regarding government investments.By pooling funds,participating
governments benefit from economies of scale,full-time portfolio management,diversification,and
liquidity(especially in the case of pools that seek a constant net asset value of$1.00).Interest is normally
allocated to the participants on a daily basis,proportionate to the size of the investment.Most pools offer a
check writing or wire transfer feature that adds value as a cash management tool.
Government Sponsored versus Joint Powers Agreement Pools
Local government investment pools(LGIPs)may be authorized under state statutes and sponsored by the
state or local governments or may be set up through intergovernmental agreements known as"joint
powers"agreements.In several states,local governments have joined together through joint powers
agreements to sponsor the creation of LGIPs that operate independent of the state government.The
investment authorization to pool funds is generally derived from state statutes that allow governments to
perform collectively any service or administrative function that they may undertake individually.A board
of trustees,normally made up of public officials,oversees these pools and typically selects a fmancial
services firm to provide services such as the following:investment management,custodial services,
participant record keeping,independent audits,and legal services.These pools may invest only in securities
otherwise allowed to individual governments.
Whether the LGIP is state-sponsored or created through a joint powers agreement,it is important to be
aware that the authorizing entity typically does not guarantee investments in the LGIP.
Not All Pools Are the Same
Although there are many similarities between the various LGIPs,there are also differences.One significant
difference among pools that must be understood before placing money in them is their investment
objectives.When LGIPs were first created,most emulated money market mutual funds with the objective
of maintaining a"constant"Net Asset Value(NAV)of$1.00 and providing excellent liquidity for the
investor. Such LGIPs invest in short-term securities with average maturities sufficiently short to avoid
market price risk.The"constant"NAV pools are appropriate investments for funds that must be liquid and
have virtually no price volatility.
There are also government investment pools that have an investment objective of maximizing return.These
pools are variable Net Asset Value(NAV)pools and introduce market risk to the investor through a
fluctuating NAV.They invest in longer-term securities,thus subjecting their portfolios and their
participants to greater market price volatility.The principal invested in the pool may not be the same
principal returned to the investor,depending on the movement of interest rates.While they may be
appropriate for longer-term strategies,these pools would not be appropriate for funds that must be liquid
and stable.
59
Other differences among pools include legal structure,authorized investments,procedures for depositing
and withdrawing money,and services provided to participants.Each pool has a process that a participant
must complete,including documents to be signed and banking information to be provided,in order to
establish an account. Sources of information for evaluating pools may include a pool offering statement,
investment policy or audited fmancial statements.
Rated LGIPs1
Rating agencies rate constant dollar LGIPs using the same criteria that they use for rating money market
mutual funds.These ratings are based on safety of principal and ability to maintain a NAV of$1.
Fluctuating NAV pool ratings include a volatility factor.Pool ratings can provide an additional method of
due diligence.
GFOA makes the following recommendations to governments that invest in or are considering investing in
Local Government Investment Pools(LGIPs).
Government investors should:
1. Confirm LGIPs are eligible investments under governing law and the government's investment
policy.
2. Fully understand the investment objectives,legal structure and operating procedures of the
investment pool before they place any money in the pool.When evaluating an LGIP,investors
should read the pool's offering statement,investment policy,and audited fmancial statements
carefully.
3. Pay particular attention to the investment objectives of a pool to determine whether the pool seeks
to maintain a constant NAV of$1.00 or could have a fluctuating NAV.This information is
essential in order to determine which pools are appropriate for liquidity strategies(constant NAV)
and which ones are only appropriate for longer-term strategies(fluctuating NAV).
4. Review the pool's list of eligible securities to determine compliance with the participating
government's investment policy.Portfolio maturity restrictions and diversification policies should
be evaluated to determine potential market and credit risks.
5. Evaluate portfolio pricing practices.
6. Review custodial policies(e.g.,delivery versus payment).
7. Evaluate the qualifications and experience of the portfolio manager,management team and/or
investment adviser.
8. Review the earnings performance history relative to other investment alternatives. On constant
NAV LGIP funds,the current yield of the portfolio can be compared with competitive institutional
money market funds,or overnight repurchase agreement rates. Standard&Poor's releases an
index of LGIPs on a weekly basis that reports the average 7-and 30-day yields and average
maturities of LGIPs holding its highest ratings(AAAm and AAm).Any pool with above-average
yields or longer maturities should be further evaluated for risk.
9. Evaluate variable NAV LGIPs in relation to appropriate benchmarks.
10. Although ratings are not mandatory,seek LGIPs with the highest ratings,where possible.
11. Fully understand procedures for establishing an account,making deposits and withdrawals,and
allocating interest earnings.There may be limits to the number of deposits and withdrawals in a
month.There may also be dollar limits for deposits,withdrawals and balances.Deposits or
withdrawals may require advanced notification,especially if they are large. If so,investors should
be aware of the deadlines.
12. When selecting an LGIP,consider any additional services offered by an LGIP,such as:check
writing,wire transfers,issuing paying agent services,setting up multiple accounts for an entity,
and arbitrage accounting for bond funds.
13. Confirm that an LGIP provides regular,detailed reporting to pool participants and follows
accepted reporting standards.GFOA recommends that pool administrators,on a daily basis,
determine the market value of all securities in the pool and report this information to all pool
participants on at least a monthly basis.These values should be obtained from a reputable and
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independent source.This information should be included in the report to the governing body
prepared on at least a quarterly basis.
14. Be aware that an LGIP may be a part of a diversified portfolio but that a portfolio comprised
solely of an LGIP may not provide the government entity with appropriate diversification.
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Government Finance Officers Association Recommended Practice
Using Safekeeping and Third-Party Custodian Services
The safety of public funds should be the primary investment objective of all governments. One of the most
important protections and a control against fraud is the separation of the safekeeping function from the
investment function. Investment policies should include a section regarding safekeeping and custody that
defines how the government should have its securities held by an independent third-party for safekeeping to
minimize the risk of a fraudulent transaction. An independent third-party in a safekeeping arrangement
may be a fmancial institution completely separate from where the depository cash assets are being held,or
it may be a separate division of that same named institution. Governments should ensure that if they are
using the same institution for both trading their assets and engaging in safekeeping services,that there are
proper firewalls and protections in place to safeguard your entity's money. Governments should also be
aware of and incorporate state and local laws related to custody and safekeeping.
It is also important to be aware that banks and financial institutions may use the terms of custody and
safekeeping interchangeably. However,as discussed below and in the Procurement of Safekeeping and
Custodial Services Resource,these agreements have different protections and offerings,and the
government needs to determine what is the best service level.
UNDERSTANDING SAFEKEEPING SERVICES
In a typical safekeeping agreement,the government arranges for a firm other than the party that is selling
the investment to provide for the transfer and safekeeping of securities. This allows for investment
transactions to be settled on a delivery-versus-payment(DVP)basis,wherein a secure delivery and
payment occur simultaneously.A safekeeping account does not protect the government from making a bad
investment choice or acquiring a defaulted or improper security.
There are generally two types of safekeeping services(arrangements)that a government will encounter:
• Basic Safekeeping Provider,a brokerage firm or banking institution
• Custodial Safekeeping Provider,usually a banking institution
Basic Safekeeping Provider
Under this arrangement,many times the fees are nominal,or the service is provided at no direct cost as part
of a broader relationship.Governments need to understand what services are being provided and how the
investment assets are being held. General elements of a basic safekeeping arrangement are as follows:
• The investment assets are held in the safekeeping firm's name for the benefit of the government.
• The assets are considered general assets of the firm and may not be protected from being used to
help pay the safekeeping frm's creditors.
• Broker/Dealer accounts may be covered by SIPC Insurance,which is limited to$500,000 and does
not cover any changes in the market value of securities.
• May allow the ability to use any broker-dealer,depending on the contract arrangement.
• May have limited capability related to the sweep of funds to other accounts,such as only allowing
accounts held at the same financial institution.
• Most operate on an actual receipt of funds basis,subject to delayed credit.
• Reporting is provided for account on a basic level,generally with limited detail and no roll-up
capabilities.
• Basic safekeeping arrangements may affect the government's ability to access its assets timely.
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Custodial Safekeeping Provider
A Custodial Safekeeping Provider has a fiduciary responsibility to its clients and usually charges a set fee
based on asset volume. Custodial arrangements with these providers are often referred to as a special type
of safekeeping service that is held within a Trust Department of the custodial bank,thus creating and
independence from the regular commercial or retail bank.The elements of a Custodial Safekeeping
Provider arrangement are as follows:
• Investment assets are protected from the claims of creditors,as the assets are considered legally
separate from the bank or fmancial institution.
• Investment assets are held directly in the government's account
• Usually includes an automated overnight cash sweep system to the investment vehicle of the
government's choice.
• Ability to use any broker/dealer for trades that settle into account.
• Comprehensive reporting,including roll-ups and customizable reporting options.
• Income is generally posted to account on payable date
GFOA recommends that governments use an independent third-party custodial service for safekeeping of
investments. Governments need to weigh the risks versus the costs of the services and understand exactly
how the failure of a safekeeping provider would impact the government's ability to access its investment
assets.
Recommended for GFOA Executive Board approval by the Committee on Treasury and Investments,
February 2020.
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Government Finance Officers Association Recommended Practice
Ensuring the Safety of Reverse Repurchase Agreements
GFOA Advisories identify specific policies and procedures necessary to minimize a government's exposure
to potential loss in connection with its financial management activities.It is not to be interpreted as GFOA
sanctioning the underlying activity that gives rise to the exposure.
Reverse repurchase agreements(reverse repos)are the mirror image of a repo.In a reverse repo,an investor
(governmental entity)owns securities,such as a Treasury note,U.S.government agency bond or other
security,that a bank or dealer purchases under an agreement and sells back to an investor on a specified
date,at an agreed-upon interest rate.
Reverse repos generally have two basic uses:
• Reverse repos may be one way to avoid liquidating a portfolio to meet unexpected or immediate
cash flow requirements.Most public fmance officers accept this straightforward use of the
instrument as a legitimate cash management practice.
• A potentially more controversial use of the reverse repo is to enhance portfolio returns through the
purchase of securities financed through repurchase transactions.The cash obtained can be invested
in another higher-yielding instrument.
Benefits of Reverse Repos:
• Provides an alternative to liquidating a portfolio;
• Provides incremental income with use of ce ?in techniques by expert investment officers;
Risks Associated with Reverse Repos:
• The reverse repurchase agreement with an entity's counterparty is not properly established;
• The financial strength of the counterparties and value of the collateral are not properly monitored;
• The governmental entity does not possess proper authority to enter into such a transaction;
• A counterparty may default on its obligations;
• Underlying securities are subject to and may erode due to volatile changes in market conditions;
and
• The government entity uses the dollars from the reverse repo to leverage the investments in the
portfolio.
Mitigating the Risk:
• Execute a Securities Industry and Financial Markets Association(SIFMA)Master Repurchase
Agreement including additional provisions specific to the governmental agency that is signed by a
duly authorized officer with each counterparty;
• Establish financial strength criteria for counterparties and for reviewing financial statements at the
inception of relationship and at least annually. Some entities will limit counterparties to primary
dealers;
• Use the proceeds from the reverse repo only to invest in securities whose maturity matches or is
no longer than the term of the repo;and
• Settle the transaction on a delivery-versus-payment(DVP)basis at the entity's custodian or trustee
for third party safekeeping.
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Reverse repo agreements require the same essential basic components as a repo.A Master Repurchase
Agreement should be entered into with a bank or counterparty.A form of the agreement may be obtained
from the website of the Securities Industry and Financial Markets Association(SIFMA)formerly known as
The Bond Market Association(TBMA).The agreement should detail the nature of the deal and conform to
suit the specifics of the governmental entity's transaction.Proper securitization practices should be utilized
to protect the securities in reverse repo transaction as well as safekeeping duties should be performed by a
third-party custodian in accordance with an executed agreement.
The conservative and prudent approach to the use of reverse repos involves short-term contracts in which
the term of the reverse repo is matched with the maturity of the reinvestment.Losses of state and local
government funds(e.g.,losses amounted in the billions in the 1980s and 1990s when governmental entities
were borrowing short to lend long in adverse markets)have occurred as the result of unsound investment
practices and the inappropriate use of reverse repos in leveraging portfolios to increase investment returns.
GFOA recommends that state and local government fmance officers develop policies and procedures to
ensure the safety of reverse repos.
The following actions are recommended:
1. Government entities and investment officers should exercise special caution in selecting and
evaluating the creditworthiness of counterparties with whom they will conduct repurchase
transactions and be able to identify the parties acting as principals to the transaction.
2. Reverse repo proceeds generally should be invested in securities whose maturity matches or is no
longer than the term of the reverse repo.For example,borrowing short to lend long can produce
losses in adverse markets.Further,the possibility exists that other factors can go wrong,such as
default by the dealer or adverse market changes that erode the value of the underlying securities.
3. Master repurchase agreements for reverse repos should be employed,subject to appropriate legal
and technical review.Governments using the prototype agreement developed by SIFMA should
include appropriate supplemental provisions regarding the types of securities,delivery,
substitution,margin maintenance,margin amounts,seller representations,and governing law as
contained in the GFOA-developed Considerations for Governments in Developing a Master
Repurchase Agreement.
4. Governmental entities should only engage in reverse repos if they possess the necessary expertise
and resources required to enter into this type of investment.Government officials should verify
whether the use of such fmancial instrument is legal in their respective jurisdictions.
Governmental officials should not engage in any investment practices for speculative purposes.
References:
• An Introduction to Broker-Dealers for State and Local Governments, Second Edition,Sofia
Anastopoulos,GFOA,2008.
• An Introduction to Collateralizing Public Deposits for State and Local Governments,Second
Edition,M. Corinne Larson,GFOA,2006.
• Investing Public Funds, Second Edition,Girard Miller with M. Corinne Larson and W.Paul Zorn,
GFOA, 1998.
• GFOA Best Practice,Frequency of Purchased Securities Valuation in Repurchase Agreements
(1999,2003,2006,2008).
• Considerations for Governments in Developing a Master Repurchase Agreement, Third Edition,
2001.
• "Do You Know Your Repurchase Agreements as Well as You Think?" GFOA's Treasury
Management Newsletter,October 3,2009,Volume 27,Number 10.
• Sample Custodial Trust Agreement,GFOA.
• The Securities Industry and Financial Markets Association(SIFMA)http://www.sifina.org
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Government Finance Officers Association Recommended Practice
Investment and Management of Bond Proceeds
When governments issue bonds,additional considerations are likely to apply to bond proceeds.Investment
policies,legal requirements such as the arbitrage yield permitted under federal tax rules,requirements from
bond covenants and/or credit enhancement providers,and the anticipated timing of drawdown of bond
proceeds should be taken into account when determining what investments to purchase.Multiple accounts
with varied investment horizons are often involved.
Cash flow analyses are critical components of the process and are useful in reducing the possibility of
"negative arbitrage"that may occur when the rate of interest paid on the bonds that are issued exceeds the
interest received from reinvestment opportunities.The manner in which bond proceeds are invested may
have a material impact on the size and cost of a bond issue,and on the cash flow available to make debt
service payments and needs to be understood and analyzed by governmental issuers in that context.
The Government Finance Officers Association(GFOA)recommends the following:
Issuers should have an Investment Policy that addresses a bond indenture's permitted investments and other
investment requirements related to bond proceeds with that policy.
Issuers should be aware of unique considerations related to investing bond proceeds such as multiple
accounts that may be required for a bond issue,the Municipal Advisor Rule as it relates to investment
advice on bond proceeds,and tax compliance issues related to tax-exempt bond proceeds.
Issuers should coordinate the management of bond proceeds with the necessary staff in their government to
ensure funds are spent properly and cash flows are matched with investment maturities.
GFOA recommends that governments have an Investment Policy which takes into consideration all
inherent risks and which also includes specific policies for the investment of bond proceeds to ensure that
legal and regulatory requirements are met,fair market value bids are received,and issuer objectives for
various uses of proceeds are attained.Governments should be aware that different types of bond proceeds
may have different investment goals.
Often the bond indenture will contain a list of permitted investments as well as any other investment
requirements related to credit enhancement providers.Different types of debt issuances may have unique
investment requirements related to various Federal,State and other programs. These requirements need to
be coordinated with the Investment Policy.In addition,governments should discuss with bond counsel any
required disclosures related to investments.
Establishment of Multiple Funds and Accounts
Governments typically must establish various funds and accounts as required in the bond indentures and
must be knowledgeable of different types of investment that each fund may require. Some common funds
and accounts and associated investment horizons include the following:
• Construction Fund(investment horizon is short-term,typically ranges from 12-36 months)
• Capitalized Interest Fund(investment horizon is short-term,typically ranges from 6-18 months)
• Interest Account(investment horizon is usually 6 months)
• Sinking Fund/Principal Account(investment horizon is usually 12 months)
• Escrow Fund/Redemption Account(investment horizon depends on a redemption date)
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• Debt Service Reserve Fund(investment horizon is long-term,maximum duration investment
allowed under governments' Investment Policy may be used)
While these are typical investment horizons for each of the funds/accounts described above,expectations
and requirements can vary across governments and each issuer should consult with their advisory team and
Investment Policy to determine optional timeframes and security options.
The MA Rule and Broker-Dealers Advice
Due to the Securities and Exchange Commission's(SEC)Municipal Advisor(MA)Rule,brokers may be
considered municipal advisors if they provide advice on investments of bond proceeds to governments,
which limits the ability to directly solicit information from broker-dealers on reinvestment choices.
Governments should understand their interactions with broker-dealers under the existing regulatory
environment at the time of a bond sale and how they will engage specific professionals to formulate an
ultimate decision on the efficiency of reinvestment options that will be selected.
Governments may obtain advice from a broker-dealer through a Request for Proposals(RFP)process or
when they have retained an independent registered municipal advisor(IRMA)whose duties include advice
on investments. The GFOA Alert on the MA Rule can serve as a resource for issuers on understating the
MA roles,their fiduciary duties,and the RFP or IRMA exemption.Issuers may also choose to retain a
registered investment adviser if they want more than de minimis investment advice.
Tax Compliance
Municipal issuers should be knowledgeable and consult with tax and legal counsel on various Federal tax
rules and post-issuance tax compliance requirements for tax-exempt bond proceeds in order to maintain
their tax-exempt status. In the broadest terms,the tax requirements can be grouped into two categories: (1)
arbitrage and rebate;and(2)use of bond proceeds and of bond-fmanced facilities.Each of these categories
involve rules that make it advisable for an issuer to adopt practices that track how bond proceeds are
invested and how and when bond proceeds are spent.Further,issuers should maintain proper records for
the required time period,which is typically the life of the bonds plus three years.
Management of Bond Proceeds Spending
When an issuer sells new money bonds and expects to take a considerable period of time to spend bond
proceeds on capital projects,this may result in an interest cost that exceeds interest earnings during that
time period("negative arbitrage"). It is critical to develop consistent and reliable spend-down estimates for
the associated capital projects and periodically update those estimates to compare against investment
income projections based upon prevailing and expected market conditions.
Issuers will need to identify and ensure coordination between the persons responsible for monitoring and
managing spending,cash flow projections,and investment performance and compliance. This is especially
true if these areas involve different offices and staff and can typically include debt management staff,
treasury staff,public works or engineering staff,etc. This coordination is critical and GFOA recommends
that governments do the following:
• Monitor how and when bond proceeds will be invested and spent with respect to federal tax law
requirements,especially when there are changes in timing or spending plans from what was
planned at the time of bond issuance.
• Make certain that the drawdown of proceeds is planned and recorded and that the investment
duration is shorter than the expected drawdown schedule. Since the draw schedule may change
over time,it should be periodically revisited.
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• Borrow only as much as needed to fund capital projects or expected expenses,after consideration
of cash funding,grants,or other funding sources.
• Explore options to stage bond issues over the capital construction period to minimize potential
arbitrage liability and/or negative arbitrage.
Consider not issuing bonds significantly earlier than proceeds are expected to begin being spent on capital
expenditures.
References:
• GFOA Investment Policy BP and Sample Investment Policy;
• GFOA Investment Program for Public Fund BP;
• GFOA Primary Market Disclosure BP;
• GFOA Alert:The MA Rule and Issuers;
• GFOA Selection and Review of Investment Advisors BP;
• GFOA Government Relationships with Securities Dealers BP;
• GFOA Post-Issuance Compliance BP;
• GFOA Developing and Implementing Procedures for Post-Issuance Tax Compliance for Issuers of
Governmental Bonds Alert;
• NABL Considerations for Developing Post-Issuance Tax Compliance Procedures.
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Government Finance Officers Association Recommended Practice
Using Benchmarks to Assess Portfolio Risk and Return
Measuring portfolio risk and return results against appropriate market benchmarks) is a technique to verify
that all the investment objectives are being met and that portfolio investment returns are appropriate for the
risk incurred. Comparing total return to a proper benchmark or index is the preferred means for assessing
performance relative to risk and investment objectives.
Investment yield alone is not sufficient for assessing risk and performance. Investment yield measures the
percentage increase or decrease that a portfolio generates during a given period and is useful for budgeting
purposes but overall,is unreliable for decision making and assessing the risk and return characteristics of
the portfolio.
1. There are many defmitions of yield such as: yield to maturity,yield to call,book yield,and
market yield.
2. Yield results can be distorted by the timing of investing relative to the current level of interest
rates and by the presence of call options. For example,it is possible to sell a bond at a loss and buy
another bond with a higher yield leaving an increase in the investment portfolio yield but a
decrease in the portfolio size.
3. Yield can be manipulated to generate more income or show higher yield in one particular period as
opposed to others.
The Government Finance Officers Association recommends that government investors assess their
investment portfolio for performance and risk by comparing the total return of the portfolio to carefully
selected benchmarks. Total return provides a complete snapshot of the outcomes resulting from investment
decisions since it measures the percent change in the value of a portfolio over a defmed historical period.
1. Total return comparisons should be completed as least quarterly and more often for portfolios
managed by external provides and those containing large investments.
Any total return measurement that is much greater or much less than that of the benchmark should be
analyzed since significant deviations between the total return measurement and the benchmark often
correlates to the portfolio risk profile. Based on total return analysis,investment managers can make
adjustments to the portfolio's risk profile when it is determined to be outside the acceptable variance with
the benchmark.
To provide a valid reference for comparison of an entity's investment portfolio,it is important to select a
benchmark that closely resembles policy constraints and management practice in terms of duration,
maturity range,average duration,security types,sector allocations and credit quality.
Selected benchmark should:
1. Be unambiguous and transparent—The names and weights of securities that constitute a
benchmark should be clearly defmed;
2. Be investable—The benchmark should contain securities that an investor can purchase in the
market or easily replicate;
3. Be priced on a regular basis—The benchmark's return should be calculated regularly;
4. Be supported by historical data—Past returns of the benchmark should be available in order to
gauge historical returns;
5. Be specified in advance—The benchmark should be adopted prior to the start of evaluation;
6. Be consistent—Consistently keep the same benchmark for comparison purposes;
7. Have published risk characteristics—The benchmark provider should regularly publish detailed
risk metrics of the benchmark so an investor can compare his/her portfolio risks against the
benchmark risks;and
8. Have a composition that is similar to the portfolio holdings.
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Notes:
1 A benchmark(or index)is an unmanaged basket of securities that provides a reference for understanding
performance and risk characteristics of an investment strategy given investment policy parameters.
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APPENDIX F
Various Code of Virginia Provisions
Pertaining to Investment of Local Government Funds
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§2.2-4500.Legal investments for public sinking funds.
The Commonwealth,all public officers,municipal corporations,other political subdivisions and all other
public bodies of the Commonwealth may invest any sinking funds belonging to them or within their control
in the following securities:
1.Bonds,notes and other evidences of indebtedness of the Commonwealth,and securities unconditionally
guaranteed as to the payment of principal and interest by the Commonwealth.
2.Bonds,notes and other obligations of the United States,and securities unconditionally guaranteed as to
the payment of principal and interest by the United States,or any agency thereof.The evidences of
indebtedness enumerated by this subdivision may be held directly,or in the form of repurchase agreements
collateralized by such debt securities,or in the form of securities of any open-end or closed-end
management type investment company or investment trust registered under the Investment Company Act of
1940,provided that the portfolio of such investment company or investment trust is limited to such
evidences of indebtedness,or repurchase agreements collateralized by such debt securities,or securities of
other such investment companies or investment trusts whose portfolios are so restricted.
3.Bonds,notes and other evidences of indebtedness of any county,city,town,district,authority or other
public body of the Commonwealth upon which there is no default;provided,that such bonds,notes and
other evidences of indebtedness of any county,city,town,district,authority or other public body are either
direct legal obligations of,or those unconditionally guaranteed as to the payment of principal and interest
by the county,city,town,district,authority or other public body in question;and revenue bonds issued by
agencies or authorities of the Commonwealth or its political subdivisions upon which there is no default.
4.Bonds and other obligations issued,guaranteed or assumed by the International Bank for Reconstruction
and Development,bonds and other obligations issued,guaranteed or assumed by the Asian Development
Bank and bonds and other obligations issued,guaranteed or assumed by the African Development Bank.
5. Savings accounts or time deposits in any bank or savings institution within the Commonwealth provided
the bank or savings institution is approved for the deposit of other funds of the Commonwealth or other
political subdivision of the Commonwealth.
(1956,c. 184, §2-297; 1958,c. 102; 1966,c. 677, § 2.1-327; 1970,c. 75; 1974,c.288; 1986,c.270; 1988,
cc. 526,834; 1996,cc. 77,508;2001,c.844.)
§2.2-4501.Legal investments for other public funds.
A.The Commonwealth,all public officers,municipal corporations,other political subdivisions and all
other public bodies of the Commonwealth may invest any and all moneys belonging to them or within their
control,other than sinking funds,in the following:
1. Stocks,bonds,notes,and other evidences of indebtedness of the Commonwealth and those
unconditionally guaranteed as to the payment of principal and interest by the Commonwealth.
2.Bonds,notes and other obligations of the United States,and securities unconditionally guaranteed as to
the payment of principal and interest by the United States,or any agency thereof.The evidences of
indebtedness enumerated by this subdivision may be held directly,or in the form of repurchase agreements
collateralized by such debt securities,or in the form of securities of any open-end or closed-end
management type investment company or investment trust registered under the Investment Company Act of
1940,provided that the portfolio of such investment company or investment trust is limited to such
evidences of indebtedness,or repurchase agreements collateralized by such debt securities,or securities of
other such investment companies or investment trusts whose portfolios are so restricted.
3. Stocks,bonds,notes and other evidences of indebtedness of any state of the United States upon which
there is no default and upon which there has been no default for more than 90 days,provided that within the
20 fiscal years next preceding the making of such investment,such state has not been in default for more
than 90 days in the payment of any part of principal or interest of any debt authorized by the legislature of
such state to be contracted.
4. Stocks,bonds,notes and other evidences of indebtedness of any county,city,town,district,authority or
other public body in the Commonwealth upon which there is no default,provided that if the principal and
interest be payable from revenues or tolls and the project has not been completed,or if completed,has not
established an operating record of net earnings available for payment of principal and interest equal to
estimated requirements for that purpose according to the terms of the issue,the standards of judgment and
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care required in Article 9(§ 64.2-780 et seq.)of Chapter 7 of Title 64.2,without reference to this section,
shall apply.
In any case in which an authority,having an established record of net earnings available for payment of
principal and interest equal to estimated requirements for that purpose according to the terms of the issue,
issues additional evidences of indebtedness for the purposes of acquiring or constructing additional
facilities of the same general character that it is then operating,such additional evidences of indebtedness
shall be governed by the provisions of this section without limitation.
5. Legally authorized stocks,bonds,notes and other evidences of indebtedness of any city,county,town,or
district situated in any one of the states of the United States upon which there is no default and upon which
there has been no default for more than 90 days,provided that(i)within the 20 fiscal years next preceding
the making of such investment,such city,county,town,or district has not been in default for more than 90
days in the payment of any part of principal or interest of any stock,bond,note or other evidence of
indebtedness issued by it;(ii)such city,county,town,or district shall have been in continuous existence for
at least 20 years;(iii)such city,county,town,or district has a population,as shown by the federal census
next preceding the making of such investment,of not less than 25,000 inhabitants;(iv)the stocks,bonds,
notes or other evidences of indebtedness in which such investment is made are the direct legal obligations
of the city,county,town,or district issuing the same; (v)the city,county,town,or district has power to
levy taxes on the taxable real property therein for the payment of such obligations without limitation of rate
or amount;and(vi)the net indebtedness of such city,county,town,or district(including the issue in which
such investment is made),after deducting the amount of its bonds issued for self-sustaining public utilities,
does not exceed 10 percent of the value of the taxable property in such city,county,town,or district,to be
ascertained by the valuation of such property therein for the assessment of taxes next preceding the making
of such investment.
6.Bonds and other obligations issued,guaranteed or assumed by the International Bank for Reconstruction
and Development,by the Asian Development Bank or by the African Development Bank.
B. This section shall not apply to funds authorized by law to be invested by the Virginia Retirement System
or to deferred compensation plan funds to be invested pursuant to§51.1-601 or to funds contributed by a
locality to a pension program for the benefit of any volunteer fire department or volunteer emergency
medical services agency established pursuant to§ 15.2-955.
C.Investments made prior to July 1, 1991,pursuant to§ 51.1-601 are ratified and deemed valid to the
extent that such investments were made in conformity with the standards set forth in Chapter 6(§ 51.1-600
et seq.)of Title 51.1.
1956,c. 184,§ 2-298; 1966,c. 677,§2.1-328; 1980,c. 596; 1988,c. 834; 1991,c.379; 1992,c.810; 1996,
c. 508; 1999,c. 772;2001,c. 844;2007,c. 67;2008,c.295;2015,cc.502,503.
§2.2-4502.Investment of funds of Commonwealth,political subdivisions,and public bodies in
"prime quality"commercial paper.
A.The Commonwealth,all public officers,municipal corporations,other political subdivisions and all
other public bodies of the Commonwealth may invest any and all moneys belonging to them or within their
control other than sinking funds in"prime quality"commercial paper,with a maturity of 270 days or less,
of issuing corporations organized under the laws of the United States,or of any state thereof including
paper issued by banks and bank holding companies. "Prime quality"means that the paper has received at
least two of the following ratings:(i)at least prime 1 by Moody's Investors Service,Inc.;(ii)at least Al by
Standard&Poor's;or(iii)at least Fl by Fitch Ratings,Inc.,provided that at the time of any such
investment:
1.The issuing corporation,or its guarantor,has a net worth of at least$50 million;and
2.The net income of the issuing corporation,or its guarantor,has averaged$3 million per year for the
previous five years;and
3.All existing senior bonded indebtedness of the issuer,or its guarantor,has received at least two of the
following ratings: (i)at least A by Moody's Investors Service,Inc.;(ii)at least A by Standard&Poor's;or
(iii)at least A by Fitch Ratings,Inc.
Not more than 35 percent of the total funds available for investment may be invested in commercial paper,
and not more than five percent of the total funds available for investment may be invested in commercial
paper of any one issuing corporation.
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B.Notwithstanding subsection A,the Commonwealth,municipal corporations,and other political
subdivisions and public bodies of the Commonwealth may invest any and all moneys belonging to them or
within their control,except for sinking funds,in commercial paper other than"prime quality"commercial
paper as defined in this section,provided that:
1.Prior written approval is obtained from the governing board,committee,or other entity that determines
investment policy.The Treasury Board shall be the governing body for the Commonwealth;and
2.A written internal credit review justifying the creditworthiness of the issuing corporation is prepared in
advance and made part of the purchase file.
1973,c.232,§ 2.1-328.1; 1974,c.295; 1976,c.665; 1986,c. 170; 1987,c.73; 1988,c. 834; 1992,c.769;
2001,c. 844;2020,c.333.
§2.2-4503.
Not applicable
§2.2-4504.Investment of funds by the Commonwealth and political subdivisions in bankers'
acceptances.
Notwithstanding any provisions of law to the contrary,all public officers,municipal corporations,other
political subdivisions and all other public bodies of the Commonwealth may invest any and all moneys
belonging to them or within their control other than sinking funds in bankers'acceptances.
(1981,c. 18, §2.1-328.3; 1988,c. 834;2001,c. 844.)
§2.2-4505.Investment in certificates representing ownership of treasury bond principal at maturity
or its coupons for accrued periods.
Notwithstanding any provision of law to the contrary,the Commonwealth,all public officers,municipal
corporations,other political subdivisions and all other public bodies of the Commonwealth may invest any
and all moneys belonging to them or within their control,in certificates representing ownership of either
treasury bond principal at maturity or its coupons for accrued periods.The underlying United States
Treasury bonds or coupons shall be held by a third-party independent of the seller of such certificates.
(1983,c. 117,§2.1-328.5; 1985,c.352; 1988,c. 834;2001,c. 844.)
§2.2-4506.Securities lending.
Notwithstanding any provision of law to the contrary,the Commonwealth,all public officers,municipal
corporations,political subdivisions and all public bodies of the Commonwealth may engage in securities
lending from the portfolio of investments of which they have custody and control,other than sinking funds.
The Treasury Board shall develop guidelines with which such securities lending shall fully comply. Such
guidelines shall ensure that the state treasury is at all times fully collateralized by the borrowing institution.
(1983,c.268, §2.1-328.6;2001,c. 844.)
§2.2-4507.Investment of funds in overnight,term and open repurchase agreements.
Notwithstanding any provision of law to the contrary,the Commonwealth,all public officers,municipal
corporations,other political subdivisions and all other public bodies of the Commonwealth,may invest any
and all moneys belonging to them or within their control in overnight,term and open repurchase
agreements that are collateralized with securities that are approved for direct investment.
(1985,c. 352, §2.1-328.8; 1988,c. 834;2001,c. 844.)
§2.2-4508.Investment of certain public moneys in certain mutual funds.
Notwithstanding any provision of law to the contrary,the Commonwealth,all public officers,municipal
corporations,other political subdivisions and all other public bodies of the Commonwealth may invest any
and all moneys belonging to them or within their control,other than sinking funds that are governed by the
provisions of§ 2.2-4500,in one or more open-end investment funds,provided that the funds are registered
under the Securities Act(§ 13.1-501 et seq.)of the Commonwealth or the Federal Investment Co.Act of
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1940,and that the investments by such funds are restricted to investments otherwise permitted by law for
political subdivisions as set forth in this chapter,or investments in other such funds whose portfolios are so
restricted.
(1986,c. 170,§2.1-328.9; 1988,c. 834; 1996,c.508;2001,c. 844.)
§2.2-4509.Investment of funds in negotiable certificates of deposit and negotiable bank deposit
notes.
Notwithstanding any provision of law to the contrary,the Commonwealth and all public officers,municipal
corporations,and other political subdivisions and all other public bodies of the Commonwealth may invest
any or all of the moneys belonging to them or within their control,other than sinking funds,in negotiable
certificates of deposit and negotiable bank deposit notes of domestic banks and domestic offices of foreign
banks:
1.With maturities not exceeding one year,that have received at least two of the following ratings: (i)at
least A-1 by Standard&Poor's;(ii)at least P-1 by Moody's Investors Service,Inc.;or(iii)at least Fl by
Fitch Ratings,Inc.;and
2.With maturities exceeding one year and not exceeding five years,that have received at least two of the
following ratings: (i)at least AA by Standard&Poor's;(ii)at least Aa by Moody's Investors Service,Inc.;
or(iii)at least AA by Fitch Ratings,Inc.
1998,cc.20,21,§2.1-328.15;2001,c. 844;2020,c. 333.
§2.2-4510.Investment of funds in corporate notes.
A.Notwithstanding any provision of law to the contrary,the Commonwealth,all public officers,municipal
corporations,other political subdivisions and all other public bodies of the Commonwealth may invest any
and all moneys belonging to them or within their control,other than sinking funds,in high quality corporate
notes with maturities of no more than five years that have received at least two of the following ratings: (i)
at least Aa by Moody's Investors Service,Inc.;(ii)at least AA by Standard and Poor's;or(iii)at least AA
by Fitch Ratings,Inc.
B.Notwithstanding any provision of law to the contrary,any qualified public entity of the Commonwealth
may invest any and all moneys belonging to it or within its control,other than sinking funds,in high quality
corporate notes that have received at least two of the following ratings: (i)at least A by Moody's Investors
Service,Inc.; (ii)at least A by Standard and Poor's;or(iii)at least A by Fitch Ratings,Inc.
As used in this section,"qualified public entity"means any state agency or institution of the
Commonwealth,having an internal or external public funds manager with professional investment
management capabilities.
C.Notwithstanding any provision of law to the contrary,the Department of the Treasury may invest any
and all moneys belonging to it or within its control,other than sinking funds,in high quality corporate
notes with a rating of at least BBB or Baa2 by two rating agencies.One of the two qualifying ratings shall
be(i)at least Baal by Moody's Investors Service,Inc.;(ii)at least BBB by Standard and Poor's;or(iii)at
least BBB by Fitch Ratings,Inc.With regard to investment securities rated below A,the Commonwealth
Treasury Board shall establish strict investment guidelines concerning the investment in such securities and
monitor the performance of the securities for compliance with the investment guidelines.
1987,c. 187, § 2.1-328.10; 1988,c. 834; 1994,c. 145;2001,c. 844;2002,cc. 18,438;2005,c.30;2020,c.
333.
§2.2-4511.Investment of funds in asset-backed securities.
Notwithstanding any provision of law to the contrary,any qualified public entity of the Commonwealth
may invest any and all moneys belonging to it or within its control,other than sinking funds,in asset-
backed securities with a duration of no more than five years with a rating of at least AAA or Aaa by two
rating agencies.One of the two qualifying ratings shall be(i)at least Aaa by Moody's Investors Service,
Inc.; (ii)at least AAA by Standard and Poor's;or(iii)at least AAA by Fitch Ratings,Inc.
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As used in this section, "qualified public entity"means any state agency,institution of the Commonwealth
or statewide authority created under the laws of the Commonwealth having an internal or external public
funds manager with professional investment management capabilities.
1994,c. 145, §2.1-328.13; 1997,c.29;2001,c. 844;2020,c. 333.
§2.2-4512.Investment of funds by State Treasurer in obligations of foreign sovereign governments.
Notwithstanding any provision of law to the contrary,the State Treasurer may invest unexpended or excess
moneys in any fund or account over which he has custody and control,other than sinking funds,in fully
hedged debt obligations of sovereign governments and companies that are fully guaranteed by such
sovereign governments with a maturity of no more than five years that have received at least two of the
following ratings: (i)at least Aaa by Moody's Investors Service,Inc.;(ii)at least AAA by Standard and
Poor's;or(iii)at least AAA by Fitch Ratings,Inc.
Not more than 10 percent of the total funds of the Commonwealth available for investment may be invested
in the manner described in this section.
1988,c.461, § 2.1-328.11;2001,c.844;2020,c.333.
§2.2-4513.1.Investment of funds in qualified investment pools.
A.Notwithstanding the provisions of Article 1 (§ 15.2-1300 et seq.)of Chapter 13 of Title 15.2,in any
locality in which the authority to invest moneys belonging to or within the control of the locality has been
granted to its elected treasurer,the treasurer may act on behalf of his locality to become a participating
political subdivision in qualified investment pools without an ordinance adopted by the locality approving a
joint exercise of power agreement.For purposes of this section,"qualified investment pool"means a jointly
administered investment pool organized as a trust fund pursuant to Article 1 of Chapter 13 of Title 15.2 that
has a professional investment manager.
B.Investments in qualified investment pools described in this section shall comply with the requirements
of this chapter applicable to municipal corporations and other political subdivisions.
C.The provisions of this section shall not apply to local trusts established pursuant to Article 8 (§ 15.2-
1544 et seq.)of Chapter 15 of Title 15.2 to fund postemployment benefits other than pensions.
2017,cc. 792,819.
§2.2-4514.Commonwealth and its political subdivisions as trustee of public funds; standard of care
in investing such funds.
Public funds held by the Commonwealth,public officers,municipal corporations,political subdivisions,
and any other public body of the Commonwealth shall be held in trust for the citizens of the
Commonwealth.Any investment of such funds pursuant to the provisions of this chapter shall be made
solely in the interest of the citizens of the Commonwealth and with the care,skill,prudence,and diligence
under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character and with like aims.
(1996,c.437,§ 2.1-328.14;2001,c.844.)
§2.2-4515.Collateral and safekeeping arrangements.
Securities purchased pursuant to the provisions of this chapter shall be held by the public official,
municipal corporation or other political subdivision or public body or its custodial agent who may not
otherwise be a counterparty to the investment transaction. Securities held on the books of the custodial
agent by a custodial agent shall be held in the name of the municipal corporation,political subdivision or
other public body subject to the public body's order of withdrawal.The responsibilities of the public
official,municipal corporation,political subdivision or other public body shall be evidenced by a written
agreement that shall provide for delivery of the securities by the custodial agent in the event of default by a
counterparty to the investment transaction.
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As used in this section, "counterparty"means the issuer or seller of a security,an agent purchasing a
security on behalf of a public official,municipal corporation,political subdivision or other public body or
the party responsible for repurchasing securities underlying a repurchase agreement.
The provisions of this section shall not apply to(i)investments with a maturity of less than 31 calendar
days or(ii)the State Treasurer,who shall comply with safekeeping guidelines issued by the Treasury Board
or to endowment funds invested in accordance with the provisions of the Uniform Prudent Management of
Institutional Funds Act,Chapter 11 (§ 64.2-1100 et seq.)of Title 64.2.
1988,c. 834, §2.1-329.01;2001,c. 844;2008,c. 184.
§2.2-4516.Liability of treasurers or public depositors.
When investments are made in accordance with this chapter,no treasurer or public depositor shall be liable
for any loss therefrom in the absence of negligence,malfeasance,misfeasance,or nonfeasance on his part
or on the part of his assistants or employees.
(1979,c. 135,§ 2.1-329.1;2001,c.844.)
§ 2.2-4517.Contracts on interest rates,currency,cash flow or on other basis.
A.Any state entity may enter into any contract or other arrangement that is determined to be necessary or
appropriate to place the obligation or investment of the state entity,as represented by bonds or investments,
in whole or in part,on the interest rate cash flow or other basis desired by the state entity. Such contract or
other arrangement may include contracts providing for payments based on levels of,or changes in,interest
rates. These contracts or arrangements may be entered into by the state entity in connection with,or
incidental to,entering into,or maintaining any(i)agreement that secures bonds or(ii)investment,or
contract providing for investment,otherwise authorized by law.These contracts and arrangements may
contain such payment,security,default,remedy,and other terms and conditions as determined by the state
entity,after giving due consideration to the creditworthiness of the counterparty or other obligated party,
including any rating by a nationally recognized rating agency,and any other criteria as may be appropriate.
The determinations referred to in this subsection may be made by the Treasury Board,the governing body
of the state entity or any public funds manager with professional investment capabilities duly authorized by
the Treasury Board or the governing body of any state entity authorized to issue such obligations to make
such determinations.
As used in this section,"state entity"means the Commonwealth and all agencies,authorities,boards and
institutions of the Commonwealth.
B.Any money set aside and pledged to secure payments of bonds or any of the contracts entered into
pursuant to this section may be invested in accordance with this chapter and may be pledged to and used to
service any of the contracts or other arrangements entered into pursuant to this section.
(2002,c.407.)
§2.2-4518.Investment of funds in deposits.
A.Notwithstanding any provision of law to the contrary,the Commonwealth and all public officers,
municipal corporations,other political subdivisions,and all other public bodies of the Commonwealth,
each referred to in this section as a"public entity,"may invest any or all of the moneys belonging to them
or within their control in accordance with the following conditions:
1.The moneys are initially invested through any federally insured bank or savings institution selected by
the public entity that is qualified by the Virginia Treasury Board to accept public deposits;
2. The selected bank or savings institution arranges for the deposit of the moneys in one or more federally
insured banks or savings institutions wherever located,for the account of the public entity;
3. The full amount of principal and any accrued interest of each such deposit is covered by federal deposit
insurance;
4.The selected bank or savings institution acts as custodian for the public entity with respect to each
deposit issued for the public entity's account; and
5.At the same time that the public entity's moneys are deposited,the selected bank or savings institution
receives an amount of deposits from customers of other financial institutions wherever located equal to or
greater than the amount of moneys invested by the public entity through the selected bank or savings
institution.
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B.After deposits are made in accordance with the conditions prescribed in subsection A,such deposits
shall not be subject to the provisions of Chapter 44(§2.2-4400 et seq.),§2.2-4515,or any security or
collateral requirements that may otherwise be applicable to the investment or deposit of public moneys by
government investors.
2008,c. 103;2010,c.33.
§2.2-4519.Investment of funds by the Virginia Housing Development Authority and the Virginia
Resources Authority.
A.For purposes of§§36-55.44 and 62.1-221 only,the following investments shall be considered lawful
investments and shall be conclusively presumed to have been prudent:
1.Obligations of the Commonwealth.Stocks,bonds,notes,and other evidences of indebtedness of the
Commonwealth,and those unconditionally guaranteed as to the payment of principal and interest by the
Commonwealth.
2.Obligations of the United States. Stocks,bonds,treasury notes,and other evidences of indebtedness of
the United States,including the guaranteed portion of any loan guaranteed by the Small Business
Administration,an agency of the United States government,and those unconditionally guaranteed as to the
payment of principal and interest by the United States;bonds of the District of Columbia;bonds and notes
of the Federal National Mortgage Association and the Federal Home Loan Banks;bonds,debentures,or
other similar obligations of federal land banks,federal intermediate credit banks,or banks of cooperatives,
issued pursuant to acts of Congress;and obligations issued by the United States Postal Service when the
principal and interest thereon is guaranteed by the government of the United States.The evidences of
indebtedness enumerated by this subdivision may be held directly,in the form of repurchase agreements
collateralized by such debt securities,or in the form of securities of any open-end or closed-end
management type investment company or investment trust registered under the federal Investment
Company Act of 1940,provided that the portfolio of such investment company or investment trust is
limited to such evidences of indebtedness or repurchase agreements collateralized by such debt securities,
or securities of other such investment companies or investment trusts whose portfolios are so restricted.
3.Obligations of other states. Stocks,bonds,notes,and other evidences of indebtedness of any state of the
United States upon which there is no default and upon which there has been no default for more than 90-
days,provided that within the 20 fiscal years next preceding the making of such investment,such state has
not been in default for more than 90 days in the payment of any part of principal or interest of any debt
authorized by the legislature of such state to be contracted.
4.Obligations of Virginia counties,cities,or other public bodies. Stocks,bonds,notes,and other evidences
of indebtedness of any county,city,town,district,authority,or other public body in the Commonwealth
upon which there is no default,provided that if the principal and interest is payable from revenues or tolls
and the project has not been completed,or if completed,has not established an operating record of net
earnings available for payment of principal and interest equal to estimated requirements for that purpose
according to the terms of the issue,the standards of judgment and care required in the Uniform Prudent
Investor Act(§64.2-780 et seq.),without reference to this section,shall apply.
In any case in which an authority,having an established record of net earnings available for payment of
principal and interest equal to estimated requirements for that purpose according to the terms of the issue,
issues additional evidences of indebtedness for the purposes of acquiring or constructing additional
facilities of the same general character that it is then operating,such additional evidences of indebtedness
shall be governed fully by the provisions of this section without limitation.
5.Obligations of cities,counties,towns,or districts of other states.Legally authorized stocks,bonds,notes,
and other evidences of indebtedness of any city,county,town,or district situated in any one of the states of
the United States upon which there is no default and upon which there has been no default for more than 90
days,provided that(i)within the 20 fiscal years next preceding the making of such investment,the city,
county,town,or district has not been in default for more than 90 days in the payment of any part of
principal or interest of any stock,bond,note,or other evidence of indebtedness issued by it;(ii)the city,
county,town,or district shall have been in continuous existence for at least 20 years;(iii)the city,county,
town,or district has a population,as shown by the federal census next preceding the making of such
investment,of not less than 25,000 inhabitants;(iv)the stocks,bonds,notes,or other evidences of
indebtedness in which such investment is made are the direct legal obligations of the city,county,town,or
district issuing the same;(v)the city,county,town,or district has power to levy taxes on the taxable real
property therein for the payment of such obligations without limitation of rate or amount;and(vi)the net
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indebtedness of the city,county,town,or district,including the issue in which such investment is made,
after deducting the amount of its bonds issued for self-sustaining public utilities,does not exceed 10
percent of the value of the taxable property in the city,county,town,or district,to be ascertained by the
valuation of such property therein for the assessment of taxes next preceding the making of such
investment.
6.Obligations subject to repurchase.Investments set forth in subdivisions 1 through 5 may also be made
subject to the obligation or right of the seller to repurchase these on a specific date.
7.Bonds secured on real estate.Bonds and negotiable notes directly secured by a first lien on improved real
estate or farm property in the Commonwealth,or in any state contiguous to the Commonwealth within a
50-mile area from the borders of the Commonwealth,not to exceed 80 percent of the fair market value of
such real estate,including any improvements thereon at the time of making such investment,as ascertained
by an appraisal thereof made by two reputable persons who are not interested in whether or not such
investment is made.
8.Bonds secured on city property in Fifth Federal Reserve District.Bonds and negotiable notes directly
secured by a first lien on improved real estate situated in any incorporated city in any of the states of the
United States which lie wholly or in part within the Fifth Federal Reserve District of the United States as
constituted on June 18, 1928,pursuant to the act of Congress of December 23, 1913,known as the Federal
Reserve Act,as amended,not to exceed 60 percent of the fair market value of such real estate,with the
improvements thereon,at the time of making such investment,as ascertained by an appraisal thereof made
by two reputable persons who are not interested in whether or not such investment is made,provided that
such city has a population,as shown by the federal census next preceding the making of such investments,
of not less than 5,000 inhabitants.
9.Bonds of Virginia educational institutions.Bonds of any of the educational institutions of the
Commonwealth that have been or may be authorized to be issued by the General Assembly.
10. Securities of the Richmond,Fredericksburg and Potomac Railroad Company. Stocks,bonds,and other
securities of the Richmond,Fredericksburg and Potomac Railroad Company,including bonds or other
securities guaranteed by the Richmond,Fredericksburg and Potomac Railroad Company.
11.Obligations of railroads.Bonds,notes,and other evidences of indebtedness,including equipment trust
obligations,which are direct legal obligations of or which have been unconditionally assumed or
guaranteed as to the payment of principal and interest by,any railroad corporation operating within the
United States that meets the following conditions and requirements:
a.The gross operating revenue of such corporation for the fiscal year preceding the making of such
investment,or the average of the gross operating revenue for the five fiscal years next preceding the
making of such investment,whichever of these two is the larger,shall have not been less than$10 million;
b.The total fixed charges of such corporation,as reported for the fiscal year next preceding the making of
the investment,shall have been earned an average of at least two times annually during the seven fiscal
years preceding the making of the investment and at least one and one-half times during the fiscal year
immediately preceding the making of the investment.The term"total fixed charges"as used in this
subdivision and subdivision c shall be deemed to refer to the term used in the accounting reports of
common carriers as prescribed by the regulations of the Interstate Commerce Commission;and
c.The aggregate of the average market prices of the total amounts of each of the individual securities of
such corporation junior to its bonded debt and outstanding at the time of the making of such investment
shall be equal to at least two-thirds of the total fixed charges for such railroad corporation for the fiscal year
next preceding the making of such investment capitalized at an annual interest rate of five percent. Such
average market price of any one of such individual securities shall be determined by the average of the
highest quotation and the lowest quotation of the individual security for a period immediately preceding the
making of such investment,which period shall be the full preceding calendar year plus the then-expired
portion of the calendar year in which such investment is made,provided that if more than six months of the
calendar year in which such investment is made shall have expired,then such period shall be only the then-
expired portion of the calendar year in which such investment is made,and provided further that if such
individual security shall not have been outstanding during the full extent of such period,such period shall
be deemed to be the length of time such individual security shall have been outstanding.
12.Obligations of leased railroads. Stocks,bonds,notes,other evidences of indebtedness,and any other
securities of any railroad corporation operating within the United States,the railroad lines of which have
been leased by a railroad corporation,either alone or jointly with other railroad corporations,whose bonds,
notes,and other evidences of indebtedness shall,at the time of the making of such investment,qualify as
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lawful investments for fiduciaries under the terms of subdivision 11,provided that the terms of such lease
shall provide for the payment by such lessee railroad corporation individually,irrespective of the liability
of other joint lessee railroad corporations,if any,in this respect,of an annual rental of an amount sufficient
to defray the total operating expenses and maintenance charges of the lessor railroad corporation plus its
total fixed charges,plus,in the event of the purchase of such a stock,a fixed dividend upon any issue of
such stock in which such investment is made,and provided that if such investment so purchased shall
consist of an obligation of definite maturity,such lease shall be one which shall,according to its terms,
provide for the payment of the obligation at maturity or extend for a period of not less than 20 years beyond
the maturity of such obligations so purchased,or if such investment so purchased shall be a stock or other
form of investment having no definite date of maturity,such lease shall be one which shall,according to its
terms,extend for a period of at least 50 years beyond the date of the making of such investment.
13.Equipment trust obligations.Equipment trust obligations issued under the"Philadelphia Plan"in
connection with the purchase for use on railroads of new standard gauge rolling stock,provided that the
owner,purchaser,or lessee of such equipment,or one or more of such owners,purchasers,or lessees,shall
be a railroad corporation whose bonds,notes,and other evidences of indebtedness shall,at the time of the
making of such investment,qualify as lawful investments for fiduciaries under the terms of subdivision 11,
and provided that all of such owners,purchasers,or lessees shall be both jointly and severally liable under
the terms of such contract of purchase or lease,or both,for the fulfillment thereof.
14.Preferred stock of railroads.Any preference stock of any railroad corporation operating within the
United States,provided such stock and such railroad corporation meet the following conditions and
requirements:
a. Such stock shall be preferred as to dividends,such dividends shall be cumulative,and such stock shall be
preferred as to assets in the event of liquidation or dissolution;
b.The gross operating revenue of such corporation for the fiscal year preceding the making of such
investment,or the average of the gross operating revenue for the five fiscal years next preceding the
making of such investment,whichever of these two is the larger,shall have been not less than$10 million;
c.The total fixed charges,as defined in subdivision 11 b,of such corporation,as reported for the fiscal year
next preceding the making of such investment,plus the amount,at the time of making such investment,of
the annual dividend requirements on such preference stock and any preference stock having the same or
senior rank,such fixed charges and dividend requirements being considered the same for every year,shall
have been earned an average of at least two and one-half times annually for the seven fiscal years preceding
the making of such investment and at least two times for the fiscal year immediately preceding the making
of such investment;and
d.The aggregate of the average market prices of the total amount of each of the individual securities of
such corporation,junior to such preference stock and outstanding at the time of the making of such
investment,shall be at least equal to the par value of the total issue of the preference stock in question plus
the total par value of all other issues of its preference stock having either the same rank as,or a senior rank
to,the issue of such preference stock plus total fixed charges,as defined in subdivision 11 b,for such
railroad corporation for the fiscal year next preceding the making of such investment capitalized at an
annual interest rate of five percent. Such average market price of any one of such individual securities shall
be determined in the same manner as prescribed in subdivision 11 c.
15.Obligations of public utilities.Bonds,notes,and other evidences of indebtedness of any public utility
operating company operating within the United States,provided such company meets the following
conditions and requirements:
a.The gross operating revenue of such public utility operating company for the fiscal year preceding the
making of such investment,or the average of the gross operating revenue for the five fiscal years next
preceding the making of such investment,whichever of these two is the larger,shall have been not less than
$5 million;
b.The total fixed charges of such corporation,as reported for the fiscal year next preceding the making of
the investment,shall have been earned,after deducting operating expenses,depreciation,and taxes,other
than income taxes,an average of at least one and three-quarters times annually during the seven fiscal years
preceding the making of the investment and at least one and one-half times during the fiscal year
immediately preceding the making of the investment;
c.In the fiscal year next preceding the making of such investment,the ratio of the total par value of the
bonded debt of such public utility operating company,including the total bonded indebtedness of all its
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subsidiary companies,whether assumed by the public utility operating company in question or not,to its
gross operating revenue shall not be greater than four to one;and
d. Such public utility operating company shall be subject to permanent regulation by a state commission or
other duly authorized and recognized regulatory body.
The term"public utility operating company"as used in this subdivision and subdivision 16 means a public
utility or public service corporation(i)of whose total income available for fixed charges for the fiscal year
next preceding the making of such investment at least 55 percent thereof shall have been derived from
direct payments by customers for service rendered them;(ii)of whose total operating revenue for the fiscal
year next preceding the making of such investment at least 60 percent thereof shall have been derived from
the sale of electric power,gas,water,or telephone service and not more than 10 percent thereof shall have
been derived from traction operations;and(iii)whose gas properties are all within the limits of one state,if
more than 20 percent of its total operating revenues are derived from gas.
16.Preferred stock of public utilities.Any preference stock of any public utility operating company
operating within the United States,provided such stock and such company meet the following conditions
and requirements:
a. Such stock shall be preferred as to dividends,such dividends shall be cumulative,and such stock shall be
preferred as to assets in the event of liquidation or dissolution;
b. The gross operating revenue of such public utility operating company for the fiscal year preceding the
making of such investment,or the average of the gross operating revenue for the five fiscal years next
preceding the making of such investment,whichever of these two is the larger,shall have been not less than
$5 million;
c. The total fixed charges of such public utility operating company,as reported for the fiscal year next
preceding the making of such investment,plus the amount,at the time of making such investment,of the
annual dividend requirements on such preference stock and any preference stock having the same or senior
rank,such fixed charges and dividend requirements being considered the same for every year,shall have
been earned,after deducting operating expenses,depreciation,and taxes,including income taxes,an
average of at least two times annually for the seven fiscal years preceding the making of such investment
and at least two times for the fiscal year immediately preceding the making of such investment;
d. In the fiscal year next preceding the making of such investment,the ratio of the sum of the total par value
of the bonded debt of such public utility operating company,the total par value of the issue of such
preference stock,and the total par value of all other issues of its preference stock having the same or senior
rank to its gross operating revenue shall not be greater than four to one;and
e. Such public utility operating company shall be subject to permanent regulation by a state commission or
other duly authorized and recognized regulatory body.
17. Obligations of the following telephone companies.Bonds,notes,and other evidences of indebtedness
of American Telephone and Telegraph,Bell Atlantic,Bell South,Southwestern Bell,Pacific Telesis,
Nynex,American Information Technologies,or U.S.West,and bonds,notes,and other evidences of
indebtedness unconditionally assumed or guaranteed as to the payment of principal and interest by any such
company,provided that the total fixed charges,as reported for the fiscal year next preceding the making of
the investment,of such company and all of its subsidiary corporations on a consolidated basis shall have
been earned,after deducting operating expenses,depreciation,and taxes,other than income taxes,an
average of at least one and three-fourths times annually during the seven fiscal years preceding the making
of the investment and at least one and one-half times during the fiscal year immediately preceding the
making of the investment.
18.Obligations of municipally owned utilities.The stocks,bonds,notes,and other evidences of
indebtedness of any electric,gas,or water department of any state,county,city,town,or district whose
obligations would qualify as legal for purchase under subdivision 3,4,or 5,the interest and principal of
which are payable solely out of the revenues from the operations of the facility for which the obligations
were issued,provided that the department issuing such obligations meets the requirements applying to
public utility operating companies as set out in subdivisions 15 a through c.
19.Obligations of industrial corporations.Bonds,notes,and other evidences of indebtedness of any
industrial corporation incorporated under the laws of the United States or of any state thereof,provided
such corporation meets the following conditions and requirements:
a.The gross operating revenue of such corporation for the fiscal year preceding the making of such
investment,or the average of the gross operating revenue for the five fiscal years next preceding the
making of such investment,whichever of these two is the larger,shall have been not less than$10 million;
81
b.The total fixed charges of such corporation,as reported for the fiscal year next preceding the making of
the investment,shall have been earned,after deducting operating expenses,depreciation,and taxes,other
than income taxes,and depletion in the case of companies commonly considered as depleting their natural
resources in the course of business,an average of at least three times annually during the seven fiscal years
preceding the making of the investment and at least two and one-half times during the fiscal year
immediately preceding the making of the investment;
c.The net working capital of such industrial corporation,as shown by its last published fiscal year-end
statement prior to the making of such investment,or in the case of a new issue,as shown by the fmancial
statement of such corporation giving effect to the issuance of any new security,shall be at least equal to the
total par value of its bonded debt as shown by such statement;and
d.The aggregate of the average market prices of the total amounts of each of the individual securities of
such industrial corporation,junior to its bonded debt and outstanding at the time of the making of such
investment,shall be at least equal to the total par value of the bonded debt of such industrial corporation at
the time of the making of such investment,such average market price of any one of such individual
securities being determined in the same manner as prescribed in subdivision 11 c.
20.Preferred stock of industrial corporations.Any preference stock of any industrial corporation
incorporated under the laws of the United States or of any state thereof,provided such stock and such
industrial corporation meet the following conditions and requirements:
a. Such stock shall be preferred as to dividends,such dividends shall be cumulative,and such stock shall be
preferred as to assets in the event of liquidation or dissolution;
b.The gross operating revenue of such corporation for the fiscal year preceding the making of such
investment,or the average of the gross operating revenue for the five fiscal years next preceding the
making of such investment,whichever of these two is the larger,shall have been not less than$10 million;
c.The total fixed charges of such corporation,as reported for the fiscal year next preceding the making of
such investment,plus the amount,at the time of making such investment,of the annual dividend
requirements on such preference stock and any preference stock having the same or senior rank,such fixed
charges and dividend requirements being considered the same for every year,shall have been earned,after
deducting operating expenses,depreciation,and taxes,including income taxes,and depletion in the case of
companies commonly considered as depleting their natural resources in the course of business,an average
of at least four times annually for the seven fiscal years preceding the making of such investment and at
least three times for the fiscal year immediately preceding the making of such investment;
d.The net working capital of such industrial corporation,as shown by its last published fiscal year-end
statement prior to the making of such investment,or,in the case of a new issue,as shown by the financial
statement of such corporation giving effect to the issuance of any new security,shall be at least equal to the
total par value of its bonded debt plus the total par value of the issue of such preference stock plus the total
par value of all other issues of its preference stock having the same or senior rank;and
e.The aggregate of the lowest market prices of the total amounts of each of the individual securities of such
industrial corporation junior to such preference stock and outstanding at the time of the making of such
investment shall be at least two and one-half times the par value of the total issue of such preference stock
plus the total par value of all other issues of its preference stock having the same or senior rank plus the par
value of the total bonded debt of such industrial corporation.Such lowest market price of any one of such
individual securities shall be determined by the lowest single quotation of the individual security for a
period immediately preceding the making of such investment,which period shall be the full preceding
calendar year plus the then-expired portion of the calendar year in which such investment is made,and if
such individual security shall not have been outstanding during the full extent of such period,such period
shall be deemed to be the length of time such individual security shall have been outstanding.
21.Obligations of finance corporations.Bonds,notes,and other evidences of indebtedness of any finance
corporation incorporated under the laws of the United States or of any state thereof,provided such
corporation meets the following conditions and requirements:
a.The gross operating income of such corporation for the fiscal year preceding the making of such
investment,or the average of the gross operating income for the five fiscal years next preceding the making
of such investment,whichever of these two is the larger,shall have been not less than$5 million;
b.The total fixed charges of such corporation,as reported for the fiscal year next preceding the making of
the investment,shall have been earned,after deducting operating expenses,depreciation,and taxes,other
than income taxes,an average of at least two and one-half times annually during the seven fiscal years
82
preceding the making of the investment and at least two times during the fiscal year immediately preceding
the making of the investment;
c. The aggregate indebtedness of such finance corporation as shown by its last fiscal year-end statement,or,
in the case of a new issue,as shown by the financial statement giving effect to the issuance of any new
securities,shall be no greater than three times the aggregate net worth,as represented by preferred and
common stocks and surplus of such corporation;and
d.The aggregate of the average market prices of the total amounts of each of the individual securities of
such fmance corporation,junior to its bonded debt and outstanding at the time of the making of such
investment,shall be at least equal to one-third of the sum of the par value of the bonded debt plus all other
indebtedness of such fmance corporation as shown by the last published fiscal year-end statement,such
average market price of any one of such individual securities being determined in the same manner as
prescribed in subdivision 11 c.
22.Preferred stock of fmance corporations.Any preference stock of any fmance corporation incorporated
under the laws of the United States or of any state thereof,provided such stock and such corporation meet
the following conditions and requirements:
a. Such stock shall be preferred as to dividends,such dividends shall be cumulative,and such stock shall be
preferred as to assets in the event of liquidation or dissolution;
b.The gross operating income of such corporation for the fiscal year preceding the making of such
investment,or the average of the gross operating income for the five fiscal years next preceding the making
of such investment,whichever of these two is the larger,shall have been not less than$5 million;
c.The total fixed charges of such fmance corporation,as reported for the fiscal year next preceding the
making of such investment,plus the amount,at the time of making such investment,of the annual dividend
requirements on such preference stock and any preference stock having the same or senior rank,such fixed
charges and dividend requirements being considered the same for every year,shall have been earned,after
deducting operating expenses,depreciation,and taxes,including income taxes,an average of at least three
and one-half times annually for the seven fiscal years preceding the making of such investment and at least
three times for the fiscal year immediately preceding the making of such investment;
d.The aggregate indebtedness and par value of the purchased stock,both the issue in question and any
issues equal or senior thereto,of such finance corporation as shown by its last published fiscal year-end
statement,or,in the case of a new issue,as shown by the financial statement giving effect to the issuance of
any new securities,shall be no greater than three times the aggregate par value of the junior securities and
surplus of such corporation;and
e.The aggregate of the lowest market prices of the total amounts of each of the individual securities of such
fmance corporation junior to such preference stock and outstanding at the time of the making of such
investment shall be at least equal to one-third of the sum of the par value of such preference stock plus the
total par value of all other issues of preference stock having the same or senior rank plus the par value of
the total bonded debt plus all other indebtedness of such fmance corporation as shown by the last published
fiscal year-end statement,such lowest market price of any one of such individual securities being
determined in the same manner as prescribed in subdivision 20 e.
23.Federal housing loans.First mortgage real estate loans insured by the Federal Housing Administrator
under Title II of the National Housing Act.
24.Certificates of deposit and savings accounts.Certificates of deposit of,and savings accounts in,any
bank,banking institution,or trust company,whose deposits are insured by the Federal Deposit Insurance
Corporation at the prevailing rate of interest on such certificates or savings accounts;however,no such
fiduciary shall invest in such certificates of,or deposits in,any one bank,banking institution,or trust
company an amount from any one fund in his or its care which shall be in excess of such amount as shall be
fully insured as a deposit in such bank,banking institution,or trust company by the Federal Deposit
Insurance Corporation.A corporate fiduciary shall not,however,be prohibited by the terms of this
subdivision from depositing in its own banking department,in the form of demand deposits,savings
accounts,time deposits,or certificates of deposit,funds in any amount awaiting investments or distribution,
provided that it shall have complied with the provisions of§§ 6.2-1005 and 6.2-1007,with reference to the
securing of such deposits.
25.Obligations of International Bank,Asian Development Bank,and African Development Bank.Bonds
and other obligations issued,guaranteed,or assumed by the International Bank for Reconstruction and
Development,the Asian Development Bank,or the African Development Bank.
83
26.Deposits in savings institutions.Certificates of deposit of,and savings accounts in,any state or federal
savings institution or savings bank lawfully authorized to do business in the Commonwealth whose
accounts are insured by the Federal Deposit Insurance Corporation or other federal insurance agency;
however,no such fiduciary shall invest in such shares of any one such association an amount from any one
fund in his or its care which shall be in excess of such amount as shall be fully insured as an account in
such association by the Federal Deposit Insurance Corporation or other federal insurance agency.
27.Certificates evidencing ownership of undivided interests in pools of mortgages.Certificates evidencing
ownership of undivided interests in pools of bonds or negotiable notes directly secured by first lien deeds of
trust or mortgages on real property located in the Commonwealth improved by single-family residential
housing units or multi-family dwelling units,provided that(i)such certificates are rated AA or better by a
nationally recognized independent rating agency;(ii)the loans evidenced by such bonds or negotiable notes
do not exceed 80 percent of the fair market value,as determined by an independent appraisal thereof,of the
real property and the improvements thereon securing such loans;and(iii)such bonds or negotiable notes
are assigned to a corporate trustee for the benefit of the holders of such certificates.
28.Shares in credit unions.Shares and share certificates in any credit union lawfully authorized to do
business in the Commonwealth whose accounts are insured by the National Credit Union Share Insurance
Fund or the Virginia Credit Union Share Insurance Corporation,provided no such fiduciary shall invest in
such shares an amount from any one fund in his or its care which shall be in excess of such amount as shall
be fully insured as an account in such credit union by the National Credit Union Share Insurance Fund or
the Virginia Credit Union Share Insurance Corporation.
B.Whenever under the terms of this section the par value of a preference stock is required to be used in a
computation,there shall be used instead of such par value the liquidating value of such preference stock in
the case of involuntary liquidation,as prescribed by the terms of its issue,in the event that such liquidating
value shall be greater than the par value of such preference stock;or in the event that the preference stock
in question has no par value,then such liquidating value shall be used instead;or when such preference
stock shall be one of no par value and one for which no such liquidating value shall have been so
prescribed,then for the purposes of such computation the preference stock in question shall be deemed to
have a value of$100 per share.
C.When any security provided for in this section is purchased by a fiduciary and at the time of such
purchase the statement for the preceding fiscal year of the corporation issuing the security so being
purchased has not been published and is therefore not available,the statement of such corporation for the
fiscal year immediately prior to such preceding fiscal year shall be considered the statement for such
preceding fiscal year and shall have the same force and effect as the statement for the fiscal year preceding
such purchase,provided the date of such purchase is not more than four months after the end of the last
fiscal year of the corporation.
D.In testing a new issue of securities under the provisions of this section,it shall be permissible,in
determining the number of times that fixed charges or preferred dividend requirements have been earned,to
use pro forma fixed charges or dividend requirements,provided the corporation or its corporate predecessor
has been in existence for a period of not less than seven years.
E.Investments made under the provisions of this section,if in conformity with the requirements of this
section at the time such investments were made,may be retained even though they cease to be eligible for
purchase under the provisions of this section,but shall be subject to the provisions of the Uniform Prudent
Investor Act(§64.2-780 et seq.).
2012,c.614.
§2.2-4600.Short title;definitions.
This chapter may be cited as the"Local Government Investment Pool Act."
(1980,c.538,§§2.1-234.1,2.1-234.3; 1996,c.77;2001,c.844.)
§2.2-4601.Findings and purpose.
A.The General Assembly finds that the public interest is served by maximum and prudent investment of
public funds so that the need for taxes and other public revenues is decreased commensurately with the
earnings on such investments.In selecting among avenues of investment,the highest rate of return,
consistent with safety and liquidity,shall be the objective.
84
B.The purpose of this chapter is to secure the maximum public benefit from the investment of public
funds,and,in furtherance of such purposes to:
1.Establish and maintain a continuing statewide policy for the deposit and investment of public funds;
2.Establish a state-administered pool for the investment of local government funds;and
3.Authorize treasurers or any other person collecting,disbursing,or otherwise handling public funds to
invest such public funds either in accordance with Chapter 45 (§2.2-4500 et seq.)of this title or through
the local government investment pool created by the chapter.
C.The General Assembly fmds that the objectives of this chapter will best be obtained through improved
money management,emphasizing the primary requirements of safety and liquidity and recognizing the
different investment objectives of operating and permanent funds.
(1980,c.538, § 2.1-234.2; 2001,c. 844.)
§2.2-4602.Local government investment pool created.
A.A local government investment pool is created,consisting of the aggregate of all funds from local
officials handling public funds that are placed in the custody of the State Treasurer for investment and
reinvestment as provided in this chapter.
B.The Treasury Board or its designee shall administer the local government investment pool on behalf of
the participating local officials subject to regulations and guidelines adopted by the Treasury Board.
C.The Treasury Board or its designee shall invest moneys in the local government investment pool with
the degree of judgment and care,under circumstances then prevailing,which persons of prudence,
discretion,and intelligence exercise in the management of their own affairs,not for speculation,but for
investment,considering the probable safety of their capital as well as the probable income to be derived.
Specifically,the types of authorized investments for local government investment pool assets shall be
limited to those set forth for local officials in Chapter 45(§2.2-4500 et seq.)of this title.
D.A separate account for each participant in the fund shall be kept to record individual transactions and
totals of all investments belonging to each participant.A monthly report showing the changes in
investments made during the preceding month shall be furnished to each participant having a beneficial
interest in the local government investment pool.Details of any investment transaction shall be furnished to
any participant upon request.
E.The Treasury Board or its designee shall administer and handle the accounts in the same manner as bond
and sinking fund trust accounts.
F.The principal and accrued income,and any part thereof,of each and every account maintained for a
participant in the local government investment pool shall be subject to payment at any time from the local
government investment pool upon request,subject to applicable regulations and guidelines.Accumulated
income shall be remitted or credited to each participant at least quarterly.
G.Except as provided in this section,all instruments of title of all investments of the local government
investment pool shall remain in the custody of the State Treasurer.The State Treasurer may deposit with
one or more fiscal agents or banks,those instruments of title he considers advisable,to be held in
safekeeping by the agents or banks for collection of the principal and interest or other income,or of the
proceeds of sale.The State Treasurer shall collect the principal and interest or other income from
investments of the investment pool,the instruments of title to which are in his custody,when due and
payable.
(1980,c. 538, § 2.1-234.8; 1984,c.320; 1988,c. 834;2001,c. 844.)
§2.2-4603.Investment authority.
Subject to the procedures set forth in this chapter,any local official handling public funds may invest and
reinvest any money subject to his control and jurisdiction in the local government investment pool
established by§2.2-4602.
(1980,c.538, § 2.1-234.4; 1988,c. 834;2001,c. 844.)
§2.2-4604.Interfund pooling for investment purposes.
Local officials handling public funds may effect temporary transfers among separate funds for the purpose
of pooling amounts available for investment.This pooling may be accomplished through interfund
85
advances and other appropriate means consistent with recognized principles of governmental accounting
provided that(i)moneys are available for the investment period required;(ii)the investment fund can repay
the advance by the time needed; (iii)the transactions are fully and promptly recorded;and(iv)the interest
earned is credited to the loaning or advancing jurisdiction.
(1980,c.538, §2.1-234.6; 1981,c.583;2001,c. 844.)
§2.2-4605.Powers of Treasury Board relating to the administration of local government investment
pool.
A.The Treasury Board shall have power to:
1.Make and adopt regulations necessary and proper for the efficient administration of the local government
investment pool hereinafter created,including but not limited to:
a. Specification of minimum amounts that may be deposited in the local government investment pool and
minimum periods of time for which deposits shall be retained in such pool;
b. Creation of a reserve for losses;
c.Payment of administrative expenses from the earnings of such pool;
d.Distribution of the earnings in excess of such expenses,or allocation of losses,to the several participants
in a manner that equitably reflects the differing amounts of their respective investments and the differing
periods of time for which such amounts were in the custody of the pool;and
e.Procedures for the deposit and withdrawal of funds.
2.Develop guidelines for the protection of the local government investment pool in the event of default in
the payment of principal or interest or other income of any investment of such pool,such guidelines to
include the following procedures:
a.Instituting the proper proceedings to collect the matured principal or interest or other income;
b.Accepting for exchange purposes refunding bonds or other evidences of indebtedness at appropriate
interest rates;
c.Making compromises,adjustments,or disposition of matured principal or interest or other income as
considered advisable for the purpose of protecting the moneys invested;
d.Making compromises or adjustments as to future payments of principal or interest or other income
considered advisable for the purpose of protecting the moneys invested.
3.Formulate policies for the investment and reinvestment of funds in the local government investment pool
and the acquisition,retention,management,and disposition of investments of the investment pool.
B. The Treasury Board may delegate the administrative aspects of operating under this chapter to the State
Treasurer,subject to the regulations and guidelines adopted by the Treasury Board.
C. Such regulations and guidelines may be adopted without complying with the Administrative Process Act
(§2.2-4000 et seq.)provided that input is solicited from local officials handling public funds. Such input
requires only that notice and an opportunity to submit written comments be given.
(1980,c. 538,§ 2.1-234.7;2001,c. 844.)
§2.2-4606.Chapter controlling over inconsistent laws;powers supplemental.
Insofar as the provisions of this chapter are inconsistent with the provisions of any other law,the provisions
of this chapter shall be controlling and the powers conferred by this chapter shall be in addition and
supplemental to the powers conferred by any other law.
(1980,c. 538,§2.1-234.9;2001,c. 844.)
86
List of Substantive Changes to Investment Policy
Section VIII. 1 Reporting
- New bullet 6: "Year-end reporting by Level input in accordance with GASB
72"
Appendix A:
- Statutory updates to Virginia Code §§ 2.2-4400, et seq.
Appendix D:
- Remove references to Duff& Phelps ratings
Appendix D:
- Wholesale updates to GFOA Best Practices. These updates are current
through GFOA actions in 2020.
Appendix E:
- Statutory updates to Virginia Code §§ 2.2-4500, et seq. and §§ 2.2-4600, et
seq.
22
ITEM— VLH.2
ORDINANCES/RESOLUTIONS
ITEM#71335
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council ADOPTED, BY
CONSENT, Resolution to APPROVE a contract extension between the Virginia Beach Community
Services Board and the Commonwealth of Virginia re mental health, developmental and substance use
disorder services
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
1 A RESOLUTION APPROVING A CONTRACT EXTENSION
2 WITH THE COMMONWEALTH OF VIRGINIA
3
4 WHEREAS, the Virginia Department of Behavioral Health and Developmental
5 Services (VBHDS) provides funding for mental health, developmental, and substance
6 use disorder services through a performance contract with local community services
7 boards;
8
9 WHEREAS, the Virginia Beach Community Service Board exceeds the Code of
10 Virginia mandated minimum local match share for these services;
11
12 WHEREAS, due to the ongoing uncertainties and impacts of the COVID-19
13 pandemic, VBHDS opted to extend the terms of the FY 2019-20 Performance Contract
14 first for the first six months of FY 2020-21 and now again for the second six months of
15 FY 2020-21; and
16
17 WHEREAS,the Virginia Beach Community Service Board, at its February 26,2021
18 meeting, approved the second six-month extension of the FY 2019-20 performance
19 contract between the Virginia Beach Community Service Board and Commonwealth of
20 Virginia;
21
22 NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
23 VIRGINIA BEACH, VIRGINIA, THAT:
24
25 The City Council of Virginia Beach hereby approves the extension of the Fiscal
26 Year 2019-20 performance contract with the Commonwealth of Virginia, a summary of
27 which is attached as Exhibit A, for a period concluding June 30, 2021.
Adopted by the Council of the City of Virginia Beach, Virginia on the 2„ri day
of March , 2021.
APPROVED AS TO CONTENT: APPROVED AS TO LEGAL SUFFICIENCY:
Budget and Management Services ey's Office
CA15327
R-1
February 16, 2021
FY2021 And FY2022 Community Services Performance Contract
FY 2021 Exhibit A: Resources and Services
Virginia Beach Community Services Board
Consolidated Budget(Pages AF-3 through AF-12)
Funding Sources Mental Health Developmental Substance TOTAL
(MH) Services (DV)Services Use Disorder
(SUD)
Services
State Funds 9,321,400 837,953 2,405,935 12,565,288
Local Matching Funds 11,666,901 9,257,621 447,044! 21,371,566
Total Fees 4,961,361 20,403,221 611,312 25,975,894
Transfer Fees In/(Out) 0 0 0 0
Federal Funds 315,522 0 1,730,010 2,045,532
Other Funds 1,337,959 323,300 796,845 2,458,104
State Retained Earnings 0 0 0 0
Federal Retained Earnings 0 0 0
Other Retained Earnings 0 0' 0 0
Subtotal Ongoing Funds 27,603,143 30,822,095 5,991,146 64,416,384
State Funds One-Time 0 0 0 0
Federal Funds One-Time 0 ,, 0 0
Subtotal One-Time Funds 0 0 0 0
TOTAL ALL FUNDS 27,603,143 30,822,095 5,991,146 64,416,384
Cost for MH/DV/SUD Services 26,974,547 30,579,128 3,859,151 61,412,826
Cost for Emergency Services(AP-4) 2,855,188
Cost for Ancillary Services (AP-4), 658,979
Total Cost for Services1 64,926,993
Local Match Computation CSB Administrative Percentage
Total State Funds 12,565,288 Administrative Expenses 7,482,897
Total Local Matching Funds 21,371,566 Total Cost for Services 64,926,993
Total State and Local Funds 33,936,854 Admin/Total Expenses 11.53%
Total Local Match% 62.97%
(Local /Total State+ Local)
Report Date 7/2/2020 AF-1
FY2021 And FY2022 Community Services Performance Contract
FY 2021 Exhibit A:Resources and Services
Virginia Beach Community Services Board
Financial Comments
Comment] MH Other Federal-CSB=$47,405 USDA
Comment2 MH Total Regional=$12,500 Clinical Supervision
Comment3 MH Other Funds$1,337,959=$24,860 Probation&Parole,$9,640 Records,
Comment4 $26,692 Miscellaneous revenue,$10,200 Beach House
Comments Snack Bar Receipts, $100,501 Anticipated PATH additional award,
Comment6 $916,066 Sheriffs Jail Initiative,$250,000 Retained for Complex Care
Comment? DV Other Funds=$323,000 DARS,$300 Miscellaneous revenue
Comment8 SA Other Federal-CSB=$12,791 Health Department HIV
Comment9 SA Other Funds$796,845=$22,328 Miscellaneous revenue,$694,677 Anticipated
Commentl0 SOR award$25,200 Medically Monitored Services to Other Boards,
Commend l $54,640 School Prevention Contract
Comment12 Some capacities have been reduced due to COVID-19 impact
Contment13
Comment14
Commentl5
Comment16
Commentll
Comment18
Comment19
Comment20
Comment21
Comment22
Comment23
Comment24
Comment25
Report Date 7/2/2020 AF-2
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Mental Health(MH)Services
Virginia Beach Community Services Board
Funding Sources Funds
FEES
MH Medicaid Fees 4,541,854
MH Fees:Other 419,507
Total MH Fees 4,961,361
MH Transfer Fees In/(Out) 0
MH Net Fees 4,961,361
FEDERAL FUNDS
MH FBG SED Child&Adolescent(93.958) 225,019
MH FBG Young Adult SMI(93.958) 0
MH FBG SMI(93.958) 16,650
MH FBG SMI PACT(93.958) 0
MH FBG SMI SWVBH Board (93.958) 0
Total MH FBG SMI Funds 16,650
MH FBG Geriatrics(93.958) 0
MH FBG Peer Services (93.958) 0
Total MH FBG Adult Funds 16,650
MH Federal PATH(93.150) 26,448
MH Federal COVID Emergency Grant(93.665)
MH Other Federal-DBHDS 0
MH Other Federal-COVID Support
MH Other Federal-CSB 47,405
Total MH Federal Funds 315,522
STATE FUNDS
Regional Funds
MH Acute Care(Fiscal Agent) 0
MH Acute Care Transfer in/(Out) 0
Total MH Net Acute Care-Restricted 0
MH Regional DAP(Fiscal Agent) 0
MH Regional DAP Transfer In/(Out) 2,895
Total MH Net Regional DAP-Restricted 2,895
MH Regional Residential DAP-Restricted 0
MH Crisis Stabilization(Fiscal Agent) 0
MH Crisis Stabilization-Transfer In/(Out) 794,934
Total Net MH Crisis Stabilization-Restricted 794,934
MH Transfers from DBHDS Facilities(Fiscal Agent) 0
MH Transfers from DBHDS Facilities-Transfer In/(Out) 0
Total Net MH Transfers from DBHDS Facilities 0
MH Expanded Community Capacity(Fiscal Agent) 0
MH Expanded Community Capacity Transfer In/(Out) 302,709
Total MH Net Expanded Community Capacity 302,709
AF-3
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Mental Health (MH)Services
Virginia Beach Community Services Board
Funding Sources Funds
MH First Aid and Suicide Prevention(Fiscal Agent) 0
MH First Aid and Suicide Prevention Transfer In/(Out) 0
Total MH Net First Aid and Suicide Prevention 0
MH STEP-VA Outpatient(Fiscal Agent) 347,895
MH STEP-VA Outpatient Transfer In/Out 12,500
Total Net MH STEP-VA Outpatient 360,395
MH STEP-VA Crisis(Fiscal Agent) 0
MH STEP-VA Crisis Transfer In/Out 0
Total Net MH STEP-VA Crisis 0
MH Forensic Discharge Planning(Fiscal Agent) 0
MH Forensic Discharge Planning Transfer In/(Out) 0
Total Net MH Forensic Discharge Planning 0
MH Permanent Supportive Housing(Fiscal Agent) 917,168
MH Permanent Supportive Housing Transfer In/(Out) 0
Total Net MH Permanent Supportive Housing 917,168
MH Recovery(Fiscal Agent) 0
MH Other Merged Regional Funds(Fiscal Agent) 1,468,833
MH State Regional Deaf Services(Fiscal Agent) 0
MH Total Regional Transfer In/(Out) 455,478
Total MH Net Unrestricted Regional State Funds 1,924,311
Total MH Net Regional State Funds 4,302,412
Children State Funds
MH Child&Adolescent Services Initiative 338,661
MH Children's Outpatient Services 75,000
MH Juvenile Detention 111,724
Total MH Restricted Children's Funds 525,385
MH State Children's Services 25,000
MH Demo Proj-System of Care(Child) 0
Total MH Unrestricted Children's Funds 25,000
MH Crisis Response&Child Psychiatry(Fiscal Agent) 0
MH Crisis Response&Child Psychiatry Transfer In/(Out) 119,369
Total MH Net Restricted Crisis Response&Child Psychiatry 119,369
Total State MH Children's Funds(Restricted for Children) 669,754
Other State Funds
MH Law Reform 397,790
MH Pharmacy-Medication Supports 29,949
MH Jail Diversion Services 241,670
MH Rural Jail Diversion 0
AF-4
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Mental Health(MH)Services
Virginia Beach Community Services Board
Funding Sources Funds
MH Docket Pilot JMHCP Match 0
MH Adult Outpatient Competency Restoration Services 0
MH CIT-Assessment Sites 348,668
MH Expand Telepsychiatry Capacity 0
MH PACT 850,000
MH PACT-Forensic Enhancement 200,000
MH Gero-Psychiatric Services 0
MH STEP-VA-SDA,Primary Care Screening,Ancillary Services,and 467,129
Clinicians Crisis
MH Young Adult SMI 0
Total MH Restricted Other State Funds 2,535,206
MH State Funds 1,814,028
MH State NGRI Funds 0
MH Geriatrics Services 0
Total MH Unrestricted Other State Funds 1,814,028
Total MH Other State Funds 4,349,234
TOTAL MH STATE FUNDS 9,321,400
MH Other Funds 1,337,959
MH Federal Retained Earnings 0
MH State Retained Earnings 0
MH State Retained Earnings-Regional Programs 0
MH Other Retained Earnings 0
Total MH Other Funds 1,337,959
LOCAL MATCHING FUNDS
MH Local Government Appropriations 11,666,901
MH Philanthropic Cash Contributions 0
MH In-Kind Contributions 0
MH Local Interest Revenue 0
Total MH Local Matching Funds 11,666,901
Total MH Funds
27,603,143
MH ONE TIME FUNDS
MH FBG SMI(93.958) 0
MH FBG SED Child&Adolescent(93.958) 0
MH FBG Peer Services (93.958) 0
MH State Funds 0
MH One-Time Restricted State Funds 0
Total One Time MH Funds 0
Total MH All Funds 27,603,143
AF-5
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Developmental Services(DV)
Virginia Beach Community Services Board
Funding Sources Funds
FEES
DV Medicaid DD Waiver Fees 7,290,354
DV Other Medicaid Fees 0
DV Medicaid ICF/IDD Fees 12,579,030
DV Fees:Other 533,837
Total DV Fees 20,403,221
DV Transfer Fees In/(Out) 0
DV NET FEES 20,403,221
FEDERAL FUNDS
DV Other Federal-DBHDS 0
DV Other Federal-CSB 0
DV Other Federal-COVID Support 0
Total DV Federal Funds 0
STATE FUNDS
DV State Funds 837,953
DV OBRA Funds 0
Total DV Unrestricted State Funds 837,953
DV Trust Fund(Restricted) 0
DV Rental Subsidies 0
DV Guardianship Funding 0
DV Crisis Stabilization(Fiscal Agent) 0
DV Crisis Stabilization Transfer in(Out) 0
DV Net Crisis Stabilization 0
DV Crisis Stabilization-Children(Fiscal Agent) 0
DV Crisis Stabilization-Children Transfer In(Out) 0
DV Net Crisis Stabilization-Children 0
DV Transfers from DBHDS Facilities(Fiscal Agent) 0
DV Transfers from DBHDS Facilities-Transfer In/(Out 0
Total Net DV Transfers from DBHDS Facilities 0
Total DV Restricted State Funds 0
Total DV State Funds 837,953
AF-6
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Developmental Services(DV)
Virginia Beach Community Services Board
Funding Sources Funds
OTHER FUNDS
DV Workshop Sales 0
DV Other Funds 323,300
DV State Retained Earnings 0
DV State Retained Earnings-Regional Programs 0
DV Other Retained Earnings 0
Total DV Other Funds 323,300
LOCAL MATCHING FUNDS
DV Local Government Appropriations 9,255,377
DV Philanthropic Cash Contributions 2,244
DV In-Kind Contributions 0
DV Local Interest Revenue 0
Total DV Local Matching Funds 9,257,621
Total DV Funds 30,822,095
DV ONE TIME FUNDS
DV One-Time Restricted State Funds 0
Total One Time DV Funds 0
Total DV All Funds 30,822,095
AF-7
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit r•".: Resources and Services
Substance Use Disorder(SUD)Services
Virginia Beach Community Services Board
Funding Sources Funds
FEES
SUD Medicaid Fees 609,855
SUD Fees:Other 1,457
Total SUD Fees 611,312
SUD Transfer Fees In/(Out) 0
SUD NET FEES 611,312
FEDERAL FUNDS
SUD FBG Alcohol/Drug Treatment(93.959) 985,968
SUD FBG SARPOS(93.959) 65,231
SUD FBG Jail Services (93.959) 165,147
SUD FBG Co-Occurring(93.959) 34,574
SUD FBG New Directions(93.959) 0
SUD FBG Recovery(93.959) 0
SUD FBG MAT-Medically Assisted Treatment(93.959) 0
Tota SUD FBG Alcohol/Drug Treatment Funds 1,250,920
SUD FBG Women(includes LINK at 6 CSBs)(93.959) 187,279
Total SUD FBG Women Funds 187,279
SUD FBG Prevention(93.959) 279,020
SUD FBG Prey-Family Wellness(93.959) 0
Total SUD FBG Prevention Funds 279,020
SUD Federal VA Project LINK/PPW(93.243) 0
SUD Federal Strategic Prevention(93.243) 0
SUD Federal COVID Emergency Grant(93.665) 0
SUD Federal YSAT—implementation(93.243) 0
SUD Federal OPT-R-Prevention(93.788) 0
SUD Federal OPT-R-Treatment(93.788) 0
SUD Federal OPT-R-Recovery(93.788) 0
Total SUD Federal OPT-R Funds(93.788) 0
SUD Federal Opioid Response—Recovery(93.788) 0
SUD Federal Opioid Response—Treatment(93.788) 0
SUD Federal Opioid Response—Prevention(93.788) 0
Total SUD Federal Opioid Response Funds(93.788) 0
SUD Other Federal-DBHDS 0
SUD Other Federal-CSB 12,791
SUD Other Federal-COVID Support 0
TOTAL SUD FEDERAL FUNDS 1,730,010
AF-8
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Substance Use Disorder(SUD)Services
Virginia Beach Community Services Board
Funding Sources Funds
STATE FUNDS
Regional Funds
SUD Facility Reinvestment(Fiscal Agent) 0
SUD Facility Reinvestment Transfer In/(Out) 476,036
Total SUD Net Facility Reinvestment 476,036
SUD Transfers from DBHDS Facilities(Fiscal Agent) 0
SUD Transfers from DBHDS Facilities-Transfer In/(Out) 0
Total Net SUD Transfers from DBHDS Facilities 0
SUD Community Detoxification(Fiscal Agent) 0
SUD Community Detoxification—Transfer In/(Out) 0
Total Net SUD Community Detoxification 0
SUD STEP-VA(Fiscal Agent) 0
SUD STEP-VA -Transfer In/(Out) 0
Total SUD Net STEP-VA-Restricted 0
Total SUP Net Regional State Funds 476,036
Other State Funds
SUD Women(includes LINK at 4 CSBs)(Restricted) 1,800
SUD Recovery Employment 0
SLID MAT-Medically Assisted Treatment 130,000
SUD Peer Support Recovery 0
SLID Permanent Supportive Housing Women 0
SUD SARPOS 76,097
SUD Recovery 0
Total SUD Restricted Other State Funds 207,897
SUD State Funds 1,460,999
SLID Region V Residential 131,215
SLID Jail Services/Juvenile Detention 27,216
SUD HIV/AIDS 102,572
Total SUD Unrestricted Other State Funds 1,722,002
Total SUD Other State Funds 1,929,899
TOTAL SLID STATE FUNDS 2,405,935
OTHER FUNDS
SUD Other Funds 796,845
SLID Federal Retained Earnings 0
SUD State Retained Earnings 0
SUD State Retained Earnings-Regional Programs 0
SLID Other Retained Earnings 0
Total SUD Other Funds 796,845
LOCAL MATCHING FUNDS
SUD Local Government Appropriations 447,044
SLID Philanthropic Cash Contributions 0
AF-9
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Substance Use Disorder(SUD)Services
Virginia Beach Community Services Board
Funding Sources Funds
SUD In-Kind Contributions 0
SUD Local Interest Revenue 0
Total SUD Local Matching Funds 447,044
Total SUD Funds 5,991,146
SUD ONE-TIME FUNDS
SUD FBG Alcohol/Drug Treatment (93.959) 0
SUD FBG Women(includes LINK-6 CSBs)(93.959) 0
SUD FBG Prevention(93.959) 0
SUD FBG Recovery(93.959) 0
SUD State Funds 0
Total SUD One-Time Funds 0
Total AU SUD Funds 5,991,146
AF-10
Report Date 7/2/2020
FY2021 And FY2022 Community Services Performance Contract
FY 2021 Exhibit A: Resources and Services
Local Government Tax Appropriations
Virginia Beach Community Services Board
City/County Tax Appropriation
Virginia Beach City 21,369,322
Total Local Government Tax Funds: 21,369,322
Report Dote 7/2/2020 AF-11
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
Supplemental Information
Reconciliation of Projected Resources and Core Services Costs by Program Area
Virginia Beach Community Services Board
MR DV SUD Emergency Ancillary
Services Services Services Services Services Total
Total All Funds(Page AF-1) 27,603,143 30,822,095 5,991,146 64,416,384
Cost for MH,DV,SUD, 26,974,547 30,579,128 3,859,151 2,855,188 658,979 64,926,993
Emergency,and Ancillary Services
Difference 628,596 242,967 2,131,995 -2,855,188 -658,979 -510,609
Difference results from
Other: 510,609
Explanation of Other in Table Above:
DAP to be paid on behalf of VBCSB by WTCSB
Report Date 7/2/2020 AF-12
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
CSB 100 Mental Health Services
Virginia Beach Community Services Board
Report for Form 11
Projected
Numbers of Projected
Projected Individuals Total
Core Services Service Receiving Service
Capacity Services Costs
310 Outpatient Services 30.17 FTEs 1721 $4,508,307 ,
312 Medical Services 23.08 FTEs 2400 $4,011,098
350 Assertive Community Treatment 11.1 FTEs 109 $1,897,705
320 Case Management Services 56.31 FTEs 1400 $6,634,974
410 Day Treatment or Partial Hospitalization 12 Slots 100 $5237626
420 Ambulatory Crisis Stabilization Services 5 Slots 40 $268,156
425 Mental Health Rehabilitation 41 Slots 175 $1,729,775
460 Individual Supported Employment 3,95 FTEs 50 $435,768
510 Residential Crisis Stabilization Services 12 Beds 320 $2,858,390
551 Supervised Residential Services 32 Beds 40 $961,158
581 Supportive Residential Services 13.68 FTEs 149 $3,116,294
610 Prevention Services 0.2 FTEs $29,296
Totals 6,504 $26,974,547
Report Date 7/2/2020 AP-1
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
CSB 200 Developmental Services
Virginia Beach Community Services Board
Report for Form 21
Projected
Numbers of Projected
Projected Individuals Total
Core Services Service Receiving Service
Capacity Services Costs
312 Medical Services 0.5 FTEs 14 $85,861
320 Case Management Services 30.8 FTEs 931 $3,924,774
425 Developmental Habilitation 69 Slots 156 $4,197,250
465 Group Supported Employment 16 Slots 36 $717,536
460 Individual Supported Employment 10.7 FTEs 150 $966,958
501 Highly Intensive Residential Services(Community-Based ICF/ID Services) 47 Beds 47 $13,934,414
521 Intensive Residential Services 25 Beds 25 $3,405,449
551 Supervised Residential Services 7 Beds 7 $654,647
581 Supportive Residential Services 35.56 FTEs 62 $2,691,239
Totals 1,428 $30,579,128
Report Date 7/2/2020 AP-2
FY2021 And FY2O22 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
CSB 300 Substance Use Disorder Services
Virginia Beach Community Services Board
Report for Form 31
Projected
Numbers of Projected
Projected Individuals Total
Core Services Service Receiving Service
Capacity Services Costs
310 Outpatient Services 5.6 FTEs 300 $776,235
335 Medication Assisted Treatment Services 0 FTEs 170 $864,243
320 Case Management Services 1.98 FTEs 65 $222,538
410 Day Treatment or Partial Hospitalization 9 Slots 85 $372,686
501 Highly Intensive Residential Services(Medically Managed Withdrawal Services) 4 Beds 150 $739,934
521 Intensive Residential Services 2 Beds 16 $65,231
610 Prevention Services 5.68 FTEs $818,284
Totals 786 $3,859,151
Report Date 7/2/2020 AP-3
FY2021 And FY2022 Community Services Performance Contract
FY2021 Exhibit A: Resources and Services
CSB 400 Emergency and Ancillary Services
Virginia Beach Community Services Board
Report for Form 01
Projected
Numbers of Projected
Projected Individuals Total
Core Services Service Receiving Service
Capacity Services Costs
100 Emergency Services 23.23 FTEs 2825 $2,855,188
318 Motivational Treatment Services 0.25 FTEs 280 $43,776
390 Consumer Monitoring Services 2.88 FTEs 370 S382,621
720 Assessment and Evaluation Services 2.2 FTEs 1000 $232,582
Totals 4,475 $3,514,167
Report Date 7/2/2020 AP-4
FY2021 And FY2022 Community Services Performance Contract
Table 2: Board Management Salary Costs
Name of CSB: Virginia Beach Community Services Board FY2021
Table 2a: FY 2021 Salary Range Budgeted Tot. Tenure
Management Position Title Beginning Ending Salary Cost (yrs)
Executive Director $199,503.00 $199,503.00 $199,503.00 1.00
Table 2: Integrated Behavioral and Primary Health Care Questions
1. Is the CSB participating in a partnership with a federally qualified health center,free clinic,
or local health department to integrate the provision of behavioral health and primary
health care?
No
2. If yes,who is the partner?
E a federally qualified health center
Name:
• a free clinic
Name:
E a local health department, or
Name:
• another organization
Name:
3.Where is primary health (medical) care provided?
• on-site in a CSB program,
• on-site at the primary health care provider, or
❑ another site--specify:
4.Where is behavioral health care provided?
• on-site in a CSB program,
• on-site at the primary health care provider,or
another site--specify:
Report Date 7/2/2020 AP-5
23
ITEM— VLH.3
ORDINANCES/RESOLUTIONS
ITEM#71336
The following registered to speak:
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
After City Council discussion, Council Member Wooten made a motion, seconded by Council Member
Berlucchi, to ADOPT,Ordinance to SUPPORT the 2021 Ignite Seminar Series and Disparity Forum and
APPROPRIATE$2,325 from General Fund Balance to Municipal Council re offset expenses(Requested
by Council Member Wooten)
Council Member Moss then made an Incidental motion, seconded by Council Member Tower, to DIVIDE
THE QUESTION, specifically the first question "Proposition #1" consisting of lines 27-30 "The City
Council hereby appropriates $2,325 from the fund balance of the General Fund to Municipal Council to
offset expenses associated with the Ignite Seminar Series and Disparity Forum, and such funds are to offset
expenses related to the Ignite Seminar Series and Disparity Forum".
The second question, "Proposition#2"consisting of lines 32-35 "To allow the payment of costs associated
with the 2021 Ignite Seminar Series that occur after June 30, 2021, the City Manager is hereby directed to
include unspent amounts from previous appropriates in support of the 2019 and 2020 in the proposed
FY2021-22 Operating Budget".
Voting on Division of the Question: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M Dyer,
Barbara M. Henley, Louis R Jones, John D. Moss, Guy K Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
REQUESTED BY COUNCILMEMBER WOOTEN
1 AN ORDINANCE TO EXPRESS CITY COUNCIL SUPPORT
2 FOR THE 2021 IGNITE SEMINAR SERIES AND THE
3 DISPARITY FORUM AND TO APPROPRIATE FUNDS IN
4 FURTHERANCE OF SAME
5
6 WHEREAS, Councilmember Wooten initiated the Ignite Seminar Series in 2019
7 and continued this series in 2020, and such events encourage small business
8 participation in City contracts and efforts to address the disparities in City contracting that
9 were shown in the City's Disparity Study;
10
11 WHEREAS. of the amounts provided by City Council for Ignite Series 2020, an
12 amount of$2,325 was unspent at the close of Fiscal Year 2019-20, and the appropriation
13 for such funds lapsed; and
14
15 WHEREAS, Councilmember Wooten desires to continue the Ignite Seminar Series
16 in 2021 to include February events (Disparity Forum and Ignite Series) utilizing a
17 previously appropriated donation and Ignite Series events tentatively scheduled for June
18 and November:
19
20 NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
21 OF VIRGINIA BEACH, VIRGINIA, THAT:
22
23 The City Council expresses its continued support for the Ignite Seminar Series and
24 Disparity Forum in 2021 because these events are vehicles and tools to address the
25 disparity identified by the Disparity Study.
26
27 The City Council hereby appropriates $2,325 from the fund balance of the General
28 Fund to Municipal Council for expenses associated with the Ignite Seminar Series and
29 Disparity Forum, and such funds are to offset expenses related to the Ignite Seminar
30 Series and Disparity Forum.
31
32 To allow the payment of costs associated with the 2021 Ignite Seminar Series that
33 occur after June 30, 2021, the City Manager is hereby directed to include unspent
34 amounts from previous appropriations in support of the 2019 and 2020 Ignite Seminar
35 Series in the proposed FY 2021-22 Operating Budget.
Adopted by the Council of the City of Virginia Beach, Virginia, on the day
of , 2021.
Requires an affirmative vote by a majority of all of the members of City Council.
APPROVED AS TO LEGAL SUFFICIENCY:
or y's Office
CA15306/R-1 / February 18, 2021
24
ITEM— VLH.3
ORDINANCES/RESOLUTIONS
ITEM#71336
(Continued)
Upon motion to ADOPT, the first question, "Proposition #1"consisting of lines 27-30, "The City Council
hereby appropriates $2,325 from the fund balance of the General Fund to Municipal Council to offset
expenses associated with the Ignite Seminar Series and Disparity Forum, and such funds are to offset
expenses related to the Ignite Seminar Series and Disparity Forum", Proposition #1 ADOPTED.
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R Jones, John D. Moss, Guy K Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R Rouse
Upon motion to ADOPT, the second question, "Proposition #2"consisting of lines 32-35, "To allow the
payment of costs associated with the 2021 Ignite Seminar Series that occur after June 30, 2021, the City
Manager is hereby directed to include unspent amounts from previous appropriates in support of the 2019
and 2020 in the proposed FY2021-22 Operating Budget".
Voting: 1-9 PROPOSITION#2 FAILED DUE TO A NEGATIVE VOTE
Council Members Voting Aye:
Sabrina D. Wooten
Council Members Voting Nay:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M Dyer,
Barbara M. Henley, Louis R Jones, John D. Moss, Guy K Tower,
Rosemary Wilson and Vice Mayor James L. Wood
Council Members Absent:
Aaron R. Rouse
March 2, 2021
PROPOSITION #1
REQUESTED BY COUNCILMEMBER WOOTEN
1 AN ORDINANCE TO EXPRESS CITY COUNCIL SUPPORT
2 FOR THE 2021 IGNITE SEMINAR SERIES AND THE
3 DISPARITY FORUM AND TO APPROPRIATE FUNDS IN
4 FURTHERANCE OF SAME
5
6 WHEREAS, Councilmember Wooten initiated the Ignite Seminar Series in 2019
7 and continued this series in 2020, and such events encourage small business
8 participation in City contracts and efforts to address the disparities in City contracting that
9 were shown in the City's Disparity Study;
10
11 WHEREAS, of the amounts provided by City Council for Ignite Series 2020, an
12 amount of$2,325 was unspent at the close of Fiscal Year 2019-20, and the appropriation
13 for such funds lapsed; and
14
15 WHEREAS, Councilmember Wooten desires to continue the Ignite Seminar Series
16 in 2021 to include February events (Disparity Forum and Ignite Series) utilizing a
17 previously appropriated donation and Ignite Series events tentatively scheduled for June
18 and November;
19
20 NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
21 OF VIRGINIA BEACH, VIRGINIA, THAT:
22
23 The City Council expresses its continued support for the Ignite Seminar Series and
24 Disparity Forum in 2021 because these events are vehicles and tools to address the
25 disparity identified by the Disparity Study.
26
27 The City Council hereby appropriates $2,325 from the fund balance of the General
28 Fund to Municipal Council for expenses associated with the Ignite Seminar Series and
29 Disparity Forum, and such funds are to offset expenses related to the Ignite Seminar
30 Series and Disparity Forum.
31
32 To allow the payment of costs associated with the 2021 Ignite Seminar Series that
33 occur after June 30, 2021, the City Manager-is hereb directed-fie rude unspent
34 m previousappropriations 2020 Ignite Seminar
35 Series in the proposed FY 2021 22 Operating-Budget
Adopted by the Council of the City of Virginia Beach, Virginia, on the 2nd day
of March , 2021.
Requires an affirmative vote by a majority of all of the members of City Council.
APPROVED AS TO LEGAL SUFFICIENCY:
o ey's Office
CA15306/R-2(Motions) / March 4, 2021
25
ITEM— VLH.4
ORDINANCES/RESOLUTIONS
ITEM#71337
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council ADOPTED, BY
CONSENT, Ordinance to RESCIND the previous award of franchises to Bird Rides, Inc., Neutron
Holdings,Inc., Skinny Labs, Inc., and VeoRide, Inc., and DIRECT the City Manager to resolicit proposals
for such franchises
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
1 AN ORDINANCE RESCINDING THE PREVIOUS AWARD
2 OF FRANCHISES TO BIRD RIDES, INC., NEUTRON
3 HOLDINGS, INC., SKINNY LABS, INC.,AND VEORIDE, INC.
4 AND DIRECTING THE CITY MANAGER TO RESOLICIT
5 PROPOSALS
6
7 WHEREAS, the City Council adopted ordinances to award four franchises for the
8 non-exclusive use of public streets and rights-of-way at its May 19, 2020 meeting;
9
10 WHEREAS, the awards were made based upon representations in the proposals
11 of the four scooter companies that the scooter companies would enter into a franchise
12 agreement with the City based upon the proposed franchise agreement included in the
13 request for proposals;
14
15 WHEREAS, subsequent to the City Council approvals, the four scooter companies
16 collectively objected to certain terms and conditions in the proposed franchise agreement;
17 and
18
19 WHEREAS, after briefings from the City staff, the City Council has informally
20 provided direction to resolicit proposals.
21
22 NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
23 VIRGINIA BEACH, VIRGINIA:
24
25 That the City Council hereby rescinds its previous award of franchises to Bird
26 Rides, Inc., Neutron Holdings, Inc., Skinny Labs, Inc., and VeoRide, Inc., and the City
27 Manager is directed to resolicit proposals for such franchises.
Adopted by the Council of the City of Virginia Beach, Virginia, on this 7 n d day
of March , 2021.
APPROVED AS TO CONTENT: APPROVED AS TO LEGAL
SUFFICIENCY:
City Managers Office City A ney's Office
CA15333
R-1
February 22, 2021
26
ITEM— VLH.5
ORDINANCES/RESOLUTIONS
ITEM#71338
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council ADOPTED, BY
CONSENT, Ordinance to EXTEND the provisions of the Ordinance previously adopted on March 31,
2020 re ensure continuity of government during the COVID-19 Disaster
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
1 AN ORDINANCE TO EXTEND THE PROVISIONS OF THE
2 PREVIOUSLY ADOPTED ORDINANCE TO ENSURE
3 CONTINUITY OF GOVERNMENT DURING THE COVID-19
4 DISASTER
5
6 WHEREAS, on March 12, 2020, the Governor of the Commonwealth of Virginia,
7 in Executive Order Number Fifty-One, declared a state of emergency and disaster within
8 the Commonwealth of Virginia pursuant to Code of Virginia Section 44-146.16 of the Code
9 of Virginia;
10
11 WHEREAS, on March 13, 2020, the City Manager, as Director of Emergency
12 Management, declared a local emergency;
13
14 WHEREAS, Section 15.2-1413 of the Code of Virginia provides that
15 "notwithstanding any contrary provision of law, general or special, any locality, may, by
16 ordinance, provide a method to assure continuity in its government, in the event of an
17 enemy attack or other disaster. Such ordinance shall be limited in its effect to a period not
18 exceeding six months after any such enemy attack or disaster and shall provide for a
19 method of resumption of normal governmental authority by the end of the six-month
20 period (emphasis added)";
21
22 WHEREAS, because of the emergency, the City Council on March 31, 2020
23 adopted an Ordinance to Ensure Continuity of Government During the COVID-19
24 Disaster ("ORD-36141");
25
26 WHEREAS, ORD-36141 includes a finding by the City Council that the COVID-19
27 Pandemic is a disaster for purposes of Virginia Code § 15.2-1413 and authorization for
28 electronic or virtual meetings of the City Council and its boards and commissions, as well
29 as for other meetings, including public bid openings;
30
31 WHEREAS, on April 7, 2020, the City Council adopted an ordinance to amend
32 ORD-36141 to provide for the holding of public hearings as required to enact the City's FY
33 2021 Operating Budget and CIP;
34
35 WHEREAS, ORD-36141 included a sunset date of either September 30, 2020 or
36 upon declaration of the Governor that the emergency is ended, whichever occurs earlier;
37
38 WHEREAS, because the Governor had not declared that the emergency has
39 ended, and because the COVID-19 Pandemic continued to threaten public health, the
40 City Council on September 15, 2020 adopted an ordinance to extend the provisions of
41 ORD-36141 for six additional months or upon declaration of the Governor that the
42 emergency is ended, whichever occurs earlier; and
43
44 WHEREAS, since the adoption of ORD-36141, some public meetings of the City
45 have been held in person by employing the use of masks and social distancing and by
46 facilitating citizen participation in those meetings in person or via electronic means, but
47 the need continues for certain meetings and public hearings to be held virtually, as the
48 COVID-19 Pandemic continues to adversely impact the City and its residents;
49
50 NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
51 OF VIRGINIA BEACH, VIRGINIA, THAT:
52
53 1. The City Council hereby extends the provisions of ORD-36141 until the earlier
54 of either a declaration by the Governor that the emergency in the Commonwealth is ended
55 or six months from the date of the adoption of this ordinance.
56
57 2. The following shall apply to the public hearings required to enact the City's
58 FY2022 Operating Budget and CIP:
59
60 a. The required hearings for the City's FY2022 Operating Budget and CIP shall
61 be held virtually and without a quorum of the Council assembled at a given place;
62
63 b. Public comment may be solicited by electronic means in advance and shall
64 also be solicited through telephonic or other electronic means during the course of each
65 hearing. All such public comments will be provided to members of the Council before or
66 during the virtual meeting and made part of the record for such meeting; and
67
68 c. The City Clerk shall cause notice of such hearings to be posted prominently
69 on the City's website, in addition to the notifications that will be published in the
70 newspaper in accordance with statutory requirements.
Adopted by the Council of the City of Virginia Beach, Virginia, on the 2 n cl day
of March , 2021.
APPROVED AS TO CONTENT: APPROVED AS TO LEGAL SUFFICIENCY:
1) V e—eZe-i;r
Office of the City Manager City Attorney's Office
CA15332
R-2
February 22, 2021
D . 36141
1 AN ORDINANCE TO ENSURE CONTINUITY OF
2 GOVERNMENT DURING THE COVID-19 DISASTER
3
4 WHEREAS, on March 12, 2020, the Governor of the Commonwealth of Virginia,
5 in Executive Order Number Fifty-One, declared in response to the COVID-19 public
6 health emergency a state of emergency and disaster within the Commonwealth of
7 Virginia, in accordance with Virginia Code § 44-146.16;
8
9 WHEREAS, on March 13, 2020, the City Manager, as Director of Emergency
10 Management, declared a local emergency;
11
12 WHEREAS, the impacts to public health, the City's economy, and the operation of
13 the City government are likely to be protracted and could last several months;
14
15 WHEREAS, there are actions which must be taken by the City in the next several
16 months which will, by law, require the action of the City Council but may not be conducted
17 in a physical setting because of the COVID-19 Pandemic; and
18
19 WHEREAS, Virginia Code§ 15.2-1413 provides that"notwithstanding any contrary
20 provision of law, general or special, any locality, may, by ordinance, provide a method to
21 assure continuity in its government, in the event of an enemy attack or other disaster.
22 Such ordinance shall be limited in its effect to a period not exceeding six months after any
23 such enemy attack or disaster and shall provide for a method of resumption of normal
24 governmental authority by the end of the six-month period";
25
26 NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
27 OF VIRGINIA BEACH, VIRGINIA, THAT:
28
29 1. The City Council finds the impacts of the COVID-19 Pandemic is a disaster for
30 purposes of§ 15.2-1413 of the Code of Virginia.
31
32 2. The City Council will meet in person when practicable, but because of the
33 possible exposure of meeting participants to the COVID-19 virus, the Council
34 may meet electronically, subject to the following restrictions. Such electronic
35 meetings must be conducted in accordance with Virginia Code § 2.2-
36 3708.2(A)(3), and the subject of such meetings may be only matters related to
37 the emergency or where a failure to act by the Council would result in
38 irrevocable public harm. Whether any particular action by the Council fits within
39 the description in the preceding sentence and the Virginia Code requirements
40 is a fact-specific determination to be made in consultation with the City
41 Attorney. Notices for such meetings shall be made on the City's website.
42 Meetings shall be conducted in a format that enables citizens to both observe
43 and, if practicable, participate in such meetings electronically.
44
45 3. Other City boards and commissions may meet electronically as necessary, but
46 any such meeting shall be subject to the restrictions set forth in Virginia Code
47 § 2.2-3708.2(A)(3) and in Section 2, supra.
48
49 4. The Council directs that any City meeting—other than meetings of public
50 bodies, which are addressed above—be held electronically in lieu of physical
51 gatherings if feasible. Public bid openings required by the Virginia Public
52 Procurement Act shall be held telephonically or electronically. Instructions on
53 how to participate shall be distributed prior to the start of any such meeting or
54 bid opening.
55
56 5. The provisions of this ordinance shall expire upon declaration by the Governor
57 that the emergency in the Commonwealth is ended,or on September 30, 2020,
58 whichever is earlier.
59
Adopted by the Council of the City of Virginia Beach, Virginia, on the day
of trotc)1\ , 2020.
APPROVED AS TO CONTENT APPROVED AS TO LEGAL SUFFICIENCY:
J./11am 4241 11/1
Office of the City Manager City Attorney's Office
CA15043
R-1
March 24, 2020
27
ITEM— VLH.6
ORDINANCES/RESOLUTIONS
ITEM#71339
The following registered to speak:
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
Vincent Olivieri, 216 43rd Street, Phone: 422-6556, did not respond
Steve Burwell, 310 45`"Street, Phone: 650-2667, did not respond
Upon motion by Council Member Moss, seconded by Council Member Wilson, City Council DEFERRED
TO APRIL 6,2021, Ordinance to EXTEND the Sunset Date to April 5, 2022, re residential permit parking
in the Historic Cavalier Shores Neighborhood
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
28
ITEM— VLH.7
ORDINANCES/RESOLUTIONS
ITEM#71340
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council ADOPTED, BY
CONSENT,Ordinance to AUTHORIZE a grant of up to$150,000from the City Council Special Pandemic
and Vaccine Support Reserve to the Oceana Volunteer Fire Department, Inc., re the purchases of a fire
support vehicle, and AUTHORIZE donation of a truck(Requested by City Council)
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
REQUESTED BY THE CITY COUNCIL
1 AN ORDINANCE TO AUTHORIZE A GRANT OF UP TO
2 $150,000 TO THE OCEANA VOLUNTEER FIRE
3 DEPARTMENT, INC. (OVFD) FOR A FIRE SUPPORT
4 VEHICLE AND THE OUTFITTING THEREOF AND TO
5 DONATE A TRUCK TO THE OVFD
6
7 WHEREAS, pursuant to Virginia Code § 15.2-953, the City may authorize grants
8 to a nonprofit rescue squad or fire department that serve to the residents of the City;
9
10 WHEREAS, the OVFD has a need to acquire a fire support vehicle and a grant
11 would be of assistance in this acquisition;
12
13 WHEREAS, the Virginia Beach Fire Department has a Ford F550 that was
14 originally acquired in 2001 and is due to be replaced; and
15
16 WHEREAS, the OVFD would like to use the Ford F550 in its Support Tech
17 Program;
18
19 NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
20 VIRGINIA BEACH, VIRGINIA:
21
22 That the grant in an amount not to exceed $150,000 is hereby authorized for the
23 OVFD for the purchase of a fire support vehicle and the equipment and accessories
24 necessary to outfit the vehicle. The source of funds is the City Council Special Pandemic
25 and Vaccine Support Reserve. The actual amount of the grant shall be based on the
26 specific total required for the purchases of the vehicle, equipment, and accessories as
27 certified by the Fire Chief or designee.
28
29 BE IT FURTHER ORDAINED, THAT:
30
31 The Ford F550, which is due to be replaced, is hereby donated to OVFD for use in
32 the Support Tech Program.
Adopted by the Council of the City of Virginia Beach, Virginia on the _2 d day
of March , 2021.
APPROVED AS TO LEGAL SUFFICIENCY:
it rney's Office
CA15329
R-4
February 22, 2021
29
ITEM— VLH.8
ORDINANCES/RESOLUTIONS
ITEM#71341
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council ADOPTED, BY
CONSENT, Ordinance to APPROPRIATE $6,948.10 to the FY2020-21 Emergency Medical Services
(EMS) Operating Budget re reimburse auction proceeds to the Plaza Volunteer Rescue Squad,Inc.
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
1 AN ORDINANCE TO APPROPRIATE FUNDS FROM THE
2 AUCTION OF SURPLUS EQUIPMENT TO THE PLAZA
3 VOLUNTEER RESCUE SQUAD, INC.
4
5 WHEREAS, at the request of the Plaza Volunteer Fire Company and Rescue Squad,
6 Inc., which operates as the Plaza Volunteer Rescue Squad, Inc. (PVRS), the City recently
7 auctioned two vehicles formerly owned by PVRS; and
8
9 WHEREAS, the proceeds of the auction total $6,948.10;
10
11 NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
12 VIRGINIA BEACH, VIRGINIA, THAT:
13
14 $6,948.10 is hereby appropriated, with miscellaneous revenue increased
15 accordingly,to the FY 2020-21 Operating Budget of the Department of Emergency Medical
16 Services for the purposes of providing such funds to PVRS.
Adopted by the Council of the City of Virginia Beach, Virginia on the 2n d day
Of March , 2021
Requires an affirmative vote by a majority of all of the members of City Council.
APPROVED AS TO CONTENT: APPROVED AS TO LEGAL SUFFICIENCY:
/,/ (4170d.
Budget and Management Services ey's Office
CA15328
R-1
February 16, 2021
30
ITEM— VLL1
PLANNING
ITEM#71342
The following registered to speak.•
Quan Le, Applicant, 1602 Shenstone Court, Phone: 616-340-3320, spoke in SUPPORT
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
Council Member Wooten made a motion, seconded by Council Member Abbott, to APPROVE Application
of QUANLEfor a Conditional Use Permit re short term rental at 1612 Tallwood Manor Court DISTRICT
1 - CENTERVILLE
Voting: 4-6 MOTION FAILED DUE TO A NEGATIVE VOTE
Council Members Voting Aye:
Jessica P. Abbott, Mayor Robert M. Dyer, Guy K. Tower and Sabrina
D. Wooten
Council Members Voting Nay:
Michael F. Berlucchi, Barbara M. Henley, Louis R. Jones, John D.
Moss, Rosemary Wilson and Vice Mayor James L. Wood
Council Members Absent:
Aaron R. Rouse
March 2, 2021
31
ITEM— VLL2
PLANNING
ITEM#71343
The following registered to speak:
Jonathan West,Applicant, 4814 Lake Drive, Phone: 804-651-3320, spoke in SUPPORT
Sarah Houck, 5032 Lauderdale Avenue, Phone: 334-0321, spoke in OPPOSITION
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
Amanda Edwards, 4812 Zivo Court, Phone, 513-276-2552, spoke in OPPOSITION
Upon motion by Council Member Jones, seconded by Council Member Moss, City Council DENIED
Application of JONATHAN WEST for a Conditional Use Permit re short term rental at 4814 Lake
Drive DISTRICT 4—BAYSIDE
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
32
ITEM— VLI.3
PLANNING
ITEM#71344
The following registered to speak:
Gus Nicoll, Applicant, 113A 55`h Street, Phone: 775-8573, spoke in SUPPORT
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council APPROVED,
AS CONDITIONED,Application of ALFRED NICOLL for a Conditional Use Permit re short term
rental at 113 55`h Street, Unit A DISTRICT 5—LYNNHAVEN
BE IT HEREBY ORDAINED BY THE COUNCIL OF THE CITY OF VIRGINIA BEACH, VIRGINIA
ALFRED NICOLL for a Conditional Use Permit re short term rental at
113 55th Street, Unit A (GPIN 24198034800001) DISTRICT 5 —
LYNNHAVEN
The following conditions shall be required:
1. The following conditions shall only apply to the dwelling unit addressed as 113 55`h Street,
Unit A, and the Short Term Rental use shall only occur in the principal structure.
2. Off-street parking shall be provided as required by Section 241.2 of the City Zoning
Ordinance or as approved by City Council.
3. This Conditional Use Permit shall expire five (5) years from the date of approval. The
renewal process of this Conditional Use Permit may be administrative and performed by
the Planning Department;however, the Planning Department shall notify the City Council
in writing prior to the renewal of any Conditional Use Permit for a Short Term Rental
where the Short Term Rental has been the subject of neighborhood complaints, violations
of its conditions or violations of any building, housing,zoning,fire or other similar codes.
4. No events associated with the Short Term Rental shall be permitted with more than the
allowed number of people who may stay overnight(number of bedrooms times two (2))on
the property where the Short Term Rental is located. This Short Term Rental may not
request or obtain a Special Event Permit under City Code Section 4-1 (8a).
5. The owner or operator must provide the name and telephone number of a responsible
person, who may be the owner, operator or an agent of the owner or operator, who is
available to be contacted and to address conditions occurring at the Short Term Rental
within thirty (30) minutes. Physical response to the site of the Short Term Rental is not
required.
6. If, or when, the ownership of the property changes, it is the seller's responsibility to notify
the new property owner of requirements 'a' through `c' below. This information must be
submitted to the Planning Department for review and approval. This shall be done within
six(6) months of the property real estate transaction closing date.
March 2, 2021
33
ITEM— VLI.3
PLANNING
ITEM#71344
(Continued)
a) A completed Department of Planning and Community
Development Short Term Rental Zoning registration form;
and
b) Copies of the Commissioner of Revenue's Office receipt of
registration; and
c) Proof of liability insurance applicable to the rental activity of
at least$1-Million
7. To the extent permitted by state law, each Short Term Rental must maintain registration
with the Commissioner of Revenue's Office and pay all applicable taxes.
8. There shall be posted in a conspicuous place within the dwelling a summary provided by
the Zoning Administrator of City Code Sections 23-69 through 23-71 (noise), 31-26, 31-27
and 31-28 (solid waste collection), 12-5 (fires on the beach), 12-43.2 (fireworks), and a
copy of any approved parking plan.
9. All refuse shall be placed in automated refuse receptacles, where provided, and comply
with the requirements of City Code sections 31-26, 31-27 and 31-28.
10. Accessory structures shall not be used or occupied as Short Term Rentals.
11. No signage shall be on-site, except one(1),four(4)square foot sign, may be posted on the
building which identifies the Short Term Rental.
12. The Short Term Rental shall have no more than one (1) rental contract during any
consecutive seven (7) day period.
13. The owner or operator shall provide proof of liability insurance applicable to the rental
activity at registration and renewal of at least $1-Million underwritten by insurers
acceptable to the City.
14. There shall be no outdoor amplified sound after 10:00 p.m. or before 10:00 a.m.
15. The maximum number of persons on the property after 11:00 p.m. and before 7:00 a.m.
("Overnight Lodgers")shall be two (2) individuals per bedroom.
16. To the extent permissible under state law, interconnected smoke detectors (which may be
wireless), a fire extinguisher and, where natural gas or propane is present, carbon
monoxide detectors, shall be installed in each Short Term Rental.
This Ordinance shall be effective in accordance with Section 1070 of the Zoning Ordinance.
March 2, 2021
34
ITEM— VLL3
PLANNING
ITEM#71344
(Continued)
Adopted by the City Council of the City of Virginia Beach, Virginia, on the 2ndday of March Two Thousand
Twenty One.
Voting: 8-2
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer, Louis
R. Jones, Guy K. Tower, Rosemary Wilson, Vice Mayor James L. Wood
and Sabrina D. Wooten
Council Members Voting Nay:
Barbara M. Henley
John D. Moss
Council Members Absent:
Aaron R. Rouse
March 2, 2021
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Zoning
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PLAN TRANS SURFACES 0 15 30 60 90 120 150 180
35
ITEM— VLI.4
PLANNING
ITEM#71345
The following registered to speak:
Karen Allen, Applicant, 1845 Rein Lane, Phone: 478-4244, spoke in SUPPORT
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
Council Member Tower made a motion, seconded by Council Member Abbott, to APPROVE
Application of KAREN AND JOE ALLEN / OLD HICKORY INVESTMENTS, LLC for a
Conditional Use Permit re short term rental at 1361 Goose Landing DISTRICT 6—BEACH
Voting: 5-5 MOTION FAILED DUE TO A TIE VOTE
Council Members Voting Aye:
Jessica P.Abbott,Michael F.Berlucchi,Mayor Robert M.Dyer, Guy K.
Tower and Sabrina D. Wooten
Council Members Voting Nay:
Barbara M. Henley, Louis R. Jones, John D. Moss, Rosemary Wilson
and Vice Mayor James L. Wood
Council Members Absent:
Aaron R. Rouse
March 2, 2021
36
ITEM— VLL5
PLANNING
ITEM#71346
The following registered to speak:
Ethan Byers,Attorney for Applicant, 101 West Main Street, Norfolk, Phone: 216-0226, spoke in
SUPPORT
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
Jessie Wilson, 625 25th Street, spoke in OPPOSITION
Kerri Chik, 625 25t"Street, spoke in OPPOSITION
Upon motion by Council Member Tower, seconded by Council Member Moss, City Council
DENIED Application of BAO LO for a Conditional Use Permit re short term rental at 619 25t"
Street DISTRICT 6—BEACH
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
37
ITEM— VLI.6
PLANNING
ITEM#71347
Upon motion by Vice Mayor Wood, seconded by Council Member Wilson, City Council APPROVED,
AS CONDITIONED, BY CONSENT, Application of WILLIAM JOSEPH WRIGHT, JR. for a
Conditional Use Permit re short term rental at 911 Pacific Avenue, Unit B DISTRICT 6—BEACH
BE IT HEREBY ORDAINED BY THE COUNCIL OF THE CITY OF VIRGINIA BEACH, VIRGINIA
WILLIAM JOSEPH WRIGHT, JR. for a Conditional Use Permit re
short term rental at 911 Pacific Avenue, Unit B(GPIN 24272444111030)
DISTRICT 6—BEACH
The following conditions shall be required:
1. The following conditions shall only apply to the dwelling unit addressed as 911 Pacific
Avenue, Unit B, and the Short Term Rental use shall only occur in the principal structure.
2. Off-street parking shall be provided as required by Section 241.2 of the City Zoning
Ordinance or as approved by City Council. Proof of ability to use at least one off-street
parking space at a location acceptable to the Zoning Administrator shall be provided to
the Planning Department on an annual basis as long as the Conditional Use Permit is
active.
3. This Conditional Use Permit shall expire five (5) years from the date of approval. The
renewal process of this Conditional Use Permit may be administrative and performed by
the Planning Department;however, the Planning Department shall notes the City Council
in writing prior to the renewal of any Conditional Use Permit for a Short Term Rental
where the Short Term Rental has been the subject of neighborhood complaints, violations
of its conditions or violations of any building, housing,zoning,fire or other similar codes.
4. No events associated with the Short Term Rental shall be permitted with more than the
allowed number of people who may stay overnight(number of bedrooms times two (2))on
the property where the Short Term Rental is located. This Short Term Rental may not
request or obtain a Special Event Permit under City Code Section 4-1 (8a).
5. The owner or operator must provide the name and telephone number of a responsible
person, who may be the owner, operator or an agent of the owner or operator, who is
available to be contacted and to address conditions occurring at the Short Term Rental
within thirty (30) minutes. Physical response to the site of the Short Term Rental is not
required.
6. If or when, the ownership of the property changes, it is the seller's responsibility to not&
the new property owner of requirements 'a'through `c'below. This information must be
submitted to the Planning Department for review and approval. This shall be done within
six(6) months of the property real estate transaction closing date.
March 2, 2021
38
ITEM— VLI.6
PLANNING
ITEM#71347
(Continued)
a) A completed Department of Planning and Community
Development Short Term Rental Zoning registration form;
and
b) Copies of the Commissioner of Revenue's Office receipt of
registration; and
c) Proof of liability insurance applicable to the rental activity of
at least$1-Million.
7. To the extent permitted by state law, each Short Term Rental must maintain registration
with the Commissioner of Revenue's Office and pay all applicable taxes.
8. There shall be posted in a conspicuous place within the dwelling a summary provided by
the Zoning Administrator of City Code Sections 23-69 through 23-71 (noise), 31-26, 31-27
and 31-28 (solid waste collection), 12-5 (fires on the beach), 12-43.2 (fireworks), and a
copy of any approved parking plan.
9. All refuse shall be placed in automated refuse receptacles, where provided, and comply
with the requirements of City Code sections 31-26, 31-27 and 31-28.
10. Accessory structures shall not be used or occupied as Short Term Rentals.
11. No signage shall be on-site, except one(1),four(4)square foot sign, may be posted on the
building which identifies the Short Term Rental.
12. The Short Term Rental shall have no more than one (1) rental contract during any
consecutive seven (7) day period.
13. The owner or operator shall provide proof of liability insurance applicable to the rental
activity at registration and renewal of at least $1-Million underwritten by insurers
acceptable to the City.
14. There shall be no outdoor amplified sound after 10:00 p.m. or before 10:00 a.m.
15. The maximum number of persons on the property after 11:00 p.m. and before 7:00 a.m.
("Overnight Lodgers')shall be two (2) individuals per bedroom.
16. To the extent permissible under state law, interconnected smoke detectors (which may be
wireless), a fire extinguisher and, where natural gas or propane is present, carbon
monoxide detectors, shall be installed in each Short Term Rental.
This Ordinance shall be effective in accordance with Section 1070 of the Zoning Ordinance.
March 2, 2021
39
ITEM— VLL6
PLANNING
ITEM#71347
(Continued)
Adopted by the City Council of the City of Virginia Beach, Virginia, on the 2"d day of March Two Thousand
Twenty One.
Voting: 8-2
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer, Louis
R. Jones, Guy K. Tower, Rosemary Wilson, Vice Mayor James L. Wood
and Sabrina D. Wooten
Council Members Voting Nay:
Barbara M. Henley
John D. Moss
Council Members Absent:
Aaron R. Rouse
March 2, 2021
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PLAN TRANS SURFACES 0 1530 60 90 120 150 180
40
ITEM— VLL7
PLANNING
ITEM#71348
The following registered to speak:
Kellie Jo David,Applicant, 2621 Highland Meadows Way, Phone: 406-4510, spoke in SUPPORT
Barbara Messner, P. O. Box 514, spoke in OPPOSITION
Upon motion by Council Member Henley,seconded by Council Member Moss, City Council DENIED
Application of D AND D CREATIONS, LLC/DANIEL AND KELLIE JO DAVID REVOCABLE
TRUST for a Conditional Use Permit re short term rental at 2621 Highland Meadows Way DISTRICT
7—PRINCESS ANNE
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
41
ITEM— VLJ.
APPOINTMENTS
ITEM#71349
BY CONSENSUS, City Council RESCHEDULED the following APPOINTMENTS.•
2040 VISION TO ACTION COMMUNITY COALITION
BAYFRONT ADVISORY COMMISSION
CLEAN COMMUNITY COMMISSION
COMMUNITY SERVICES BOARD
DEFERRED COMPENSATION BOARD
GREEN RIBBON COMMITTEE
HEALTH SERVICES ADVISORY BOARD
HISTORIC PRESERVATION COMMISSION
HOUSING ADVISORY BOARD
INVESTIGATION REVIEW PANEL
OLD BEACH DESIGN REVIEW COMMITTEE
OPEN SPACE ADVISORY COMMITTEE
PERSONNEL BOARD
PROCESS IMPROVEMENT STEERING COMMITTEE
SENIOR SERVICES OF SOUTHEASTERN VIRGINIA
SOUTHEASTERN PUBLIC SERVICE AUTHORITY
TRANSITIONAREA/INTERFACILITY TRAFFIC AREA CITIZENS ADVISORY COMMITTEE
March 2, 2021
42
ITEM— VLJ
APPOINTMENTS
ITEM#71350
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
JUDGE WINSHIP TOWER
Unexpired term thru 6/30/2022
ARTS AND HUMANITIES COMMISSION
Voting: 9-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Rosemary Wilson,
Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Abstaining:
Guy K. Tower
Council Members Absent:
Aaron R. Rouse
March 2, 2021
43
ITEM— VLJ
APPOINTMENTS
ITEM#71351
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
MARK HORTON
Unexpired term thru 6/30/2022
BIKEWAYS AND TRAILS ADVISORY COMMITTEE
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
44
ITEM— VLJ
APPOINTMENTS
ITEM#71352
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
ANNE MANNARINO
JENNIFER MYNES
Three year term 4/1/2021—3/31/2024
CLEAN COMMUNITY COMMISSION
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
45
ITEM— VLJ
APPOINTMENTS
ITEM#71353
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
NANCY BLOOM
(Represents City Council Designee)
JOY RIOS
(Represents Parent Representative)
Two year term 4/1/2021 —3/31/2023
COMMUNITY POLICY AND MANAGEMENT TEAM
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
46
ITEM— VLJ
APPOINTMENTS
ITEM#71354
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
STACEY HAWKS
(Represents Employee Relations Manager)
BEVERLYANDERSON
(Represents the School Board Member)
No Term
DEFERRED COMPENSATION BOARD
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
47
ITEM— VLJ
APPOINTMENTS
ITEM#71355
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
COUNCIL MEMBER JOHND.MOSS
No Term
HAMPTON ROADS PLANNING COMMISSION
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
48
ITEM— VLJ
APPOINTMENTS
ITEM#71356
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
STEVENANNUNZIATO
SHEILA MAGULA
Three year term 4/1/2021—3/31/2024
HEALTH SERVICES ADVISORY BOARD
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
49
ITEM— VLJ
APPOINTMENTS
ITEM#71357
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
COUNCIL MEMBER JOHND. MOSS
Four year term 3/2/2021 —3/31/2025
HOUSING ADVISORY BOARD
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
50
ITEM— VLJ
APPOINTMENTS
ITEM#71358
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
BEATRIZAMBERMAN
RODNEY BURNSWORTH
JAMAL GUNN
SYLVIA STRICKLAND
Three year term 4/1/2021—3/31/2024
HUMAN RIGHTS COMMISSION
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
51
ITEM— VLJ
APPOINTMENTS
ITEM#71359
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
VICTORIA MANNING
(Represents the School Board Member)
No Term
IN-HOUSE PHARMACY EXPLORATORY COMMITTEE
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
52
ITEM— VLJ
APPOINTMENTS
ITEM#71360
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
KEVIN COOK
CRAIG QUIGLEY
Five year term 3/1/2021 —2/28/2026
MILITARY ECONOMIC DEVELOPMENT ADVISORY COMMITTEE
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
53
ITEM— VLJ
APPOINTMENTS
ITEM#71361
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
FRANK BORUM
(Alternate Member)
LANITHA HUDSON
(Alternate Member,Merit Service)
SUSAN SALAFRANCA
(Alternate Member,Merit Service)
Three year term 3/1/2021—2/28/2024
PERSONNEL BOARD
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
54
ITEM— VLJ
APPOINTMENTS
ITEM#71362
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
COUNCIL MEMBER SABRINA WOOTEN
One year term 4/1/2021 —3/31/2022
PLANNING COUNCIL
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
55
ITEM— VLJ
APPOINTMENTS
ITEM#71363
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
JAMES YOUNG
(Represents Student Member)
Unexpired Term thru 9/30/2022
HARVEST BELLANTE
LYNN CARWELL
Four year term 3/2/2021 —3/31/2025
PUBLIC LIBRARY BOARD
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
56
ITEM— VLJ
APPOINTMENTS
ITEM#71364
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
MICHAEL MAUCH
Unexpired term thru 12/31/2023
RESORT ADVISORY COMMISSION
Voting: 9-1
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, Guy K. Tower, Rosemary Wilson,
Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Voting Nay:
John D. Moss
Council Members Absent:
Aaron R. Rouse
March 2, 2021
57
ITEM— VLJ
APPOINTMENTS
ITEM#71365
Upon NOMINATION by Vice Mayor Wood, City Council REAPPOINTED:
LISA HARTMAN
JOSEPH STRANGE
(Represents Development Authority Member)
Three year term 3/1/2021 —2/28/2024
TRANSITION AREA/INTERFACILITY TRAFFIC AREA CITIZENS ADVISORY COMMITTEE
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
58
ITEM— VLJ
APPOINTMENTS
ITEM#71366
Upon NOMINATION by Vice Mayor Wood, City Council APPOINTED:
DR.AUDREY DOUGLAS-COOKE
Unexpired term thru 12/31/2023
VIRGINIA BEACH COMMUNITY DEVELOPMENT CORPORATION
Voting: 10-0
Council Members Voting Aye:
Jessica P. Abbott, Michael F. Berlucchi, Mayor Robert M. Dyer,
Barbara M. Henley, Louis R. Jones, John D. Moss, Guy K. Tower,
Rosemary Wilson, Vice Mayor James L. Wood and Sabrina D. Wooten
Council Members Absent:
Aaron R. Rouse
March 2, 2021
59
ADJOURNMENT
ITEM#71367
Mayor Robert M. Dyer DECLARED the City Council FORMAL SESSION ADJOURNED at 8:44 P.M.
Terri H. Cheli
Chief Deputy City Clerk
A nda Barne M C Robert M. Dyer
City Clerk Mayor
March 2, 2021
60
OPEN DIALOGUE
The following registered to speak:
Helene McCarthy, 400 South Military Highway, #2415, Phone: 678-1573, requested the reason the City
Attorney petitioned the Circuit Court for guardianship of her husband.
Carl Wright, 1144 Mondrian Loop,Phone:235-5596, expressed frustration concerning the level of scrutiny
Council Member Wooten received tonight during the discussion of the Ignite Seminar Series Resolution.
Melissa Hebert, 801 Norton Court, Phone: 635-7548, spoke concerning flooding on Norton Court
ADJOURNED AT 8:53 P.M.
March 2, 2021