Page 68 - City of Bedford FY20 Approved Budget

Liquidity - General, Enterprise, or Operating-type Funds require the greatest short-term
liquidity of any of the fund-types. Financial institution deposits, short-term investment
pools and money market mutual funds will provide daily liquidity and may be utilized as a
competitive yield alternative to fixed maturity investments.

Diversification - Investment maturities should be staggered throughout the budget cycle
to provide cash flow based on the anticipated operating needs of BEDFORD.
Diversifying the appropriate maturity structure up to the three-year maximum will reduce
interest rate risk.

Yield - Attaining a competitive market yield for comparable investment -types and
portfolio restrictions is the desired objective. The yield of an equally weighted, rolling
three-month Treasury Bill portfolio will be the minimum yield objective.

2. Special Revenue Funds

Suitability - Any investment eligible in the Investment Policy is suitable for Special
Revenue Funds.

Safety of Principal – All investments will be of high quality with no perceived default
risk. Market price fluctuations will occur. However, by managing Special Revenue
Funds to balance the short-term and long-term anticipated cash flow requirements of the
specific revenue/expense plan, the market risk of the Fund’s portfolio will be minimized.
No stated final investment maturity shall exceed the shorter of the anticipated cash flow
requirement or three years.

Marketability - Balancing short-term and long-term cash flow needs requires the short-
term portion of the Funds portfolio to have securities with active and efficient secondary
markets. Historical market “spreads” between the bid and offer prices of a particular
security-type of less than a quarter of a percentage point will define an efficient secondary
market. Securities with less active and efficient secondary markets are acceptable for the
long-term portion of the portfolio.

Liquidity - A portion of the Special Revenue Funds are reasonably predictable.
However, unanticipated needs or emergencies may arise. Selecting investment maturities
that provide greater cash flow than the anticipated needs will reduce the liquidity risk of
unanticipated expenditures.

Diversification - Investment maturities should blend the short-term and long-term cash
flow needs to provide adequate liquidity and yield enhancement and stability. A
“barbell” maturity ladder may be appropriate.

Yield - Attaining a competitive market yield for comparable investment -types and
portfolio structures is the desired objective. The yield of an equally weighted, rolling six-
month Treasury Bill portfolio will be the minimum yield objective.

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