Page 69 - City of Bedford FY20 Approved Budget

3. Capital Improvement Funds

Suitability - Any investment eligible in the Investment Policy is suitable for Capital
Improvement Funds.

Safety of Principal - All investments will be of high quality with no perceived default
risk. Market price fluctuations will occur. However, by managing Capital Improvement
Funds to not exceed the anticipated expenditure schedule, the market risk of the overall
portfolio will be minimized. No stated final investment maturity shall exceed the shorter
of the anticipated expenditure schedule or three years.

Marketability - Securities with active and efficient secondary markets are necessary in
the event of an unanticipated cash flow requirement. 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.

Liquidity - Most capital improvements programs have reasonably predictable draw down
schedules. Therefore, investment maturities should generally follow the anticipated cash
flow requirements. Financial institution deposits, investment pools and money market
mutual funds will provide readily available funds generally equal to one month’s
anticipated cash flow needs, or a competitive yield alternative for short-term fixed
maturity investments. A singular repurchase agreement may be utilized if disbursements
are allowed in the amount necessary to satisfy any expenditure request. This investment
structure is commonly referred to as a flexible repurchase agreement.

Diversification - Market conditions and arbitrage regulations influence the attractiveness
of staggering the maturity of fixed rate investments for bond proceeds. Generally, if
investment rates exceed the applicable cost of borrowing, BEDFORD is best served by
locking in most investments. If the cost of borrowing cannot be exceeded, then current
market conditions will determine the attractiveness of diversifying maturities or investing
in shorter and larger amounts. At no time shall the anticipated expenditure schedule be
exceeded in an attempt to bolster yield.

Yield - Achieving a positive spread to the cost of borrowing is the desired objective,
within the limits of the Investment Policy’s risk constraints. The yield of an equally
weighted, rolling six-month Treasury Bill portfolio will be the minimum yield objective
for non-borrowed funds.

4. Debt Service/Interest and Sinking Funds

Suitability - Any investment eligible in the Investment Policy is suitable for Interest and
Sinking Funds.

Safety of Principal - All investments shall be of high quality with no perceived default
risk. Market price fluctuations will occur. However, by managing Debt Service Funds to
not exceed the debt service payment schedule, the market risk of the overall portfolio will

47