Page 463 - Bedford-FY22-23 Budget

investment maturities should not exceed the anticipated cash flow requirements.
Financial institution deposits, investments pools and money market mutual funds may
provide 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 debt service payment. This investment structure is commonly
referred to as a flexible repurchase agreement.

Diversification - Market conditions influence the attractiveness of fully extending
maturity to the next “unfunded” payment date. Generally, if investment rates are
anticipated to decrease over time, BEDFORD is best served by locking in most
investments. If the interest rates are potentially rising, then investing in shorter and larger
amounts may provide advantage. At no time shall the debt service schedule be exceeded
in an attempt to bolster yield.

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 shall be the minimum yield objective.

5. Debt Service Reserve Funds

Suitability - Any investment eligible in the Investment Policy is suitable for Debt Service
Reserve Funds. Bond resolution and loan documentation constraints and insurance
company restrictions may create specific considerations in addition to the Investment
Policy.

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 Reserve
Fund maturities to not exceed the call provisions of the borrowing will reduce the
investment’s market risk if BEDFORD’s debt is redeemed and the Reserve Fund
liquidated. No stated final investment maturity shall exceed the shorter of the final
maturity of the borrowing or three years. Annual mark-to-market requirements or specific
maturity and average life limitations within the borrowing’s documentation will influence
the attractiveness of market risk and influence maturity extension.

Marketability - Securities with less active and efficient secondary markets are acceptable
for Debt Service Reserve Funds.

Liquidity – Debt Service Reserve Funds have no anticipated expenditures. The Funds are
deposited to provide annual debt service payment protection to BEDFORD’s debt holders.
The funds are “returned” to BEDFORD at the final debt service payment. Market
conditions and arbitrage regulation compliance determine the advantage of investment
diversification and liquidity. Generally, if investment rates exceed the cost of borrowing,
BEDFORD is best served by locking in investment maturities and reducing liquidity. If
the borrowing cost cannot be exceeded, then current market conditions will determine the
attractiveness of locking in maturities or investing shorter and anticipating future
increased yields.

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