Subject
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Adoption of a Resolution to Revise the City's Statement of Investment Policy for the Investment of the City’s Operating and Capital Funds
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Department
Finance
Recommendation
Staff recommends the Mayor and Council adopt the resolution to formally revise the City's Statement of Investment Policy.
Discussion
The City of Rockville's Statement of Investment Policy ("Policy") serves as a guideline for the adequate safeguarding of the City's financial assets. All investments allowed under the Policy conform to the State of Maryland statutes governing the investment of public funds. Review and adoption of a resolution to update the Policy should take place at least every five years. Periodic updates help to ensure that the City’s Policy reflects legislative changes and best practices in municipal finance.
During FY 2019, staff engaged in a competitive procurement process to obtain an outside investment advisor and asset manager (“advisor”) to assist with the City’s investment program. The principal functions and responsibilities of the advisor are to provide independent services related to the discretionary investment and reinvestment of the City’s operating and capital funds (non-pension) and the periodic review of relevant policy documents that govern the City’s investment activities.
The Mayor and Council last approved a resolution to update the City’s Statement of Investment Policy on May 20, 2024. Pursuant to the State of Maryland statues (§ 17-205 of the Local Government Article, Annotated Code of Maryland) the City is required to adopt its investment policy by resolution. Staff recommends the Mayor and Council adopt Attachment 1, which is the formal resolution that reflects the changes presented in this item. The State of Maryland Statutes were updated in Fall 2024 and the Maryland Code of Regulations were revised in April 2025. The recommended changes to the City’s Policy aligns it with the most recent revisions with the State.
As part of this review and update to the Policy, the following recommendations for changes were made and appear in Attachment 2:
• Updated the list of authorized investment instruments to align the City’s policy with the Annotated Code of Maryland (with the exception of Foreign Sovereign Debt)
• Added diversification limits for newly added investment instruments and updated diversification limits to existing investment instruments to align the City’s policy with the Annotated Code of Maryland
These updates are relatively minor, but are important in keeping the City’s Policy consistent with the investment options and limitations set by the State of Maryland. The City’s permitted investment instruments are intentionally restricted to conservative, high-credit-quality securities consistent with State of Maryland guidelines. These instruments are characterized by strong issuer creditworthiness, active secondary markets, and short- to intermediate-term maturities, all of which contribute to a low-risk profile focused on preservation of capital and reliable liquidity.
The presentation in Attachment 3 provides an overview of municipal investment policies, Maryland statutes and Maryland Code of Regulations, investment policy best practices, a sector allocation comparison, and an overview of our historical portfolio allocations. It is important to note, that while the City is able to utilize a range of investment instruments, the City’s portfolio has historically been comprised of mostly U.S. Treasuries, Federal Agencies, FDIC-insured certificates of deposit, and the Maryland Local Government Investment Pool. While the City supports the principles underlying Environmental, Social, and Governance (ESG) investing, the highly constrained and government-focused nature of the permitted investment universe limits the applicability of traditional ESG frameworks.
Mayor and Council History
The Mayor and Council last approved a resolution to update the City’s Statement of Investment Policy on May 20, 2024.
Fiscal Impact
There is no direct fiscal impact associated with this agenda item, however, the Policy governs the investment of City funds, which generates City revenues through interest earnings.