City of Lacey raises investment portfolio maturity ceiling

The City of Lacey is looking to boost earnings on its public investment portfolio, following a unanimous vote by the Lacey City Council to revise an investment policy. 

Resolution No. 1180, approved at the council's regular meeting on Tuesday, April 7, raises the maximum weighted average maturity (WAM) from two to 2.5 years. 

The amendment, recommended by the city's external investment advisor following an annual policy review, does not alter authorized investment types or core priorities. 

Finance Director Troy Woo presented the change, saying a higher WAM ceiling gives the city more room to capture intermediate-term yields without increasing risk exposure.  A WAM is the average time until securities in a debt portfolio mature.

"The longer we invest out, typically, the higher rates that the city receives," Woo told the council. "We want to stretch out that yield just a little bit to gain some interest." 

Woo said the city has been holding higher cash balances in overnight accounts and short-term instruments to support ongoing capital improvement projects.

That practice reduces the weighted average maturity and limits the portfolio's ability to capture longer-term yields. A higher ceiling allows the city to offset that effect, he said. 

The updated policy maintains the city's investment priority order: safety of principal, liquidity and return on investment. It also preserves the prudent person standard, which requires investment officers to manage public funds with the same judgment and care they would apply to their own finances. 

Diversification constraints, internal controls and conflict-of-interest disclosure requirements remain in place. 

Under the revised policy, the city's portfolio may not directly invest in securities maturing more than 5.5 years from the date of purchase. At least 25 percent of holdings must mature within one year. Prohibited investments continue to include mortgage-backed securities, mutual funds, derivative products and repurchase agreements. 

No changes were made during the 2025 Washington legislative session that required updates to authorized investment types. The policy remains compliant with Revised Code of Washington (RCW) 39.59, which governs public fund investments. 

Mayor Andy Ryder credited the city's investment advisory relationship as a factor in his support, calling the decision to hire an advisor one of the city's best financial moves. 

"We've done a really good job of keeping up on what the trends are," Ryder said. "Hiring our investment advisor has been one of the best decisions we've made when it comes to the financial stability of our city. If this is something that's being recommended, then I think that would be prudent to follow suit." 

Council member Maren Turner, serving her first term, said she sought clarification from Woo before the vote. 

"I really appreciated Troy taking a few minutes to answer some of the questions I had to better understand this process," Turner said. "But I agree with it." 

Resolution No. 1180 supersedes Resolution No. 1168, which was adopted on June 3, 2025. The policy was reviewed internally on Jan. 26 and carries no direct budgetary impact.