Investments The Code of Virginia Sec. 2.2-4501 et seq. authorizes the Authority to invest in obligations of the United States or agencies thereof; obligations of the Commonwealth of Virginia and political subdivisions thereof; obligations of other states and their political subdivisions; obligations of the International Bank for Reconstruction and Development (World Bank), the Asian Development Bank, and the African Development Bank; “prime quality” commercial paper; negotiable certificates of deposits, bank notes, and corporate bonds rated AA or better by Standard & Poor’s Rating Services (S&P), and Aa or better by Moody’s Investors Services, Inc., and a maturity of no more than five years; bankers’ acceptances; overnight term and open repurchase agreements; money market mutual funds; and the LGIP. The Authority’s investment policy follows state law except where the Authority further limits allowable investments by excluding certain treasury strips and the International, Asian, and African Development Banks. Additionally, the investment policy establishes upper limits on the percentage of the total portfolio that may be invested in certain securities. The Authority’s investments are subject to interest rate, credit, concentration of credit, and custodial credit risk as described herein. Interest rate risk: Interest rate risk is the risk the fair value of the securities in the portfolio will decline due to rising interest rates. As a means of limiting this exposure, the Authority’s investment guidelines restrict average duration to 24 months and the maturity of any single investment to five years. Interest rate risk is also contained by avoiding mortgage-backed and callable securities. The risk of loss of fair value from rising interest rates is greater for those types of securities because the expected maturity of such securities increase as rates rise, compounding the impact on fair value. By comparison, the average maturity terms of US Treasury notes, non-callable US Agency securities and the LGIP are generally not affected by periods of rising interest rates. The Authority’s investments with the LGIP and LGIP EM are included in the accompanying Statements of Net Position as cash and cash equivalents. At June 30, 2020, the average maturity of the underlying LGIP and LGIP EM investments was 52 days, or .14 years and 443 days, or 1.23 years, respectively. At June 30, 2020 and 2019, the Authority had the following investments and maturities: 2020 Investment Type Unrestricted investments US Agencies (FHLB,FFCB) US Treasuries Virginia State and Local Commercial Paper Total unrestricted investments Restricted investments US Treasuries Total restricted investments Total investments Fair Value $ 153,120,085 88,433,470 5,343,840 28,995,461 275,892,856 – – $ 275,892,856 – 1.10 Weighted Average Maturity (Years) 1.44 0.80 1.88 0.09 Fair Value $ 106,672,821 177,582,690 2,769,983 41,263,666 328,289,160 2,912,000 2,912,000 $ 331,201,160 0.00 0.59 Credit risk: Credit risk is the risk of loss due to the failure of the security issuer or backer to repay its obligations, and may also apply where there is loss of fair value of the investment due to a deterioration of an issuer’s credit rating. The Authority’s Investment Policy and Guidelines seek to diversify the Authority’s portfolio by limiting the types of investments that can be purchased and the percentage of the portfolio that may be invested in any one type of instrument. 2019 Weighted Average Maturity (Years) 0.77 0.58 0.40 0.25 NOTES TO FINANCIAL STATEMENTS FINANCIAL SECTION 43
Prince William County Service Authority | 4 County Complex Court Woodbridge, VA 22192
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