Investment Guidelines

New York City Municipal Water Finance Authority
Investment Guidelines

Adopted April 10, 1986
Amended August 10, 1993
Amended February 18, 1998
Amended April 17, 1998
Amended March 20, 2009
Amended October 10, 2013
Amended October 21, 2015
Amended February 23, 2016
Amended May 31, 2018
Amended October 14, 2020
Amended October 7, 2024

Table of Contents

I. Purpose

A. Adoptions

B. Scope

C. Review and Amendment

II. Permitted Obligations

A. Bonds Resolution Funds

B. Additional Restrictions

C. Other Funds

III. Conditions of Investment

A. Maturities

B. Diversification

C. Concentration

D. Payment for Securities

E. Custodial Arrangements

F. Standards and Qualifications

G. Contracts

IV. Reports

A. Quarterly

B. Annually

V. Applicability

I. Purpose

1. Adoption. These Guidelines are adopted by the Board of Directors of the New York City Municipal Water Finance Authority (the "Authority"), pursuant to Section 2925 of the Public Authorities Law of the State of New York, and as amended by the Board of Directors.
   
   
2. Scope. These Guidelines specify the policies and procedures relating to the investment, monitoring and reporting of funds of the Authority. For purposes of these Guidelines, funds of the Authority are all monies and other financial resources available for investment by the Authority on its own behalf or on behalf of any other entity or individual. All such monies shall be invested at all times to the fullest extent practicable, and in accordance with the requirements and restrictions set forth in these Guidelines.
   
   
3. Review and Amendment. These Guidelines shall be reviewed and approved by the Board of Directors annually and may be amended by the Board of Directors from time to time.

II. Permitted Obligations

1. Bond Resolution Funds. Article V of the Authority's Water and Sewer System General Revenue Bond Resolution adopted November 14, 1985, as amended (the "General Resolution"), and Article V of the Authority’s Water and Sewer System Second General Revenue Bond Resolution adopted March 30, 1994, as amended (the "Second General Resolution" and, together with the General Resolution, the "Bond Resolutions"), each established the following funds: Construction Fund, Revenue Fund, Debt Service Fund, Authority Expense Fund, Debt Service Reserve Fund, Subordinated Indebtedness Fund, Surplus Fund and Arbitrage Rebate Fund. Section 514(a) of the General Resolution and Section 515(a) of the Second General Resolution permit monies held in each of the respective Debt Service Funds to be invested in any securities as defined under “Investment Securities” in the Bond Resolutions, paragraphs (ii), (iii) or (vi). Subject to 508(d) of the General Resolution and Section 509(d) of the Second General Resolution, monies held in each of the Debt Service Reserve Funds may be invested in any securities as defined in paragraphs (i) through (ix) under Investment Securities. The Resolutions permit monies held in any other funds created by the General Resolution and the Second General Resolution (including the Subordinated Indebtedness Fund) to be invested in any securities described in paragraphs (i) through (ix) under Investment Securities.
   
   
2. Additional Restrictions. Notwithstanding the more liberal provisions of the Resolutions, the Authority has determined that (1) investments in the Subordinated Indebtedness Fund shall be limited to investments described in paragraphs (ii), (iii), (vi) or (viii) under Investment Securities, and (2) investments from the Debt Service Funds or the Subordinated Indebtedness Funds invested in Repurchase Agreements, defined in paragraph (vi) under Investment Securities, shall be further limited to agreements collateralized by securities in paragraphs (ii) and (iii) under Investment Securities and the Trustee will value the collateral securities no less than weekly.
   
   In addition, (1) investments in Money Market Funds, defined in paragraph (viii) under Investment Securities, shall be further limited to funds meeting the definition of “Government Money Market Fund” under rule 2a-7¹ that do not impose any liquidity fees or suspend redemptions as provided thereunder, (2) investments in Banker's Acceptances or Certificates of Deposit, defined in paragraph (iv) under Investment Securities, shall mature within two years of the date of purchase and shall be limited to banks having the highest short-term rating from at least two Rating Agencies as defined in the Bond Resolutions, and (3) Corporate Securities, defined in paragraph (v) under Investment Securities, shall mature within one year of the date of purchase.
   
   
3. Other Funds. Subject to the restrictions set forth in Section II.B. above, monies in any other funds which may be established by the Authority may be invested in any of the securities described in paragraphs (i) through (ix) under Investment Securities.

III. Conditions of Investment

1. Maturities. All investments shall mature or be redeemable at the option of the holder no later than such times as shall be necessary to provide monies needed for payments to be made from any such fund or account.
   
   
2. Diversification. Investments of Authority monies in the funds specified in this section shall be subject to the diversification restrictions set forth below at the time of investment:
   
   

Debt Service Reserve Funds:

	Bond Resolution Investment Securities Paragraph (1)
1. State Guaranteed or other State & Local Government Securities	(i)	0-60%
2. Federally Guaranteed Securities	(ii)	0-100%
3. Federal Agency Securities	(iii)	0-100%
4. Banker's Acceptances	(iv)	0-60%
5. Certificates of Deposit	(iv)	0-60%
6. Corporate Securities	(v)	0-60%
7. Repurchase Agreements	(vi)	0-50%
8. Collateralized Investment Agreements	(vii)	0-50%
9. Uncollateralized Investment Agreements	(vii)	0-40%
10. Money Market Funds	(viii)	0-50%
11. Pre-refunded Municipal Obligations	(ix)	0-100%
(1) Refer to Appendix 1 Definitions related to Investment Securities

Debt Service Funds: Up to 100% of the amounts on deposit in the Debt Service Funds may be invested in Federally Guaranteed Securities, Federal Agency Securities or Repurchase Agreements. Amounts on deposit in the Debt Service Funds are disbursed to pay interest at least once every six months and substantially all of such amounts are withdrawn annually to pay principal. Accordingly, the period of time during which there may be some exposure to the credit of a counterparty under a Repurchase Agreement is limited to no longer than one year. In light of this relatively short time period, and the requirement in the Resolutions and these Guidelines that Repurchase Agreements be collateralized, the Authority has determined that it is appropriate to permit up to 100% of these funds to be invested in Repurchase Agreements, subject to the concentration restrictions set forth in Section III.C. hereof.

Subordinated Indebtedness Fund: Up to 100% of the amounts on deposit in the Subordinated Indebtedness Fund may be invested in Federally Guaranteed Securities, Federal Agency Securities, Repurchase Agreements, or Money Market Funds. Amounts on deposit in the Subordinated Indebtedness Funds are transferred to the Debt Service Fund and disbursed to pay interest at least once every six months and substantially all of such amounts are withdrawn annually to pay principal. Accordingly, the period of time during which there may be some exposure to the credit of a counterparty under a Repurchase Agreement is limited to no longer than one year. In light of this relatively short time period, and the requirement in the Resolutions and these Guidelines that Repurchase Agreements be collateralized, the Authority has determined that it is appropriate to permit up to 100% of these funds to be invested in Repurchase Agreements, subject to the concentration restrictions set forth in Section III.C. hereof. Further, in light of the requirement in the Resolutions that Money Market Funds are rated in the highest rating category and the additional restrictions as provided in Section II.B. hereof, the Authority has determined that it is appropriate to permit up to 100% of these funds to be invested in Money Market Funds.

Construction Funds and all other Funds in which the amount on deposit at the time of making the investment exceeds $5 million:

	Bond Resolution Investment Securities Paragraph (1)
1. State Guaranteed or State & Local Government Securities	(i)	0-60%
2. Federally Guaranteed Securities	(ii)	0-100%
3. Federal Agency Securities	(iii)	0-100%
4. Banker's Acceptances	(iv)	0-60%
5. Certificates of Deposit	(iv)	0-60%
6. Corporate Securities	(v)	0-60%
7. Repurchase Agreements	(vi)	0-100%
8. Collateralized Investment Agreements	(vii)	0-100%
9. Uncollateralized Investment Agreements	(vii)	0-50%
10. Money Market Funds	(viii)	0-100%
11. Pre-refunded Municipal Obligations	(ix)	0-100%
(1) Refer to Appendix 1 Definitions related to Investment Securities

Amounts on deposit in these Funds, although available for payment of debt service on Bonds and Notes in the event of a default, are not expected to be used to pay debt service.  Also, amounts in the Construction Funds are generally disbursed to pay the costs of projects within six months of the date of deposit therein and would virtually always be disbursed within two years. In light of the foregoing, the Authority has determined that it is appropriate to permit up to 100% of the amounts on deposit in these Funds to be invested in Repurchase Agreements, Collateralized Investment Agreements, or Money Market Funds.

3. Concentration.
   
   
   1. For the Debt Service and Subordinated Indebtedness Funds: If more than 50% of the amounts on deposit (determined at the time of investment) in either Debt Service Fund or in either Subordinated Indebtedness Fund are invested in Repurchase Agreements, 5 there must be at least two separate Repurchase Agreements with different counterparties for each such Fund.
      
      
   2. For the Reserve Funds: No more than 20% of each Reserve Fund (determined at the time of investment) shall be invested in Repurchase Agreements or collateralized Investment Agreements with a single counterparty and no more than 15% of each such Fund (determined at the time of investment) shall be invested in uncollateralized Investment Agreements with a single counterparty.
      
      
   3. For all Funds in which the amount on deposit at the time of making the investment exceeds $5 million: Except for Repurchase Agreements, collateralized Investment Agreements, Pre-refunded Municipal Obligations, Money Market Funds, Federal Agency Securities and Federally Guaranteed Securities, no more than 15% (determined at the time of investment) of the investments made from such fund may be invested in securities of a single issuer or in an uncollateralized Investment Agreement with a single counterparty.
      
      
4. Payment for Securities.Payment for investments shall be made only upon receipt of the securities purchased. In the case of book entry form securities, payment may be made only when the custodian's account at the Federal Reserve Bank is credited for the purchased securities.
   
   
5. Custodial Arrangements.
   1. All securities held by any depository designated by the Authority in bearer or book-entry form (the "Custodial Bank") are held solely as agent to the Trustee on behalf of the various accounts involved. Any securities held in registered form shall be registered in the name of the Authority or the Trustee. Investments held at the Custodial Bank will be audited by the Authority's external auditors. Payment for investments is not to be released until the purchased securities are received by the Custodial Bank.
      
      
   2. The Custodial Bank will, upon instructions of the Trustee, release to the Treasurer of the Authority all purchased securities including those subject to repurchase. This will permit the Authority to sell such securities, if necessary.
      
      
   3. Collateral securities shall not be held by an institution having a depository relationship with the Authority.
      
      
6. Standards and Qualifications.The following are the standards for the qualifications of brokers, agents, dealers, investment advisors, investment bankers and custodians:
   
   
   1. Brokers, Agents, Dealers
      
      
      1. In Government Securities: any bank or trust company organized or licensed under the laws of any state of the United States of America or of the United States of America or any national banking association or any registered broker/dealer.
         
         
      2. In Municipal Securities: any broker, agent or dealer registered with the Municipal Securities Rulemaking Board (the "MSRB").
         
         
   2. Investment Advisors: any bank or trust company organized under the laws of any state of the United States of America or any national banking association, and any firm or person which is registered with the Securities Exchange Commission under the Investment Advisors Act of 1940.
      
      
   3. Investment Bankers: firms retained by the Authority to serve as senior managing underwriters for negotiated sales must be registered with the MSRB.
      
      
   4. Custodians: any bank or trust company organized under the laws of any state of the United States of America or any national banking association which qualifies as a Depository under Section 512 of the General Resolution and Section 513 of the Second General Resolution.
      
      
7. Contracts.There is not a regular business practice of written contracts for the purchase on a current basis of the investments described in Section II.A. hereof, other than those described in (vi) and (vii) under Investment Securities. The Authority shall, in the case of investments described in (vi) and (vii) under Investment Securities, enter into written contracts with qualified providers. In addition, when the Authority agrees to purchase securities on a forward delivery basis of more than six months, the Authority shall enter into written contracts providing for such forward purchase and delivery.

IV. Reports

1. Quarterly. The Executive Director shall prepare and deliver to the Board of Directors once for each quarter of the Authority's fiscal year a report setting forth a summary of new investments made during that quarter, investment holdings and the selection of investment bankers, brokers, agents, dealers, investment advisors and auditors.
   
   
2. Annually.
   
   
   1. Audit. The Authority's independent auditors shall conduct an annual audit of the Authority's investments for each fiscal year of the Authority, the results of which shall be made available to the Board of Directors at the time of its annual review and approval of these Guidelines.
      
      
   2. Investment Report. Annually, the Executive Director shall prepare, and the Board of Directors shall review and approve, an Investment Report, which shall include:
      
      
      1. The Investment Guidelines and amendments thereto since the last report;
         
         
      2. An explanation of the Guidelines and any amendments made since the last report;
         
         
      3. The independent audit report required by Section IV.B.1.;
         
         
      4. The investment income record of the Authority for the fiscal year; and
         
         
      5. A list of fees, commissions or other charges paid to each investment banker, broker, agent, dealer and advisor rendering investment associated services to the Authority since the last report. The Investment Report shall be submitted to the New York State Department of Audit and Control, and to the Mayor and Comptroller of the City of New York. Copies of the annual report shall also be made available to the public upon reasonable request.

V. Applicability

These Guidelines shall govern all investments initiated by the Authority on and after April 17, 1998 and shall not apply to any investments initiated by the Authority prior to April 17, 1998. Nothing contained in these Guidelines shall be deemed to alter, affect the validity of, modify the terms of or impair any contract, agreement or investment of funds made or entered into in violation of, or without compliance with, the provisions of these Guidelines.

* Unless otherwise indicated, all capitalized terms shall have the meaning set forth in the General Resolution or the Second General Resolution, as appropriate.

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¹ [17 CFR 270.2a-7] under the Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.] ("1940 Act").

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Appendix 1

Definitions related to Investment Securities for bonds issued by the NEW YORK CITY MUNICIPAL WATER FINANCE AUTHORITY Pursuant to the General Revenue Bond Resolution (the “First Resolution”) Adopted November 14, 1985.

See page 10 below for definitions relating to “Rating Agencies” and “Investment Securities” for First Resolution Bonds issued or reoffered after October 21, 2015 and outstanding bonds issued Pursuant to the Second General Revenue Bond Resolution (the “Second Resolution”) Adopted March 30, 1994

“Rating Agencies” shall mean Moody’s Investors Service Inc. and Standard & Poor’s Corporation and their respective successors and assigns.

“Investment Securities” shall mean and include any of the following securities, if and to the extent the same are at the time legal investments by the Authority of the funds to be invested therein and conform to the policies set forth in any investment guidelines adopted by the Authority and in effect at the time of the making of such investment:

1. direct obligations of, or obligations guaranteed as to principal and interest by, the State or direct obligations of any agency or public authority thereof, provided such obligations are rated, at the time of purchase, in one of the two highest rating categories by each Rating Agency then maintaining a rating on Outstanding Bonds;
   
   
2. (A) any bonds or other obligations which as to principal and interest constitute direct obligations of, or are guaranteed by the United States of America, including obligations of any agency thereof or corporation which has been or may hereafter be created pursuant to an Act of Congress as an agency or instrumentality of the United States of America to the extent unconditionally guaranteed by the United States of America or (B) any other receipt, certificate or other evidence of an ownership interest in obligations or in specified portions thereof (which may consist of specified portions of the interest thereon) of the character described in subclause (A) of this clause (ii);
   
   
3. obligations of any agency, subdivision, department, division or instrumentality of the United States of America; or obligations fully guaranteed as to interest and principal by any agency, subdivision, department, division or instrumentality of the United States of America;
   
   
4. banker’s acceptances or certificates of deposit issued by a commercial bank (A) whose long-term debt obligations are rated by each Rating Agency then maintaining a rating on the Outstanding Bonds at least equal to the rating on Outstanding Bonds that are not insured or otherwise secured by a Credit Facility or a Special Credit Facility, (B) that has its principal place of business within the State and (C) that has capital and surplus of more than $100,000,000;
   
   
5. corporate securities, including commercial paper and fixed income obligations, which are, at the time of purchase, rated by each Rating Agency then maintaining a rating on Outstanding Bonds, in its highest rating category for comparable types of obligations;
   
   
6. repurchase agreements collateralized by securities described in clauses (ii) or (iii) above with any registered broker/dealer or with any domestic commercial bank whose long-term debt obligations are rated “investment grade” by each Rating Agency then maintaining a rating on Outstanding Bonds, provided that (1) a specific written repurchase agreement governs the transaction, (2) the securities are held, free and clear of any lien, by the Trustee or an independent third party acting solely as agent for the Trustee, and such third party is (a) a Federal Reserve Bank, or (b) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $25 million, and the Trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Trustee, (3) the repurchase agreement has a term of thirty days or less, or the Trustee will value the collateral securities no less frequently than monthly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within five business days of such valuation, (4) the fair market value of the collateral securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 102% and (5) the repurchase agreement meets the guidelines then applicable to such investments of each Rating Agency then maintaining a rating on Outstanding Bonds;
   
   
7. investment agreements or guaranteed investment contracts1 with any financial institution whose senior long term debt obligations, or whose obligations under such an investment agreement or guaranteed investment contract, are guaranteed by a financial institution whose senior long term debt obligations, have a rating (at the time such agreement or contract is entered into) in one of the two highest rating categories for comparable types of obligations by each Rating Agency then maintaining a rating on the Bonds;
   
   
8. money market funds rated in the highest rating category for comparable types of obligations by each Rating Agency then maintaining a rating on the Bonds; and
   
   
9. municipal obligations, the payment of principal and redemption price, if any, and interest on which is irrevocably secured by obligations of the type referred to in clauses (i), (ii) or (iii) above and which obligations have been deposited in an escrow arrangement which is irrevocably pledged to the payment of such municipal obligations and which municipal obligations are rated in the highest rating category for comparable types of obligations by each Rating Agency then maintaining a rating on the Bonds.
   
   

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Definitions related to Investment Securities for bonds issued by the
NEW YORK CITY MUNICIPAL WATER FINANCE AUTHORITY

Pursuant to the Supplemental Resolutions to the General Revenue Bond Resolution and Second General Revenue Bond Resolution Amending and Restating Certain Definitions, effective October 21, 2015

THE FOLLOWING DEFINITIONS OF “INVESTMENT SECURITIES” AND “RATING AGENCIES” HAVE BECOME EFFECTIVE WITH RESPECT TO FIRST RESOLUTION BONDS ISSUED OR EXISTING BOND ISSUES REOFFERED AFTER OCTOBER 21, 2015, BUT ONLY TO THE EXTENT MONEYS ARE SEPARATELY SEGREGATED OR ALLOCATED TO THE FIRST RESOLUTION BONDS ISSUED OR THE EXISTING BOND ISSUES REOFFERED AFTER OCTOBER 21, 2015. THE FOLLOWING DEFINITIONS WILL BECOME EFFECTIVE WITH RESPECT TO ALL OTHER FIRST RESOLUTION BONDS AT SUCH TIME AS THE APPROVAL OF TWO-THIRDS IN PRINCIPAL AMOUNT OF THE HOLDERS OF ALL OUTSTANDING FIRST RESOLUTION BONDS HAS BEEN OBTAINED, AT WHICH TIME THE DEFINITION OF “RATING AGENCIES” AND “INVESTMENT SECURITIES” WILL BE AMENDED TO READ AS FOLLOWS FOR ALL OUTSTANDING FIRST RESOLUTION BONDS.

THE FOLLOWING DEFINITIONS OF “INVESTMENT SECURITIES” AND “RATING AGENCIES” HAVE BECOME EFFECTIVE WITH RESPECT TO ALL OUTSTANDING SECOND RESOLUTION BONDS EFFECTIVE JANUARY 24, 2020.