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Invest funds with VML/VACO Virginia Investment Pool (VIP)
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EXPLANATION AND SUMMARY:
Following actions taken by the Federal Reserve Bank to increase interest rates, interest rates available on deposits are rising. The Town of Vienna's funds are currently invested 100 percent in the Commonwealth of Virginia's Local Government Investment Pool (LGIP). This is a very safe, liquid, short-term investment allowing for stable asset value and daily retrieval of funds.
Due to market demands and requests by municipalities, both LGIP and VML developed funds offering longer term investments, such as government agency and corporate bonds. Both funds comply with the Investment of Public Funds Act (Va. Code 2.2-4500 through 2.2-4519) and are rated triple-A by the rating agencies. LGIP also is authorized by the Local Government Investment Pool Act (Code of Va. 2.2-4600) and is managed by the Virginia Department of the Treasury. The VML / VACO pool is managed by an outside investment firm with VML/VACO finance oversight.
LGIP started its extended maturity fund in 2017. VML/VACO's pool was started in 2013. Both funds satisfy state code requirements, both have high fund ratings, and both have similar investments and investment objectives. However, the VML/VACO VIP pool, while charging a higher fee, generates a higher return. The Finance Department recommends investing excess funds in the VML/VACO VIP program due to its higher net returns on a similarly safe investment.
The Finance Department analyzed balances in various funds to determine which ones to invest at a higher interest rate. Factors considered included high and low balances over a three- and quarter-year period as well as determining which funds had a component that would not be paid out over the short term - i.e. matching the investment to the payment needs. The recommended amounts for four funds take into account the historical low balance and fund payment needs. No amounts recommend...
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