Valdez Permanent Fund

Overview

The City of Valdez Permanent Fund came into being from a voter approved charter amendment on July 19, 1977. The oil company owners of the trans-Alaska pipeline used the City's bonding authority and saved millions of dollars in the issuance of tax-exempt bonds to build the pipeline and Valdez Marine Terminal. The City asked for and received a 1% fee, amounting to a windfall of $13,576,000 on the initial bond sales.The principal of the fund "shall not be spent, but shall be held perpetually in trust for the benefit of the present and future generations of Valdez residents."

Asset Allocations

The Permanent Fund Investment Committee reviews the fund's asset allocation with the City Council once a year. The City Council approved the 2003 asset allocation as follows:

Fund History

The City expended all interest earnings of the fund until the passage of inflation-proofing legislation in 1983 and 1985. After 1987 until the present, the City Council has made a policy of not appropriating any fund earnings to the annual operating and capital budget. This along with the infusion of additional refinancing fees, has enabled the fund to grow to a market value of just over $86 million by November 2003.

The City Treasurer managed the Permanent Fund internally for the first twenty years. In 1996, an investment committee was formed and an investment advisor was hired to advise the Permanent Fund Investment Committee and City Council on the selection of full time outside money managers. Brinson Partners and Alaska Permanent Capital Management were hired in April of 1997 to manage all fixed income investments.

In October 1997, the voters approved a charter amendment permitting the investment in domestic and foreign common stocks. In 1998, the City Council selected the Vanguard Group and Putnam Investments as managers of a domestic and international portfolio. Dreyfus Service Corporation was added in 1999 as a manager of domestic small cap stocks.