HomeMy WebLinkAbout028870 RES - 12/07/2010RESOLUTION
REAFFIRMING THE CITY OF CORPUS CHRISTI INVESTMENT POLICY
WHEREAS, the City of Corpus Christi Investment Policy was adopted in Resolution No. 022390
on October 24, 1995; and was last approved in Resolution 028440 on December 15, 2009; and
WHEREAS, the Investment Policy provides for annual review by City Council; and
WHEREAS, the Public Funds Investment Act requires annual review by the governing
body of its Investment Policy, and adoption of a written instrument stating that it has
reviewed the investment policy and investment strategies;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS
CHRISTI, TEXAS:
SECTION 1. That the Corpus Christi City Council has reviewed and reaffirms the Investment
Policy as previously adopted by Resolution Number 028440 on December 15, 2009. A copy of
the Investment Policy is attached.
ATTEST:
Armando Chapa
City Secretary
APPROVED: November 17, 2010
Lisa Aguilar U
Assistant City Attorney
for the City Attorney
H:1LEG-DIRILisa12010 Resolutionsllnvestment Policy.doc
THE CITY OF CORPUS CHRISTI
Joe Ada
Mayor
0.28870
INDEXED
Corpus Texas ( ,
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The above resolution was passed by the following vote:
Joe Adame A If
Chris N. Adler
44k
Larry R. Elizondo, Sr.
Kevin Kieschnick
Priscilla Leal
John E. Marez
Nelda Martinez
Mark Scott
Linda Strong
Resolution Vote Sheet
A'vy
028870
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City of
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City of Corpus Christi
Financial Services Department
Investment Policy
Approved on December 15, 2009
Resolution 028440
TABLE OF CONTENTS
Page
I. INTRODUCTION 2
II. PURPOSE 2
III. DEFINITIONS 3
IV. INVESTMENT OBJECTIVES 5
V. AUTHORIZED INVESTMENTS AND MAXIMUM MATURITY 6
VI. INVESTMENT STRATEGIES 10
VII. DESIGNATION OF RESPONSIBILITY 12
VIII. INTERNAL CONTROLS 14
IX. COMPETITIVE SOLICITATION 14
X. AUTHORIZED COUNTER -PARTIES 15
XI. COLLATERALIZATION 16
XII. SAFEKEEPING OF CITY SECURITIES 16
XIII. INFORMATION REPORTING/PORTFOLIO EVALUATION 17
XIV. BANKING SERVICES 18
XV. ANNUAL POLICY ADOPTION 18
XVI. GENERAL PROVISIONS 18
APPENDICES
A. PUBLIC FUNDS INVESTMENT ACT 1-29
B. CITY'S CODE OF ETHICS ORDINANCE 1-8
C. RESOLUTION 1-2
D. LEGAL DEFENSE AND INDEMNIFICATION OF CITY OFFICERS AND
EMPLOYEES 1-2
1
INTRODUCTION
The City of Corpus Christi shall invest all available monies in compliance with this
Investment Policy as adopted by the City Council and authorized by the Public Funds
Investment Act.
Effective cash management is recognized as essential to good fiscal management. An
aggressive cash management program will be pursued to maximize interest earnings as
a viable and material revenue source. The City's portfolio shall be designated and
managed in a manner responsive to the public trust and consistent with local, state and
federal law.
Investments shall be made with the primary objective of:
• Preservation of capital and protection of principal;
• Maintenance of sufficient liquidity to meet operating needs;
• Security of city funds and investments;
• Diversification of investments to minimize risk while maximizing interest earnings;
and
• Maximization of return on the portfolio.
Earnings from investments will be used in a manner that will best serve the interests of
the City of Corpus Christi.
Investments shall be made with judgment and care, under prevailing circumstances, that
a person of prudence, discretion and intelligence would exercise in the management of
that person's own affairs, not for speculation, but for investment, considering the
probable safety of capital and the probable income to be derived.
11. PURPOSE
A. Authorization
This Investment Policy is authorized by the City Council in accordance with
Chapter 2256, Subchapter A of the Texas Government Code - The Public Funds
Investment Act (the "Act" attached and incorporated as Appendix A).
B. Scope
This Investment Policy applies to all funds of the City, excluding pension funds,
with regard to investing the financial assets of Funds, including, but not limited to:
General Fund
Special Revenue Funds
Enterprise Funds
Internal Service Funds
Special Purpose Funds (within the control of Investment Officers)
Capital Improvement Funds (Bond Proceeds, Bond Reserves, Debt Service,
Commercial Paper and any other debt instrument)
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In addition to this Policy, the investment of Bond Funds, Debt Service, and
Reserve Funds shall be managed (including the yield calculation thereon) by
their governing ordinances and Federal Law, including the Tax Reform Act of
1986 and subsequent legislation.
C. Review and Amendment
This Policy shall be reviewed and adopted no less than annually by the City
Council on or before December 31 of each calendar year. Amendments must be
adopted by the City Council. The City Council shall adopt a written instrument by
ordinance or resolution stating that it has reviewed the Investment Policy. This
ordinance or resolution shall record any changes made to the Investment Policy.
III. DEFINITIONS
Authorized Broker/Dealer - Primary dealer and regional firms that have been selected
by the federal underwriters to distribute their securities. Each authorized firm in a
Broker/Dealer will offer the issue at the price authorized by the governmental agency on
the initial market issuance.
Authorized City Representatives — Investment Officers and City officers authorized to
execute transactions are designated in the attached and incorporated Appendix A on
behalf of the City. (Specific positions so authorized are the City Treasurer, Investment
Analyst, Controller, Chief Accountant, Deputy Director of Financial Services and Director
of Financial Services).
Authorized Investment — Authorized investments defined by this Policy with a
maximum maturity are approved by the Investment Committee and City Council. All
Policy authorized securities are listed in Section V.
Collateral - Securities pledged by a banking institution or sold under a repurchase
agreement, to guarantee City assets. All collateral must be AAA rated. The City requires
U.S. Treasuries, U.S. Agency Securities or municipal obligations as collateral so that the
market values can be readily determined at any point in time. Collateral requirements
are defined in Section XI.
Custodian — An approved independent custodian charged with the safekeeping of
securities owned by or pledged to the City. An independent custodian is one not
affiliated with any pledging institution or counter -party.
Director of Financial Services - The Director of Financial Services is the Municipal
Finance Officer responsible for City investments, but not designated as an Investment
Officer. The Director of Financial Services may designate the Deputy Director of
Financial Services, Controller or Chief Accountant to assist in this process.
Excess Cash Balances - Collected bank balances not needed to pay estimated check
clearings.
Failed Transaction — A transaction in which an investment is not delivered to an
institution for operational or availability reasons. The security would fail to be delivered
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to the Custodian.
Institution - Any firm, bank, bank holding company, broker/dealer or Public Funds
Investment Pool that offers to sell/buy a financial transaction/security to the City. All
such firms must complete a Policy certification as stated by this Policy.
Investment Advisor — SEC registered investment advisor contracted by the City to
assist in the portfolio management process, reporting and treasury operations/controls.
Investment Officers — Individuals designated by the City Council to execute investment
transactions. Positions include only the City Treasurer and Investment Analyst.
Investment Portfolio - All City monies and securities invested under authority of the
Investment Officers.
Qualified Representative — As defined by the Act, a person, who holds a position with a
business organization, who is authorized to act on behalf of the business organization,
and who is one of the following:
(A) For a business organization doing business that is regulated by or registered with
a securities commission, a person who is registered under the rules of the
National Association of Securities Dealers;
(B)
For a state or federal bank, a savings bank, or a state or federal credit union, a
member of the loan committee for the bank or branch of the bank or a person
authorized by corporate resolution to act on behalf of and bind the banking
institution;
(C) For an investment public funds investment pool, the person authorized by the
elected official or board with authority to administer the activities of the
investment public funds investment pool to sign the written instrument on behalf
of the investment public funds investment pool; or
(D) For an investment management firm registered under the Investment Advisers
Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or, if not subject to registration
under that Act, registered with the State Securities Board, a person who is an
officer or principal of the investment management firm.
Reserve Funds - Funds designated by the City Council for specific purposes, which
have not been appropriated for spending.
Securities - Approved Investments designated by the Investment Committee, as defined
by Section VII, to be held in the Investment Portfolio or acceptable to be pledged as
Collateral to secure the monies of the City.
Special Purpose Funds - Monies of non-profit corporations that Investment Officers are
permitted to invest; includes such entities as the Coastal Bend Health Facilities
Development Corporation, Corpus Christi Housing Finance Corporation, Corpus Christi
Community Improvement Corporation, HOME Project, First Time Home Buyer, Corpus
Christi Industrial Development Corporation, Corpus Christi Business and Job
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Development Corporation, North Padre Island Development Corporation, Corpus Christi
Crime Control and Prevention District, and Corpus Christi Digital Community
Development Corporation.
Third Party Safekeeping Institution - Any Institution not affiliated with an Institution
delivering the Authorized Investment.
IV. INVESTMENT OBJECTIVES
The following states the investment objectives of the City in order of priority:
A. Preservation and Safety of Principal
Investments of the City shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall Investment Portfolio.
B. Liquidity
The City's Investment Portfolio must be structured in a manner which maintains
the liquidity necessary to pay obligations as they become due. Sufficient cash
flows must be maintained through cash flow analysis and by rapidly depositing
monies and timing disbursements. Generally, Investments are matched to
specific cash flow requirements such as payrolls, construction drawdown
schedules, debt service payments, and other payables. Liquidity is also
achieved by investing in Authorized Investments with active secondary markets
or in Public Funds Investment Pools with stable net asset values.
C. Investment Yield
The City's Investment Portfolio shall be designed with the objective of regularly
exceeding the average yield of the following benchmarks in a manner consistent
with the principles of this Policy described in Section IV. A and B and reflecting
the cash flow expectations and portfolio strategy of the City:
Six-month average of Texpool, Lone Star, Texstar and Texas Daily.
However, it must be recognized that differing interest rate environments will
result in fluctuations. During a declining market, satisfying this objective may not
be practical until Authorized Investments mature and can be re -invested,
especially since preservation of capital is the first priority in the investment of
monies pursuant to this Policy.
For bond issues to which arbitrage restrictions apply, the primary objectives shall
be to avoid negative arbitrage and to obtain market yields minimizing the costs
associated with investing such monies.
D. Diversification
Diversification is required because of differing liquidity needs of the City and to
control risk. Diversification minimizes the risk to the overall Investment Portfolio
5
by spreading market and credit risk as well as potential losses on individual
securities or market sector thereby enhancing safety of the Investment Portfolio.
Through the solicitation of competitive proposals, the City shall allocate and
diversify its Investments through various Institutions. The following types of
Investments will be solicited from approved Institutions:
1. Obligations of the United States;
2. Repurchase Agreements - through a Third Party Safekeeping Institution
Agreement, which includes an approved primary dealer doing business in
Texas as required by the PFIA;
3. Public Funds Investment Pools - through participation agreements;
4. Certificates of Deposit - through approved local banks;
5. Money Market Mutual Funds;
6. Guaranteed Investment Contracts (for Bond Proceeds only);
7. Texas Term Investment Pool; and
8. Securities Lending Program.
The City recognizes that investment risks can result from default risk, credit
volatility risk, and market price risks due to various technical and fundamental
economic factors, and other complications, leading to temporary illiquidity.
To control market price risks, volatile Investments shall be avoided. To control
default risk, the only acceptable method of payment will be on a delivery versus
payment -basis for all transactions, except Public Funds Investment Pools and
repurchase agreements.
Delivery versus Payment provides for payment to Institutions at the time the
Investments are recorded in book entry form at the City's Third Party
Safekeeping Institution, currently maintained at the Federal Reserve. For
certificates of deposit, sufficient Collateral at 102% of current market values must
be pledged to protect all City monies or monies under its control that exceed
Federal Deposit Insurance Corporation (FDIC) coverage; the Collateral must be
safe kept at a Third Party Safekeeping Institution not affiliated with the bank or
bank holding company providing the certificate of deposit.
V. AUTHORIZED INVESTMENTS AND MAXIMUM MATURITY
The City of Corpus Christi is authorized to invest only in the following investments. City
monies, governed by this Policy, may not be invested in other investments permitted by
law unless this Policy is amended and adopted to permit such investment.
A. Authorized Investments
1.
Obligations of the United States or its agencies and
instrumentalities, excluding mortgage backed securities, which
currently include the following stated final maturities:
a. Short-term U.S. Treasuries:
t) U.S. Treasury Bills
2.) U.S. Treasury Coupon Notes
3.) U.S. Treasury Notes and Strips
Maximum Maturity
up to 365 days*
up to 3 years*
up to 3 years*
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b. U.S. Agencies: Maximum Maturity
1.) Federal Home Loan Bank up to 2 years*
2.) Federal National Mortgage Associationup to 2 years*
3.) Federal Farm Credit up to 2 years*
4.) Federal Home Loan Mortgage Corporation up to 2 years*
5.) Federal Agricultural Mortgage Corporation up to 2 years*
*Reserve Funds invested in Treasury and Agency obligations may
have a stated final maturity up to five years.
2. Repurchase Agreements up to 365 days
Repurchase agreements must be fully collateralized at 102% with a
defined maturity date, placed with a primary government dealer with
collateral, and safekept at a City approved Custodian, as provided under
the provisions of the SIFMA (Securities Industry and Financial Markets
Association) Master Repurchase Agreement. An executed agreement
between the City, primary government dealer and Custodian will be on file
before the City will enter into a tri -party repurchase agreement.
Weekly monitoring by the City's Investment Officers or Advisor of all
Collateral underlying repurchase agreements is required. More frequent
monitoring may be necessary during periods of market volatility.
3. Public Funds Investment Pool ... up to 1 day
A Public Funds Investment Pool duly created and managed in
accordance with the Act to function as a money market mutual fund that
marks its portfolio to market daily and, to the extent reasonably possible,
which stabilizes its portfolio to market daily at $1 net asset value. If the
ratio of the market value of the Public funds investment pool's portfolio
divided by the book value of the portfolio is less than 99.50% or greater
than 100.50%, the Public -funds investment pool's portfolio holdings shall
be sold as necessary to maintain the ratio between 99.50% and 100.50%.
The maximum amount that may be invested in any one public funds
investment pool is five (5) percent of the total current invested balance of
the Public Funds Investment Pool. The maximum total amount that may
be invested in any one overnight Public Funds Investment Pool is thirty
(30) percent of the Investment Portfolio.
The Public Funds Investment Pool must be continuously rated no lower
than AAA or AAA -m or at an equivalent rating by at least one nationally
recognized rating service with a weighted average maturity no greater
than 90 days. Public Funds Investment Pools may contain investment
securities that are not directly authorized by this Policy, so long as (i) the
AAA rating is standard herein above stated is satisfied, and (ii) the
investment is permitted by Subchapter A of the Texas Public Funds
Investment Act, Chapter 2256 of the Texas Government Code.
4. Collateralized Certificates of Deposit up to 1 year
Certificates of deposit or other instruments issued by state and national
banks domiciled in Texas that are:
a. Guaranteed or insured by the Federal Deposit Insurance
Corporation or its successor; or
b. Secured at 102% by obligations defined by Section XI of
this Policy.
Certificates of deposit must be fully collateralized at 102% of their
market value. The City requires the bank to pledge U.S.
Treasuries or U.S. Agencies as collateral as described in section
V, Subdivision A.1. The Investment Officers will monitor
adequacy of collateralization on a weekly basis.
5. Money Market Mutual Fund up to 1 year
A AAA -rated no-load money market mutual fund (no service charge) is an
authorized investment if:
a. the money market mutual fund is registered with and regulated
by the Securities and Exchange Commission;
b. the money market mutual fund provides the City with a
prospectus and other information required by the Securities
Exchange Act of 1934 (15 U.S.C. Section 78a et seq.) or the
Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et
seq.);
c. the money market mutual fund includes in its investment
objectives the maintenance of a stable net asset value of $1
for each share;
d. the assets of the money market mutual fund are invested in
those investments authorized under this Investment Policy;
and
e. the money market mutual fund has a dollar weighted average
stated maturity of 90 days or fewer.
6. Guaranteed Investment Contracts up to 3 years
Guaranteed investment contracts offer to pay a specific interest rate over
a period of time, and can be structured to reflect an anticipated draw
down schedule for capital improvements funded with bond proceeds. The
collateral and monitoring requirements applicable to repurchase
agreements shall apply to guaranteed investment contracts. A
guaranteed investment contract may be utilized only in connection with
the investment of bond proceeds. The maximum term of a guaranteed
investment contract shall not exceed the anticipated construction period
for the capital improvement, the construction of which is to be funded with
Bond Proceeds.
7. Texas Term Investment Pool up to 1 year
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The Texas Term Investment Pool for fixed term investments was created
as an investment pool and is a hybrid, mutual fund structure. The pool
offers a fixed rate, fixed term portfolio option and is rated AAAf by
Standard and Poor's Ratings Services. Participants may lock in a fixed
rate for a term of 60 to 365 days.
8. Securities Lending Program up to 1 year
Securities lending program as defined by the Act qualifies as an
authorized investment if the value of the securities loaned under the
program is not less than 100%. However, the City requires 102%
collateral. A loan made under the program must allow for termination at
any time. Collateral is required and pledged to the City, held in the City's
name and deposited with a custodian approved by the City. A loan made
under the program must be secured by pledged securities described by
Section 2256.009(a), pledged irrevocable letters of credit issued by a
bank that is organized and existing under the laws of the United States or
any other state and continuously rated by at least one nationally
recognized investment rating firm at not less than A or its equivalent or
cash invested in accordance with Section 2256.009, 2256.013, 2256.014
or 2256.016. The terms of a loan made under the program must require
that the securities being held as collateral be pledged to the investing
entity, held in the investing entity's name and deposited at the time the
investment is made with the entity or with a third party selected by or
approved by the investing entity. A loan made under the program must be
placed through a primary government securities dealer or a financial
institution doing business in Texas. An agreement to lend securities must
have a term of one year or less.
B. Weighted Average Maturity
In order to assure adequate liquidity and to, minimize risk of loss to the
Investment Portfolio due to interest rate fluctuations, investment maturities will
not exceed the anticipated cash flow requirements of the Funds. Maturity
guidelines by Fund are as follows:
The weighted average maturity (WAM) of the overall portfolio shall be no more
than 365 days.
1. Operating Funds
The maximum weighted average maturity of Operating Funds shall be
365 days. The Investment Officers will monitor the maturity level and
adjust as appropriate throughout the fiscal year.
2. Capital Improvement Funds
The maximum weighted average maturity of Capital Improvement Funds
shall be 365 days. The Authorized Investment maturity of that portion of
the City Portfolio that represents Capital Improvement Funds (bond
proceeds, reserve funds, debt service and Commercial Paper) shall be
determined considering:
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a. The anticipated cash flow requirements of the Capital
Improvement Funds; and
b. The "temporary period" as defined by Federal income tax law
during which time bond proceeds may be invested at an
unrestricted yield. Bond proceeds subject to yield restriction shall
be invested considering that yield restriction to avoid a challenge
to the City's related indebtedness qualification as an obligation,
the interest in which is not subject to federal taxation under
section 103 of the Internal Revenue Code of 1986 as amended
(the "IRC"). Bond proceeds subject to yield restriction shall be
invested considering the anticipated cash flow requirements of the
Capital Improvement Funds.
For all bond proceeds controlled by the tax-exempt bond provisions of the
IRC a complete yield analysis shall be performed to assure compliance
with the IRC. An annual rebate calculation shall be performed to assure
compliance with IRC. An annual rebate calculation shall be performed to
determine the City's rebate liability at the end of each respective bond
issue's five-year term.
On the third anniversary of the respective issue date for each bond issue,
bond proceeds from such issue will be yield restricted as required by the
IRC.
3. Reserve Funds: Established by Operative Bond Funds or by the City
Council.
The following Reserve Funds may be invested up to five years in U.S.
Treasuries or Agencies:
Maximum
Choke Canyon Fund 4050 $10,000,000
City monies governed by this Policy may not be invested in other
investments permitted by law unless (1) such investments are specifically
authorized for the investment of these monies by an ordinance adopted
by the City Council issuing bonds or other debt obligations or (ii) this
Policy is amended to permit such investment.
C. Methods to Monitor Investment Market Price
The City monitors the market price of investments by obtaining this information
from the Bloomberg system which is made available through the City's
authorized institutional brokers. The City may also obtain market price
information from other nationally recognized sources of financial information such
as the Wall Street Journal.
VI. INVESTMENT STRATEGIES
A. Investment Maturity Diversification
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A minimum of 15% of the total investment portfolio shall be held in Authorized
Investments with maturity dates of 90 days or less for liquidity. U.S.
Treasuries/Agencies may be purchased for longer-term maturities (greater than
one year) but shall not exceed 40% of the total investment portfolio to preserve
liquidity.
The weighted average maturity limitation of the overall Investment Portfolio takes
these requirements into account to protect liquidity and allow flexibility for market
environments. Daily Authorized Investment reports shall monitor and address
whether these diversification requirements are being met. Unless approved by
the Investment Committee, the target percentages specified shall riot be
exceeded for temporary periods greater than thirty (30) days without the
Investment Officers taking corrective action.
B. Strategies
1. Operating and CIP Funds
Investment strategies for operating funds and capital improvement funds
have as their primary objective the assurance that anticipated cash flows
are matched with adequate investment liquidity. The secondary objective
is to create an Investment Portfolio structure, which will experience
minimal volatility during economic cycles. To accomplish this strategy, the
City will purchase high credit quality, short -to -intermediate term
investments primarily in a laddered structure.
To pay for anticipated disbursements, Authorized Investments will be
laddered to correspond with the projected cash flow needs of the City.
Investments maturing that are acquired on the short end of the yield curve
90 days or less will meet immediate cash needs. A few Authorized
Investments are purchased on the intermediate part of the yield curve (1-
3 year maturity) to lock in higher interest rates when rates are projected to
decline due to the economic cycle of the economy. The dollar weighted
average investment maturity of 365 days or less will be calculated using
the stated final maturity dates of each investment.
2. Debt Service Funds
Investment strategies for debt service funds shall have as the primary
objective the assurance that debt service payment obligations are timely
met.
3. Debt Service Reserve Funds
Investment strategies for debt service reserve funds shall have as the
primary objective the ability to generate a dependable revenue stream
with a low degree of volatility. In accordance with the specific bond
authorization document, investments should be of high credit quality, with
short -to -intermediate-term maturities and a maximum weighted average
maturity of one year.
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4. Special Purpose Funds
Investment strategies for Special Purpose Funds will have as their
primary objective the assurance that anticipated cash flows are matched
with adequate Authorized Investment liquidity. The stated final maturity
dates and weighted average maturity shall be structured on the project
completion date.
These investment portfolios shall include highly liquid investments to
allow for flexibility and unanticipated project outlays.
C. Achieving Investment Yield Objectives
The City will utilize a conservative buy and hold strategy for the majority of the
Investment Portfolio with investment selection based on legality,
appropriateness, liquidity, and risk/return considerations. This strategy
recognizes the unique needs of individual funds and provides for their recognized
cash flow needs. The remaining portion of the Investment Portfolio may be
invested actively and the reasons for doing so are:
1. Passive investment provides for:
a. Investments targeted to pay upcoming anticipated
disbursements.
b. Liquidity to provide for a measure of anticipated disbursements
and
c. Laddering and diversification to manage market and credit risk.
2. Active investment provides for:
a. The ability to improve yields in the Investment Portfolio by riding
the yield curve during business cycle recovery and expansion
periods. Interest rates on longer maturities typically exceed those
on shorter maturities. Therefore, longer maturities (that can be
held to maturity, if necessary) are purchased in anticipation of
selling later at the same or lower interest rate, improving the total
return during the holding period.
b. The ability to improve market sector diversification by swapping
out of one investment into another for a better total return, to
realign for disbursement projections, or to extend or shorten
maturity depending on economic forecasts. The City Manager, or
his designee, is required to approve any investment that must be
sold at a Toss. All gains and losses will be reported to the City
Council and Investment Committee no less frequently than on a
quarterly basis.
VII. DESIGNATION OF RESPONSIBILITY
A. Investment Committee
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An Investment Committee, consisting of City Manager, Assistant City Managers,
Director of Financial Services (or if vacant, Deputy Director of Financial
Services), City Attorney, Assistant Director of Financial Services/Management
and Budget shall meet at least quarterly to determine operational strategies and
to monitor investment results. The Investment Committee will be responsible for
monitoring, reviewing and making recommendations regarding the City's
Investment Portfolio to the City Council.
The Investment Committee will review quarterly investment reports before
submission to the City Council and will, on no less than an annual basis, review
and adopt a list of authorized broker/dealers prepared by the City. The
Investment Committee shall include in its deliberation such topics as: economic
outlook, Investment Portfolio diversification, maturity structure, risk and
performance of the portfolio(s).
B. Investment Officers
The authority to invest City funds and the execution of any documentation
necessary to evidence the investment of City funds is granted to the Investment
Officers. The City Treasurer and the Investment Analyst are the designated
Investment Officers responsible for the daily operation of the investment
program. Investment Officers will prepare monthly and quarterly reports,
maintain information on counter -parties, monitor collateral, and attend training as
required by the Act.
As required by the Act, each Investment Officer shall attend ten hours of training
in accordance with the Act within 12 months of assuming responsibilities and
attend 10 hours of training in each successive two year period. Training should
include topics such as investment controls, security risk, market risks,
diversification of the investment portfolio and compliance with Texas laws.
The Investment Committee approves investment — training seminars presented
by the following organizations:
Government Finance Officers Association
Government Finance Officers Association of Texas
Government Treasurers Organization of Texas
Association of Public Treasurer's of the US & Canada
Texas Municipal League
University of North Texas Center for Public Management
If the Investment Officer desires to attend an investment -training seminar
presented by another organization for training credit, such seminar must be
approved by the Director of Financial Services.
C. Investment Advisor
The City Council may contract with an investment management firm registered
under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) to
provide for the investment and management of City funds. The initial A contract
made under authority of this subsection may not be for a term longer than two
13
years. A renewal or extension of the contract must be made by the City Council
by ordinance or resolution.
VIII. INTERNAL CONTROLS
The City Treasurer will establish a system of internal controls over the investment
activities of the City and document such controls in the Investment Procedures
Manual. These internal controls shall be approved by the Director of Financial
Services.
A. Standard of Care
Investments shall be made with the same judgment and care, under prevailing
circumstances, that a person of prudence, discretion, and intelligence would
exercise in the management of the person's own affairs, not for speculation, but
for investment, considering the probable safety of capital and the probable
income to be derived. Prudent investment is to be judged by the Investment
Portfolio as a whole, not on individual Investments.
In the case of a loss required rating, if liquidation is necessary due to a public
funds investment pool losing its AAA rating or for other reasons, liquidation will
be done in a prudent manner consistent with the investment objectives of this
Policy and as provided in 2256.021 of the Government Code the Act.
Investment Officers and the Investment Advisor shall perform their duties strictly
in accordance with the adopted Investment Policy. Investment Officers acting in
good faith and in accordance either these policies and procedures shall be
relieved of personal liability if exceptions are reported on a timely basis and
prudent actions are taken to reduce potential loss. The investment Committee
and officers are indemnified as provided by City ordinance attached and
incorporated as Appendix D.
B. Ethics
Investment Officers, Investment Committee members and employees involved in
the investment process shall comply with the City's Code of Ethics attached and
incorporated as Appendix B which requires disclosure of financial interests by
April of each year. These individuals shall refrain from personal business
activities that could conflict with proper execution of the investment program or
which could impair the ability to make impartial investment decisions. Officers
and employees shall disclose to the City Council any material investment
decisions. Officers and employees shall disclose to the council any material
financial interest in institutions that conduct investment or banking transactions
with the City.
Any Investment officer who has a personal or business relationship with an
organization seeking to sell an investment to the City shall file a statement
disclosing that relationship or interest. Disclosure statements required under this
subsection must be filed.
IX. COMPETITIVE SOLICITATION
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Except for Repurchase Agreements, Guaranteed Investment Contracts, and
Public Funds Investment Pools, any new issue investment will be purchased
through an Authorized Broker/Dealer or directly through the issuer. Investment
Officers identify the best rate prior to the purchase of an Authorized Investment
that meets the City's cash flow needs at the time.
Any Institution authorized to participate in the City's investment program must
meet Collateral pledge requirements outlined in Section XI of these guidelines
and must submit annual financial reports.
X. AUTHORIZED COUNTER -PARTIES
A. Broker/Dealers
Any broker/dealer seeking to sell an Authorized Investment to the City is required
to complete the questionnaire approved by the Investment Committee and
furnish supporting documentation required by the Investment Committee.
Information on the firms shall be maintained by the Investment Officers or the
Investment Advisor.
Securities qualifying as Authorized Investments shall only be purchased through
those institutions approved by the Investment Committee.
B. Policy Certification:
Investments shall only be made with those Institutions who have executed a
written certification in a form acceptable to the City, executed by a Qualified
Representative of that Institution, and substantially to the effect that the
Institution has:
1. Received, thoroughly reviewed and acknowledged, in writing,
receipt and understanding of this Policy.
2. Acknowledged that the Institution has implemented reasonable
procedures and controls in an effort to preclude investment
transactions conducted between the Institution and the City that
are riot authorized by this Policy.
C. Investments shall only be made with those institutions who have met the
qualifications and standards established by the City's Investment Committee and
set forth in the Investment Procedures Manual.
D. The Investment Committee shall, at least annually, review, revise, and adopt a
list of qualified brokers that are authorized to engage in investment transactions
with the City.
E. The City Treasurer will request the Investment Committee to authorize deletion of
institutions for:
1. Slow response time;
2. Inability to compete with other authorized firms;
3. Insufficient market information on technical or fundamental
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expectations based on economic indicators;
4. Failed transactions or continuing operational difficulties;
5. Unwillingness to continue to abide by this Policy; the provisions
listed in IX.A.;
6. Other reasons as approved by the Investment Committee.
XI. COLLATERALIZATION
It is imperative that the securities in the Investment Portfolio be protected through
independent safekeeping and all time deposits and demand bank cash balances be
protected with sufficient collateral at a minimum of 102% daily of current market values
to guard against market and volatility risk.
A. Pledged Collateral for Time and Demand Deposits
Depository collateral is pledged to and not owned by the City. All collateral shall
be held by a custodian approved by the City under an executed collateral
agreement.
The market value of pledged collateral for time and demand deposits Collateral
must be at least 102% of the principal plus accrued interest. All collateral shall
be held by an independent custodian outside the holding company of the
pledging bank. Original evidence of City collateralization in the form of original
safekeeping receipts will be provided to the City Treasurer and will be maintained
in the City Treasurer's Office. The custodian will provide a monthly listing of
collateral describing the securities and giving a market value. An investment
officer will approve and release all pledged collateral. The Investment Officers
will monitor adequacy of collateralization on a weekly basis.
B. Collateral Substitution
Collateralized investments and certificates of deposit often require substitution of
Collateral. Any Institution must contact the Investment Officers for approval and
settlement. The substituted collateral's value will be calculated and substitution
approved if its value is equal to or greater than the required collateral value.
Substitution is allowable for all transactions, but should be limited, to minimize
the City's potential administrative problems.
C. Collateral Reductions
Should the collateral's market value exceed the required amount, any Institution
may request approval from the Investment Officer to reduce collateral. Collateral
reductions may be permitted only if the City's records indicate that the collateral's
market value exceeds the required amount.
D. Prohibited Securities
Investment securities described in Section 2256.009(b), Government Code, shall
not be eligible for use as collateral of City monies governed by this Policy.
XII. SAFEKEEPING OF CITY SECURITIES
A. Third Party Safekeeping Agreement
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The City shall utilize its banking services depository or other banks for the
safekeeping of City owned securities. The delivery of all securities into
safekeeping will be done on a delivery versus payment basis.
B. Safekeeping of Certificate of Deposit Collateral
All Collateral securing bank and savings and loan deposits must be held by a
Third Party Safekeeping Institution approved by the City, or Collateral may be
held at the Federal Reserve Bank.
C. Safekeeping of Repurchase Agreement Collateral
Repurchase Agreement Collateral is restricted to U.S. Treasuries and must be
delivered to a Third -Party Safekeeping institution with which the City has (subject
to the limitation described in Section XI.D above) established a third -party
safekeeping agreement.
D. Guaranteed Investment Agreement Collateral
Guaranteed investment contract collateral is restricted to U.S. Treasuries and
Agencies (subject to the limitation described in Section XI.D above) and must be
delivered to a Third -Party Safekeeping Institution with which a third --party
safekeeping agreement has been established pursuant to the terms of the
guaranteed investment contract.
XIII. INFORMATION REPORTING/PORTFOLIO EVALUATION
A. The City Treasurer and Investment Analyst as designated Investment Officers
are responsible for reporting to the Investment Committee and City Council on a
quarterly basis in accordance with the Act.
B. Quarterly Investment Reports are to include the following in accordance with the
Act:
a. Combined Investment Portfolio Report of Market versus Book
Values
b. Combined Portfolio Composition
c. Individual Portfolio Composition
d. Cash and Cash Equivalents, U.S. Treasuries and investments
Greater than One year
e. Combined Summary of Investment Transactions
f. Combined Investment Portfolio - Weighted Average Maturity
g. Investment Revenue
h. Analysis of Excess Collateral Coverage
Aggregate Activity Per Broker
j. Comparison of Investment Returns to Benchmarks
k. Investment Portfolio Report — Lake Texana Project and Packery
Channel Project
Bond Funds by Issue
m. Pools and Money Market Accounts - Approved Institutional
Brokers
n. Economic and Interest Rate Forecast
o. Glossary
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P.
q.
Compliance Statement
Quarterly Investment Committee Meeting Minutes
Internal Reporting/Evaluation
In addition, the following reports are to be submitted on a monthly basis:
1) Cash position by bank account
2) Collateral position
3) Investment transactions
D. External Reporting/Evaluations
On a quarterly basis, any institution holding City time or demand deposits will
provide to the Investment Officers for the institution's review a copy of the
balance sheet and income statement for the Call Report for review. All
depository and brokerage institutions will provide annual audited financial
statements. Any Public Funds Investment Pools must provide reports and
disclosure statements as required by the Act.
E. Record Retention
The City follows the guidelines of retaining records for five years from City's
current fiscal year, as recommended in the Texas State Library Municipal
Records Manual or may be authorized by the City's local records management
guidelines.
XIV. BANKING SERVICES
All depository services are provided in the City's main depository agreement.
Other services such as credit cards, direct deposit of payroll or other services
may be administered through separate agreements. To aggressively invest
Excess Cash Balances, controlled disbursements accounts, zero balance
accounts and other cash management tools may be employed.
XIV. ANNUAL POLICY ADOPTION
This Policy will be reviewed and adopted by the City Council no less than
annually. The accepting ordinance resolution will include a description of all
changes made to this policy.
XVI. GENERAL PROVISIONS
A. Audits and Inspections. During regular business hours and as often as the
Investment Officers deem necessary, the Institution providing certificates of
deposit will make available for examination by the City Manager, his duly
authorized agent, accountant, or legal representative, such records and data to
assure the pledge of Collateral, availability of Collateral, and financial stability of
the Institution.
B. Compliance with Laws. Each Institution agrees to comply with all federal, state,
and local laws, rules, regulations, and ordinances. The personnel or officers of
such Institution shall be fully qualified and authorized under federal, state, and
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local law to perform the services set out under this Policy. Each Institution shall
permit the Investment Officers to audit, examine, and make excerpts or
transcripts from such records and to make audits of all contract, invoices,
materials, and other data relating to applicable Investments.
C. Performance Audits. The City's Annual External Financial Audit shall include a
compliance audit of management controls on Investments and adherence to this
Policy. If the City invests in other than money market mutual funds, investment
public funds investment pools or accounts offered by its depository in the form of
certificates of deposit or money market accounts; the quarterly reports prepared
by Investment Officers for the City Council must be formally reviewed at least
annually by an independent auditor. The results of the review must be reported to
the City Council by that auditor.
D. Investment Policy Resolution. The resolution authorizing this Investment
Policy is attached hereto as Appendix C.
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