HomeMy WebLinkAbout024679 RES - 12/11/2001RESOLUTION
AMENDING THE CITY INVESTMENT POLICY TO MAKE MINOR REVISIONS FOR
CLARIFICATION AND FOLLOWING CHANGES: TO CHANGE INVESTMENT
BENCHMARKS TO CONSTANT MATURITY INDEXES; TO LIST U.S. TREASURIES
AS A SEPARATE INVESTMENT GROUP; TO ADD MONEY MARKET ACCOUNTS
AS AUTHORIZED INVESTMENT; TO MODIFY AMOUNTS IN LOCAL
GOVERNMENT INVESTMENT POOLS; TO DELETE REQUIRED INVESTMENT
TARGET OF 25% IN U.S. TREASURY SECURITIES FROM INVESTMENT MIX
REQUIREMENT
WHEREAS, the City of Corpus Christi Investment Policy was adopted in Resolution
No. 022390 on October 24, 1995; amended in Resolution No. 022980 on July 8, 1997; amended
in Resolution No. 023133 on November 18, 1997; amended in Resolution No. 023472 on
October 27, 1998; amended in Resolution No. 023864 on December 14, 1999; and amended in
Resolution No. 024208 on September 12, 2000;
WHEREAS, the City of Corpus Christi Investment Committee reviewed the proposed
amendments to the Investment Policy identified herein on the attached and incorporated Exhibit
I and recommends that the City Council amend the City Investment Policy;
WHEREAS, as provided in Section II. C of the Investment Policy, the City Council must
review the Investment Policy on or before December 31 of each year.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF CORPUS CHRISTI, TEXAS:
SECTION 1. The City Investment Policy is hereby amended to include the changes
identified on the attached and incorporated Exhibit 1. A copy of the amended City Investment
Policy is attached and incorporated as Exhibit 2.
ATTEST:
Armando Chapa
City Secretary
Approved this the ;k'~ day of
James R. Bray, Jr.
City Attorney
By: ~_ .~1~_ ~
Lisa Aguilar (~
Assistant City Attorney
THE CITY OF CORPUS CHRISTI
Samuel L. Neal, Jr.
Mayor
,2001.
LOA\res.064
November 27, 2001
Corpus Christi, Texas
I UP'Day of ~(-0
The above resolution was passed by the following vote:
Samuel L. Neal, Jr.
Brent Chesney
Javier D. Colmenero
Henry Garrett
Bill Kelly
Rex A. Kinnison
John Longoria
Jesse Noyola
Mark Scott
LOA~res.064
November 27, 2001
l--T-
EXHIBIT 1
1. The first sentence of Section I Introduction is amended as follows:
........ policy of The City of Corpus Christi -to shall invest all available monies in
............... compliance with ........ ~ ....................... ~ .......... tMs Investment
Policy as authorized by the Public Funds Investment Act.
Section III, Definitions
"Decayed Transaction" is renamed "Failed Transaction"
Failed Dccaycd Transaction - An Investment which an Institution fails to deliver to the
City's Third Party Safekeeping Institution.
w
Section IV. Investment Objections
C. Return on Investments is amended as follows:
The City's Investment Portfolio shall be designed with the objective of regularly
exceeding the average yield of the thrcc ...... '- "° .......... ~-:" '
.................... .~ .... following benchmarks
in a manner consistent with the principles of this policy describe in IV. A and B abovc.
Operating Funds - Six-Month Constant Maturity Index
Capital Improvement Funds -- Three-Month Constant Maturity Index
Core Funds -- One-Year Constant Maturity Index
Special Funds -- Three-Month U.S. Treasury_ Bill Yield
However, it must be recognized that during a bear market, satisfying this objective may
not be practical until Investments mature and can be re-invested.
For bond issues to which arbitrage restrictions apply, the primary objectives shall be to
obtain satisfactory market yields and to minimize the costs associated with investing such
monies.
Section IV. Investment Objectives
D. Diversification is amended as follows:
Diversification is required because of differing liquidity needs of the City and is
employed as a way to control risk. Diversification minimizes the risk to the overall
Investment Portfolio of potential losses on individual Securities and enhances the 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 the following types of Institutions:
LOASres.064
November 27,2001
U. S. Treasuries
U. S. Government Agencies Sccuritics - through approved brokers;
Repurchase Agreements - through a Third Party Safekeeping Institution
Agreement which includes an approved primary dealer;
Public Funds Investments Pools - through participation agreements; and
Certificates of Deposit - through approved local banks.
Money Market
The City recognizes that investment risks can result from default 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 investment pool funds and repurchase agreements.
Section V. Authorized Investments and Maximum Term
A. Authorized Investments
4. Local Government Investment Pool is amended as follows
Investments made on behalf of the City by a public funds investment pool
duly created to function as a money market mutual fund who marks its
portfolio to market daily and, to the extent reasonably possible, who
stabilizes its portfolio to market daily and, to the extent reasonably
possible, who stabilizes its portfolio at a $1 net asset value. If the ratio of
the market value of the Pool's portfolio divided by the book value of the
portfolio is less than 99.50% or greater than 100.50%, the Pool's portfolio
holdings shall be sold as necessary to maintain the ratio between 99.50%
and 100.50%.
No more than ,o .......... $50.000.000 may be invested in local
eovernment investment Pools at any time.
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 (see the attached and incorporated Appendix C)
with a weighted average maturity no greater than 90 days.
Section VI. Investment Mix and Strategies
A. Investment Mix is amended as follows:
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November 27, 2001
~ ....:'--~ :-" * ' - A minimum of 15% of the total Investment Portfolio shall
be held in 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.
Daily Investment reports shall specifically address whether stated Investment mix
requirements are being met. Unless approved by the Investment Advisory
Committee, the target percentages specified shall not be exceeded for temporary
periods greater than thirty (30) days without the Investment Officers taking
corrective action.
Section IX. Authorized Institutions
D. 4. is amended to read as follows:
The City Treasurer will request the Investment Committee to authorize deletion of
Institutions for:
1. Slow response time;
2. Less than competitive pricing;
3. Little or no information on technical or fundamental expectations based on
economic indicators;
.... ~ Failed Transactions or continuing operational difficulties; or
5. Unwillingness to continue to abide the provisions listed in IX.A.
Section XI. Safekeeping
C. Safekeeping of Repurchase Agreement Collateral is amended as follows:
~-L_ ·, o ~- ....... : ..... ":-~ ...... aa Renurchase Agreement Collateral for
l,,~ .........~ ............................... ts restricted to U.S. Treasuries and must
be delivered to a Third-Party Safekeeping Institution with which the City has
established a third-party safekeeping agreement.
LOA\res.064
November 27, 2001
City cf Corpus Christi
Investment I~clicy
Approved Uecember I 1, ~(~(~1
TABLE OF CONTENTS
Page
I. INTRODUCTION ........................................................................................................................... 2
II. PURPOSE ....................................................................................................................................... 2
III. DEFINITIONS ................................................................................................................................ 3
IV. INVESTMENT OBJECTIVES ....................................................................................................... 4
V. AUTHORIZED INVESTMENTS AND MAXIMUM TERM ....................................................... 6
VI. INVESTMENT MIX AND STRATEGIES .................................................................................... 9
VII. RESPONSIBILITY AND CONTROLS ....................................................................................... 1 I
VIII. COMPETITIVE SOLICITATION ............................................................................................... 13
IX. AUTHORIZED INSTITUTIONS ................................................................................................. 13
X. PLEDGED COLLATERAL .......................................................................................................... 14
XI. SAFEKEEPING ............................................................................................................................ 14
XII. WIRE AND ELECTRONIC SERVICES ..................................................................................... 15
XIII. INFORMATION REPORTING/EVALUATION ........................................................................ 15
XIV. BANKING SERVICES ................................................................................................................. 16
XV. GENERAL PROVISIONS ............................................................................................................ 17
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I. INTRODUCTION
The City of Corpus Christi shall invest all available monies in compliance with this Investment
Policy as 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 pr/mary 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.
II. PURPOSE
A. Authorization
This Investment Policy is authorized by the City Council (see Appendix F) in
accordance with Chapter 2256, Subchapter A of the Government Code - The Public
Funds Investment Act (see the attached and incorporated Appendix A).
B. Scope
This Investment Policy applies to activities of the City, excluding pension funds,
with regard to investing the financial assets of Funds, including, but not limited to:
General Funds
Special Revenue Funds
Enterprise Funds
Internal Service Funds
Special Purpose Funds (within the control of Investment Officers)
Capital Improvement Funds (Bond Proceeds, Bond Reserves and Debt Service,
Interfund Transfer and Commercial Paper)
In addition to this policy, the investment of Bond Funds, Debt Service, and Reserve
Funds shall be managed by their governing ordinances and Federal Law, including
the Tax Reform Act of 1986 and subsequent legislation.
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C. Review and Amendment
This Policy shall be reviewed annually by the City Council on or before December
31 of each calendar year subsequent to its adoption. Amendments must be
authorized by the City Council. The City Council shall adopt a written instrument by
ordinance or resolution stating that it has reviewed the Investment Policy. The
written instrument so adopted shall record any changes made to the Investment
Policy.
III. DEFINITIONS
Director of Financial Services - The Director of Financial Services is the Municipal Finance Officer
responsible for City investments.
Director of Financial Services Designee - Controller or Chief Accountant.
Excess Cash Balances - Collected bank balances not needed to pay estimated check clearings.
Investment Officers - City Treasurer and Investment Analyst.
Investment Portfolio - All City monies being invested under authority of the Investment Officers.
Institution - Any firm, bank, bankholding company, broker or dealer who provides quotes for either
the purchase or sale of investments.
Third Party Safekeeping Institution - Any Institution not affiliated with Institution delivering the
Investment.
Investment - All authorized Securities listed in Item V. Authorized investments and maximum term
investments approved by the Investment Committee include U.S. Treasuries, U.S. Agencies,
Repurchase Agreements, Local Government Investment Pool, and Collateralized Certificates of
Deposit.
Failed Transaction - An Investment which an Institution fails to deliver the City's Third Party
Safekeeping Institution.
Collateral - Securities pledged by an Institution to safeguard City assets; the City requires either U.S.
Treasuries or U.S. Agencies Securities so that the market values can be readily determined at any
point in time.
Authorized City Representative - Officers authorized to transact as set out in the attached and
incorporated Appendix B on behalf of the City (City Treasurer, Controller, Chief Accountant, and
Director of Financial Services).
Reserve Funds - Funds designated by Council for specific purposes, which have not been
appropriated for spending.
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Securities - Approved Investments designated by the Investment Committee to be held in the
Investment Portfolio or acceptable to be pledged as Collateral to secure the monies of the City.
Special Purpose Funds o Monies of non-profit corporations that Investment Officers are permitted to
invest; includes such entities as the Corpus Christi Health Facilities Development Corporation,
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, and Corpus Christi Crime Control
and Prevention District.
Authorized Selling Group - Primary dealer and regional firms that have been selected by the
underwriter to sell their securities. Each authorized member of a selling group will offer the issue at
the price authorized by the governmental agency.
Qualified Representative - 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; or
(c)
For an investment pool, the person authorized by the elected official or board with
authority to administer the activities of the investment pool to sign the written
instrument on behalf of the investment pool.
(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.
IV. INVESTMENT OBJECTIVES
A. Preservation and Safety of Principal
Investments of the City shall bc undcrtakan 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 by rapidly depositing monies and timing disbursements.
Generally, Investments are matched to specific cash flow requirements such as
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payrolls, debt service payments, and other payables. Liquidity is also achieved by
investing in Investments with active secondary markets or in Local Government
Pools with stable net asset values.
It is imperative that the Investment Portfolio and Excess Cash Balances be protected
with sufficient Collateral at 102% of current market values so that monies are
available as needed.
Return on Investments
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 IV.A and B.
Operating Funds Six-Month Constant Maturity Index
Capital Improvement Funds - Three-Month Constant Maturity Index
Corn Funds One-Year Constant Maturity Index
Special Funds - Three-Month U.S. Treasury Bill Yield
However, it must be recognized that during a declining market, satisfying this
objective may not be practical until Investments mature and can be re-invested.
For bond issues to which arbitrage restrictions apply, the primary objectives shall be
to obtain satisfactory market yields and to minimize the costs associated with
investing such monies.
Diversification
Diversification is required because of differing liquidity needs of the City and is
employed as a way to control risk. Diversification minimizes the risk to the overall
Investment Portfolio of potential losses on individual Securities and enhances the
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:
U.S. Treasuries
U.S. Government Agencies
Repurchase Agreements - through a Third Party Safekeeping Institution
Agreement, which includes an approved primary dealer doing business in
Texas as required by the PFIA.
Public Funds Investments Pools - through participation agreements; and
Certificates of Deposit - through approved local banks.
Money Market
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The City recognizes that investment risks can result from default 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 investment pool funds 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 safekept at a Third Party
Safekeeping Institution not affiliated with the bank or bank holding company
providing the certificate of deposit.
AUTHORIZED INVESTMENTS AND MAXIMUM TERM
The City of Corpus Christi is authorized to invest in:
A. Authorized Investments
Obligations of the United States or its agencies and instrumentalities which currently
include:
1. Short-term U.S. Treasuries: Maximum Term
a. U.S. Treasury Bills .................................................... up to 365 days
b. U.S. Treasury Coupon Notes ....................................... up to 3 years
c. U.S. Treasury Notes and Strips .................................. up to 3 years*
*see Section V.B.3.
U.S. Agencies:
a.
b.
C.
d.
e.
Maximum Term
Federal Home Loan Bank ............................................ up to 2 years
Federal National Mortgage Association ...................... up to 2 years
Federal Farm Credit ..................................................... up to 2 years
Federal Home Loan Mortgage Corporation ................. up to 2 years
Student Loan Marketing Association ........................... up to 2 years
3. Repurchase Agreements ............................................... up to 365 days
Repurchase agreements fully collateralized at 102% with a defined maturity
date placed with a primary government dealer and safekept at a Third Party
Safekeeping Institution, as provided under the provisions of the PSA (Pubic
Securities Association) master repurchase agreement. An executed
agreement between the City, primary government dealer and Third Party
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Safekeeping Institution will be on file before the City will enter into a tri-
party repurchase agreement.
Weekly monitoring by the City's Investment Officers of all Collateral
underlying repurchase agreements is required. More frequent monitoring
may be necessary during periods of market volatility.
Reverse repurchase agreements are not a permitted Investment.
4. Local Government Investment Pool ............................................ daily
Investments made on behalf of the City by a public funds investment pool
duly created to function as a money market mutual fund who marks its
portfolio to market daily and, to the extent reasonably possible, who
stabilizes its portfolio to market daily and, to the extent reasonably possible,
who stabilizes its portfolio at a $1 net asset value. If the ratio of the market
value of the Pool's portfolio divided by the book value of the portfolio is less
than 99.50% or greater than 100.50%, the Pool's portfolio holdings shall be
sold as necessary to maintain the ratio between 99.50% and 100.50%.
No more than $50,000,000 may be invested in local government investment
pools at any time.
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.
5. 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:
Guaranteed or insured by the Federal Deposit Insurance
Corporation or its successor; or
bo
Secured by obligations that are described by Section V,
Subdivision A. 1 (a) through A.2 (e).
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. (Collateral Mortgage Obligations will not
be eligible as Collateral-see X.C.). The Investment Officers will
monitor adequacy of collateralization on a weekly basis.
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Weighted Average Maturity
In order 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 maximum term for any Investment other than Reserve Funds is three years. The
weighted averaged days to maturity shall be less than 365 days for Investments, other
than Reserve Funds.
1. Operating Funds
The weighted average days to maturity of Investments, other than Reserve
Funds, shall be 365 days or less. The Investment Officers will monitor the
maturity level and make changes as appropriate.
Capital Improvement Funds (Bond Proceeds, Bond Reserves, and Debt
Service)
The Investment maturity of that portion of the City Portfolio that represents
Capital Improvement Funds (bond proceeds, reserve funds, and debt service)
shall be determined considering:
The anticipated cash flow requirements of the Capital Improvement
Funds; and
The "temporary period" as defined by Federal tax law during which
time bond proceeds may be invested at an unrestricted yield. After
the expiration of the temporary period, bond proceeds subject to yield
restriction shall be invested considering the anticipated cash flow
requirements of the Capital Improvement Funds.
Before an Investment can be made of bond proceeds from all bond issues
affected by the Tax Reform Act of 1986, a careful yield analysis must be
performed to comply with the Tax Reform Act. Also, an annual rebate
calculation must be performed to determine if the City is required to rebate
interest at the end of each respective bond issue's five-year term.
Beginning on the anniversary of the third year for the respective bond issues,
all bond proceeds will be yield restricted as required by the Tax Reform Act.
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VI.
3. Reserve Funds: Established by Operative Bond Funds or by the City Council.
The following Reserve Funds may be invested up to seven years in U.S.
Treasuries: Maximum
Choke Canyon Fund 4050 ............................................... $2,000,000
Debt Service Fund 2010 ................................................... $4,000,000
Utility Refunding Fund 4100 ........................................... $5,975,000
City monies governed by this Policy may not be invested in other
investments permitted by law unless (I) 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 or the Tele-Rate system, which are made available
through the City's authorized institutional brokers. The City may also obtain market
price information from other nationally recognized soumes of financial information
such as the Wall Street Journal.
INVESTMENT MIX AND STRATEGIES
A. Investment Mix
A minimum of 15% of the total Investment Portfolio shall be held in Investments
with maturity dates of 90 days or less for liquidity. U.S. Treasuries/Agencies maybe
purchased for longer-term maturities (greater than one year) but shall not exceed 40%
of the total Investment Portfolio to preserve liquidity.
Daily Investment reports shall specifically address whether stated Investment mix
requirements are being met. Unless approved by the Investment Advisory
Committee, the target percentages specified shall not be exceeded for temporary
periods greater than thirty (30) days without the Investment Officers taking corrective
action.
B. Strategies
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 pumhase high quality, short-to-medium-
term investments which will compliment each other.
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I¥ T
To pay for anticipated disbursements, investments will be laddered to correspond
with the projected cash needs of the City. Some Investments are acquired on the
short end of the yield curve (90 days or less) to meet immediate cash needs. A few
Investments are purchased on the intermediate part of the yield curve (1-3 years) 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.
Investment strategies for debt service funds shall have as the primary objective the
assurance of investment liquidity adequate to cover the debt service obligations on
the required payment date. Investments purchased shall not have a stated final
maturity date that exceeds the debt service payment date.
Investment strategies for debt service reserve funds shall have as the primary
objective the ability to generate a dependable revenue stream to the appropriate debt
service fimd from investments with a low degree of volatility. In accordance with the
bond ordinance specific to an individual bond issue, which sets out the maximum
investment term, Investments should be of high quality, with short-to-intermediate-
term maturities.
Investment strategies for Special Purpose Funds will have as their primary objective
the assurance that anticipated cash flows are matched with adequate Investment
liquidity.
These investment portfolios shall include highly liquid investments to allow for
flexibility and unanticipated project outlays. The stated final maturity dates of
Investments held shall not exceed the estimated project completion date.
Achieving Investment Return Objectives
Investment selection shall be based on legality, appropriateness, liquidity, and
risk/return considerations. Monies designated for immediate expenditure should be
passively invested.
Passive investment provides for:
Liquidity to pay upcoming disbursements (payroll, debt service, payments,
payables, etc.)
2. Maximizing investment terms under the current budget; and
3. Structuring the Investment Portfolio on a "laddered" basis.
The remaining portion of the Investment Portfolio may be invested actively and the
reasons for doing so are:
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Active investment provides for:
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.
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 loss. All gains and losses will be reported
to the City Council and Investment Comanittee on a quarterly basis.
VII. RESPONSIBILITY AND CONTROLS
A. Authority to Invest
The authority to invest City funds and the execution of any documentation necessary
to evidence the investment of City funds is granted to the Director of Financial
Services. The City Treasurer and the Investment Analyst are the designated
Investment Officers responsible for the daily operation of the investment program.
All investments will be approved in writing by the Director of Financial Services or
Designee (excluding Investment Officers).
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.) or with the
State Securities Board to provide for the investment and management of public funds
or other funds under its control. A contract made under authority of this subsection
may not be for a term longer than two years. A renewal or extension of the contract
must be made by the City Council by ordinance or resolution.
B. Establishment of 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.
C. Prudent Investment Management
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,
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not on individual Investments.
If liquidation is necessary due to a 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.
Investment of monies shall be govemed by the following investment objectives in
order of priority:
preservation and safety of principal;
liquidity; and
yield.
The designated Investment Officers shall perform their duties in accordance with the
adopted Investment Policy and Procedures set forth in the Investment Procedures
Manual. Investment Officers acting in good faith and in accordance with these
policies and procedures shall be relieved of personal liability. The Investment
Committee and Officers are indemnified as provided by City Ordinance attached and
incorporated as Appendix D.
Standards of Ethics
The Investment Committee and City Treasurer will comply with the City's Code of
Ethics Ordinance attached and incorporated as Appendix C which requires disclosure
of financial interests by April of each year.
The designated Investment Officers and all members of the Investment Committee
shall adhere to the City's Ethics Ordinance. To the extent required by section
2256.005(I) of the Government Code, the Investment Committee and City Treasurer
shall make such filings as required by law.
Training and Education
Recognizing that the training and education of Investment Officers contributes to
efficient and effective investment management, the City requires its Investment
Officers to obtain appropriate professional training. Such training is currently
required by, and shall be obtained in accordance with Section 2256.008 of the
Government Code Public Funds Investment Act. 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
Municipal Treasurers Association
Texas Municipal League
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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
City Manager or his designee.
VIII. COMPETITIVE SOLICITATION
Except for repurchase agreements and public funds investment pools, any new issue
investment will be purchased through an Authorized Selling Group or directly
through the issuer.
For any Investment purchased or sold through the secondary market, the City will
obtain at least three proposals from Authorized Institutions.
Any Institution authorized to participate in the City's investment program must meet
Collateral pledge requirements outlined in Section IV.D. of these guidelines and must
submit annual financial reports.
IX. AUTHORIZED INSTITUTIONS
All institutions who seek to sell an authorized Investment to the City are required to
complete the questionnaire approved by the Investment Committee and furnish
supporting documentation required by the Investment Conunittee. Securities shall
only be purchased through those Institutions approved by the Investment Committee.
Investments shall only be made with those Institutions who have executed a written
instrument in a form acceptable to the City, executed by a Qualified Representative
of the Institution, and substantially to the effect that the Institution has:
Received, thoroughly reviewed and acknowledged, in writing, receipt
and understanding of the City's Investment Policy, and;
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
not authorized by the City's Investment Policy.
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.
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.
The City Treasurer will request the Investment Committee to authorize deletion of
Institutions for:
1. Slow response time;
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Less than competitive pricing;
Little or no information on technical or fundamental expectations based on
economic indicators;
Failed transactions or continuing operational difficulties; or
Unwillingness to continue to abide the provisions listed in IX.A.; or
Other reasons as approved by the Investment Committee.
X. PLEDGED COLLATERAL
The market value of pledged Collateral must be at least 102% of the principal plus accrued interest
for Excess Cash Balances, certificates of deposit, and repurchase agreements. Evidence of proper
collateralization in the form of original safekeeping receipts held at a Third Party Safekeeping
Institution not affiliated with the Institution pledging the Collateral will be approved by the City
Treasurer and will be maintained in the City's Treasurer Office. An authorized City Representative
(See Appendix B) will approve and release all pledged collateral.
A. 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.
B. 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.
C. 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.
XI. SAFEKEEPING
A. Third Party Safekeeping Agreement
The City shall contract with a Bank or Banks for the safekeeping of Securities either
owned by the City as a part of its Investment Portfolio or held as Collateral to secure
certificates of deposit, repurchase agreements, or Excess Cash Balances.
B. Safekeeping of Certificate of Deposit Collateral
All Collateral securing bank and savings and loan deposits must be held by a Third
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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
established a third-party safekeeping agreement.
XII. WIRE AND ELECTRONIC SERVICES
Wire and electronic services are to be provided as referenced in the City's Depository
Services agreement, portions of which are attached and incorporated as Appendix E.
The City requests applications for depository services every three to five years.
XIII. INFORMATION REPORTING/EVALUATION
The City Treasurer and Investment Analyst are hereby designated as the Investment
Officers and are responsible for the daily operation of the Investment program and
will report to the Investment Comxnittee on a quarterly basis.
A. Investment Committee Consists of:
City Manager
Deputy City Manager
Assistant City Managers
Director of Financial Services
City Attorney
Director of Management and Budget
The Investment Committee will be responsible for monitoring, reviewing, and
making recommendations regarding the City's Investment program to the City
Council. Reports will be provided to the City Council by the Investment Officers no
less than quarterly, as required by the Public Funds Investment Act.
B. Internal Reporting/Evaluation
The following reports are to be submitted on a:
Daily basis to the Director of Financial Services or Designee (Excluding
Investment Officers):
Cash Position by Bank Account
Collateral Position
Investment Portfolio (Including Purchases/Maturities)
2. Quarterly Reporting to Investment Committee and City Council.
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Executive Summary
Schedules
g.
h.
i.
j.
k.
1.
m.
n.
o.
Combined Investment Report of Market Versus Book Values
Combined Portfolio Composition
Individual Portfolio Composition
Cash and Equivalents
U.S. Treasuries
Investments Greater than One Year
Combined Summary of Investment Transactions
Combined Summary of Portfolio Activity
Combined Investment Portfolio - Weighted Average Maturity
Income Received from Investments
Combined Analysis of Gains on Sale of Securities
Aggregate Activity per Broker
Analysis of Excess Coverage
Comparison of Investment Returns to Benchmarks
Combined Summary of Investment Transactions - Lake Texana
Project
Summary of Portfolio Activity - Lake Texana Project
Weighted Average Maturity - Lake Texana Project
Trade Journal
Trade Journal
Approved Institutional Brokers
Glossary
Compliance Statement
Quarterly Investment Committee Meeting Agenda and Minutes
C. External Reporting/Evaluations
On a quarterly basis, the City's main depository and all applicable Institutions
providing certificates of deposit in excess of FDIC coverage will provide to the
Investment Officer for review a copy of the balance sheet and income statement for
the Call Report. All Institutions will provide annual audited financial statements.
Any local government investment pools must provide reports and disclosure
statements as required by the Public Funds Investment Act.
D. Record Retention
The City follows the guidelines of retaining records for seven years fi.om 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
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administered through separate agreements. To aggressively invest Excess Cash
Balances, controlled disbursements accounts, zero balance accounts and other cash
management tools may be employed.
XV. GENERAL PROVISIONS
Ao
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.
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 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.
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
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.
Investment Policy Resolution. The resolution authorizing this Investment Policy is
attached and incorporated as Appendix F "Investment Policy Resolutions."
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