The URL can be used to link to this page

Home My WebLink About026345 RES - 07/19/2005 RESOLUTION APPROVING AMENDMENTS TO THE CITY INVESTMENT POLICY WHEREAS, the City of Corpus Christi Investment Policy was adopted in Resolution No. 022390 on October 24, 1995; amending in Resolution No. 022980 on July 8,1997: amended in Resolution No. 023472 on October 27, 1998; amended in Resolution No. 023864 on December 14, 1999; amended in Resolution No. 024208 on September 12, 2000; amended in Resolution No. 024679 on December 11, 2001: amended in Resolution No. 025151 on December 17, 2002; amended in Resolution No. 025266 on April 15, 2003; and amended in Resolution No 025557 on November 11, 2003; WHEREAS, the City of Corpus Christi Investment Committee reviewed these proposed amendments to the Investment Policy and recommends that the City Council amend the City Investment Policy; and WHEREAS, the Investment Policy provides for annual review by City Council; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS CHRISTI, TEXAS: SECTION 1. Inveslment Officer. Section III Definitions is amended to add Assistant Director of Financial Services to definition of Director of Financial Services: "Director of Financial Services Designee - Assistant Director of Financial Services, Controller or Chief Accountant" SECTION 2. Return on Inveslments. Investment benchmarks found in Section IV Investment Objections Subsection C Return on Investments are amended to read as follows: "C. Return on Inveslments 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 MeAth Censtant Malllrity Insex Six-month averaqe of Texpool. Texstar and Texas Dailv: Capital Improvement Funds Three MeAth Constant Malllrity IAsex Six- month averaoe of Texpool. Texstar and Texas Dailv: Core Funds - One Year Censtant Maturity IAsex Six-month averaoe of Texpool. Texstar and Texas Daily; Special Funds - Three MentA U.S. Tr-easllry Bill Yield Six-month averaqe of Texpool, Texstar and Texas Daily" SECTION 3. Section IV D Diversification is amended to add "Texas Term Investment Pool as one of the investment options: "0. Diversification Investment POlicy,doc 026345 2 * * * * * 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. U.S Treasuries 2. U.S Government Agencies 3. Repurchase Agreements - through a Third Party Safekeeping Institution Agreement, which includes an approved primary dealer doing business in Texas as required by the PFIA. 4. Public Funds Investments Pools - through participation agreements: and 5. Certificates of Deposit - through approved local banks. 6. Money Market Mutual Funds 7. Guaranteed Investment Contracts (for Bond Proceeds only) 8. Texas Term Investment Pool." SECTION 4. Section V Authorized Investments and Maximum Term, Subsection A.4.Local Government Investment Pool is amended to increase Maximum term from daily to up to one year "4. Local Government Investment Pool daily UP to one vear" SECTION 5. Section V Authorized Investments and Maximum Term, Subsection A.6. Money Market Mutual Fund, is amended to specify no service charge: "6. Money Market Mutual Fund A no-load money market mutual fund (no service charqe) 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 has a dollar weighted average stated maturity of 90 days or fewer; and d. the money market mutual fund includes in its investment objectives the maintenance of a stable net asset value of $1 for each share. e. the assets of the money market mutual fund are invested in those investments authorized under this Investment Policy." SECTION 6. Section V, Authorized Investments and Maximum Term, Subsection B, Weighted Average Maturity, part 3, is amended to read as follows Investment Policy_doc 3 "3. Reserve Funds: Established by Operative Bond Funds or by the City Council. The following Reserve Funds may be invested up to sevefl five years in U.S Treasuries or Aqencies: Maximum Choke Canyon Fund 1050. .................. $2,000,000 ... $1,000,000 Debt Servicc Fund 2010 Utility Refunding Fund 1100 ...... $5,975,000 .$10,000,000 Choke Canyon Fund 4050 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." SECTION 7. Section V, Authorized Investments and Maximum Term, Subsection C Methods to Monitor Investment Market Price, is amended to delete Tele-Rate system "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 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. " SECTION 8. Section VII, Responsibilities and Controls, Subsection A, Authority to Invest, is amended to delete last sentence in the first paragraph, to read as follows: "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 Servises City Treasurer. 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 (elCcluding Investment Officers)." SECTION 9. Section VII, Responsibilities and Controls, Subsection E, Training and Education, is amended to authorize Director of Financial Services to approve training seminars, to read as follows: "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 Director of Financial Services or his designee" Investment Policy.doc 4 SECTION 10. Section XIII, Information Reporting/Evaluation, Subsection A, Investment Committee, is amended to authorize the Assistant Director of Financial Services and Assistant Director of Management and Budget to substitute on the Investment Committee for the Director of Financial Services and the Director of Management and Budget: "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 Committee on a quarterly basis A. Investment Committee consists of: City Manager Assistant City Managers Director of Financial Services or if vacant. Assistant Director of Financial Services City Attorney Director of Management and Budget or if vacant, Assistant Director of Manaqement and Budqet 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." SECTION 11. Section XIII, Subsection B, is amended to revise daily reporting to weekly reporting: "1. Weeklv Gaily basis to the Director of Financial Services or Designee (Excluding Investment Officers): a. Cash Position by Bank Account b. Collateral Position c. Investment Portfolio (Including Purchases/Maturities)" SECTION 12. Section XIII, Subsection D, is amended to revise record retention for five years: "0. Record Retention The City follows the guidelines of retaining records for sevefl 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." SECTION 13. A copy of the amended City Investment Policy is attached and incorporated as an Exhibit. The Investment Policy is adopted as amended. Investment Policy.doc ATTEST' Arman~ City Secretary APPROVED: ~ I L , 2005. i . b"..,L eL< ./-(, n.. . Lisa Aguilar .:..) Assistant City Attorney for City Attorney Investment Policy. doc 5 Ii! IV TABLE OF CONTENTS INTRODUCTION. .... Paqe .................................2 Ii PURPOSE ........ ....................................2 ..............................3 DEFINITIONS ... INVESTMENT OBJECTIVES ...............................4 V AUTHORIZED INVESTMENTS AND MAXIMUM TERM. ............................................6 VI VII. VIII. IX. X XI XII. XIII. XIV. XV INVESTMENT MIX AND STRATEGIES ... ............9 RESPONSIBILITY AND CONTROLS ...... ...........11 COMPETITIVE SOLICITATION ...........................................13 AUTHORIZED INSTITUTIONS ............................................13 PLEDGED COLLATERAL ...........................................14 SAFEKEEPING .... .... ...........................................14 WIRE AND ELECTRONIC SERVICES ..... ...........................................15 INFORMATION REPORTINGIEVALUATION .................................15 BANKING SERVICES ..... ................................16 GENERAL PROVISIONS ... ...........................................17 APPENDICES A PUBLIC FUNDS INVESTMENT ACT ................. ...... ........ .................................18 B CITY'S CODE OF ETHICS ORDINANCE....................................................40 C INVESTMENT POLICY RESOLUTIONS ..................................................................76 ADOPTION OF INVESTMENT POLICY 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 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. 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 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 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. 2 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 Authorized City Representative - Officers authorized to transact as set out in the attached and incorporated Appendix A on behalf of the City (City Treasurer, Controller, Chief Accountant, and Director of Financial Services). 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. 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. Director of Financial Services - The Director of Financial Services is the Municipal Finance Officer responsible for City investments Director of Financial Services Designee - Assistant Director of Financial Services, Controller or Chief Accountant. Excess Cash Balances - Collected bank balances not needed to pay estimated check clearings. Failed Transaction - An Investment, which an Institution fails to deliver to the City's Third Party Safekeeping Institution. Institution - Any firm, bank, bank holding company, broker or dealer who provides quotes for either the purchase or sale of investments. 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, Guaranteed Investment Contracts (with respect to bond proceeds), and Collateralized Certificates of Deposit. Investment Officers - City Treasurer and Investment Analyst. Investment Portfolio - All City monies being invested under authority of the Investment Officers. 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 3 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.SC. 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 Council for specific purposes, which have not been appropriated for spending. 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 - 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, Corpus Christi Business and Job Development Corporation, North Padre Island Development Corporation, and Corpus Christi Crime Control and Prevention District. Third Party Safekeeping Institution - Any Institution not affiliated with Institution delivering the 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 by rapidly depositing monies and timing disbursements. Generally, Investments are matched to specific cash flow requirements such as payrolls, construction drawdown schedules, debt service 4 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 a minimum of 102% of current market values so that monies are available as needed. C. 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 Inclex Capital Improvement Funds Threo Month Constant MatuFity Insox Core Funds One Year Constant Maturity Inclex Special Funds Three Month U.S. Treasury Bill YielS Six-month averaae of TexDool. Texstar and Texas Dailv 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, 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 obtain satisfactory market yields and to minimize the costs associated with investing such monies. D. 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: 1. U.S. Treasuries 2. U.S. Government Agencies 3. Repurchase Agreements - through a Third Party Safekeeping Institution Agreement, which includes an approved primary dealer doing business in Texas as required by the PFIA. 4. Public Funds Investments Pools - through participation agreements; and 5. Certificates of Deposit - through approved local banks. 6. Money Market Mutual Funds 7. Guaranteed Investment Contracts (for Bond Proceeds only) 8. Texas Term Investment Pool. 5 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 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. V. 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. US 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. 2. U.S. Agencies: Maximum Term a. Federal Home Loan Sank ............. ..................... up to 2 years b Federal National Mortgage Association. ................... up to 2 years c Federal Farm Credit ............................................ up to 2 years d. Federal Home Loan Mortgage Corporation. .............. up to 2 years e 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 (Public Securities Association) master repurchase agreement. An executed agreement between the City, primary government dealer and Third Party 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 6 may be necessary during periods of market volatility. Reverse repurchase agreements are not a permitted Investment. 4. Local Government Investment Pool......................GaiIy UP to 1 vear Investments made on behalf of the City by a public funds investment pool duly created 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 and, to the extent reasonably possible, which 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%. The maximum amount that may be invested in anyone local government investment pool is the lesser of the following: (i) five (5) percent of the current invested balance of the local government investment pool, or (ii) $50,000,000. The maximum total amount that may be invested in all local government investment pools is twenty-five (25) percent of the Investment Portfolio. The Director of Financial Services or designee may allow for up to a two-day increase in maximum amounts upon notification to Investment Committee. 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. Local Government Investment Pools may contain investment securities that are not directly authorized by this Policy, so long as (i) the rating standard hereinabove 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. 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: a. Guaranteed or insured by the Federal Deposit Insurance Corporation or its successor; or b. Secured by obligations that are described by Section V, Subdivision A 1 (a) through A2 (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. 7 6. Money Market Mutual Fund A no-load money market mutual fund (no service charqe) 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 has a dollar weighted average stated maturity of 90 days or fewer; and d. the money market mutual fund includes in its investment objectives the maintenance of a stable net asset value of $1 for each share. e. the assets of the money market mutual fund are invested in those investments authorized under this Investment Policy. 7. 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. B. 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. 2. Capital Improvement Funds (Bond Proceeds, Bond Reserves, Debt Service and Commercial Paper) 8 The 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: 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. 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-exempt bond provisions of the Internal Revenue Code of 1986, as amended (the "IRC"), a careful yield analysis must be performed to comply with the IRC. 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 IRC. 3. Reserve Funds: Established by Operative Bond Funds or by the City Council. The following Reserve Funds may be invested up to SEW8fl five years in U.S Treasuries or Aqencies: Maximum Choko Canyon Fune 1050............................................ $2,000,000 Choke Canyon Fund 4050.......................................... $10.000.000 Dest Servi()(l Fund 2010............................................... $1,000,000 Utility Refuneing Fune 1100.......................................... $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 ti:le Tele Rate system which ;s 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. 9 VI. 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. TreasurieslAgencies 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. 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 purchase high quality, short-to-medium-term investments which will compliment each other. 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 fund 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. 10 C. 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: 1. 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 "Iaddered" basis. The remaining portion of the Investment Portfolio may be invested actively and the reasons for doing so are: 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 loss. All gains and losses will be reported to the City Council and Investment Committee no less frequently than 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 Servioe!> Citv Treasurer. The City Treasurer and the Investment Analyst are the designated Investment Officers responsible for the daily operation of the investment program. /111 iAveEtR'leAts will be appFO'Iod in writing by the Director of Financial Servisss or Dosignee (exoluding Investment Offioers). 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 II 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, 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 governed by the following investment objectives in order of priority 1. preservation and safety of principal: 2. liquidity: and 3. 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 C. 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 B 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(1) of the Government Code, the Investment Committee and City Treasurer shall make such filings as required by law. E. 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 12 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 UNT 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 City Manager Director of Financial Services or his designee. VIII. COMPETITIVE SOLICITATION Except for repurchase agreements, guaranteed investment contracts, 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 Committee. Securities shall only be purchased through those Institutions approved by the Investment Committee. A. 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: 1. Received, thoroughly reviewed and acknowledged, in writing, receipt and understanding of the City's Investment Policy, and: 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 not authorized by the City's Investment Policy. B. 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. 13 C 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. D. The City Treasurer will request the Investment Committee to authorize deletion of I nstitutions for: 1. Slow response time: 2. Less than competitive pricing; 3. Little or no information on technical or fundamental expectations based on economic indicators: 4. Failed transactions or continuing operational difficulties; or 5. Unwillingness to continue to abide by the provisions listed in IX.A.: or 6. 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, guaranteed investment contracts, 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 A) 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 by the City or a Third Party Safekeeping Institution as Collateral to secure certificates of 14 deposit, repurchase agreements, guaranteed investment contracts 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 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 X.C. 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 X.C. 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. 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 D. 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 Committee on a quarterly basis. A. Investment Committee consists of: City Manager Assistant City Managers Director of Financial Services or if vacant, Assistant Director of Financial Services City Attorney Director of Management and Budget or if vacant, Assistant Director of Manaoement and Budoet 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. 15 B. Internal Reporting/Evaluation The following reports are to be submitted on a: 1. Weeklv QaiIy basis to the Director of Financial Services or Designee (Excluding Investment Officers): a. Cash Position by Bank Account b. Collateral Position c. Investment Portfolio (Including Purchases/Maturities) 2. Quarterly Reporting to Investment Committee and City Council. Executive Summary Schedules a. Combined Investment Portfolio Report of Market versus Book Values b. Combined Portfolio Composition c. Individual Portfolio Composition d. Cash and 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. Aggregate Activity per Broker and Analysis of Excess Collateral Coverage i. Comparison of Investment Returns to Benchmarks J. Investment Portfolio Report of Market versus Book Values and Weighted Average Maturity - Lake Texana Project k. Bond Funds by Issue I. Approved Institutional Brokers m. Economic and Interest Rate Forecast n. Glossary o. Compliance Statement p. Quarterly Investment Committee Meeting Minutes from Previous Meeting 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. t6 D. Record Retention The City follows the guidelines of retaining records for 8ElVeA 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. XV. 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 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 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 and incorporated as Appendix E "Investment Policy Resolutions" 17 Corpus Christi, Texas .. l:=:r-- Day Of~r-' 2005 The above resolution was ~~ssed by the following vote: cry ~ ?-1- 0+ ~ Henry Garrett Brent Chesney Melody Cooper Jerry Garcia Bill Kelly Rex Kinnison John E. Marez Mark Scott Jesse Noyola (':;(;315