HomeMy WebLinkAbout027290 RES - 05/29/2007RESOLUTION
APPROVING AMENDMENT TO THE CITY INVESTMENT POLICY TO
ADD FEDERAL AGRICULTURAL MORTGAGE CORPORATION
OBLIGATIONS AS AUTHORIZED INVESTMENTS FOR CITY FUNDS
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. 023472 on October 27, 1998; amended in Resolution No.
023864 on December 14, 2999. 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; and
amended in Resolution No. 026345 on July 19, 2005; and
WHE'tEAS, the City of Corpus Christi Investment Committee reviewed the
proposed amendment to the Investment Policy to add Federal Agricultural
Mortge Corporation obligations as authorized investments, and recommends
that the City Council approve such amendment; and
WHEREAS, the Investment Policy provides for annual review by City Council
and City Council approval of any amendments to the Investment Policy;
NO14 THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
CORPUS CHRISTI, TEXAS:
Section 1. Section V of the City of Corpus Christi Investment Policy is amended to
read as follows:
"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 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.
Maximum Term
2. U.S. Agencies:
investment Policy Resolution 52907 doc
r.Ii►*f"9tt
a. Federal Home Loan Bank
b. Federal National Mortgage Association.
c. Federal Farm Credit Bank
d. Federal Home Loan Mortgage Corporation
e. Student Loan Marketing Association.
f. Federal Agricultural Mortgage Corporation
SECTION 2. The City Council has reviewed and does approve the
Policy as amended. A copy of the amended City Investment Policy
incorporated as an Exhibit
ATTEST°
2
up to 2 years
up to 2 years
up to 2 years
up to 2 years
up to 2 years
up to 2 years"
attached Investment
is attached and
THE CITY OF CORPUS CHRISTI
Armando Chapa nry Garrett
City Secretary Mayor
APP*OVEM: May 23, 2007
Lisa Aguilar
Assidant City Attorney
for City Attorney
Investment Policy Resolution 52907 doc
Corpus Christi, Texas
of `(A.
, 2007
The above resolution was passed by the following vote:
Henry Garrett
Melody Cooper
LarryElizondo, Sr,
Mike Humrnell
Bill Kelly
PrisIa G. Leal
John E. Marez
Nelda Martinez
Michael McCutchon
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TABLE OF CONTENTS
Page
INTRODUCTION 2
II PURPOSE 2
III DEFINITIONS 3
IV. INVESTMENT OBJECTIVES 4
V. AUTHORIZED INVESTMENTS AND MAXIMUM TERM 6
VI. INVESTMENT MIX AND STRATEGIES 10
VII, RESPONSIBILITY AND CONTROLS 11
VIII COMPETITIVE SOLICITATION 13
IX AUTHORIZED INSTITUTIONS 13
X. PLEDGED COLLATERAL .. 14
XI. SAFEKEEPING 15
XII, WIRE AND ELECTRONIC SERVICES 15
XIII. INFORMATION REPORTING/EVALUATION 15
XIV BANKING SERVICES 17
XV. GENERAL PROVISIONS 17
APPIDICES
A. PUBLIC FUNDS INVESTMENT ACT 1-18
B. CITY'S CODE OF ETHICS ORDINANCE 1-8
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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 primary objective of:
• Preservation of capital and protection of principal;
• Ivintenence of sufficient liquidity to meet operating needs;
• S*curity of city funds and investments;
• Diversification of investments to minimize risk while maximizing interest earnings; and
• NMpximization of return on the portfolio.
Earnings from investments will be used in a manner that will best serve the interests of the City
of Corpus Christi.
Investments shall be made with judgment and care, under prevailing circumstances, that a
person of prudence, discretion and intelligence would exercise in the management of that
person's own affairs, not for speculation, but for investment, considering the probable safety of
capital and the probable income to be derived.
11. PURPOSE
A. Authorization
This Investment Policy is authorized by the City Council (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.
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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
1I1. 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
Safel eeping Institution.
Institution - Any firm, bank, bank holding company, broker or dealer who provides quotes for
either the purchase or sale of investments.
Investnent - All authorized Securities listed in Item V. Authorized investments and maximum
term investments approved by the Investment Committee include U.S. Treasuries, U.S.
Agenpies, 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.
Quali*ed Representative - A person, who holds a position with a business organization, who is
authowtized 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
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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.
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
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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.
Six-month average of Texpool, Texstar and Texas Daily
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. Diversificatlion
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.
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
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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
safe kept at a Third Party Safekeeping Institution not affiliated with the bank or
bank holding company providing the certificate of deposit.
V. AUTHORIZED INVESTMENTS AND MAXIMUM 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
U.S. Treasury Notes and Strips up to 3 years
2. U.S. Agencies:
Maximum Term
a. Federal Home Loan Bank 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 Marketin• 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
may be necessary during periods of market volatility. Reverse
repurchase agreements are not a permitted Investment.
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4. Local Government Investment Pool up to 1 year
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 any one local govemment
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)
$65,000,000. 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 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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6. Money Market Mutual Fund
A no-load money market mutual fund (no service charge) is an authorized
investment If:
a. the money market mutual fund is registered with and regulated
by the Securities and Exchange Commission
b. the money market mutual fund provides the City with a
prospectus and other information required by the Securities
Exchange Act of 1934 (15 U.S.C. Section 78a et seq.) or the
investment Company Act of 1940 (15 U.S.C. Section 80a-1 et
seq.),
c. the money market mutual fund 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)
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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
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 five years in U.S.
Treasuries or Agencies: Maximum
Choke Canyon Fund 4050 $10,000,000
City monies governed by this Policy may not be invested in other
investments permitted by law unless (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 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.
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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 Tess 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.
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 Tess 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.
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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 "laddered" 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 City
Treasurer. The City Treasurer and the Investment Analyst are the designated
Investment Officers responsible for the daily operation of the investment
program.
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.
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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.
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.
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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 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 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.
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.
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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.
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.
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;
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 head 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
Treasltarer 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.
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XL 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
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
Management and Budget
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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:
Weekly basis to the Director of Financial Services or Designee (Excluding
Investment Officers):
a. Cash Position by Bank Account
Collateral Position
c. Investment Portfolio (Including Purchases/Maturities)
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
Comparison of Investment Returns to Benchmarks
Investment Portfolio Report of Market versus Book Values and
Weighted Average Maturity — Lake Texana Project
k. Bond Funds by Issue
Approved Institutional Brokers
m. Economic and Interest Rate Forecast
n. Glossary
o. Compliance Statement
p. Quarterly Investment Committee Meeting Minutes from Previous
Meeting
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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 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. GEMERAL 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.
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Investment Policy Resolution. The resolution authorizing this Investment
Policy is attached and incorporated as Appendix E "Investment Policy
Resolutions."
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