HomeMy WebLinkAbout027520 RES - 12/11/2007RESOLUTION
APPROVING AMENDMENTS TO THE CITY INVESTMENT POLICY WHICH
INCLUDES THE ADDITION OF THE SECURITY LENDING PROGRAM, THE
REMOVAL OF THE STUDENT LOAN MARKETING ASSOCIATION AS
AUTHORIZED INVESTMENTS FOR CITY FUNDS, AND OTHER
ADMINISTRATIVE CHANGES.
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 amended in Resolution No.
027290 on May 29, 2007.
WHEREAS, the City of Corpus Christi Investment Committee reviewed the proposed
amendment to the Investment Policy to add the Security Lending Program as
authorized investments, the removal of the Student Loan Marketing Association, and
recommends that the City Council approve such amendments; and
WHEREAS, the Investment Policy provides for annual review by City Council and City
Council approval of any amendments to the Investment Policy;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
CORPUS CHRISTI, TEXAS:
Section 1. Section 111 of the City of Corpus Christi Investment Policy is amended to
read as follows:
"111. 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, Investment Analyst, Controller,
Chief Auntant, Deputy Director of Financial Services and Director of Financial Services).
Director of Financial Services Designee — Deputy Assistant Director of Financial Services,
Controller or Chief Accountant.
Special Purpose Funds - Monies of non-profit corporations that Investment Officers are
permitted to invest; includes such entities as the
Corporation, Coastal Bend Health Facilities Development ent Corporation, Corpus Christi Housing
._
investment polciy res.doc
027520
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Finance Corporation, Corpus Christi Community Improvement vement Corporation, HOME Project, First
Time Home Buyer, Corpus Christi Industrial Development Corporation, Corpus Christi Business
and Job Development Corporation, North Padre Island Development Corporation, Corpus
Christi Crime Control and Prevention District, and Conus Christi Ei.ital C mrnuni#y
Development Corporation.
Section 2. Section IV f the City of Corpus Christi Investment Policy is amended to
read as flaws:
IV. INVESTMENT T BJECTI ES
D. Diversification
. Securities Lending Pro' ram
*****
**
Section 3. Section V of the City of Corpus Christi Investment Policy is amended to
read as fellows:
V. AUTHORIZED INVESTMENTS AND MAXIMUM TERM
. U.S. Agencies:
Maximum Term
. Repurchase Agreements up to 365 days
Repurchase agreements must be fully collateralized at 102% with a
defined maturity date placed with a primary government dealer 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.
. Local Government Investment Pool up to 1 year
investment polciy res.doc
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The maximum amount that may be invested in any one local government
investment pool is the lesser of the following: (1) five percent of the
total current invested balance of the local government investment pool, or
(11) $75,000,000, The maximum total amount that may be
invested in all vernight local government investment pools is ewe
45)-pereent thirty percent of the Investment Portfolio. The Director
of Financial Services or designee may allow for up to a two-week
increase in maximum amounts upon notification to Investment
Committee.
. Texas Term Investment Pool up to 1 year
The Texas Term Local Government Investment Pool was created by
Texas local governments to provide investment programs tailored to the
needs of Texas cities. Texas Term is a fixed rate, fixed term porffolio
option rated AAAf by Standard and Poor's Corporation. Participants may
lock_ in fixed rate fora term of _ t 365 days. The Pool is directed b
an Advisory Board of experienced local finance directors and treasurers.
. securities Lending Program _ up_to 1 year
A securities lending program qualifies as an authorized investment
if the value of the securities loaned under the program is not less
than 100 percent collateralized, A loan made under the program
must allow for termination tarty _ time._ A _loan made_ under the
program must be secured by pledged securities described by
Section 2256.009(a), pledged irrevocable letters of credit issued
by a bank that is organized and existing under the laws of the
United States or any other state and continuously rated by at least
one nationally recognized investment rating firm at not less than A
or its equivalent or cash invested in accordance with Section
2256.009,_ 2256 013, 2256.014_ or 2256.016. The teras of_a__loan
made under the program must require that the securities being
held as collateral be pledged to the City, held in the City's name
and de.csited at the time the investment is made with the Cit or
with a third party selected by or approved by the City. A loan
made under the program must be placed through a overnment securities dealer or a financial institution din•
business in the state. An agreement to lend securities must have
a term of one year or less.
Section 4. Section VI(A) the City of Corpus Christi Investment Policy is amended to
read as follows
VI. INVESTMENT MI AND STRATEGIES
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A. Investment ix
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 5. Section VII(C) the City of Corpus Christi Investment Policy is amended to
read as follows
VII. RESPONSIBILITY AND CONTROLS
C. Prudent Investment Management
The designated Investment Officers shall perform their duties in accordance with
the adopted Investment Policy a.,. Procedurte set forth n the r t t
Pry . 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.
Section 6. Section VIII of the City of Corpus Christi Investment Policy is amended to
read as follows
VIII. COMPETITIVE SOLICITATION
Section 6. Section IIIA) of the City of Corpus Christi Investment Policy is amended to
read as follows
XIII. INFORMATION REPORTING/EVALUATION
A. Investment Committee consists of:
Director of Financial Services or if vacant, Assistant Deputy Director of Financial
Services
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SECTION 7. The City Council has reviewed and does approve the attached Investment
Policy as amended. A copy of the amended City Investment Policy is attached and
incorporated as an Exhibit.
ATTEST:
Armando Chapa
City Secretary
APPROVED: December 11, 2007
Benja in V. Lugg
Assistant City Attorney
for City Attorney
investment polciy res.doc
THE CITY of COPS CHRISTI
. IJP
enry Garr
Mayor
Corpus C rsti, Texas
of bi ai . 2007
The above resolution was passed by the following vote:
Henry Garrett
Melody Cooper
Larry Elh ondo, Sr.
Mike Rummell
Bill Kelly
Priscilla Leal
John E. Marez
Nelda Martinez
Michael McCutchon
10,seAlL
027520
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4,...w
City of
Corpus
Christi
City of Corpus Christi
Financial Services Department
Investment Policy
As of October 4, 2007
TABLE OF CONTENTS
Page
1. INTRODUCTION 2
11. PURPOSE ...,. 2
111. DEFINITIONS 3
IV. INVESTMENT OBJECTIVES
V. AUTHORIZED INVESTMENTS ENTS AND MAXIMUM TERM
VI. INVESTMENT MIX AND STRATEGIES 10
VII. RESPONSIBILITY AND CONTROLS 12
VIII. COMPETITIVE SOLICITATION 13
IX. AUTHORIZED INSTITUTIONS S 13
X. PLEDGED COLLATERAL 14
XI. SAFEKEEPING 15
XII. WIRE AND ELECTRONIC SERVICES 15
XII1. INFORMATION REPORTING/EVALUATION 15
XIV. BANKING SERVICES 17
XV. GENERAL PROVISIONS 17
APPENDICES
A. PUBLIC FUNDS INVESTMENT ACT 1-18
B. CITY'S CODE OF ETHICS ORDINANCE 1-8 RESOLUTION 1-3
D. LEGAL DEFENSE AND INDEMNIFICATION OF CITY OFFICERS AND
EMPLOYEES 1-2
E. WIRE AND ELECTRONIC SERVICES 1
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 a risk while maximizing interest earnings; and
• Maximization of return on the portfolio.
Earnings from investments will be used in a manner that will best serve the interests of the City of
Corpus Christi.
Investments shall be made with judgment and care, under prevailing circumstances, that a person of
prudence, discretion and intelligence would exercise in the management of that person's own
affairs, not for speculation, but for investment, considering the probable safety of capital and the
probable income to be derived.
11. PURPOSE
A. Authorization
This Investment Policy is authorized by the City Council in accordance with Chapter
2256, Subchapter A of the 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 rm Act of 1986 and subsequent legislation.
C. Review and Amendment
This Policy shall be reviewed annually by the City Council on or befre 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.
111. DEFINITIONS
Authorized City Representative - Officers authorized to transact as set out in the attached and
incorporated Appendix A on behalf of the Ci (City Treasurer, nv s n n . t Controller, Chief
Appendix ......nv.v...,....nx,.n s,......t
Accountant,
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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 ofFinancial Services - The Director of Financial Services is the Municipal Finance Officer
responsible for City investments.
Director of Financial Services Designee or Chief Accountant.
Fitt: ntx:r<.n: tx Director of Financial Services, Controller
Excess Cash Balances - Collected bank balances not needed to pay estimated check clearings.
Failed Transaction - An Investment, which an Institution falls 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 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 InvestmentOfficers,are permitted to
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Invest, includes such entities as the
Coastal Bend Health Facilities Development Corporation, Corpus Christi Housing Finance
Corporation, Corpus Christi Community Improvement Corporation, HOME Project, First Time Home
Buyer, Corpus Christi Industrial Development Corporation, Corpus Christi Business and Job
Development Corporation, North Padre Island Development Corporation, Corpus Christi Crime
Control and Prevention District, , �. tr; ;t .tV � � ������t�;t ��:� . �� � -.,.t.v-�v�v ¢ ....... ......... .
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Third Party Safekeeping Institution - Any Institution not affiliated with Institution delivering
the Investment.
IV. INVESTMENT BJ ECTIVES
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 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 ient 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 a the costs associated with
investing such monies.
D. Diversification
Diversification n is required because of differing liquidity needs of the City and is employed as
a way to control risk. Diversification minimizes es 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
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
c. 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
a.e Corporation
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<�•;' &e' 4 e d. Federal Home Loan t
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Federal Agricultural Mortgage Corporation
up to 2 years
3. Repurchase Agreements up to 365 days
Repurchase agreements e 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.
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 government
investment pool is the lesser of the following: i five percent of the total
current invested balance of the local government investment pool, or Ii)
vnv
:., e ^mss • ° T ha maximum total amount that may be invested
.
k.:;;a' is
•�vka�<;t�.#'an{¢;¢i�; :.a;�«•:•,an¢:~.;:nv;:"
in all ;.. n n local government investment pools } ¢x , , v,
of the Investment Portfolio. The Director of Financial
Services or designee may allow for up tonv . i¢.'i¢{v:.=vt.t;¢.... increase in
maximumamounts 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 (0 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:
. 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.
6. Money Market t M t al 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.;
. 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.
. 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.
. Texas Term Investment ent Pool up to 1 year
The Texas Term Local Government Investment Pool was created by Texas
local governments to provide investment programs tailored to the needs of
Texas cities. Texas Term is a fixed rate, fixed term portfolio option rated
AAAf by Standard and Poor's Corporation. Participants may lock in a fixed
rate fora term of 60to 365 days. The Pool is directed by an Advisory Board
of experienced local finance directors and treasurers.
v,
r
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)
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 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 ortherdebtbligatins or ii this Policy is amended to permit
such investment.
C. Methods to Monitor Investment Market Price
The City monitors the market price of investments by obtaining this information from
the Bloomberg system which is made available through the City's authorized
institutional brokers. The City may also obtain market price information from other
nationally recognized sources of financial information such as the Wall Street
Journal.
VI. INVESTMENT 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 }'t r , Co mittee, 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
-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.
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 Inger maturities typically exceed those on shorter maturities. Therefore,
longer maturities (that can be held to maturity, if necessary) are purchased in
anticipation of selling Tater at the same or lover interest rate, improving the
total return during the holding period.
b. The ability to improve market sector diversification by swapping out of one
investment into another for a better total return, to realign for disbursement
projections, or to extend or shorten maturity depending on economic
forecasts. The City Manager, or his designee, is required to approve any
investment that must be sold at a Toss. All gains and losses will be reported
to the City Council and Investment Committee no less frequently than on a
quarterly basis.
VII. 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.
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
. 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 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.
Any Institution authorized to participate in the City's investment program must meet
Collateral pledge requirements outlined in Section N.D. of these guidelines and
must submit annual financial reports.
IX. AUTHORIZED INSTITUTIONS
API institutions who seek to sell an authorized Investment to the City are required to
complete the questionnaire approved by the investment Committee ittee 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.
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.
E. 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.
D. 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 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), Goverment 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 deposit,
repurchase agreements, guaranteed investment contracts or Excess Cash
Balances.
B. Safekeeping ing f 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 ing f 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 KC. 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,t
��!'°� Director of Financial
Services
City Attorney
Director of Management and Budget or if vacant, Assistant 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 Tess than
quarterly, as required by the Public Funds Investment Act.
B. Internal Reporting/Evaluation
The following reports are to be submitted on a:
1. Weekly basis to the Director of Financial Services or Designee (Excluding
Investment Officers):
a. Cash Position by Bank Account
b. Collateral Position
. 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
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
Approved Institutional Brokers
m. Economic and Interest Rate Forecast
n. Glossary
0. 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.
D. Record Retention
The City follows the guidelines of retaining records for five years from City's current
fiscal year, as recommended in the Texas State Library Municipal Records Manual
or may be authorized by the City's local records management guidelines.
XIV. BANKING SERVICES
All depository services are provided in the City's main depository agreement. Other
services such as credit cards, direct deposit of payroll or other services may be
administered through separate agreements. To aggressively invest Excess Cash
Balances, controlled disbursements accounts, zero balance accounts and other cash
management tools may be employed.
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 Kcal 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 i
attached.