HomeMy WebLinkAbout027989 RES - 12/16/2008RESOLUTION
REAFFIRMING THE CITY OF CORPUS CHRISTI INVESTMENT POLICY
WHEREAS, the City of Corpus Christi Investment Policy was adopted in Resolution No. 022390
on October 24, 1995; 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; amended in Resolution No. 025557
on November 11, 2003; amended in Resolution No. 026345 on July 19, 2005; amended in
Resolution NO. 027290 on May 29, 2007; and amended in Resolution 027520 on December 11,
2007;
WHEREAS, the Investment Policy provides for annual review by City Council;
WHEREAS, the Public Funds Investment Act requires annual review by the governing
body of its Investment Policy, and adoption of a written instrument stating that it has
reviewed the investment policy and investment strategies;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS
CHRISTI, TEXAS:
SECTION 1. That the Corpus Christi City Council has reviewed and reaffirms the Investment
Policy as previously adopted by Resolution Number 027520 on December 11, 2007. A copy of
the Investment Policy is attached.
Armando Chapa
City Secretary
APPROVED:PpDecember 5, 2008.
d -N3
Lisa Aguila
Assistant City Attorney
for the City Attorney
THE OF CORP CHRISTI
legit dr. d
H=nry Garre
Mayor
027989
H:\LEG-DIR\Lisa\2008 Resolutions\Investment Policy.doc
Corpus Christi, Texas
I(i4i of b.QaYll_ , 2008
The above resolution was passed by the following vote:
Henry Garrett
Melody Cooper n
Larry Elizondo, Sr.
Mike Hummel) U
Bill Kelly
Priscilla G. Leal
John E. Marez
Nelda Martinez
Michael McCutchon
027989
TABLE OF CONTENTS
Pape
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 14
XII. WIRE AND ELECTRONIC SERVICES 15
XIII. INFORMATION REPORTING/EVALUATION 15
XIV. BANKING SERVICES 17
XV. GENERAL PROVISIONS 17
APPENDICES
A. PUBLIC FUNDS INVESTMENT ACT 1-14
B. CITY'S CODE OF ETHICS ORDINANCE 1-8
C. RESOLUTION 1
D. LEGAL DEFENSE AND INDFMNIFICATION OF CITY OFFICERS AND
EMPLOYEES 1-2
E. WIRE AND ELECTRONIC SERVICES 1
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 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 Act of 1986 and subsequent legislation.
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, Investment Analyst, Controller,
Chief Accountant, Deputy Director of Financial Services 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 — Deputy 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:
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(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;
(8) 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 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,
and Corpus Christi Digital Community Development Corporation.
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
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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 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.
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.
9. Securities Lending Program
The City recognizes that investment risks can result from default risk, credit
volatility risk, and market price risks due to various technical and fundamental
economic factors, and other complications, leading to temporary illiquidity.
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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
d. Federal Home Loan Mortgage Corporation up to 2 years
e. Federal Agricultural Mortgage Corporation up to 2 years
3. 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.
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 government
investment pool is the lesser of the following: (i) five (5) percent of the
total current invested balance of the local government investment pool, or
(ii) $75,000,000. The maximum total amount that may be invested in all
overnight local government investment pools is thirty (30) 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.
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.
6. Money Market Mutual Fund
A no-load money market mutual fund (no service charge) is an authorized
investment if:
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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.
8. 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 portfolio
option rated AAAf by Standard and Poor's Corporation. Participants may
lock in a fixed rate for a term of 60 to 365 days. The Pool is directed by
an Advisory Board of experienced local finance directors and treasurers.
9. Securities Lending Program up to 1 year
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 at any 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 terms of a
loan made under the program must require that the securities being held
as collateral be pledged to the investing entity, held in the investing
entity's name and deposited at the time the investment is made with the
entity or with a third party selected by or approved by the investing entity.
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A loan made under the program must be placed through a primary
government securities dealer or a financial institution doing business in
the state. An agreement to lend securities must have a term of one year
or less.
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 o 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
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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 Joumal.
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. 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 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
t0
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 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
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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 ordinanceattachedand 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 2256.0050) 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.
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.
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.
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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), Government Code, shall
not be eligible for use as collateral of City monies governed by this Policy.
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
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, Deputy Director of Financial Services
City Attorney
Direottor-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 less than quarterly, as required by the Public Funds Investment Act.
B. Internal Reporting/Evaluation
The following reports are to be submitted on a:
I5
1. Weekly 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
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
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
disrIncura 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.
16
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.
17
APPENDIX A
Texas Public Funds Investment Act
Texas Government Code, Chapter 2256 Subchapter A
GOVERNMENT CODE
CHAPTER 2256. PUBLIC FUNDS INVESTMENT
SUBCHAPTER A. AUTHORIZED INVESTMENTS FOR GOVERNMENTAL ENTITIES
Sec. 2256.001. SHORT TITLE. This chapter may be cited as
the Public Funds Investment Act.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995.
Sec. 2256.002. DEFINITIONS. In this chapter:
(1) "Bond proceeds" means the proceeds from the sale
of bonds, notes, and other obligations issued by an entity, and
reserves and funds maintained by an entity for debt service
purposes.
(2) "Book value" means the original acquisition cost
of an investment plus or minus the accrued amortization or
accretion.
(3) "Funds" means public funds in the custody of a
state agency or local government that:
(A) are not required by law to be deposited in the
state treasury; and
(B) the investing entity has authority to invest.
(4) "Institution of higher education" has the meaning
assigned by Section 61.003, Education Code.
(5) "Investing entity" and "entity" mean an entity
subject to this chapter and described by Section 2256.003.
(6) "Investment pool" means an entity created under
this code to invest public funds jointly on behalf of the entities
that participate in the pool and whose investment objectives in
order of priority are:
(A) preservation and safety of principal;
(B) liquidity; and
(C) yield.
(7) "Local government" means a municipality, a county,
a school district, a district or authority created under Section
52(b)(1) or (2), Article III, or Section 59, Article XVI, Texas
Constitution, a fresh water supply district, a hospital district,
and any political subdivision, authority, public corporation, body
politic, or instrumentality of the State of Texas, and any
nonprofit corporation acting on behalf of any of those entities.
(8) "Market value" means the current face or pax value
of an investment multiplied by the net selling price of the security
as quoted by a recognized market pricing source quoted on the
valuation date.
(9) "Pooled fund group" means an internally created
fund of an investing entity in which one or more institutional
accounts of the investing entity are invested.
(10) "Qualified representative" means 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;
(8) for a state or federal bank, a savings bank,
or a state or federal credit union, a member of the loan committee
for the bank or branch of the bank or a person authorized by
corporate resolution to act on behalf of and bind the banking
institution;
(C) for an investment 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; or
(D) for—an investment management firm registered
under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1
et seq.) or, if not subject to registration under that Act,
registered with the State Securities Board, a person who is an
officer or principal of the investment management firm.
(11) "School district" means a public school district.
(12) "Separately invested asset" means an account or
fund of a state agency or local government that is not invested in a
pooled fund group.
(13) "State agency" means an office, department,
commission, board, or other agency that is part of any branch of
state government, an institution of higher education, and any
nonprofit corporation acting on behalf of any of those entities.
1
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1421, Sec. 1, eff. Sept. 1, 1997;
Acts 1999, 76th Leg., ch. 1454, Sec. 1, eff. Sept. 1, 1999.
Sec. 2256.003. AUTHORITY TO INVEST FUNDS; ENTITIES SUBJECT
TO THIS CHAPTER. (a) Each governing body of the following
entities may purchase, sell, and invest its funds and funds under
its control in investments authorized under this subchapter in
compliance with investment policies approved by the governing body
and according to the standard of care prescribed by Section
2256.006:
(1) a local government;
(2) a state agency;
(3) a nonprofit corporation acting on behalf of a
local government or a state agency; or
(4) an investment pool acting on behalf of two or more
local governments, state agencies, or a combination of those
entities.
(b) In the exercise of its powers under Subsection (a), the
governing body of an investing entity 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 its public funds or other funds under its control. A contract
made under authority of this subsection may not be fox a term longer
than two years. A renewal or extension of the contract must be made
by the governing body of the investing entity by order, ordinance,
or resolution.
(c) This chapter does not prohibit an investing entity or
investment officer from using the entity's employees or the
services of a contractor of the entity to aid the investment officer
in the execution of the officer's duties under this chapter.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1999, 76th Leg., ch. 1454, Sec. 2, eff. Sept. 1, 1999.
Sec. 2256.004. APPLICABILITY. (a) This subchapter does
not apply to:
(1) a public retirement system as defined by Section
(2) state funds invested as authorized by Section
(3) an institution of higher education having total
endowments of at least $95 million in book value on May 1, 1995;
(4) funds invested by the Veterans' Land Board as
authorized by Chapter 161, 162, or 164, Natural Resources Code;
(5) registry funds deposited with the county or
district clerk under Chapter 117, Local Government Code; or
(6) a deferred compensation plan that qualifies under
either Section 401(k) or 457 of the Internal Revenue Code of 1986
(26 U.S.C. Section 1 et seq.), as amended.
(b) This subchapter does not apply to an investment donated
to an investing entity for a particular purpose or under terms of
use specified by the donor.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 505, Sec. 24, eff. Sept. 1, 1997;
Acts 1997, 75th Leg., ch. 1421, Sec. 2, eff. Sept. 1, 1997; Acts
1999, 76th Leg., ch. 62, Sec. 8.21, eff. Sept. 1, 1999; Acts 1999,
76th Leg., ch. 1454, Sec. 3, eff. Sept. 1, 1999.
Sec. 2256.005. INVESTMENT POLICIES; INVESTMENT
STRATEGIES; INVESTMENT OFFICER. (a) The governing body of an
investing entity shall adopt by rule, order, ordinance, or
resolution, as appropriate, a written investment policy regarding
the investment of its funds and funds under its control.
(b) The investment policies must:
(-Id be written,
802.001;
404.024;
(2) primarily emphasize safety of principal and
liquidity;
(3) address investment diversification, yield, and
maturity and the quality and capability of investment management;
and
(4) include:
(A) a list of the types of
in which the investing entity's funds may be
(B) the maximum allowable
individual investment owned by the entity;
(C) for pooled fund
dollar -weighted average maturity allowed
2
authorized investments
invested;
stated maturity of any
groups, the maximum
based on the stated
maturity date for the portfolio;
(D) methods to monitor the market price of
investments acquired with public funds; and
(E) a requirement for settlement of all
transactions, except investment pool funds and mutual funds, on a
delivery versus payment basis.
(c) The investment policies may provide that bids for
certificates of deposit be solicited:
(1) orally;
(2) in writing;
(3) electronically; or
(4) in any combination of those methods.
(d) As an integral part of an investment policy, the
governing body shall adopt a separate written investment strategy
fox each of the funds or group of funds under its control. Each
investment strategy must describe the investment objectives for the
particular fund using the following priorities in order of
importance:
(1) understanding of the suitability of the investment
to the financial requirements of the entity;
(2) preservation and safety of principal;
(3) liquidity;
(4) marketability of the investment if the need arises
to liquidate the investment before maturity;
(5) diversification of the investment portfolio; and
(6) yield.
(e) The governing body of an investing entity shall review
its investment policy and investment strategies not less than
annually. The governing body shall adopt a written instrument by
rule, order, ordinance, or resolution stating that it has reviewed
the investment policy and investment strategies and that the
written instrument so adopted shall record any changes made to
either the investment policy or investment strategies.
(f) Each investing entity shall designate, by rule, order,
ordinance, or resolution, as appropriate, one or more officers or
employees of the state agency, local government, or investment pool
as investment officer to be responsible fox the investment of its
funds consistent with the investment policy adopted by the entity.
If the governing body of an investing entity has contracted with
another investing entity to invest its funds, the investment
officer of the other investing entity is considered to be the
investment officer of the first investing entity for purposes of
this chapter. Authority granted to a person to invest an entity's
funds is effective until rescinded by the investing entity, until
the expiration of the officer's term ox the termination of the
person's employment by the investing entity, or if an investment
management firm, until the expiration of the contract with the
investing entity. In the administration of the duties of an
investment officer, the person designated as investment officer
shall exercise the judgment and care, under prevailing
circumstances, that a prudent person would exercise in the
management of the person's own affairs, but the governing body of
the investing entity retains ultimate responsibility as
fiduciaries of the assets of the entity. Unless authorized by law,
a person may not deposit, withdraw, transfer, or manage in any other
manner the funds of the investing entity.
(g) Subsection (f) does not apply to a state agency, local
government, or investment pool for which an officer of the entity is
assigned by law the function of investing its funds.
Text of subsec. (h) as amended by Acts 1997, 75th Leg., ch. 685,
Sec. 1
(h) kno£€ice-r or employee of a commission created under
Chapter 391, Local Government Code, is ineligible to be an
investment officer for the commission under Subsection (f) if the
officer or employee is an investment officer designated under
Subsection (f) for another local government.
Text of subsec. (h) as amended by Acts 1997, 75th Leg. , ch. 1421,
Sec. 3
(h) An officer or employee of a commission created under
Chapter 391, Local Government Code, is ineligible to be designated
as an investment officer under Subsection (f) for any investing
entity other than for that commission.
(i) An investment officer of an entity who has a personal
business relationship with a business organization offering to
engage in an investment transaction with the entity shall file a
3
statement disclosing that personal business interest. An
investment officer who is related within the second degree by
affinity or consanguinity, as determined under Chapter 573, to an
individual seeking to sell an investment to the investment
officer's entity shall file a statement disclosing that
relationship. A statement required under this subsection must be
filed with the Texas Ethics Commission and the governing body of the
entity. For purposes of this subsection, an investment officer has
a personal business relationship with a business organization if:
(1) the investment officer owns 10 percent or more of
the voting stock or shares of the business organization or owns
$5,000 or more of the fair market value of the business
organization;
(2) funds received by the investment officer from the
business organization exceed 10 percent of the investment officer's
gross income for the previous year; or
(3) the investment officer has acquired from the
business organization during the previous year investments with a
book value of $2,500 or more for the personal account of the
investment officer.
(j) The governing body of an investing entity may specify in
its investment policy that any investment authorized by this
chapter is not suitable.
(k) A written copy of the investment policy shall be
presented to any person offering to engage in an investment
transaction with an investing entity or to an investment management
firm under contract with an investing entity to invest or manage the
entity's investment portfolio. For purposes of this subsection, a
business organization includes investment pools and an investment
management firm under contract with an investing entity to invest
or manage the entity's investment portfolio. Nothing in this
subsection relieves the investing entity of the responsibility for
monitoring the investments made by the investing entity to
determine that they are in compliance with the investment policy.
The qualified representative of the business organization offering
to engage in an investment transaction with an investing entity
shall execute a written instrument in a form acceptable to the
investing entity and the business organization substantially to the
effect that the business organization has:
(1) received and reviewed the investment policy of the
entity; and
(2) acknowledged that the business organization has
implemented reasonable procedures and controls in an effort to
preclude investment transactions conducted between the entity and
the organization that are not authorized by the entity's investment
policy, except to the extent that this authorization is dependent
on an analysis of the makeup of the entity's entire portfolio or
requires an interpretation of subjective investment standards.
(1) The investment officer of an entity may not acquire or
otherwise obtain any authorized investment described in the
investment policy of the investing entity from a person who has not
delivered to the entity the instrument required by Subsection (k).
(m) An investing entity other than a state agency, in
conjunction with its annual financial audit, shall perform a
compliance audit of management controls on investments and
adherence to the entity's established investment policies.
(n) Except as provided by Subsection (o), at least once
every two years a state agency shall arrange for a compliance audit
of management controls on investments and adherence to the agency's
established investment policies. The compliance audit shall be
performed by the agency's internal auditor or by a private auditor
employed in_the_¢anner provided by Section 321.020. Not later than
January 1 of each even-numbered year a state agency shall report the
results of the most recent audit performed under this subsection to
the state auditor. Subject to a risk assessment and to the
legislative audit committee's approval of including a review by the
state auditor in the audit plan under Section 321.013, the state
auditor may review information provided under this section. If
review by the state auditor is approved by the legislative audit
committee, the state auditor may, based on its review, require a
state agency to also report to the state auditor other information
the state auditor determines necessary to assess compliance with
laws and policies applicable to state agency investments. A report
under this subsection shall be prepared in a manner the state
auditor prescribes.
(o) The audit requirements of Subsection (n) do not apply to
assets of a state agency that are invested by the comptroller under
Section 404.024.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 685, Sec. 1, eff. Sept. 1, 1997;
Acts 1997, 75th Leg., ch. 1421, Sec. 3, eff. Sept. 1, 1997; Acts
1999, 76th Leg., ch.,1454, Sec. 4, eff. Sept. 1, 1999; Acts 2003,
78th Leg., ch. 785, Sec. 41, eff. Sept. 1, 2003.
Sec. 2256.006. STANDARD OF CARE. (a) 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 the person's own affairs, not for speculation,
but for investment, considering the probable safety of capital and
the probable income to be derived. Investment of funds shall be
governed by the following investment objectives, in order of
priority:
(1) preservation and safety of principal;
(2) liquidity; and
(3) yield.
(b) In determining whether an investment officer has
exercised prudence with respect to an investment decision, the
determination shall be made taking into consideration:
(1) the investment of all funds, or funds under the
entity's control, over which the officer had responsibility rather
than a consideration as to the prudence of a single investment; and
(2) whether the investment decision was consistent
with the written investment policy of the entity.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995.
Sec. 2256.007. INVESTMENT TRAINING; STATE AGENCY BOARD
MEMBERS AND OFFICERS. (a) Each member of the governing board of a
state agency and its investment officer shall attend at least one
training session relating to the person's responsibilities under
this chapter within six months after taking office or assuming
duties.
(b) The Texas Higher Education Coordinating Board shall
provide the training under this section.
(c) Training under this section must include education in
investment controls, security risks, strategy risks, market risks,
diversification of investment portfolio, and compliance with this
chapter.
(d) An investment officer shall attend a training session
not less than once in a two-year period and may receive training
from any independent source approved by the governing body of the
state agency. The investment officer shall prepare a report on this
subchapter and deliver the report to the governing body of the state
agency not latex than the 180th day after the last day of each
regular session of the legislature.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 73, Sec. 1, eff. May 9, 1997; Acts
1997, 75th Leg., ch. 1421, Sec. 4, eff. Sept. 1, 1997; Acts 1999,
76th Leg., ch. 1454, Sec. 5, eff. Sept. 1, 1999.
Sec. 2256.008. INVESTMENT TRAINING; LOCAL GOVERNMENTS.
(a) Except as provided by Subsections (b) and (e), the treasurer,
the chief financial officer if the treasurer is not the chief
financial officer, and the investment officer of a local government
shall:
(1) attend at least one training session from an
independent source approved by the governing body of the local
government or a designated investment committee advising the
investment officer as provided for in the investment policy of the
local government and containing at least 10 hours of instruction
relating to the treasurer's or officer's responsibilities under
this subchapter within 12 months after taking office or assuming
duties; and
(2) except as provided by Subsections (b) and (e),
attend an investment training session not less than once in a
two-year period and receive not less than 10 hours of instruction
relating to investment responsibilities under this subchapter from
an independent source approved by the governing body of the local
government or a designated investment committee advising the
investment officer as provided for in the investment policy of the
local government.
(b) An investing entity created under authority of Section
52(b), Article III, or Section 59, Article XVI, Texas Constitution,
5
that has contracted with an investment management firm under
Section 2256.003(b) and has fewer than five full-time employees or
an investing entity that has contracted with another investing
entity to invest the entity's funds may satisfy the training
requirement provided by Subsection (a)(2) by having an officer of
the governing body attend four hours of appropriate instruction in
a two-year period. The treasurer or chief financial officer of an
investing entity created under authority of Section 52(b), Article
III, or Section 59, Article XVI, Texas Constitution, and that has
fewer than five full-time employees is not required to attend
training required by this section unless the person is also the
investment officer of the entity.
(c) Training under this section must include education in
investment controls, security risks, strategy risks, market risks,
diversification of investment portfolio, and compliance with this
chapter.
(d) Not later than December 31 each year, each individual,
association, business, organization, governmental entity, or other
person that provides training under this section shall report to
the comptroller a list of the governmental entities for which the
person provided required training under this section during that
calendar year. An individual's reporting requirements under this
subsection are satisfied by a report of the individual's employer
or the sponsoring or organizing entity of a training program or
seminar.
(e) This section does not apply to a district governed by
Chapter 36 or 49, Water Code.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1421, Sec. 5, eff. Sept. 1, 1997;
Acts 1999, 76th Leg., ch. 1454, Sec. 6, eff. Sept. 1, 1999; Acts
2001, 77th Leg., ch. 69, Sec. 4, eff. May 14, 2001.
Sec. 2256.009. AUTHORIZED INVESTMENTS: OBLIGATIONS OF, OR
GUARANTEED BY GOVERNMENTAL ENTITIES. (a) Except as provided by
Subsection (b), the following are authorized investments under this
subchapter:
(1) obligations, including letters of credit, of the
United States or its agencies and instrumentalities;
(2) direct obligations of this state or its agencies
and instrumentalities;
(3) collateralized mortgage obligations directly
issued by a federal agency or instrumentality of the United States,
the underlying security for which is guaranteed by an agency or
instrumentality of the United States;
(4) other obligations, the principal and interest of
which are unconditionally guaranteed or insured by, or backed by
the full faith and credit of, this state or the United States or
their respective agencies and instrumentalities;
(5) obligations of states, agencies, counties,
cities, and other political subdivisions of any state rated as to
investment quality by a nationally recognized investment rating
firm not less than A or its equivalent; and
(6) bonds issued, assumed, ox guaranteed by the State
of Israel.
(b) The following are not authorized investments under this
section:
(1) obligations whose payment represents the coupon
payments on the outstanding principal balance of the underlying
mortgage-backed security collateral and pays no principal;
(2) obligations whose payment represents the
principal stream of cash flow from the underlying mortgage-backed
security collateral and bears no interest;
(3) collateralized mortgage obligations that have a
stated final maturity date of greater than 10 years; and
(4) collateralized mortgage obligations the interest
rate of which is determined by an index that adjusts opposite to the
changes in a market index.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1999, 76th Leg., ch. 1454, Sec. 7, eff. Sept. 1, 1999;
Acts 2001, 77th Leg. , ch. 558, Sec. 1, eff. Sept. 1, 2001.
Sec. 2256.010. AUTHORIZED INVESTMENTS: CERTIFICATES OF
DEPOSIT AND SHARE CERTIFICATES. (a) A certificate of deposit or
share certificate is an authorized investment under this subchapter
if the certificate is issued by a depository institution that has
its main office or a branch office in this state and is:
(1) guaranteed or insured by the Federal Deposit
6
Insurance Corporation or its successor or the National Credit Union
Share Insurance Fund or its successor;
(2) secured by obligations that are described by
Section 2256.009(a), including mortgage backed securities directly
issued by a federal agency or instrumentality that have a market
value of not less than the principal amount of the certificates, but
excluding those mortgage backed securities of the nature described
by Section 2256.009(b); or
(3) secured in any other manner and amount provided by
law for deposits of the investing entity.
(b) In addition to the authority to invest funds in
certificates of deposit under Subsection (a), an investment in
certificates of deposit made in accordance with the following
conditions is an authorized investment under this subchapter:
(1) the funds are invested by an investing entity
through a depository institution that has its main office or a
branch office in this state and that is selected by the investing
entity;
(2) the depository institution selected by the
investing entity under Subdivision (1) arranges for the deposit of
the funds in certificates of deposit in one or more federally
insured depository institutions, wherever located, for the account
of the investing entity;
(3) the full amount of the principal and accrued
interest of each of the certificates of deposit is insured by the
United States or an instrumentality of the United States;
(4) the depository institution selected by the
investing entity under Subdivision (1) acts as custodian for the
investing entity with respect to the certificates of deposit issued
for the account of the investing entity; and
(5) at the same time that -the funds are deposited and
the certificates of deposit are issued for the account of the
investing entity, the depository institution selected by the
investing entity under Subdivision (1) receives an amount of
deposits from customers of other federally insured depository
institutions, wherever located, that is equal to or greater than
the amount of the funds invested by the investing entity through the
depository institution selected under Subdivision (1).
Amended by Acts 1995, 74th Leg., ch. 32, Sec. 1, eff. April 28,
1995; Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995;
Acts 1997, 75th Leg., ch. 1421, Sec. 6, eff. Sept. 1, 1997.
Amended by:
Acts 2005, 79th Leg., Ch. 128, Sec. 1, eff. September 1, 2005.
Sec. 2256.011. AUTHORIZED INVESTMENTS: REPURCHASE
AGREEMENTS. (a) A fully collateralized repurchase agreement is
an authorized investment under this subchapter if the repurchase
agreement:
(1) has a defined termination date;
(2) is secured by obligations described by Section
2256.009(a)(1); and
(3) requires the securities being purchased by the
entity to be pledged to the entity, held in the entity's name, and
deposited at the time the investment is made with the entity or with
a third party selected and approved by the entity; and
(4) is placed through a primary government securities
dealer, as defined by the Federal Reserve, or a financial
institution doing business in this state.
(b) In this section, "repurchase agreement" means a
simultaneous agreement to buy, hold for a specified time, and sell
back at a future date obligations described by Section
2256.009(a)(1), at a market value at the time the funds are
disbursed of not less than the principal amount of the funds
disbursed. Thterm includes a direct securityrepurchase
agreement and a reverse security repurchase agreement.
(c) Notwithstanding any other law, the term of any reverse
security repurchase agreement may not exceed 90 days after the date
the reverse security repurchase agreement is delivered.
(d) Money received by an entity under the terms of a reverse
security repurchase agreement shall be used to acquire additional
authorized investments, but the term of the authorized investments
acquired must mature not later than the expiration date stated in
the reverse security repurchase agreement.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995.
Sec. 2256.0115. AUTHORIZED INVESTMENTS: SECURITIES
7
LENDING PROGRAM. (a) A securities lending program is an
authorized investment under this subchapter if it meets the
conditions provided by this section.
(b) To qualify as an authorized investment under this
subchapter:
(1) the value of securities loaned under the program
must be not less than 1o0 percent collateralized, including accrued
income;
(2) a loan made under the program must allow for
termination at any time;
(3) a loan made under the program must be secured by:
(A) pledged securities described by Section
2256.009;
(B) pledged irrevocable letters of credit issued
by a bank that is:
(i) organized and existing under the laws
of the United States or any other state; and
(ii) continuously rated by at least one
nationally recognized investment rating firm at not less than A or
its equivalent; or
(C) cash invested in accordance with Section:
(i) 2256.009;
(ii) 2256.013;
(iii) 2256.014; or
(iv) 2256.016;
(4) the terms of a loan made under the program must
require that the securities being held as collateral be:
(A) pledged to the investing entity;
(B) held in the investing entity's name; and
(C) deposited at the time the investment is made
with the entity or with a third party selected by or approved by the
investing entity;
(5) a loan made under the program must be placed
through:
(A) a primary government securities dealer, as
defined by 5 C.F.R. Section 6801.102(f), as that regulation existed
on September 1, 2003; or
(B) a financial institution doing business in
this state; and
(6) an agreement to lend securities that is executed
under this section must have a term of one year or less.
Added by Acts 2003, 78th Leg., ch. 1227, Sec. 1, eff. Sept. 1, 2003.
Sec. 2256.012. AUTHORIZED INVESTMENTS: BANKER'S
ACCEPTANCES. A bankers' acceptance is an authorized investment
under this subchapter if the bankers' acceptance:
(1) has a stated maturity of 270 days or fewer from the
date of its issuance;
(2) will be, in accordance with its terms, liquidated
in full at maturity;
(3) is eligible for collateral fox borrowing from a
Federal Reserve Bank; and
(4) is accepted by a bank organized and existing under
the laws of the United States or any state, if the short-term
obligations of the bank, or of a bank holding company of which the
bank is the largest subsidiary, are rated not less than A-1 or P-1
or an equivalent rating by at least one nationally recognized
credit rating agency.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995.
Sec. 2256.013. AUTHORIZED INVESTMENTS: COMMERCIAL PAPER.
Commercial paper is an authorized investment under this subchapter
if the commercial paper:
(7.) has a stated maturity of 270 days or fewer from the
date of its issuance; and
(2) is rated not less than A-1 or P-1 ox an equivalent
rating by at least:
(A) two nationally recognized credit rating
agencies; or
(B) one nationally recognized credit rating
agency and is fully secured by an irrevocable letter of credit
issued by a bank organized and existing under the laws of the United
States or any state.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995.
Sec. 2256.014. AUTHORIZED INVESTMENTS: MUTUAL FUNDS.
8
(a) A no-load money market mutual fund is an authorized investment
under this subchaptex if the mutual fund:
(1) is registered with and regulated by the Securities
and Exchange Commission;
(2) provides the investing entity 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 S0a-1 et seq.);
(3) has a dollax-weighted average stated maturity of
90 days or fewer; and
(4) includes in its investment objectives the
maintenance of a stable net asset value of $1 fox each share.
(b) In addition to a no-load money market mutual fund
permitted as an authorized investment in Subsection (a), a no-load
mutual fund is an authorized investment under this subchapter if
the mutual fund:
(1) is registered with the Securities and Exchange
Commission;
(2) has an average weighted maturity of less than two
years;
(3) is invested exclusively in obligations approved by
this subchapter;
(4) is continuously rated as to investment quality by
at least one nationally recognized investment rating firm of not
less than AAA or its equivalent; and
(5) conforms to the requirements set forth in Sections
2256.o16(b) and (c) relating to the eligibility of investment pools
to receive and invest funds of investing entities.
(c) An entity is not authorized by this section to:
(1) invest in the aggregate more than 15 percent of its
monthly average fund balance, excluding bond proceeds and reserves
and othex funds held for debt service, in mutual funds described in
Subsection (b);
(2) invest any portion of bond proceeds, reserves and
funds held fox debt service, in mutual funds described in
Subsection (b); or
(3) invest its funds or funds under its control,
including bond proceeds and reserves and other funds held for debt
service, in any one mutual fund described in Subsection (a) or (b)
in an amount that exceeds 10 percent of the total assets of the
mutual fund.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1421, Sec. 7, eff. Sept. 1, 1997;
Acts 1999, 76th Leg., ch. 1454, Sec. 8, eff. Sept. 1, 1999.
Sec. 2256.015. AUTHORIZED INVESTMENTS: GUARANTEED
INVESTMENT CONTRACTS. (a) A guaranteed investment contract is an
authorized investment for bond proceeds under this subchapter if
the guaxanteed investment contract:
(1) has a defined termination date;
(2) is secured by obligations described by Section
2256.009(a)(1), excluding those obligations described by Section
2256.009(b), in an amount at least equal to the amount of bond
proceeds invested under the contract; and
(3) is pledged to the entity and deposited with the
entity or with a third party selected and approved by the entity.
(b) Bond proceeds, other than bond proceeds representing
reserves and funds maintained fox debt service purposes, may not be
invested under this subchapter in a guaranteed investment contract
with a term of longer than five years from the date of issuance of
the bonds.
(c) To be eligible as an authorized investment:
(1) the governing body of the entity must specifically
authorize guaranteed investment contracts as an eligible
investment in the order, ordinance, or resolution authorizing the
issuance of bonds;
(2) the entity must receive bids from at least three
separate providers with no material financial interest in the bonds
from which proceeds were received;
(3) the entity must purchase the highest yielding
guaranteed investment contract for which a qualifying bid is
received;
(4) the price of the guaranteed investment contract
must take into account the reasonably expected drawdown schedule
for the bond proceeds to be invested; and
(5) the provider must certify the administrative costs
9
reasonably expected to be paid to third parties in connection with
the guaranteed investment contract.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1421, Sec. 8, eff. Sept. 1, 1997;
Acts 1999, 76th Leg., ch. 1454, Sec. 9, 10, eff. Sept. 1, 1999.
Sec. 2256.016. AUTHORIZED INVESTMENTS: INVESTMENT POOLS.
(a) An entity may invest its funds and funds under its control
through an eligible investment pool if the governing body of the
entity by rule, order, ordinance, ox resolution, as appropriate,
authorizes investment in the particular pool. An investment pool
shall invest the funds it receives from entities in authorized
investments permitted by this subchapter.
(b) To be eligible to receive funds from and invest funds on
behalf of an entity under this chapter, an investment pool must
furnish to the investment officer or other authorized
representative of the entity an offering circular or other similar
disclosure instrument that contains, at a minimum, the following
information:
(1) the types of investments in which money is allowed
to be invested;
(2) the maximum average dollar -weighted maturity
allowed, based on the stated maturity date, of the pool;
(3) the maximum stated maturity date any investment
security within the portfolio has;
(4) the objectives of the pool;
(5) the size of the pool;
(6) the names of the members of the advisory board of
the pool and the dates their terms expire;
(7) the custodian bank that will safekeep the pool's
assets;
(8) whether the intent of the pool is to maintain a net
asset value of one dollar and the risk of market price fluctuation;
(9) whether the only source of payment is the assets of
the pool at market value or whether there is a secondary source of
payment, such as insurance or guarantees, and a description of the
secondary source of payment;
(10) the name and address of the independent auditor
of the pool;
(11) the requirements to be satisfied for an entity to
deposit funds in and withdraw funds from the pool and any deadlines
or other operating policies required fox the entity to invest funds
in and withdraw funds from the pool; and
(12) the performance history of the pool, including
yield, average dollar -weighted maturities, and expense ratios.
(c) To maintain eligibility to receive funds from and invest
funds on behalf of an entity under this chapter, an investment pool
must furnish to the investment officer or other authorized
representative of the entity:
(1) investment transaction confirmations; and
(2) a monthly report that contains, at a minimum, the
following information:
(A) the types and percentage breakdown of
securities in which the pool is invested;
(8) the current average dollar -weighted
maturity, based on the stated maturity date, of the pool;
(C) the current percentage of the pool's
portfolio in investments that have stated maturities of more than
one year;
(D) the book value versus the market value of the
pool's portfolio, using amortized cost valuation;
(E) the size of the pool;
(F) the number of participants in the pool;
(G) the custodian bank that is safekeeping the
assets -of the pool,
(H) a listing of daily transaction activity of
the entity participating in the pool;
(I) the yield and expense ratio of the pool;
(J) the portfolio managers of the pool; and
(K) any changes or addenda to the offering
circular.
(d) An entity by contract may delegate to an investment pool
the authority to hold legal title as custodian of investments
purchased with its local funds.
(e) In this section, "yield" shall be calculated in
accordance with regulations governing the registration of open-end
10
management investment companies under the Investment Company Act of
1940, as promulgated from time to time by the federal Securities and
Exchange Commission.
(f) To be eligible to receive funds from and invest funds on
behalf of an entity under this chapter, a public funds investment
pool created to function as a money market mutual fund must mark its
portfolio to market daily, and, to the extent reasonably possible,
stabilize at a $1 net asset value., If the ratio of the market value
of the portfolio divided by the book value of the portfolio is less
than 0.995 or greater than 1.005, portfolio holdings shall be sold
as necessary to maintain the ratio between 0.995 and 1.005.
(g) To be eligible to receive funds from and invest funds on
behalf of an entity under this chapter, a public funds investment
pool must have an advisory board composed:
(1) equally of participants in the pool and other
persons who do not have a business relationship with the pool and
are qualified to advise the pool, for a public funds investment pool
created under Chapter 791 and managed by a state agency; or
(2) of participants in the pool and other persons who
do not have a business relationship with the pool and are qualified
to advise the pool, for other investment pools.
(h) To maintain eligibility to receive funds from and invest
funds on behalf of an entity under this chapter, an 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.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1421, Sec. 9, eff. Sept. 1, 1997.
Sec. 2256.017. EXISTING INVESTMENTS. An entity is not
required to liquidate investments that were authorized investments
at the time of purchase.
Added by Acts 1995, 74th Leg., ch. 76, Sec. 5.46(a), eff. Sept. 1,
1995; Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995.
Amended by Acts 1997, 75th Leg., ch. 1421, Sec. 10, eff. Sept. 1,
1997.
Sec. 2256.019. RATING OF CERTAIN INVESTMENT POOLS. A
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 or no lower than investment
grade by at least one nationally recognized rating service with a
weighted average maturity no greater than 90 days.
Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995.
Amended by Acts 1997, 75th Leg., ch. 1421, Sec. 11, eff. Sept. 1,
1997.
Sec. 2256.020. AUTHORIZED INVESTMENTS: INSTITUTIONS OF
HIGHER EDUCATION. In addition to the authorized investments
permitted by this subchapter, an institution of higher education
may purchase, sell, and invest its funds and funds under its control
in the following:
(1) cash management and fixed income funds sponsored
by organizations exempt from federal income taxation under Section
501(f), Internal Revenue Code of 1986 (26 U.S.C. Section 501(f));
(2) negotiable certificates of deposit issued by a
bank that has a certificate of deposit rating of at least 1 or the
equivalent by a nationally recognized credit rating agency or that
is associated with a holding company having a commercial paper
rating of at least A-1, P-1, or the equivalent by a nationally
recognized credit rating agency; and
(3) corporate bonds, debentures, or similar debt
obligations rated by a nationally recognized investment rating firm
in one of the two highest long-term rating categories, without
regard to gradations within those categories.
Added by Acts 1995,il4th Leg. , ch. 402, Sec. 1, eff. Sept. 1, 1995.
Sec. 2256.0201. AUTHORIZED INVESTMENTS; MUNICIPAL
UTILITY. (a) A municipality that owns a municipal electric
utility that is engaged in the distribution and sale of electric
energy or natural gas to the public may enter into a hedging
contract and related security and insurance agreements in relation
to fuel oil, natural gas, coal, nuclear fuel, and electric energy to
protect against loss due to price fluctuations. A hedging
transaction must comply with the regulations of the Commodity
Futures Trading Commission and the Securities and Exchange
Commission. If there is a conflict between the municipal charter
of the municipality and this chapter, this chapter prevails.
(b) A payment by a municipally owned electric or gas utility
11
under a hedging contract or related agreement in relation to fuel
supplies or fuel reserves is a fuel expense, and the utility may
credit any amounts it receives under the contract or agreement
against fuel expenses.
(c) The governing body of a municipally owned electric or
gas utility or the body vested with power to manage and operate the
municipally owned electric or gas utility may set policy regarding
hedging transactions.
(d) In this section, "hedging" means the buying and selling
of fuel oil, natural gas, coal, nuclear fuel, and electric energy
futures or options or similar contracts on those commodities and
related transportation costs as a protection against loss due to
price fluctuation.
Added by Acts 1999, 76th Leg., ch. 405, Sec. 48, eff. Sept. 1, 1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 7, Sec. 1, eff. April 13,
2007.
Sec. 2256.0205. AUTHORIZED INVESTMENTS; DECOMMISSIONING
TRUST. (a) In this section:
(1) "Decommissioning trust" means a trust created to
provide the Nuclear Regulatory Commission assurance that funds will
be available for decommissioning purposes as required under 10
C.F.R. Part 50 or other similar regulation.
(2) "Funds" includes any money held in a
decommissioning trust regardless of whether the money is considered
to be public funds under this subchapter.
(b) In addition to other investments authorized under this
subchapter, a municipality that owns a municipal electric utility
that is engaged in the distribution and sale of electric energy or
natural gas to the public may invest funds held in a decommissioning
trust in any investment authorized by Subtitle B, Title 9, Property
Code.
Added by Acts 2005, 79th Leg., Ch. 121, Sec. 1, eff. September 1,
2005.
Sec. 2256.021. EFFECT OF LOSS OF REQUIRED RATING. An
investment that requires a minimum rating under this subchapter
does not qualify as an authorized investment during the period the
investment does not have the minimum rating. An entity shall take
all prudent measures that are consistent with its investment policy
to liquidate an investment that does not have the minimum rating.
Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995.
Sec. 2256.022. EXPANSION OF INVESTMENT AUTHORITY.
Expansion of investment authority granted by this chapter shall
require a risk assessment by the state auditor or performed at the
direction of the state auditor, subject to the legislative audit
committee's approval of including the review in the audit plan
under Section 321.013.
Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995.
Amended by Acts 2003, 78th Leg., ch. 785, Sec. 42, eff. Sept. 1,
2003.
Sec. 2256.023. INTERNAL MANAGEMENT REPORTS. (a) Not less
than quarterly, the investment officer shall prepare and submit to
the governing body of the entity a written report of investment
transactions for all funds covered by this chapter for the
preceding reporting period.
(b) The report must:
(1) describe in detail the investment position of the
entity on the date of the report;
(2) be prepared jointly by all investment officers of
the entity;
(3) be signed by each investment officer of the
entity;
(4) contain a summary statement, prepared in
compliance with generally accepted accounting principles, of each
pooled fund group that states the:
(A) beginning market value for the reporting
period;
(B) additions and changes to the market value
during the period;
(C) ending market value for the period; and
(D) fully accrued interest for the reporting
period;
(5) state the book value and market value of each
separately invested asset at the beginning and end of the reporting
period by the type of asset and fund type invested;
12
(6) state the maturity date of each separately
invested asset that has a maturity date;
(7) state the account ox fund or pooled group fund in
the state agency or local government for which each individual
investment was acquired; and
(8) state the compliance of the investment portfolio
of the state agency ox local government as it relates to:
(A) the investment strategy expressed in the
agency's or local government's investment policy; and
(B) relevant provisions of this chapter.
(c) The report shall be presented not less than quarterly to
the governing body and the chief executive officer of the entity
within a reasonable time after the end of the period.
(d) If an entity invests in other than money market mutual
funds, investment pools or accounts offered by its depository bank
in the form of certificates of deposit, or money market accounts or
similar accounts, the reports prepared by the investment officers
under this section shall be formally reviewed at least annually by
an independent auditor, and the result of the review shall be
reported to the governing body by that auditor.
Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995.
Amended by Acts 1997, 75th Leg., ch. 1421,•Sec. 12, eff. Sept. 1,
1997.
Sec. 2256.024. SUBCHAPTER CUMULATIVE. (a) The authority
granted by this subchapter is in addition to that granted by other
law. Except as provided by Subsection (b), this subchapter does
not:
(1) prohibit an investment specifically authorized by
other law; ox
(2) authorize an investment specifically prohibited
by other law.
(b) Except with respect to those investing entities
described in Subsection (c), a security described in Section
2256.009(b) is not an authorized investment for a state agency, a
local government, or another investing entity, notwithstanding any
other provision of this chapter or other law to the contrary.
(c) Mortgage pass-through certificates and individual
mortgage loans that may constitute an investment described in
Section 2256.009(b) are authorized investments with respect to the
housing bond programs operated by:
(1) the Texas Department of Housing and Community
Affairs or a nonprofit corporation created to act on its behalf;
(2) an entity created under Chapter 392, Local
Government Code; or
(3) an entity created under Chapter 394, Local
Government Code.
Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1, 1995.
Sec. 2256.025. SELECTION OF AUTHORIZED BROKERS. The
governing body of an entity subject to this subchapter or the
designated investment committee of the entity shall, at least
annually, review, revise, and adopt a list of qualified brokers
that are authorized to engage in investment transactions with the
entity.
Added by Acts 1997, 75th Leg., ch. 1421, Sec. 13, eff. Sept. 1,
1997.
Sec. 2256.026. STATUTORY COMPLIANCE. All investments made
by entities must comply with this subchapter and all federal,
state, and local statutes, rules, or regulations.
Added by Acts 1997, 75th Leg., ch. 1421, Sec. 13, eff. Sept. 1,
1997.
SUBCHAPTER B. MISCELLANEOUS PROVISIONS
Sec. 2256.051. ELECTRONIC FUNDS TRANSFER. Any local
govsr-nment may-ucc electronic means to transfer or invest all funds
collected or controlled by the local government.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995.
Sec. 2256.052. PRIVATE AUDITOR. Notwithstanding any other
law, a state agency shall employ a private auditor if authorized by
the legislative audit committee either on the committee's
initiative or on request of the governing body of the agency.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995.
Sec. 2256.053. PAYMENT FOR SECURITIES PURCHASED BY STATE.
The comptroller or the disbursing officer of an agency that has the
power to invest assets directly may pay for authorized securities
13
purchased from or through a member in good standing of the National
Association of Securities Dealers or from or through a national or
state bank on receiving an invoice from the seller of the securities
showing that the securities have been purchased by the board or
agency and that the amount to be paid for the securities is just,
due, and unpaid. A purchase of securities may not be made at a price
that exceeds the existing market value of the securities.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1423, Sec. 8.67, eff. Sept. 1,
1997.
Sec. 2256.054. DELIVERY OF SECURITIES PURCHASED BY STATE.
A security purchased under this chapter may be delivered to the
comptroller, a bank, or the board or agency investing its funds.
The delivery shall be made under normal and recognized practices in
the securities and banking industries, including the book entry
procedure of the Federal Reserve Bank.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1423, Sec. 8.68, eff. Sept. 1,
1997.
Sec. 2256.055. DEPOSIT OF SECURITIES PURCHASED BY STATE.
At the direction of the comptroller or the agency, a security
purchased under this chapter may be deposited in trust with a bank
or federal reserve bank or branch designated by the comptroller,
whether in or outside the state. The deposit shall be held in the
entity's name as evidenced by a txust receipt of the bank with which
the securities are deposited.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
1995; Acts 1997, 75th Leg., ch. 1423, Sec. 8.69, eff. Sept. 1,
1997.
14
APPENDIX B
Article V Code of Ethics
ARTICLE V. CODE OF ETHICS
DIVISION 1. RULES OF CONDUCT
Sec. 2-310. Preamble.
The purpose of this Code of Ethics is to promote public trust by establishing rules of
conduct for city council members, board members, and employees; by providing a fair
process for receiving and adjudicating complaints; and by requiring periodic financial
disclosure. The rules of conduct form the basis for possible sanctions, and are therefore
intended to clearly define proper conduct so that those who must comply may understand
the rules and carry out their responsibilities consistently with the rules. It is recognized
that situations with ethical implications will arise outside the prohibitions of the rules; in
such situations, council members, board members, and employees are encouraged to keep
in mind the ideal of the public trust and to conduct themselves in a manner to avoid the
appearance of impropriety even where not compelled by the rules.
(Ord. No. 23772, § 1, 9-21-1999)
Sec. 2-311. Standards.
The following rules of conduct apply to all council members, board members, and
employees:
Special privileges.
(1) You shall not use your office for private advancement or gain or to secure special
privileges or exemptions for yourself or others.
(2) You shall not grant any special consideration, treatment or advantage to any
person or group beyond that which is available to others generally.
(3) (a) You shall not use city facilities, personnel, equipment or supplies for
purposes unrelated to the interests of the city, except to the extent such are lawfully
available to the public. Notwithstanding the foregoing sentence, Corpus Christi police
officers, airport public safety officers and municipal court marshals may wear their city -
issued uniforms, badges, and other uniform attire, may use their city -issued radios, and
may carry their city -issued weapons, on approved off-duty law enforcement employment;
and Corpus Christi fire fighters may wear their city -issued uniforms, badges, and other
uniform attire, and use their city -issued radios on approved off-duty fire watch
employment.
(b) You may not spend or authorize the spending of public funds for political
advertising. This prohibition does not apply to a communication that factually describes
the purposes of a measure if the communication does not advocate passage or defeat of
the measure. This paragraph shall be construed consistently with Texas Election Code
Section 255.003.
1
(4) Unless you are a council member, you shall not use the prestige of your position
with the city on behalf of any political party or cause.
Gifts:
(5) You shall not accept or solicit any money, property, service or other thing of
value by way of gift, favor, loan or otherwise that might reasonably tend to influence you
in the discharge of your official duties or which you know or should have known was
offered with the intent to influence or reward your official conduct.
(6) In the event you receive any gift or loan of property or services on behalf of the
city, you shall promptly deliver such gift or loan to the city manager for official
acceptance and inventory of the city.
Conflicts of interest:
(7) In the event you or one of your relatives have an interest or any substantial
interest in a contract or transaction involving the city which comes before you in the
performance of your official duties, you shall make a written disclosure of your interest
in the matter and abstain from any vote or decision and not participate in any discussion
on the matter.
(8) You shall not engage in any outside activities or employment which will conflict
or be incompatible with the full and proper discharge of your official duties, impair your
independent judgment in the performance of your duties, or reflect discredit upon the
city.
(9) You shall not represent any other private person, or group or interest in any action
or proceeding against or adverse to the interest of the city or in any litigation in which the
city is a party.
(10) You shall not represent any other private person or group in any action or
proceeding in the municipal courts of the city which was instituted by city officers or
employees in the course of their official duties.
(11) You shall not receive any fee or compensation for your official services from any
source other than the city except as may be provided by law or authorized by the city
council.
Actions adverse to the city:
(12) You shall not disclose information that could adversely affect the property or
affairs of the city.
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(13) You shall not knowingly perform or refuse to perform any act in order to
deliberately thwart the execution of federal, state or local laws or regulations or the
achievement of any official city programs.
(14) You shall not engage in any felony crime, misdemeanor involving moral
turpitude, or other conduct that reflects discredit on the city.
Provisions for council members:
(15) As a council member, you shall not have a substantial interest in any contract with
the city.
(16) In order to preserve and promote independent advice and decisions from city
boards and the integrity of the independent board process as a council member, you shall
not speak before any city board, commission or committee except on behalf of your own
financial interest; in which case, you shall publicly state the nature of your financial
interest and that you are appearing only in your private capacity.
(17) As a council member, you shall not give any orders to any employee except
through the city manager as provided by the City Charter.
(18) As a council member, you shall not participate in the process for the appointment
of or the confirmation of the appointment of a member to a board, commission or
committee of the city, or to the governing body of an independent entity all or part of
whose members are appointed by the city council, after you are aware that an individual
seeking, being promoted for, or being considered for the position:
(1) is related to you within a degree described by Section 573.002, Texas
Government Code;
(2) is your employer;
(3) is a director or officer of a business entity (as defined in Section 171.001, Texas
Local Government Code) which is your employer; or
(4) owns ten (10) per cent or more of the voting stock or shares of a business entity
which is your employer.
Provisions for board members:
(19) As a board member, you shall not have a substantial interest in any contract with
the city in which your board or commission, or the city department related thereto, has
jurisdiction.
(20) As a board member, you shall not represent or appear on behalf of the private
interest of others before your board, commission or committee, the city council, or any
board which has appellate jurisdiction over your board, commission or committee,
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concerning a matter which is within the subject matter jurisdiction of your board. (This
rule does not prohibit you from appearing on behalf of your own financial interest even
though others may have the same or a similar interest.)
Provisions for employees:
(21) As an employee you shall not have an interest in any contract with the city.
(22) Unless previously recommended by the city manager, and approved by the ethics
commission, as an employee, you shall not, within twelve (12) months after leaving city
employment, represent any other person or organization in any formal or informal
appearance with the city council or any other agency or employee of the city concerning
a project for which you had responsibility as an employee.
(23) As an employee, you shall not represent or appear on behalf of the private interest
of others before the city council or any board, commission or committee of the city. (This
rule does not prohibit you from appearing on behalf of your own financial interest even
though others may have the same or a similar interest).
(24) As an employee, you may not be employed by any business or individual who has
business dealings with or for your department, including any work that is subject to
review or inspection by your department, even if you do not personally review or inspect
the work of the business or individual.
Sec. 2-312. Definitions.
The following definitions apply to the above rules of conduct:
Board member: A member of any board, commission or committee of the city, including
the board of any corporation created by the city.
Employee: Any person employed by the city, whether under civil service or not,
including part-time employees and employees of any corporation created by the city.
Interest: Any direct or indirect pecuniary or material benefit in a contract or transaction
other than:
(1) An interest which is shared by and available to all other persons similarly
situated; or
(2) A remote or incidental interest which would not increase or decrease materially
due to the action of the city or is less than two hundred dollars ($200.00) in value; or
(3) An interest of a subcontractor which has no direct contractual relationship with
the city, is receiving fair and reasonable compensation, and is not operating as a
subterfuge to circumvent the code of ethics; or
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(4) An interest in real property acquired by the city which could otherwise be
accomplished only through eminent domain provided that the property must be acquired
for a public purpose and just compensation must be paid under the Texas Constitution
after obtaining an independent appraisal.
Relative: Spouse, father, mother, brother, sister, son, daughter, spouse's children, father-
in-law, mother-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law and
adoptive relationships being treated the same as natural relationships.
Substantial interest: Any interest which has a value of five thousand dollars ($5,000.00)
or more or represents ten (10) per cent or more of a person's gross income during the
most recent calendar year.
(Ord. No. 20781, § 1, 9-19-1989)
Sec. 2-313. Effect of violation.
A violation of these rules of conduct shall subject the council member, board member or
employee to appropriate disciplinary proceedings, but such violation shall not render the
action of the city voidable by the city unless the action would not have been approved
without the vote of the person who violated the rules of conduct.
(Ord. No. 20781, § 1, 9-19-1989)
Sec. 2-314. Exceptions to abstention requirement.
The requirement that a council member or board member abstain from voting on a matter
or participating in discussion as contained in rule 7 of the rules of conduct shall not apply
in the following situations, provided that such person has complied with the requirements
of written disclosure of the interest:
(a) In the event a majority of the members of the council or the board, commission or
committee have filed a written disclosure of a conflict of interest on the matter and would
be required to abstain; or
(b) On the final approval of the budget when the person has abstained from a separate
vote taken on the particular budget item pertaining to the conflict of interest and action or
that particular item has been resolved.
(Ord. No. 20781, § 1, 9-19-1989)
Cross references: Rules of conduct, § 2-311.
Sec. 2-315. Freedom of expression.
Nothing contained in the code of ethics shall abridge the right of any citizen, whether or
not a council member, board member or employee, to exercise his or her right of
expression under the U.S. or Texas Constitutions.
(Ord. No. 20781, § 1, 9-19-1989)
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Sec. 2-316. Lobbyist registration.
Subsection A. Persons required to
register as lobbyists.
(a) A person who engages in lobbying must register with the city secretary if, with
respect to any client, the person engages in lobbying activities for compensation.
(b) The following persons are not required to register under subsection (a):
(1) Media outlets. A person who owns, publishes or is employed by:
(A) a newspaper;
(B) any other regularly published periodical;
(C) a radio station;
(D) a television station;
(E) a wire service; or
(F) any other bona fide news medium that in the ordinary course of business
disseminates news, opinions, or paid advertisements that directly or indirectly oppose or
promote municipal questions to seek to influence official action relating thereto, if the
person does not engage in other activities that require registration under Part E. This
subsection does not exempt the news media or a person whose relation to the news media
is only incidental to a lobbying effort or if a position taken or advocated by a media outlet
directly impacts, affects, or seeks to influence a municipal question in which the media
outlet has a direct or indirect economic interest.
(2) Mobilizing entity constituents. A person whose only lobbying activity is to
encourage or solicit the members, employees, or owners (including shareholders) of an
entity by whom the person is compensated to communicate directly with one or more city
officials to influence municipal questions: This exception is intended to apply to
neighborhood and other similar not-for-profit organizations.
(3) Governmental entities. Governmental entities and their officers and employees,
provided the communications relate solely to subjects of governmental interest
concerning the respective governmental bodies and the city.
(4) Unknown municipal questions. A person who does not know and has no reason to
know that a municipal question is pending at the time of contact with a city official.
(5) Dispute resolution. An attorney or other person whose contact with a city official
is made solely as part of resolving a dispute with the city, provided that the contact is
solely with city officials who do not vote on or have final authority over any municipal
question involved and so long as such an attorney complies with Rule 4.02 of the Texas
Disciplinary Rules of Professional Conduct, as amended.
Subsection B. Definitions.
The following words and phrases have the meaning ascribed to them in this section
herwise.
(a) City official means the members of the city council, city manager, deputy and
assistant city managers, city secretary, city attorney, assistant city attorneys, department
heads, municipal court judges, and all members of any board, commission or committee
of the city, including the board of any corporation created by the city.
- $
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(b) Client means any person on whose behalf lobbying is conducted. In the case of a
coalition or association that employs or retains other persons to conduct lobbying
activities, the client is the coalition or association and not its individual members.
(c) Compensation means money, service, facility or other thing of value or financial
benefit that is received or is to be received in return for or in connection with services
rendered or to be rendered. Compensation does not include a payment made to any
individual regularly employed by a person if (1) the payment ordinarily would be made
regardless of whether the individual engaged in lobbying activities and (2) lobbying
activities are not part of the individual's regular responsibilities to the person making the
payment. Compensation does not include the financial gain that a person may realize as a
result of the determination of a municipal question, unless that gain is in the form of a
contingent fee.
(d) Lobby or lobbying means any oral or written communication (including an
electronic communication) to a city official, made directly or indirectly by any person in
an effort to influence or persuade an official to favor or oppose, recommend or not
recommend, vote for or against, or take or refrain from taking action on any municipal
question. The term lobby or lobbying does not include a communication:
(1) merely requesting information or inquiring about the facts or status of any
municipal question, matter, or procedure, and not attempting to influence a city official;
(2) made by a public official or employee acting in his or her official capacity;
(3) made by a representative of a media organization if the purpose of the
communication is gathering and disseminating news and information to the public;
(4) made in a speech, article, publication, or other material that is distributed and
made available to the public, or through radio, television, cable television, or any other
medium of mass communication;
(5) made at a meeting open to the public under the Open Meetings Act;
(6) made in the form of a written comment filed in the course of a public proceeding
or any other communication that is made on the record in a public proceeding;
(7) made in writing as a petition for official action and required to be a public record
pursuant to established city procedures;
(8) made in writing to provide information in response to an oral or written request by
a city official for specific information;
(9) the content of which is compelled by law;
(10) made in response to a public notice soliciting communications from the public
and directed to the official specifically designated in the notice to receive such
communications;
(11) made on behalf of an individual with regard to that individual's employment or
benefits;
(12) made by a fact witness or expert witness at an official proceeding; or
(13) made by a person solely on behalf of that individual, his or her spouse, or his or
her minor children.
(e) Municipal question means a public policy issue of a discretionary nature pending
or impending before city council or any board or commission, including but not limited
to proposed action, or proposals for action, in the form of ordinances, resolutions,
motions, recommendations, reports, regulations, policies, nominations, appointments,
sanctions, and bids, including the adoption of specifications, awards, grants, or contracts.
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The term municipal question does not include the day-to-day application, administration,
or execution of city programs and policies.
Subsection C. Registration.
(a) A registration form shall be completed and filed by a person required to register
prior to the commencement of lobbying activity for a client.
(b) A separate registration form must be filed for each client.
(c) The registration shall be on a form prescribed by the city secretary and shall
include, to the extent applicable:
(1) the full name, phone number, permanent address, and nature of the business of:
(A) the registrant;
(B) the client;
(C) any lobbying firm for which the registrant is an agent or employee with respect to
the client; and
(D) each employee or agent of the registrant who has acted or whom the registrant
expects to act as a lobbyist on behalf of the client;
(2) a statement of all municipal questions on which the registrant will lobby for the
client.
(d) A registrant shall file an amended registration if the information contained in the
current registration changes or is incorrect.
(e) A registrant may file a termination of registration when no longer required to
register.
(Ord. No. 23772, § 3, 9-21-1999)
Secs. 2-317--2-319. Reserved.
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APPENDIX D
Corpus Christi Code of Ordinances
Chapter 39 Personnel Article I In General
Sec. 39-16. Legal defense and indemnification of city officers and employees.
(a) Definitions. For the purposes of this section the term "officer" shall include any elected or
appointed official of the city; and the term "employee" shall include all employees of the
city, whether under civil service or not, including firemen and policemen, and shall
include authorized volunteers, working under a volunteer program approved by the city
manager.
(b) Indemnification. Any officer or employee who is liable for the payment of any claims or
damages arising out of the course and scope of employment shall be entitled to
indemnification by the city provided that the acts or omissions resulting in such liability
were done in good faith and without malicious or felonious intent. For the purposes of
this section, the term "arising out of the course and scope of employment" shall not
include any action, which occurs during a period of time in which the officer or employee
is engaged in outside employment or is rendering contractual services to someone other
than the city. Whether the acts were done in good faith, without malicious or felonious
intent, and within the course and scope of employment shall be determined by the city,
and such determination shall be final for the purposes of the representation and indemnity
of this section; provided, however, that in the event such representation and indemnity
have been denied by the city, if upon a trial on the merits the city determines that the
officer or employee was acting in good faith, without malicious or felonious intent and
within the scope of employment the indemnification hereunder shall be granted and
reasonable legal expenses incurred in the defense of the claim reimbursed. The city shall
not be liable for any settlement of any such claim or suit effected without consent, and
the city reserves the right to assert any defense and make any settlement of any claim or
suit that it deems expedient.
(c)
Representation in actions. The city shall have the right and duty to provide legal
representation through the city attorney, or in its discretion through the selection of
outside legal counsel, to any officer or employee sued in connection with any claim for
damages or other civil action against such person arising out of the course and scope of
employment, provided that such officer or employee is entitled to indemnification as set
forth in this section. Such legal representation shall be provided at no cost to the officer
or employee, and any officer or employee may have his or her own counsel assist in the
defense at the sole expense of the officer or employee. The officer or employee shall
cooperate fully with the city in preparation and presentation of the case, and the failure to
cooperate shall waive such officer's or employee's right to representation and indemnity
under this section.
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(d) City's defenses. Nothing in this section shall be construed as waiving the city's defense of
governmental immunity to it or its employees or officers in any action brought against the
city or such officer or employee. For any suit or claim arising under the Texas Tort
Claims Act, the indemnity provided by this section shall be limited to the statutory limits
applicable to the city provided in said Act, as amended.
(e) Notice. The provisions of this section shall apply only where the city has been given
notice of the action brought against any city officer or employee within ten (10) days of
service of process upon the officer or employee.
(0 Disciplinary actions. Nothing in this section shall prevent the city from taking
disciplinary action against any officer or employee for conduct defended or indemnified
by the city under this section, either before or after conclusion of the civil suit.
(g)
Suits in behalf of the city. Nothing in this section shall require the city to indemnify any
officer or employee for recoveries made against him or her in suits by or on behalf of the
city. The city council may, however, authorize the city attorney to represent any officer
or employee in a suit brought by a taxpayer in behalf of the city against the officer or
employee.
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APPENDIX E
WIRE AND ELECTRONIC SERVICES
COMPANY AGREEMENT
FOR ELECTRONIC FUNDS TRANSFERS
THROUGH THE AUTOMATED CLEARING HOUSE
The remainder of this agreement is on file in the Office of the Director of Finance, 1201
Leopard Street, 4th floor, Corpus Christi, Texas 78401.
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