HomeMy WebLinkAbout028440 RES - 12/15/2009RESOLUTION
APPROVING AMENDMENT TO THE CITY INVESTMENT POLICY TO
CHANGE THE MAXIMUM TOTAL AMOUNT THAT MAY BE INVESTED IN
ANY PUBLIC FUNDS INVESTMENT POOL TO BE FIVE PERCENT OF THE
TOTAL CURRENT INVESTED BALANCE OF THE POOL, CHANGING THE
MAXIMUM TOTAL AMOUNT THAT MAY BE INVESTED IN ANY ONE
OVERNIGHT PUBLIC FUNDS INVESTMENT POOL TO THIRTY PERCENT,
AND OTHER ADMINISTRATIVE CHANGES; AND APPROVING THE
INVESTMENT POLICY AS AMENDED.
WHEREAS, the City of Corpus Christi Investment Policy was adopted in Resolution No. 022390
on October 24, 1995; amended in Resolution No. 022980 on July 8, 1997; amended in
Resolution No. 023472 on October 27, 1998; amended in Resolution No. 023864 on December
14, 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; amended in Resolution 027520 on December 11,
2007; and reaffirmed in Resolution No. 027989 on December 16, 2009;
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;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF CORPUS
CHRISTI, TEXAS:
SECTION 1. That the City of Corpus Christi Investment Policy is amended to change
the maximum total amount that may be invested in any public funds investment pool to
be five percent of the total current invested balance of the pool, change the maximum
total amount that may be invested in any one overnight public funds investment pool to
thirty percent, and other administrative changes.
SECTION 2. That the City Council has reviewed and approves the City Investment Policy as
amended. A copy of the amended City Investment Policy is attached.
ATTES
Arma d: Chapa
City Secretary
APPROVED: December 4, 2009.
Lisa Aguilar-Ffiterim City Attorney
H:\LEG-DIR\Lisa\2009 Resolutions\Investment Policy.doc
THE CITY OF CORPUS CHRISTI
7://441,46
Joe Ad me
Mayor
'`140
Corpus
Christi, Texas
of b 11A-
, 2009
The above resolution was passed by the following vote:
Joe Adame
Chris N. Adler
Brent Chesney
Larry Elizondo, Sr.
Kevin Kieschnick L�
Priscilla G. Leal
John E. Marez
Nelda Martinez
Mark Scott
? A V)
TABLE OF CONTENTS
Page
I. INTRODUCTION 2
II. PURPOSE 2
III. DEFINITIONS 3
IV. INVESTMENT OBJECTIVES 5
V. AUTHORIZED INVESTMENTS AND MAXIMUM MATURITY TERM 6
VI. INVESTMENT MIX AND STRATEGIES 11
VII. DESIGNATION OF RESPONSIBILITY AND CONTROLS 14
VIII. INTERNAL CONTROLS - ! -' 15
IX. COMPETITIVE SOLICITATION 17
X. AUTHORIZED COUNTER -PARTIES PLEDGED COLLATERAL 17
Xl. COLLATERALIZATION SAFEKEEPING.. 18
XII. SAFEKEEPING OF CITY SECURITIES WIRE AND ELECTRONIC SERVICES 19
XIII. INFORMATION; REPORTING/PORTFOLIO EVALUATION 20
XIV. BANKING SERVICES; 21
XV. ANNUAL POLICY ADOPTION 21
XVI. GENERAL PROVISIONS 21
APPENDICES
A. PUBLIC FUNDS INVESTMENT ACT 1-18
B. CITY'S CODE OF ETHICS ORDINANCE 1-8
C. RESOLUTION 1-3
D. LEGAL DEFENSE AND INDEMNIFICATION OF CITY OFFICERS AND
EMPLOYEES 1-2
E. WIRE AND ELECTRONIC SERVICES 1
1
INTRODUCTION
The City of Corpus Christi shall invest all available monies in compliance with this
Investment Policy as adopted by the City Council and 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 eamings;
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
B.
Authorization
This Investment Policy is authorized by the City Council in accordance with
Chapter 2256, Subchapter A of the Texas Govemment Code - The Public Funds
Investment Act (the "Act" see the attached and incorporated as Appendix A).
Scope
This Investment Policy applies to all funds 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,
Commercial Paper and any other debt instrument)
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In addition to this Policy, the investment of Bond Funds, Debt Service, and
Reserve Funds shall be managed (including the yield calculation thereon) by
their goveming ordinances and Federal Law, including the Tax Reform Act of
1986 and subsequent legislation.
C. Review and Amendment
This Policy shall be reviewed and adopted no less than annually by the City
Council on or before December 31 of each calendar year. subceguent t„ its
adoption. Amendments must be adopted 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 This ordinance or resolution
adopted shall record any changes made to the Investment
Policy.
III. DEFINITIONS
Authorized Broker/Dealer - Primary dealer and regional firms that have been selected
by the federal underwriters to distribute sell their securities. Each authorized firm in
member -4 a Broker/Dealer will offer the issue .:at the price authorized by the
governmental agency on the initial market issuance.
Authorized City Representatives — Investment Officers and City officers authorized to
execute transactions are designated in the attached and incorporated
Appendix A on behalf of the City. (Specific positions so authorized are the (City
Treasurer, Investment Analyst, Controller, Chief Accountant, Deputy Director of
Financial Services and Director of Financial Services).
Authorized Investment — Authorized investments defined by this Policy with a
maximum maturity are approved by the Investment Committee and City Council. All
Policy authorized securities are listed in Section V.
Collateral - Securities pledged by an banking institution or sold under a repurchase
agreement, to guarantee safeguard City assets. All collateral must be AAA rated. The
City requires either U.S. Treasuries, er U.S. Agency Agencies Securities or municipal
obligations as collateral so that the market values can be readily determined at any point
in time. Collateral requirements are defined in Section Xl.
Custodian — An approved independent custodian charged with the safekeeping of
securities owned by or pledged to the City. An independent custodian is one not
affiliated with any pledging institution or counter -party.
Director of Financial Services - The Director of Financial Services is the Municipal
Finance Officer responsible for City investments, but not designated as an Investment
Officer. The Director of Financial Services may designate the Deputy Director of
Financial Services, Controller or Chief Accountant to assist in this process.
Controller or .
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Excess Cash Balances - Collected bank balances not needed to pay estimated check
clearings.
Failed Transaction — A transaction in which an investment is not delivered to an
institution for operational or availability reasons. The security would fail to be delivered
to the Custodian. - •- - • , - . _ _ ' _ _ _ _ _ _ _ _ _ '. -
Institution - Any firm, bank, bank holding company, broker/dealer or Public Funds
Investment Pool that offers to sell/buy a financial transaction/security to the City. All
such firms must complete a Policy certification as stated by :this Policy. broker -or dealer
Investment Advisor — SEC registered investment advisor contracted by the City to
assist in the portfolio management,proeess,,reportinq and treasury operations/controls.
Investment Officers — Individuals designated by the City Council to execute investment
transactions. Positions include only the City Treasurer. and Investment Analyst.
Investment Portfolio - All City monies and securities being invested under authority of
the Investment Officers.
Qualified Representative— As defined by the Act, a person, who holds a position with a
business organization, who is authorized to act on behalf of the business organization,
and who is one of the following:
A)
For a business organization doing business that is regulated by or registered with
a securities commission, a person who is registered under the rules of the
National Association of Securities Dealers;
(B) For a state or federal bank, a savings bank, or a state or federal credit union, a
member of the loan committee for the bank or branch of the bank or a person
authorized by corporate resolution to act on behalf of and bind the banking
institution;
(C) For an investment public funds investment pool, the person authorized by the
elected official or board with authority to administer the activities of the
investment public funds investment pool to sign the written instrument on behalf
of the investment public funds investment pool; or
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(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 the City Council for specific purposes, which
have not been appropriated for spending.
Securities - Approved Investments designated by the Investment Committee, as defined
by Section VII, 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 an Institution
delivering the Authorized 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.
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 through cash flow analysis and by rapidly depositing
monies and timing disbursements. Generally, Investments are matched to
specific cash flow requirements such as payrolls, construction drawdown
schedules, debt service payments, and other payables. Liquidity is also
achieved by investing in Authorized Investments with active secondary markets
or in Public Funds Investment Pools with stable net asset values.
C. Investment Yield
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
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with the principles of this Policy described in Section IV. A and B and reflecting
the cash flow expectations and portfolio strategy of the City:
Six-month average of Texpool, Lone Star, Texstar and Texas Daily.
However, it must be recognized that differing interest rate environments will
result in fluctuations. During a declining market, satisfying this objective may not
be practical until Authorized 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 avoid negative arbitrage and to obtain satisfastery market yields and to
minimizing the costs associated with investing such monies.
D. Diversification
Diversification is required because of differing liquidity needs of the City and is
to control risk. Diversification minimizes the risk to the
overall Investment Portfolio by spreading market and credit risk as well as ef
potential losses on individual securities or market sector thereby enhancing
safety f 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. Obligations of the United States;
2. Repurchase Agreements -' through a Third Party Safekeeping Institution
Agreement, which includes an approved primary dealer doing business in
Texas as required by the PFIA;
3. Public Funds Investment Pools - through participation agreements; and
4. Certificates of Deposit - through approved local banks;
5. Money Market Mutual Funds;
6. Guaranteed Investment Contracts (for Bond Proceeds only);
7. Texas Term Investment Pool; and
8. 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.
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 Public Funds Investment Pools 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
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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 MATURITY TERM
The City of Corpus Christi is authorized to invest in only in the following investments.
City monies, governed by this Policy, may not be invested in other investments permitted
by law unless this Policy is amended and adopted to permit such investment.
A. Authorized Investments
1. Obligations of the United States or its agencies and
instrumentalities, excluding mortgage backed securities, which
currently include the following stated final maturities:
a. Short-term U.S. Treasuries: Maximum Maturity Term
1.) U.S. Treasury Bills up to 365 days*
2.) U.S. Treasury Coupon Notes up to 3 years*
3.) U.S. Treasury Notes and Strips up to 3 years*
b. U.S. Agencies: Maximum Maturity Terlil
1.) Federal Home Loan Bank up to 2 years*
2.) Federal National Mortgage Association. up to 2 years*
3.) Federal Farm Credit .... up to 2 years*
4.) Federal Home Loan Mortgage Corporation up to 2 years*
5.) Federal Agricultural Mortgage Corporation up to 2 years*
*Reserve Funds invested in Treasury and Agency obligations may
have a stated final maturity up to five years.
2. 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 with
collateral, and . safekept at a City approved Custodian Third Party
, as provided under the provisions of the PSA
SIFMA (Securities Industry and Financial
Markets Association) Master Repurchase greement. An executed
agreement between the City, primary government dealer and Custodian
will be on file before the City will enter
into a tri -party repurchase agreement.
Weekly monitoring by the City's Investment Officers or Advisor of all
Collateral underlying repurchase agreements is required. More frequent
monitoring may be necessary during periods of market volatility. Reverce
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3. Public Funds Investment Pool
up to 1 day
• - - A Public Funds Investment
Pool duly created and managed in accordance with the Act 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
at $1 net asset value. If the ratio of the market value
of the Public funds investment pool's portfolio divided by the book value
of the portfolio is less than 99.50% or greater than 100.50%, the Public
funds investment 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 public funds
investment pool is - - - - - - - - - . . five (5) percent of the
total current invested balance of the local—government Public Funds
Investment Pool, er (1144-7-5700070943. The maximum total amount that may
be invested in any one all ovemight local—goverment Public Funds
Investment Pools is thirty (30) percent of the Investment Portfolio. The
Committee:-
The
ommittee.
The Public Funds Investment Pool must be continuously rated no lower
than AAA or AAA-mor at an equivalent rating by at least one nationally
recognized rating service with a weighted average maturity no greater
than 90 days. Public Funds Investment Pools may contain investment
securities that are not directly authorized by this Policy, so long as (i) the
AAA rating is standard herein above 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.
4. ` Collateralized Certificates of Deposit up to 1 year
Certificates of deposit or other instruments issued by state and national
banks domiciled in Texas that are:
Guaranteed or insured by the Federal Deposit Insurance
Corporation or its successor; or
Secured at 102% by obligations defined by Section XI of
this Policy
(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 as described in section
V, Subdivision A.1. The Investment Officers will monitor
adequacy of collateralization on a weekly basis.
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5. Money Market Mutual Fund up to 1 year
A AAA -rated no-load money market mutual fund (no service charge) is an
authorized investment if:
a. the money market mutual fund is registered with and regulated
by the Securities and Exchange Commission;
b. the money market mutual fund provides the City with a
prospectus and other information required by the Securities
Exchange Act of 1934 (15 U.S.C. Section 78a et seq.) or the
Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et
seq.);
c. the money market mutual fund includes in its investment
objectives the maintenance of a stable net asset value of $1
for each share;
d. the assets of the money market mutual fund are invested in
those investments authorized under this Investment Policy;
and
e. the money market mutual fund has a dollar weighted average
stated maturity of 90 days or fewer.
6. Guaranteed Investment Contracts
upto3years
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
nd Proceeds.
7. Texas Term Investment Pool up to 1 year
The Texas Term Investment Pool for fixed term investments was created
as an investment pool and is a hybrid, mutual fund structure. by Texxav
need&
ef-Texas-cities Term The pool offers is a fixed rate, fixed term
portfolio option and is rated AAAf by Standard and Poor's Ratings
Services Corporation. Participants may lock in a fixed rate for a term of
60 to 365 days.
8. Securities Lending Program up to 1 year
Securities lending program as defined by the Act qualifies as an
authorized investment if the value of the securities loaned under the
program is not less than 100%. However, the City requires 102%
collateral. A loan made under the program must allow for termination at
any time. percent col ateralized. Collateral is required and pledged to the
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City, held in the City's name and deposited with a custodian approved by
the City. 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. A loan made under
the program must be placed through a primary government securities
dealer or a financial institution doing business in Texas. An agreement to
lend securities must have a term of one year or Tess
B. Weighted Average Maturity
In order to assure adequate liquidity and 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 weighted averaged maturity (WAM) of the overall portfolio shall be no more
than 365 days. • - • -
1
The maximum weighted average maturity of Operating Funds shall be
365 days. -- - --- - - - --- ,
shall—be-36g days or Tess. The Investment Officers will monitor the
maturity level, and adjust make changes as appropriate throughout the
fiscal year.
Capital improvement Funds
The maximum weighted average maturity of Capital Improvement Funds
shall be 365 days. The Authorized 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. Bond proceeds subject to yield restriction shall
be invested considering that yield restriction to avoid a challenge
to the City's related indebtedness qualification as an obligation,
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the interest in which is not subject to federal taxation under
section 103 of the Internal Revenue Code of 1986 as amended
(the "IRC"). _ - _' - '_ _ - period, Bond
proceeds subject to yield restriction shall be invested considering
the anticipated cash flow requirements of the Capital Improvement
Funds.
- _ _ . - _ -• - For all bond proceeds from -all bond
issues -affected controlled by the tax-exempt bond provisions of the IRC
Internal Revenue Code of 1986, as amended (the "IRC"), a complete
careful yield analysis shall must be performed to assure compliance with
comply -with the IRC. Also, An annual rebate calculation shall must be
performed to assure compliance with IRC. Also An annual rebate
calculation must shall be performed to determine if the City's rebate
liability ' at the end of each respective bond
issue's five-year term.
On Beginning en the third anniversary of the respective issue date for
each the -respective bond issue, all bond proceeds from such issue will be
yield restricted as required by the IRC.
3. Reserve Funds: Established by Operative Bond Funds or by the City
Council.
The following Reserve Funds may be invested up to five years in U.S.
Treasuries or Agencies:
Maximum
Choke Canyon Fund 4050 $10,000,000
City monies governed by this Policy may not be invested in other
investments permitted by law unless (i) such investments are specifically
authorized for the investment of these monies by an ordinance adopted
by the City Council issuing bonds or other debt obligations or (ii) this
Policy is amended to permit such investment.
Methods to Monitor Investment Market Price
The City monitors the market price of investments by obtaining this information
from the Bloomberg system which is made available through the City's
authorized institutional brokers. The City may also obtain market price
information from other nationally recognized sources of financial information such
as the Wall Street Journal.
VI. INVESTMENT MIX -AND STRATEGIES
A. Investment Mix Maturity Diversification
A minimum of 15% of the total investment portfolio shall be held in Authorized
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.
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The weighted average maturity limitation of the overall Investment Portfolio takes
these requirements into account to protect liquidity and allow flexibility for market
environments. Daily Authorized Investment reports shall monitor and specifically
address whether these diversification 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
1. Operating and CIP Funds
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 credit quality, short -to -intermediate medium-term
investments primarily in a laddered structure.
ether.
To pay for anticipated disbursements, Authorized Investments will be
laddered to correspond with the projected cash flow needs of the City.
Some Investments maturing that are acquired on the short end of the
yield curve (90 days or less) will to meet immediate cash needs. A few
Authorized Investments are purchased on the intermediate part of the
yield curve (1-3 year maturity) 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.
Debt Service Funds
Investment strategies for debt service funds shall have as the primary
objective the assurance that - - - - - - - -
debt service payment obligations are timely met. on the required
3. Debt Service Reserve Funds
Investment strategies for debt service reserve funds shall have as the
primary objective the ability to generate a dependable revenue stream to
the-apprep ate - - - - - _ • with a low degree of
volatility. In accordance with the specific bond authorization document
ordinance - - - - - - - - - - - - - out the
maximum investment term, investments should be of high credit quality,
with short -to -intermediate-term maturities and a maximum weighted
average maturity of one year.
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4. Special Purpose Funds
Investment strategies for Special Purpose Funds will have as their
primary objective the assurance that anticipated cash flows are matched
with adequate Authorized Investment liquidity. The stated final maturity
dates and weighted average maturity shall be
structured on the project completion date. not exceed tho estimated
project completion -date.
These investment portfolios shall include highly liquid investments to
allow for flexibility and unanticipated project outlays.
C. Achieving Investment Yield Return Objectives
The City will utilize a conservative buy and hold strategy for the majority of the
Investment Portfolio with investment selection shall—bee based on legality,
appropriateness, liquidity, and risk/return considerations. This strategy
recognizes the unique needs of individual funds and provides for their recognized
cash flow needs.
The remaining portion of the Investment Portfolio may be
invested actively and the reasons for doing so are:
1. Passive investment provides for:
a. Investments targeted
disbursements.
pay upcoming anticipated
Liquidity to provide for a measure of anticipated disbursements
and
Laddering and diversification to manage market and credit risk.
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
retum 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.
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VII. DESIGNATION OF RESPONSIBILITY
A. Investment Committee
An Investment Committee, consisting of City Manager, Assistant City Managers,
Director of Financial Services (or if vacant, Deputy Director of Financial
Services), City Attorney, Assistant Director of Financial Services/Management
and Budget - - --- - •- - - - - - - = = - _ - - - , shall
meet at least quarterly to determine operational strategies and to monitor
investment results. The Investment Committee will be responsible for
monitoring, reviewing and making recommendations regarding the City's
Investment Portfollio to the City Council.
The Investment Committee will review quarterly investment reports before
submission to the City Council and will, on no Tess than an annual basis, review
and adopt a list of authorized broker/dealers prepared by the City. The
Investment Committee shall include in its deliberation such topics as: economic
outlook, Investment Portfolio diversification, maturity structure, risk and
performance of the portfolio(s).
Treasurer.
City the Investment Analyst are the designated Investment
B. Investment Officers
The authority to invest City funds and the execution of any documentation
necessary to evidence the investment of City funds is granted to the Investment
Officers. The City Treasurer and the Investment Analyst are the designated
Investment Officers responsible for the daily operation of the investment
Program. Investment Officers will prepare monthly and quarterly reports,
maintain information on counter -parties, monitor collateral, and attend training as
required by the Act.
As required by the Act, each Investment Officer shall attend ten hours of training
in accordance with the Act within 12 months of assuming responsibilities and
attend 10 hours of training in each successive two year period. Training should
include topics such as investment controls, security risk, market risks,
diversification of the investment portfolio and compliance with Texas laws.
The Investment Committee approves investment — training seminars presented
by the following organizations:
Govemment Finance Officers Association
Govemment Finance Officers Association of Texas
Govemment Treasurers Organization of Texas
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Association of Public Treasurer's of the US & Canada
Texas Municipal League
University of North Texas 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.
C. Investment Advisor
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.) of
• = - .- = - = - . ' - _ - - = to provide for the investment and management of
City clic funds. The initial 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.
VIII. INTERNAL CONTROLS
The City Treasurer will establish a system of intemal 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.
A. Standard of Care
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.
In the case of a loss required rating, if liquidation is necessary due to a public
funds investment 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 Govemment Code the Act.
Investment Officers and the Investment Advisor shall perform their duties strictly
in accordance with the adopted Investment Policy. Investment Officers acting in
good faith and in accordance either these policies and procedures shall be
relieved of personal liability if exceptions are reported on a timely basis and
prudent actions are taken to reduce potential loss. The Investment Committee
and officers are indemnified as provided by City ordinance attached and
incorporated as Appendix D.
15
1. preservation and safety of principal;
2. liquidity; and
3. yield.
B. Ethics
Investment Officers, Investment Committee members and employees involved in
the investment process shall comply with the City's Code of Ethics attached and
incorporated as Appendix B which requires disclosure of financial interests by
April of each year. These individuals shall refrain from personal business
activities that could conflict with proper execution of the investment program or
which could impair the ability to make impartial investment decisions. Officers
and employees shall disclose to the City Council any material investment
decisions. Officers and employees shall disclose to the council any material
financial interest in institutions that conduct investment or banking transactions
with the City.
Any Investment officer who has a personal or business relationship with an
organization seeking to sell an investment to the City shall file a statement
disclosing that relationship or interest. Disclosure statements required under this
subsection must be filed.
The designated Investment Officers and all members of the Investment
E.
-----Training-and-Education
16
IX. COMPETITIVE SOLICITATION
Except for Repurchase Agreements, Guaranteed Investment Contracts, and
Public Funds Investment Pools, any new issue investment will be purchased
through an Authorized Broker/Dealer or directly through the issuer. Investment
Officers identify the best rate prior to the purchase of an Authorized Investment
that meets the City's cash flow needs at the time.
Any Institution authorized to participate in the City's investment program must
meet Collateral pledge requirements outlined in Section XI of these guidelines
and must submit annual financial reports.
X. AUTHORIZED COUNTER -PARTIES
A. Broker/Dealers
Any broker/dealerll inctitutionc who soak seeking to sell an Authorized
Investment to the City is required to complete thequestionnaire approved by the
Investment Committee and furnish supporting documentation required by the
Investment Committee.
Information on the firms
shall be mai ined :bv the Investment Officers or the Investment Advisor.
Securities Qualifying as Authorized Investments shall only be purchased through
those institutions approved by the Investment Committee.
B. Policy Certification:
Investments shall only be made with those Institutions who have executed a
written went certification in a form acceptable to the City, executed by a
Qualified Representative of that the Institution, and substantially to the effect that
the Institution has:
1. Received, thoroughly reviewed and acknowledged, in writing,
receipt and understanding of this tho City'c Investment Policy.
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 this the -City's -Investment Policy.
C. 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.
D. 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.
17
E. The City Treasurer will request the Investment Committee to authorize deletion of
institutions for:
1. Slow response time;
2. Inability to compete with other authorized firms; Less than
3. Insufficient market Little or no information on technical or
fundamental expectations based on economic indicators;
4. Failed transactions or continuing operational difficulties;
5. Unwillingness to continue to abide by this Policy; the provisions
listed in IX.A.;
6. Other reasons as approved by the Investment Committee.
XI. COLLATERALIZATION SAFEKEEPING
It is imperative that the securities in the Investment Portfolio be protected through
independent safekeeping and all time deposits and demand bank Excec cash balances
be protected with sufficient collateral at a minimum of 102% daily of current market
values to sward against market and volatility risk.
needed.
A. Pledged Collateral for Time and Demand Deposits
Depository collateral is pledged to and not owned by the City. All collateral shall
be held by a custodian approved by the City under an executed collateral
agreement.
The market value of pledged collateral for time and demand deposits Collateral
must be at least 102% of the principal plus accrued interest. All collateral shall
be held by an independent custodian outside the holding company of the
pledging bank.
Original evidence of City
proper collateralization in the form of original safekeeping receipts will be
provided to the City Treasurer and will be maintained in the City Treasurer's
Office. The custodian will provide a monthly listing of collateral describing the
securities and giving a market value. An investment officer will approve and
release all pledged collateral. The Investment Officers will monitor adequacy of
collateralization on a weekly basis.
City Treasurer and will be maintained in the City's Treasurer Office. An
•
pledged collateral.
B. 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.
18
C. 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.
D. 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.
XII. SAFEKEEPING OF CITY SECURITIES
A. Third Party Safekeeping Agreement
The City shall utilize its banking services depository or other banks contrast -with
a Bank or Banks for the safekeeping of City owned S securities. The delivery of
all securities into safekeeping will be done on a delivery versus payment basis.
Gash -Balances.
B. Safekeeping of Certificate of Deposit Collateral
C.
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 atthe Federal Reserve Bank,
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 XI.D above) established a third -party
safekeeping agreement.
Guaranteed investment Agreement Collateral
Guaranteed investment contract collateral is restricted to U.S. Treasuries and
Agencies (subject to the limitation described in Section XI.D 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.
three to five years.
19
XIII. INFORMATION REPORTING/PORTFOLIO EVALUATION
A.
B.
The City Treasurer and Investment Analyst as are -hereby designated as -the
Investment Officers and are responsible for reporting the daily operation of the
to the Investment Committee and City
Council on a quarterly basis in accordance with the Act.
Quarterly Investment Reports are to include the following in accordance with the
Act:
a. Combined Investment Portfolio Report of Market versus Book
Values
b. Combined Portfolio Composition
c. Individual Portfolio Composition
d. Cash and Cash 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. Analysis of Excess Collateral Coverage
i. Aggregate Activity Per Broker
j. Comparison of Investment Returns to Benchmarks
k. Investment Portfolio Report -Lake Texana Project and Packery
Channel Pi
I. Bond Funds by Issue
m. Approved Institutional Brokers
n. Pools and Money Market Accounts
o. Economic and Interest Rate Forecast
p`. Glossary
q,. Compliance Statement
r_ Quarterly Investment Committee Meeting Minutes
C.
City -y;
Director of Management and Budget or if vacant, Assistant Director of
Management and Budget
Internal Reporting/Evaluation
In addition, T the following reports are to be submitted on a monthly basis:
1.
Cash position by bank account
Collateral position
Investment transactions
Weekly basis to the Director of Financial Services or Designee (Excluding
20
a. Cash Position by Bank Account
b. Collateral Position
Schedules
D. External Reporting/Evaluations
On a quarterly basis, any institution holding City time or demand deposits the
will provide to the Investment Officers for the
institution's review a copy of the balance sheet and income statement for the Call
Report for review. All depository and brokerage institutions will provide annual
audited financial statements. Any Public Funds Investment Pools must provide
reports and disclosure statements as required by the Public Funds Invent
Act.
E. Record Retention
The City follows the guidelines of retaining records for five years from City's
current fiscal year, as recommended in the Texas State Library Municipal
Records Manual or may be authorized by the City's local records management
guidelines.
XIV. BANKING SERVICES
All depository services are provided in the City's main depository agreement.
Other services such as credit cards, direct deposit of payroll or other services
may be administered through separate agreements. To aggressively invest
Excess Cash Balances, controlled disbursements accounts, zero balance
accounts and other cash management tools may be employed.
XV. ANNUAL POLICY ADOPTION
This Policy will be reviewed and adopted by the City Council no less than
annually. The accepting ordinance resolution will include a description of all
changes made to this Policy.
XVI. 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.
21
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
public 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 hereto as Appendix C.
22
APPENDIX A
Texas Public Funds Investment Act
Texas Government Code, Chapter 2256
GOVERNMENT CODE CHAPTER 2256. PUBLIC FUNDS INVESTMENT
GOVERNMENT CODE
TITLE 10. GENERAL GOVERNMENT
SUBTITLE F. STATE AND LOCAL CONTRACTS AND FUND MANAGEMENT
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 par
Page -1 -
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;
(B) for a state or federal bank, a savings bank,
or a state or federal credit union, a member of the loan
committee for the bank or branch of the bank or a person
authorized by corporate resolution to act on behalf of and bind
the banking institution;
(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.
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
Page -2 -
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
for 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
802.001;
(2) state funds invested as authorized by Section
404.024;
(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
Page -3 -
terms of use specified by the donor.
Amended by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff.
1995; Acts 1997, 75th Leg., ch. 505, Sec. 24, eff.
1997; Acts 1997, 75th Leg., ch. 1421, Sec. 2, eff.
1997; Acts 1999, 76th Leg., ch. 62, Sec. 8.21, eff.
1999; Acts 1999, 76th Leg., ch. 1454, Sec. 3, eff.
1999.
Sept.
Sept.
Sept.
Sept.
Sept.
1,
1,
1,
1,
1,
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
(1)
(2) safety of principal and
liquidity;
(3) address investment diversification,
maturity and the quality and capability of
management; and
(4) include:
(A) a list of the types of authorized
investments in which the investing entity's funds may be
invested;
investment policies must:
be written;
primarily emphasize
yield, and
investment
(B) the maximum allowable stated maturity of any
individual investment owned by the entity;
(C) for pooled fund groups, the maximum dollar -
weighted average maturity allowed 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)
(2)
(3)
(4)
(d) As
governing body shall adopt a separate written
strategy for each of the funds or group of funds
control. Each investment strategy must describe the
objectives for the particular fund using the
orally;
in writing;
electronically; or
in any combination of those methods.
an integral part of an investment policy,
Page -4 -
the
investment
under its
investment
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 for 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 or 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
Page -5 -
(h) An officer 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
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
Page -6 -
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 manner 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
Page -7 -
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;
1997;
1997;
1999;
2003.
Acts
Acts
Acts
Acts
1995, 74th Leg., ch. 402, Sec. 1, eff.
685, Sec. 1, eff.
1421, Sec. 3, eff.
1454, Sec. 4, eff.
785, Sec. 41, eff.
1997,
1997,
1999,
2003,
75th Leg., ch.
75th Leg., ch.
76th Leg., ch.
78th Leg., ch.
Sept.
Sept.
Sept.
Sept.
Sept.
1,
1,
1,
1,
1,
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
Page -8 -
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 later 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, 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
Page -9 -
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
Page -10 -
rating firm not less than A or its equivalent; and
(6) bonds issued, assumed, or 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
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;
Page -11 -
(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
Page -12 -
disbursed of not less
disbursed. The term
agreement and a reverse
(c)
security
date the
(d)
reverse
additional
authorized
expiration
agreement.
Amended by
1995.
than the principal amount of the funds
includes a direct security repurchase
security repurchase agreement.
Notwithstanding any other law, the term of any reverse
repurchase agreement may not exceed 90 days after the
reverse security repurchase agreement is delivered.
Money received by an entity under the terms of a
security repurchase agreement shall be used to acquire
authorized investments, but the term of the
investments acquired must mature not later than the
date stated in the reverse security repurchase
Acts
1995,
74th Leg.,
ch. 402, Sec. 1, eff. Sept. 1,
Sec. 2256.0115. AUTHORIZED INVESTMENTS: SECURITIES
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 100 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
Page -13 -
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 for 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:
(1) 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 or an
equivalent rating by at least:
(A) two nationally recognized credit rating
(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,
agencies; or
Page -14 -
1995.
Sec. 2256.014. AUTHORIZED INVESTMENTS: MUTUAL FUNDS.
(a) A no-load money market mutual fund is an authorized
investment under this subchapter 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 80a-1 et seq.);
(3) has a dollar -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 for 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 2256.016(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 other funds held for debt service, in mutual funds
described in Subsection (b);
(2) invest any portion of bond proceeds, reserves and
funds held for 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,
Page -15 -
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 guaranteed 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 for 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 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
Page -16 -
entity by rule, order, ordinance, or 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 for 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;
Page -17 -
(B) 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 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
Page -18 -
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
public funds investment pool
than AAA or AAA -m or at an
nationally recognized rating
grade by at least one nationally recognized
a weighted average maturity no greater than 90 days.
Added by Acts 1995, 74th Leg., ch. 402, Sec. 1, eff.
1995. Amended by Acts 1997, 75th Leg., ch. 1421, Sec.
Sept. 1, 1997.
OF CERTAIN INVESTMENT POOLS. A
must be continuously rated no lower
equivalent rating by at least one
service or no lower than investment
with
rating
service
Sept. 1,
11, eff.
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, 74th Leg., ch. 402, Sec. 1, eff. Sept. 1,
Page -19 -
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 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
Page -20 -
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.
report must:
describe in detail the investment position of the
entity date of the report;
be prepared jointly by all investment officers of
be signed by each investment officer of the
(b) The
(1)
on the
(2)
entity;
(3)
the
entity;
(4)
contain a summary
compliance with generally accepted
each pooled fund group that states the:
beginning market value
statement,
accounting
period;
(A)
prepared in
principles, of
for the reporting
(B) additions and changes to the market value
during the period;
(C) ending market value for the period; and
Page -21 -
(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;
(6) state the maturity date of each separately
invested asset that has a maturity date;
(7) state the account or 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 or 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; or
(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
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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
government may use 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 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
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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 trust 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.
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APPENDIX B
Article V Code of Ethics
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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.
If a council member believes that he/she should abstain from voting on an item to
avoid the appearance of impropriety, as encouraged by this Code of Ethics
Ordinance, or who in discussing or voting on an issue is unable to take an
unbiased position, that council member shall be disqualified from discussions
about and subsequent voting for that item under this city ordinance.
The city recognizes that city council members are also members of the society
and, therefore, cannot and should not be without any personal and economic
interest in the decisions and policies of government; that city council members
retain their rights as citizens to interests of a personal or economic nature and
their rights to publicly express their views on matters of general public interest. It
is not the intent of this ordinance to diminish the rights of city council members as
citizens of the community.
(Ord. No. 23772, § 1, 9-21-1999; Ord. No. 028170, § 1, 5-12-2009; Ord. No.
028271, § 2, 8-18-2009)
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.
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(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.
(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.
(5)(a) Special applications. Subsection 2-311(5) does not include:
(1) A gift to a city official or employee relating to a special occasion, such as a
wedding, anniversary, graduation, birth, illness, death, or holiday, provided that
the value of the gift is fairly commensurate with the occasion and the relationship
between the donor and recipient;
(2) Advancement for or reimbursement of reasonable expenses for travel in
connection with official duties provided by third parties must be disclosed in the
travel report; payment for or reimbursement of expenses for travel in excess of
authorized rates under city policy will be treated as a personal gift to the official
or employee for any applicable reporting requirement;
(3) A public award or reward for meritorious service or professional
achievement, provided that the award or reward is reasonable in Tight of the
occasion and it is not prohibited under Texas Penal Code Section 36.08 (Gift to
Public Servant by Person Subject to His Jurisdiction);
(4) A loan from a lending institution made in its regular course of business on
the same terms generally available to the public;
(5) A scholarship or fellowship awarded on the same terms and based on the
same criteria that are applied to other applicants;
(6) Any solicitation for civic or charitable causes;
(7) Admission to an event in which the city official or employee is participating
in connection with his or her spouse's position;
(8) Ceremonial and protocol gifts presented to city officials from a foreign
government or international or multinational organization and accepted for the
City of Corpus Christi;
(9) Admission to a widely attended event, such as a convention, conference,
symposium, forum, panel discussion, dinner, viewing, reception or similar event,
offered by the sponsor of the event, and unsolicited by the city official or
employee, if attending or participating in an official capacity, including:
(A) the official or employee participates in the event as a speaker or panel
participant by presenting information related to matters before the city; or
(B) the official or employee performs a ceremonial function appropriate to that
individual's position with the city; or
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(C) attendance at the event is appropriate to the performance of the official
duties or representative function of the official or employee;
(10) Admission to a charity event provided by the sponsor of the event, where
the offer is unsolicited by the city official or employee;
(11) Admission to training or education program or other program, including
meals and refreshments furnished to all attendees, if such training is related to
the official or employee's official duties and the training is in the interest of the
city.
(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 a potential conflict of interest
which could influence the council member's ability to make an impartial decision,
an interest, a reasonable expectation of an economic benefit, 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.
(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 city council member, individually, you shall not have a substantial
interest in any contract with the City of Corpus Christi.
(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
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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, 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. This prohibition does not include any employment contract which may be
authorized for the employee, a contract of sale for real property or a contract for
services which are available for all citizens.
(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
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subject to review or inspection by your department, even if you do not personally
review or inspect the work of the business or individual.
(Ord. No. 20781, § 1, 9-19-1989; Ord. No. 20913, § 1, 5-1-1990; Ord. No. 23772,
§ 2, 9-21-1999; Ord. No. 24613, § 1, 10-9-2001; Ord. No. 025769, § 1, 5-25-
2004; Ord. No. 027642, § 1, 4-8-2008; Ord. No. 028170, § 1, 5-12-2009; Ord.
No. 028271, § 2, 8-18-2009)
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.
Economic benefit: An action that is likely to affect an economic interest if it is
likely to have an effect on that interest that is distinguishable from its effect on
members of the public in general or a substantial segment thereof.
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
(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 in a business entity if a city council member or
relative owns ten (10) per cent or more of voting stock or shares of the business
entity or owns ten (10) per cent or more or five thousand dollars ($5,000.00) or
more of the fair market value of the business entity or funds received from the
business entity exceeds ten (10) per cent or more of the person's gross income
for the previous year. A city council member has a substantial interest in real
property if he or his relative controls or has an equitable or legal ownership
interest with a fair market value of two thousand five hundred dollars ($2,500.00)
or more.
(Ord. No. 20781, § 1, 9-19-1989; Ord. No. 028170, § 2, 5-12-2009; Ord. No.
028271, § 3, 8-18-2009)
Sec. 2-313. Effect of violation.
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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 ofthe 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)
erved.
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APPENDIX C
RESOLUTION
APPENDIX D
Corpus Christi Code of Ordinances
Chapter 39 Personnel Article I In General
Sec. 39-14. 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.
(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.
(f) 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.
(Ord. No. 14320, § 1, 5-17-1978; Ord. No. 17867, §§ 1--3, 10-5-1983; Ord. No.
19863, § 1, 7-21-1987; Ord. No. 19864, § 1, 7-21-1987)
Editor's note: Formerly numbered § 39-16.