HomeMy WebLinkAbout030711 RES - 12/15/2015 Resolution amending and reaffirming the City's Investment Policy
and Investment Strategies for FY 2015-2016
WHEREAS, the City of Corpus Christi's Investment Policy and Investment
Strategies were adopted pursuant to Resolution No. 022390 on October 24, 1995;
WHEREAS, the Texas Public Funds Investment Act requires the governing body
to annually review, amend as necessary, and reaffirm its investment policy and
investment strategies;
WHEREAS, the Investment Policy and Investment Strategies were previously
reviewed for fiscal year 2014-2015 on December 11, 2014, and reaffirmed pursuant to
Resolution No. 030398 on January 20, 2015; and
WHEREAS, the Investment Policy and Investment Strategies were reviewed for
fiscal year 2015-2016 on November 16, 2015 by the Investment Committee; require
several amendments to clarify and correct certain provisions; and must be annually
reaffirmed; therefore,
Be it resolved by the City Council of the City of Corpus Christi, Texas, that:
Section 1. The City Council has reviewed the City of Corpus Christi's Investment
Policy and Investment Strategies for the current fiscal year 2015-2016. A copy of the
City of Corpus Christi's Investment Policy, which contains the separate Investment
Strategies, is attached to this resolution as Exhibit A and is incorporated by reference
into this resolution as if set out here in its entirety.
Section 2. The following amendments are made to the Investment Policy and
Investment Strategies to correct and clarify certain provisions:
(a) Cover Page: the date is amended to reflect the date of reaffirmation;
(b) Document: changes to the formatting of the document including bolding, tabs,
margins, spacing and underscoring so that the document's appearance would be more
consistent;
(c) Page 4, section IV.C. entitled "Investment Yield": remove Lonestar from the Six-
month average, to read as follows: "Six-month average of Texpool, Texstar and Texas
Daily"; and
(d) Page 12, section VII.B. entitled "Investment Officers": change the required number
of hours of training from 10 to 8 for the Public Funds Investment Act training that is
required after the initial 10 hour of training, with the second paragraph to read as follows:
"As required by the Act, each Investment Officer shall attend 10 hours of training in
accordance with the Act within 12 months of assuming responsibilities and attend 8
hours of training that begins on the first day of that local government's fiscal year and
consists of the two consecutive fiscal years after that date. Training should include
topics such as investment controls, security risk, market risks, diversification of the
investment portfolio, and compliance with Texas laws."
() 3071.
INDEXED
Section 3. As amended by Section 2 of this resolution, the City Council reaffirms the
City of Corpus Christi's Investment Policy and Investment Strategies for the current
fiscal year 2015-2016 and continues the policy and strategies in full force and effect.
ATTEST: CITY OF CORPUS CHRISTI
1.2_,Ricxxxx—
Rebecca Huerta, City Secretary Nelda a , Mayor
Corpus Christi, Texas
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The above resolution was passed by the following vote:
Nelda Martinez
Rudy Garza
Chad Magill
Colleen McIntyre /TO
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Lillian Riojas
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Brian Rosas ���
Lucy Rubio
Mark Scott 1!/
Carolyn Vaughn
030711
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2852
CITY OF CORPUS CHRISTI, TEXAS
FINANCIAL SERVICES
INVESTMENT POLICY
December 15, 2015
TABLE OF CONTENTS
Page
I. INTRODUCTION 1
II. PURPOSE 1
III. DEFINITIONS 2
IV. INVESTMENT OBJECTIVES 4
V. AUTHORIZED INVESTMENTS AND MAXIMUM MATURITY 5
VI. INVESTMENT STRATEGIES 9
VII. DESIGNATION OF RESPONSIBILITY 11
VIII. INTERNAL CONTROLS 12
IX. COMPETITIVE SOLICITATION 13
X. AUTHORIZED COUNTER-PARTIES 14
XI. COLLATERALIZATION 15
XII. SAFEKEEPING OF CITY SECURITIES 15
XIII. INFORMATION REPORTING/PORTFOLIO EVALUATION 16
XIV. BANKING SERVICES 17
XV. ANNUAL POLICY ADOPTION 17
XVI. GENERAL PROVISIONS 17
APPENDICES
A. TEXAS PUBLIC FUNDS INVESTMENT ACT 1-31
B. CODE OF ETHICS 1-8
C. RESOLUTION 1-2
D. LEGAL DEFENSE AND INDEMNIFICATION OF CITY OFFICERS AND
EMPLOYEES 1
i
L 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 earnings;
and
• Maximization of return on the portfolio.
Earnings from investments will be used in a manner that will best serve the interests of
the City of Corpus Christi.
Investments shall be made with judgment and care, under prevailing circumstances, that
a person of prudence, discretion and intelligence would exercise in the management of
that person's own affairs, not for speculation, but for investment, considering the
probable safety of capital and the probable income to be derived.
Il. PURPOSE
A. Authorization
This Investment Policy is authorized by the City Council in accordance with
Chapter 2256, Subchapter A of the Texas Government Code -The Public Funds
Investment Act(the "Act"attached and incorporated as Appendix A).
B. Scope
This Investment Policy applies to all funds 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 (including Bond Proceeds, Bond Reserves, Debt
Service, Commercial Paper and any other debt instrument)
In addition to this Policy, the investment of Bond Funds, Debt Service, and
Reserve Funds shall be managed (including the yield calculation thereon) by
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their governing ordinances and Federal Law, including the Tax Reform Act of
1986 and subsequent legislation.
C. Review and Amendment
This Policy shall be reviewed and adopted no less than annually by the City
Council on or before December 31 of each calendar year. Amendments must be
adopted by the City Council. The City Council shall adopt a written instrument by
ordinance or resolution stating that it has reviewed the Investment Policy. This
ordinance or resolution 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 their securities. Each authorized firm in 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, Assistant 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 a banking institution or sold under a repurchase
agreement, to guarantee City assets. All collateral must be AAA rated. The City requires
U.S. Treasuries, U.S. Agency 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 XI.
Cusip Number-A cusip is a 9-character alphanumeric code which identifies a financial
security for purposes of facilitating clearing and settlement of trades.
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 Assistant Director of
Financial Services, Controller or Chief Accountant to assist in this process.
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.
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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.
Investment Advisor — SEC registered investment advisor contracted by the City to
assist in the portfolio management process, reporting 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 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
(0) 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.
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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.
B. Liquidity
The City's Investment Portfolio must be structured in a manner which maintains
the liquidity necessary to pay obligations as they become due. Sufficient cash
flows must be maintained 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
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, 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 market yields minimizing the costs
associated with investing such monies.
D. Diversification
Diversification is required because of differing liquidity needs of the City and to
control risk. Diversification minimizes the risk to the overall Investment Portfolio
by spreading market and credit risk as well as potential losses on individual
securities or market sector thereby enhancing safety of the Investment Portfolio.
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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; including obligations that are fully
guaranteed or insured by the Federal Deposit Insurance Corporation or
by the explicit full faith and credit 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;
4. Certificates of Deposit - through approved local banks or a broker that
has a main office or a branch office in this state and is selected from a list
adopted by the investing entity.
5. Money Market Mutual Funds;
6. Guaranteed Investment Contracts(for Bond Proceeds only); and
7. Texas Term Investment Pool;
The City recognizes that investment risks can result from default risk, credit
volatility risk, and market price risks due to various technical and fundamental
economic factors, and other complications, leading to temporary illiquidity.
To control market price risks, volatile Investments shall be avoided. To control
default risk, the only acceptable method of payment will be on a delivery versus
payment-basis for all transactions, except 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
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
The City of Corpus Christi is authorized to invest 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
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*
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b. U.S. Agencies: Maximum Maturity
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, is secured by a combination of cash and obligations, including
obligations that are fully guaranteed or insured by the Federal Deposit
Insurance Corporation or by the explicit full faith and credit of the United
States placed with a primary government dealer with collateral, and safekept
at a City approved Custodian, as provided under the provisions of the SIFMA
(Securities Industry and Financial Markets Association) Master Repurchase
Agreement. 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.
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
Public Funds Investment Pool. The maximum total amount that may be
invested in any one overnight Public Funds Investment Pool is thirty (30)
percent of the Investment Portfolio.
The Public Funds Investment Pool must be continuously rated no lower than
AAA or AAA-m or at an equivalent rating by at least one nationally recognized
rating service. 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.
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An investment pool may invest its funds in money market mutual funds to the
extent permitted by and consistent with the investment policies and objectives
adopted by the investment pool. In addition to the requirements of its
investment policy and any other forms of reporting, a public funds investment
pool created to function as a money market fund shall report yield to its
investors in accordance with regulations of the Securities and Exchange
Commission applicable to reporting by money market funds. If the
investment pool operates as an internet website, the information in a
disclosure instrument or report must be posted on the website.
4. Collateralized and Brokered Certificates of Deposit up to 2 years
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. Collateralized Certificates of Deposit
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.
b. Brokered Certificates of Deposit
The Investment Officer shall monitor, on no less than a weekly basis,
the status and ownership of all banks issuing brokered CDs owned
by the City of Corpus Christi based upon information from the FDIC.
Brokered CDs will be required to have a cusip number and be held in
safekeeping at a third-party institution. If any bank has been
acquired or merged with another bank in which brokered CDs are
owned, the Investment Officer shall immediately liquidate any
brokered CD which is above the FDIC insurance level.
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;
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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 up to 3 years
Guaranteed investment contracts offer to pay a specific interest rate over a
period of time, and can be structured to reflect an anticipated draw down
schedule for capital improvements funded with bond proceeds. The collateral
and monitoring requirements applicable to repurchase agreements shall
apply to guaranteed investment contracts. A guaranteed investment contract
may be utilized only in connection with the investment of bond proceeds.The
maximum term of a guaranteed investment contract shall not exceed the
anticipated construction period for the capital improvement, the construction
of which is to be funded with Bond Proceeds.
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. The pool offers a
fixed rate, fixed term portfolio option and is rated AAA by Standard and
Poor's Ratings Services. Participants may lock in a fixed rate for a term of 60
to 365 days.
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 average maturity (WAM) of the overall portfolio shall be no more
than 365 days.
1. Operating Funds
The maximum weighted average maturity of Operating Funds shall be 365
days. The Investment Officers will monitor the maturity level and adjust as
appropriate throughout the fiscal year.
2. 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
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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, the interest in
which is not subject to federal taxation under section 103 of the
Internal Revenue Code of 1986 as amended_(the "IRC"). Bond
proceeds subject to yield restriction shall be invested considering the
anticipated cash flow requirements of the Capital Improvement
Funds.
For all bond proceeds controlled by the tax-exempt bond provisions of the
IRC a complete yield analysis shall be performed to assure compliance with
the IRC. An annual rebate calculation shall be performed to assure
compliance with IRC. An annual rebate calculation shall be performed to
determine the City's rebate liability at the end of each respective bond issue's
five-year term.
On the third anniversary of the respective issue date for each bond issue,
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.
C. Methods to Monitor Investment Market Price
The City monitors the market price of investments obtained from Texpool's
securities pricing service or 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 STRATEGIES
A. Investment 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.
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 address
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whether these diversification 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 term
investments primarily in a laddered structure.
To pay for anticipated disbursements, Authorized Investments will be
laddered to correspond with the projected cash flow needs of the City.
Investments maturing that are acquired on the short end of the yield curve
90 days or less will 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.
2. 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.
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
with a low degree of volatility. In accordance with the specific bond
authorization document, investments should be of high credit quality, with
short-to-intermediate-term maturities and a maximum weighted average
maturity of one year.
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.
These investment portfolios shall include highly liquid investments to
allow for flexibility and unanticipated project outlays.
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C. Achieving Investment Yield Objectives
The City will utilize a conservative buy and hold strategy for the majority of the
Investment Portfolio with investment selection 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 to pay upcoming anticipated
disbursements.
b. Liquidity to provide for a measure of anticipated disbursements
and
c. Laddering and diversification to manage market and credit risk.
2. Active investment provides for:
a. The ability to improve yields in the Investment Portfolio by riding
the yield curve during business cycle recovery and expansion
periods. Interest rates on longer maturities typically exceed those
on shorter maturities. Therefore, longer maturities (that can be
held to maturity, if necessary) are purchased in anticipation of
selling later at the same or lower interest rate, improving the total
return during the holding period.
b. The ability to improve market sector diversification by swapping
out of one investment into another for a better total return, to
realign for disbursement projections, or to extend or shorten
maturity depending on economic forecasts. The City Manager, or
his designee, is required to approve any investment that must be
sold at a loss. All gains and losses will be reported to the City
Council and Investment Committee no less frequently than on a
quarterly basis.
VII. DESIGNATION OF RESPONSIBILITY
A. Investment Committee
An Investment Committee, consisting of City Manager, Assistant City Managers,
Director of Financial Services (or if vacant, Assistant 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 Portfolio to the City Council.
The Investment Committee will review quarterly investment reports before
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submission to the City Council and will, on no less 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).
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 8hours of training that begins on the first day of that local government's
fiscal year and consists of the two consecutive fiscal years after that date.
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:
Government Finance Officers Association
Government Finance Officers Association of Texas
Government Treasurers Organization of Texas
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.) to
provide for the investment and management of City funds. The initial 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 internal controls over the investment
activities of the City and document such controls in the Investment Procedures
Manual. These internal controls shall be approved by the Director of Financial
Services.
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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 Government Code the Act. The
Investment Officer shall monitor, on no less than a weekly basis, the credit rating
on all authorized investments in the portfolio based upon independent
information from a nationally recognized rating agency. If any security falls below
the minimum rating required by Policy, the Investment Officer shall notify the City
Manager, Director of Finance and City Council of the loss of rating, conditions
affecting the rating and possible loss of principal with liquidation options
available, within two weeks after the loss of the required rating.
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 with 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.
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.
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
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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/dealer seeking to sell an Authorized Investment to the City is required
to complete the questionnaire approved by the Investment Committee and
furnish supporting documentation required by the Investment Committee.
Information on the firms shall be maintained by 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 certification in a form acceptable to the City, executed by a Qualified
Representative of that Institution, and substantially to the effect that the
Institution has:
1. Received, thoroughly reviewed and acknowledged, in writing,
receipt and understanding of this Policy.
2. Acknowledged that the Institution has implemented reasonable
procedures and controls in an effort to preclude investment
transactions conducted between the Institution and the City that
are not authorized by this 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.
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;
3. Insufficient market 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.;
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6. Other reasons as approved by the Investment Committee.
Xl. COLLATERALIZATION
It is imperative that the securities in the Investment Portfolio be protected through
independent safekeeping and all time deposits and demand bank cash balances be
protected with sufficient collateral at a minimum of 102% daily of current market values
to guard against market and volatility risk.
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 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 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.
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.
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 for the
safekeeping of City owned securities. The delivery of all securities into
safekeeping will be done on a delivery versus payment basis.
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B. Safekeeping of Certificate of Deposit Collateral
All Collateral securing bank and savings and loan deposits must be held by a
Third Party Safekeeping Institution approved by the City, or Collateral may be
held at the Federal Reserve Bank.
C. Safekeeping of Repurchase Agreement Collateral
Repurchase Agreement Collateral is restricted to U.S. Treasuries and must be
delivered to a Third-Party Safekeeping Institution with which the City has (subject
to the limitation described in Section XI.D above) established a third-party
safekeeping agreement.
D. Guaranteed Investment Agreement Collateral
Guaranteed investment contract collateral is restricted to U.S. Treasuries and
Agencies (subject to the limitation described in Section 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.
XIII. INFORMATION REPORTING/PORTFOLIO EVALUATION
A. The City Treasurer and Investment Analyst as designated Investment Officers
are responsible for reporting to the Investment Committee and City Council on a
quarterly basis in accordance with the Act.
B. 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 Project
I. Bond Funds by Issue
m. Pools and Money Market Accounts - Approved Institutional
Brokers
n. Economic and Interest Rate Forecast
o. Glossary
p. Compliance Statement
q. Quarterly Investment Committee Meeting Minutes
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Internal Reporting/Evaluation
In addition, the following reports are to be submitted on a monthly basis:
1) Cash position by bank account
2) Collateral position
3) Investment transactions
C. External Reporting/Evaluations
On a quarterly basis, any institution holding City time or demand deposits 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 Act.
D. Record Retention
The City follows the guidelines of retaining records for five years from City's
current fiscal year, as recommended in the Texas State Library Municipal
Records Manual or may be authorized by the City's local records management
guidelines.
XIV. BANKING SERVICES
All depository services are provided in the City's main depository agreement.
Other services such as credit cards, direct deposit of payroll or other services
may be administered through separate agreements. To aggressively invest
Excess Cash Balances, controlled disbursements accounts, zero balance
accounts and other cash management tools may be employed.
XIV. 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.
B. Compliance with Laws
17
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.
APPENDIX A
Texas Public Funds Investment Act
Texas Government Code, Chapter 2256 Subchapter A
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
1
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 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
2
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 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 a term longer than two years. A renewal or
extension of the contract must be made by the governing body of the
investing entity by order, ordinance, or resolution.
(c) This chapter does not prohibit an investing entity or investment
officer from using the entity' s employees or the services of a contractor
of the entity to aid the investment officer in the execution of the
officer's duties under this chapter.
Amended by Acts 1995, 74th Leg. , ch. 402, Sec. 1, eff . Sept. 1, 1995;
Acts 1999, 76th Leg. , ch. 1454, Sec. 2, eff. Sept. 1, 1999.
3
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 terms of use specified
by the donor.
Amended by Acts 1995, 74th Leg. , ch. 402, Sec. 1, eff. Sept . 1, 1995;
Acts 1997, 75th Leg. , ch. 505, Sec. 24, eff. Sept. 1, 1997; Acts 1997,
75th Leg. , ch. 1421, Sec. 2, eff. Sept. 1, 1997; Acts 1999, 76th Leg. ,
ch. 62, Sec. 8 .21, eff. Sept . 1, 1999; Acts 1999, 76th Leg. , ch. 1454,
Sec. 3, eff. Sept. 1, 1999.
Sec. 2256. 005. INVESTMENT POLICIES; INVESTMENT STRATEGIES;
INVESTMENT OFFICER. (a) The governing body of an investing entity shall
adopt by rule, order, ordinance, or resolution, as appropriate, a written
investment policy regarding the investment of its funds and funds under
its control.
(b) The investment policies must:
(1) be written;
(2) primarily emphasize safety of principal and liquidity;
(3) address investment diversification, yield, and maturity and
the quality and capability of investment management; and
(4 ) include:
(A) a list of the types of authorized investments in which
the investing entity' s funds may be invested;
4
(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;
(E) a requirement for settlement of all transactions,
except investment pool funds and mutual funds, on a delivery versus
payment basis; and
(F) procedures to monitor rating changes in investments
acquired with public funds and the liquidation of such investments
consistent with the provisions of Section 2256. 021.
(c) The investment policies may provide that bids for certificates
of deposit be solicited:
(1) orally;
(2) in writing;
(3) electronically; or
(4) in any combination of those methods.
(d) As an integral part of an investment policy, the governing body
shall adopt a separate written investment strategy for each of the funds
or group of funds under its control . Each investment strategy must
describe the investment objectives for the particular fund using the
following priorities in order of importance:
(1) understanding of the suitability of the investment to the
financial requirements of the entity;
(2) preservation and safety of principal;
(3) liquidity;
(4) marketability of the investment if the need arises to
liquidate the investment before maturity;
(5) diversification of the investment portfolio; and
(6) yield.
(e) The governing body of an investing entity shall review its
investment policy and investment strategies not less than annually. The
governing body shall adopt a written instrument by rule, order, ordinance,
or resolution stating that it has reviewed the investment policy and
investment strategies and that the written instrument so adopted shall
5
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
(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
6
(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 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
7
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 state auditor may, based on its review, require a
state agency to also report to the state auditor other information the
8
state auditor determines necessary to assess compliance with laws and
policies applicable to state agency investments. A report under this
subsection shall be prepared in a manner the state auditor prescribes.
(o) The audit requirements of Subsection (n) do not apply to assets
of a state agency that are invested by the comptroller under Section
404 .024 .
Amended by Acts 1995, 74th Leg. , ch. 402, Sec. 1, eff. Sept. 1, 1995;
Acts 1997, 75th Leg. , ch. 685, Sec. 1, eff. Sept. 1, 1997; Acts 1997,
75th Leg. , ch. 1421, Sec. 3, eff. Sept. 1, 1997; Acts 1999, 76th Leg. ,
ch. 1454, Sec. 4 , eff. Sept . 1, 1999; Acts 2003, 78th Leg. , ch. 785, Sec .
41, eff. Sept. 1, 2003.
Amended by:
Acts 2011, 82nd Leg. , R. S. , Ch. 1004 (H.B. 2L6) , Sec. 1, eff. June
17, 2011 .
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.
9
Sec. 2256. 007 . INVESTMENT TRAINING; STATE AGENCY BOARD MEMBERS AND
OFFICERS. (a) Each member of the governing board of a state agency and
its investment officer shall attend at least one training session relating
to the person' s responsibilities under this chapter within six months
after taking office or assuming duties.
(b) The Texas Higher Education Coordinating Board shall provide the
training under this section.
(c) Training under this section must include education in investment
controls, security risks, strategy risks, market risks, diversification of
investment portfolio, and compliance with this chapter.
(d) An investment officer shall attend a training session not less
than once each state fiscal biennium 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.
Amended by:
Acts 2011, 82nd Leg. , R.S. , Ch. 1004 (H. B. 2226) , Sec. 2, eff. June
17, 2011.
This section was amended by the 84th Legislature. Pending publication of
the current statutes, see H.B. 870 and H. B. 1148, 84th Legislature,
Regular Session, for amendments affecting this section.
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
10
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 that
begins on the first day of that local government' s fiscal year and
consists of the two consecutive fiscal years after that date, 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 appropriate
instruction in a two-year period that begins on the first day of that
local government ' s fiscal year and consists of the two consecutive fiscal
years after that date. 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.
11
(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.
Amended by:
Acts 2011, 82nd Leg . , R.S. , Ch. 1004 (H.B. 2T26) , Sec. 3, eff. June
17, 2011 .
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, including obligations that are fully guaranteed or
insured by the Federal Deposit Insurance Corporation or by the explicit
full faith and credit of the United States;
(5) obligations of states, agencies, counties, cities, and
other political subdivisions of any state rated as to investment quality
by a nationally recognized investment rating firm not less than A or its
equivalent; and
(6) bonds issued, assumed, or guaranteed by the State of
Israel.
(b) The following are not authorized investments under this section:
12
(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 .
Amended by:
Acts 2011, 82nd Leg. , R. S. , Ch. 1004 (H.8. 2226) , Sec. 4, eff. June
17, 2011 .
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
13
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) a broker that has its main office or a branch office
in this state and is selected from a list adopted by the investing entity
as required by Section 2256. 025; or
(B) a depository institution that has its main office or a
branch office in this state and that is selected by the investing entity;
(2) the broker or 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; and
(4) the investing entity appoints the depository institution
selected by the investing entity under Subdivision (1) , an entity
described by Section 2257 . 041 (d) , or a clearing broker-dealer registered
with the Securities and Exchange Commission and operating pursuant to
Securities and Exchange Commission Rule 15c3-3 (17 C. F. R. Section
240. 15c3-3) as custodian for the investing entity with respect to the
certificates of deposit issued for the account of the investing entity.
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 (H. B. 256) , Sec. 1, eff. September 1,
2005.
Acts 2011, 82nd Leg. , R.S. , Ch. 1004 (H.B. 2226) , Sec. 5, eff. June
17, 2011.
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;
14
(2) is secured by a combination of cash and obligations
described by Section 2256. 009 (a) (1 ) ; and
(3) requires the securities being purchased by the entity or
cash held by the entity to be pledged to the entity, held in the entity' s
name, and deposited at the time the investment is made with the entity or
with a third party selected and approved by the entity; and
(4) is placed through a primary government securities dealer,
as defined by the Federal Reserve, or a financial institution doing
business in this state.
(b) In this section, "repurchase agreement" means a simultaneous
agreement to buy, hold for a specified time, and sell back at a future
date obligations described by Section 2256. 009 (a) (1) , at a market value at
the time the funds are disbursed of not less than the principal amount of
the funds disbursed. The term includes a direct security repurchase
agreement and a reverse security repurchase agreement.
(c) Notwithstanding any other law, the term of any reverse security
repurchase agreement may not exceed 90 days after the date the reverse
security repurchase agreement is delivered.
(d) Money received by an entity under the terms of a reverse
security repurchase agreement shall be used to acquire additional
authorized investments, but the term of the authorized investments
acquired must mature not later than the expiration date stated in the
reverse security repurchase agreement .
Amended by Acts 1995, 74th Leg. , ch. 402, Sec. 1, eff. Sept . 1, 1995.
Amended by:
Acts 2011, 82nd Leg. , R.S. , Ch. 1004 (H. B. 2226) , Sec. 6, eff. June
17, 2011 .
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;
15
(3) a loan made under the program must be secured by:
(A) pledged securities described by Section 2256.009;
(B) pledged irrevocable letters of credit issued by a bank
that is:
(i) organized and existing under the laws of the
United States or any other state; and
(ii) continuously rated by at least one nationally
recognized investment rating firm at not less than A or its equivalent;
or
(C) cash invested in accordance with Section:
(i) 2256. 009;
(ii) 2256. 013;
(iii) 2256. 014; or
(iv) 2256.016;
(4) the terms of a loan made under the program must require
that the securities being held as collateral be:
(A) pledged to the investing entity;
(B) held in the investing entity' s name; and
(C) deposited at the time the investment is made with the
entity or with a third party selected by or approved by the investing
entity;
(5) a loan made under the program must be placed through:
(A) a primary government securities dealer, as defined by
5 C. F. R. Section 6801 . 102 (f) , as that regulation existed on September 1,
2003; or
(B) a financial institution doing business in this state;
and
(6) an agreement to lend securities that is executed under this
section must have a term of one year or less .
Added by Acts 2003, 78th Leg. , ch. 1227, Sec. 1, eff. Sept. 1, 2003.
Sec. 2256. 012. AUTHORIZED INVESTMENTS: BANKER'S ACCEPTANCES. A
bankers ' acceptance is an authorized investment under this subchapter if
the bankers' acceptance:
(1) has a stated maturity of 270 days or fewer from the date of
its issuance;
16
(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-i 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 agencies; or
(B) one nationally recognized credit rating agency and is
fully secured by an irrevocable letter of credit issued by a bank
organized and existing under the laws of the United States or any state.
Amended by Acts 1995, 74th Leg. , ch. 402, Sec. 1, eff. Sept. 1, 1995.
Sec. 2256.014 . AUTHORIZED INVESTMENTS: MUTUAL FUNDS. (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
17
(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, 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
18
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 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. An investment pool may invest its funds in money market
mutual funds to the extent permitted by and consistent with this
19
subchapter and the investment policies and objectives adopted by the
investment pool .
(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
20
(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;
(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, including a
statement regarding how yield is calculated;
(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. In addition to the requirements of its
investment policy and any other forms of reporting, a public funds
investment pool created to function as a money market mutual fund shall
21
report yield to its investors in accordance with regulations of the
federal Securities and Exchange Commission applicable to reporting by
money market funds.
(g) To be eligible to receive funds from and invest funds on behalf
of an entity under this chapter, a public funds investment pool must have
an advisory board composed:
(1) equally of participants in the pool and other persons who
do not have a business relationship with the pool and are qualified to
advise the pool, for a public funds investment pool created under Chapter
791 and managed by a state agency; or
(2) of participants in the pool and other persons who do not
have a business relationship with the pool and are qualified to advise the
pool, for other investment pools .
(h) To maintain eligibility to receive funds from and invest funds
on behalf of an entity under this chapter, an investment pool must be
continuously rated no lower than AAA or AAA-m or at an equivalent rating
by at least one nationally recognized rating service.
(i) If the investment pool operates an Internet website, the
information in a disclosure instrument or report described in Subsections
(b) , (c) (2) , and (f) must be posted on the website.
(j ) To maintain eligibility to receive funds from and invest funds
on behalf of an entity under this chapter, an investment pool must make
available to the entity an annual audited financial statement of the
investment pool in which the entity has funds invested.
(k) If an investment pool offers fee breakpoints based on fund
balances invested, the investment pool in advertising investment rates
must include either all levels of return based on the breakpoints provided
or state the lowest possible level of return based on the smallest level
of funds invested.
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 .
Amended by:
Acts 2011, 82nd Leg. , R.S. , Ch. 1004 (H.B. 2226) , Sec. 7, eff. June
17, 2011.
22
Sec. 2256.017 . EXISTING INVESTMENTS. An entity is not required to
liquidate investments that were authorized investments at the time of
purchase.
Added by Acts 1995, 74th Leg. , ch. 76, Sec. 5.46 (a) , eff. Sept. 1, 1995;
Acts 1995, 74th Leg. , ch. 402, Sec. 1, eff. Sept. 1, 1995. Amended by
Acts 1997, 75th Leg. , ch. 1421, Sec. 10, eff. Sept. 1, 1997 .
Sec. 2256. 019. RATING OF CERTAIN INVESTMENT POOLS . A public funds
investment pool must be continuously rated no lower than AAA or AAA-m or
at an equivalent rating by at least one nationally recognized rating
service.
Added by Acts 1995, 74th Leg. , ch. 402, Sec. 1, eff. Sept . 1, 1995.
Amended by Acts 1997, 75th Leg. , ch. 1421, Sec. 11, eff. Sept. 1, 1997 .
Amended by:
Acts 2011, 82nd Leg. , R.S. , Ch. 1004 (H.B. 2226) , Sec. 8, eff. June
17, 2011.
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, 1995.
23
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 (S.B. 495) , Sec. 1, eff. April 13,
2007 .
Sec. 2256. 0202. AUTHORIZED INVESTMENTS: MUNICIPAL FUNDS FROM
MANAGEMENT AND DEVELOPMENT OF MINERAL RIGHTS. (a) In addition to other
investments authorized under this subchapter, a municipality may invest
funds received by the municipality from a lease or contract for the
management and development of land owned by the municipality and leased
for oil, gas, or other mineral development in any investment authorized to
be made by a trustee under Subtitle B, Title 9, Property Code (Texas Trust
Code) .
24
(b) Funds invested by a municipality under this section shall be
segregated and accounted for separately from other funds of the
municipality.
Added by Acts 2009, 81st Leg. , R. S. , Ch. 1371 (S.B. 894) , Sec. 1, eff.
September 1, 2009.
Sec. 2256.0203. AUTHORIZED INVESTMENTS: PORTS AND NAVIGATION
DISTRICTS. (a) In this section, "district" means a navigation district
organized under Section 52, Article III, or Section 59, Article XVI, Texas
Constitution.
(b) In addition to the authorized investments permitted by this
subchapter, a port or district may purchase, sell, and invest its funds
and funds under its control in 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-i, or the equivalent by a nationally recognized credit rating
agency.
Added by Acts 2011, 82nd Leg. , R.S. , Ch. 804 (H. B. 2346) , Sec. 1, eff.
September 1, 2011.
Sec. 2256.0204 . AUTHORIZED INVESTMENTS: INDEPENDENT SCHOOL
DISTRICTS . (a) In this section, "corporate bond" means a senior secured
debt obligation issued by a domestic business entity and rated not lower
than "AA-" or the equivalent by a nationally recognized investment rating
firm. The term does not include a debt obligation that:
(1) on conversion, would result in the holder becoming a
stockholder or shareholder in the entity, or any affiliate or subsidiary
of the entity, that issued the debt obligation; or
(2) is an unsecured debt obligation.
(b) This section applies only to an independent school district that
qualifies as an issuer as defined by Section 1371 . 001.
(c) In addition to authorized investments permitted by this
subchapter, an independent school district subject to this section may
purchase, sell, and invest its funds and funds under its control in
25
corporate bonds that, at the time of purchase, are rated by a nationally
recognized investment rating firm "AA-" or the equivalent and have a
stated final maturity that is not later than the third anniversary of the
date the corporate bonds were purchased.
(d) An independent school district subject to this section 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, reserves, and other funds
held for the payment of debt service, in corporate bonds; or
(2) invest more than 25 percent of the funds invested in
corporate bonds in any one domestic business entity, including
subsidiaries and affiliates of the entity.
(e) An independent school district subject to this section may
purchase, sell, and invest its funds and funds under its control in
corporate bonds if the governing body of the district:
(1) amends its investment policy to authorize corporate bonds
as an eligible investment;
(2) adopts procedures to provide for:
(A) monitoring rating changes in corporate bonds acquired
with public funds; and
(B) liquidating the investment in corporate bonds; and
(3) identifies the funds eligible to be invested in corporate
bonds.
(f) The investment officer of an independent school district, acting
on behalf of the district, shall sell corporate bonds in which the
district has invested its funds not later than the seventh day after the
date a nationally recognized investment rating firm:
(1) issues a release that places the corporate bonds or the
domestic business entity that issued the corporate bonds on negative
credit watch or the equivalent, if the corporate bonds are rated "AA-" or
the equivalent at the time the release is issued; or
(2) changes the rating on the corporate bonds to a rating lower
than "AA-" or the equivalent .
(g) Corporate bonds are not an eligible investment for a public
funds investment pool .
Added by Acts 2011, 82nd Leg. , R. S. , Ch. 1347 (S. B. 1543) , Sec. 1, eff.
June 17, 2011 .
26
Sec. 2256.0205. AUTHORIZED INVESTMENTS; DECOMMISSIONING TRUST. (a)
In this section:
(1) "Decommissioning trust" means a trust created to provide
the Nuclear Regulatory Commission assurance that funds will be available
for decommissioning purposes as required under 10 C. F.R. Part 50 or other
similar regulation.
(2) "Funds" includes any money held in a decommissioning trust
regardless of whether the money is considered to be public funds under
this subchapter.
(b) In addition to other investments authorized under this
subchapter, a municipality that owns a municipal electric utility that is
engaged in the distribution and sale of electric energy or natural gas to
the public may invest funds held in a decommissioning trust in any
investment authorized by Subtitle B, Title 9, Property Code.
Added by Acts 2005, 79th Leg. , Ch. 121 (S. B. 1464) , 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 :f
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.
27
Sec. 2256. 023. INTERNAL MANAGEMENT REPORTS. (a) Not less than
quarterly, the investment officer shall prepare and submit to the
governing body of the entity a written report of investment transactions
for all funds covered by this chapter for the preceding reporting period.
(b) The report must:
(1) describe in detail the investment position of the entity on
the date of the report;
(2) be prepared jointly by all investment officers of the
entity;
(3) be signed by each investment officer of the entity;
(4) contain a summary statement of each pooled fund group that
states the:
(A) beginning market value for the reporting period;
(B) ending market value for the period; and
(C) fully accrued interest for the reporting period;
(5) state the book value and market value of each separately
invested asset at the 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
28
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 .
Amended by:
Acts 2011, 82nd Leg. , R.S. , Ch. 1004 (H.B. 2226) , Sec. 9, eff. June
17, 2011 .
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 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
29
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 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.
30
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 .
31
APPENDIX B
Code of Ethics
ARTICLE V.-CODE OF ETHICS'="1
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.
However,city council members may not use their positions in dealing with the city manager or city
employees to advance their personal economic interest,their families'economic interest,or the entities in
which they have a substantial interest.
(Ord.No.23772,§ I,9-21-1999;Ord. No.028170,§ 1,5-12-2009;Ord. No.028271,§2,8-18-2009;Ord.No.
029428,§ 1,3-27-2012)
• Sec.2-311.-Standards.
The following rules of conduct apply to all council members,board members,and employees:
Special privileges.
(1)You shall not use your office for private advancement or gain or to secure special privileges or
exemptions for yourself or others.
(2)You shall not grant any special consideration,treatment or advantage to any person or group beyond
that which is available to others generally.
(3)(a)You shall not use city facilities,personnel,equipment or supplies for purposes unrelated to the
interests of the city,except to the extent such are lawfully available to the public.Notwithstanding the
foregoing sentence,Corpus Christi police officers,airport public safety officers and municipal court
marshals may wear their city-issued uniforms,badges,and other uniform attire,may use their city-
issued radios,and may carry their city-issued weapons,on approved off-duty law enforcement
employment;and Corpus Christi fire fighters may wear their city-issued uniforms,badges,and other
uniform attire,and use their city-issued radios on approved off-duty fire watch employment.
(b)You may not spend or authorize the spending of public funds for political advertising.This
prohibition does not apply to a communication that factually describes the purposes of a measure
if the communication does not advocate passage or defeat of the measure.This paragraph shall
be construed consistently with Texas Election Code Section 255.003.
1
(4)Unless you are a council member,you shall not use the prestige of your position with the city on behalf
of any political party or cause.
(5)You shall maintain appropriate relationships with other officials,employees,customers,defendants,
and individuals receiving services from you or your organizational unit,and shall not use your
position to engage in any inappropriate personal relationships.
Gifts:
(6)You shall not accept or solicit any money,property,service or other thing of value by way of gift,
favor, loan or otherwise that might reasonably tend to influence you in the discharge of your official
duties or which you know or should have known was offered with the intent to influence or reward
your official conduct.
(6)(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 light 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
(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;
(t 1)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.
(7) 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:
2
(8)(A) If a contract or business transaction involving the city,in which you or one of your relatives have a
conflict of interest or potential conflict of interest comes before you in the performance of your
official duties,you shall take the following actions:
(i) Immediately make a written disclosure of your interest in the matter to the city secretary
and city manager.
(ii) Abstain from any vote or decision.
(iii)Not participate in any discussion on the matter with members of the council,the city
manager,or city employees.
(B)You may not use your position to influence the action of a city official or employee in the performance of
their duties related to a contract or business transaction in which you or one of your relatives have a conflict
of interest or potential conflict of interest.
(C) If you were initially not aware that you or a relative has a conflict or potential conflict of interest,you must
comply with(7)(A)as soon as you become aware that you have or should have been aware that you have
the conflict or potential conflict of interest.
(D)However, you may apply for city services or discuss your personal interest with a city representative on
behalf of your own interest if you notify the city secretary and city tnanager in writing that you have a
personal interest in a matter that requires action by the city,and that you are acting strictly in your private
capacity,and not as a member of the city council or board or as a city employee and you advise any
member of the city council,city board or commission,or any city employee you are dealing with that you
are appearing only in your private capacity.
(9)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.
(10)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.
(I 1)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.
(12)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:
(13)You shall not disclose information that could adversely affect the property or affairs of the city,
except as required by law.
(14)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.
(1 5)You shall not engage in any felony crime,misdemeanor involving moral turpitude,or other conduct
that reflects discredit on the city.
Provisions for council menthe's:
(16)As a city council member,individually,you shall not have a substantial interest in any contract with
the City of Corpus Christi.
(17)In order to preserve and promote independent advice and decisions from city boards and the integrity
of the independent board process as a council member,you shall not speak before any city board,
commission or committee except on behalf of your own financial interest;in which case,you shall
publicly state the nature of your financial interest and that you are appearing only in your private
capacity.
(I3)As a council member,you shall not give any orders to any employee except through the city manager
as provided by the City Charter.
3
(19)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 hoard members:
(20)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.
(21)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:
(22)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.
(23)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.
(24)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).
(25)As an employee,you may not be employed by any business or individual who has business dealings
with or for your department, including any work that is subject to review or inspection by your
department,even if you do not personally review or inspect the work of the business or individual.
(26)As an employee,you may not violate the confidentiality or privacy of an individual,including a
juvenile and adult defendants or detainees or juvenile clients being counseled through a city program.
unless it is to seek emergency assistance or consultation services from within the city's program or
school campus;the individual has threatened to harm themselves or others;or to provide details of any
criminal activity or enterprise.
(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;Ord.No. 029428,§ 1,3-27-2012;Ord. No. 029467, § 1,5-8-2012)
• 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.
4
Conflict of interest:Any interest,reasonable expectation of an economic benefit,substantial interest,or
anticipated substantial interest in a matter or business transaction involving the city that could influence an
individual's ability to make an impartial decision.
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.
Ernplwee: 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:
(I)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.
R'e/ative: 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 the person 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 person 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;Ord. No.
029428. § 1,3-27-2012)
• Sec.2-313.-Effect of violation.
A violation of these rules of conduct shall subject the council member,board member or employee to
appropriate disciplinary proceedings,but such violation shall not render the action of the city voidable by the
city unless the action would not have been approved without the vote of the person who violated the rules of
conduct.
(Ord.No.20781, § 1,9-19-1989)
• Sec.2-314.-Exceptions to abstention requirement.
The requirement that a council member or board member abstain from voting on a matter or participating
in discussion as contained in rule 7 of the rules of conduct shall not apply in the following situations,provided
that such person has complied with the requirements of written disclosure of the interest:
S
(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 reference—Rules of conduct, §2-311.
• See.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)
• Sec.2-316.-Lobbyist registration.
Subsection A. Persons required to register as lohbristc.
(a)A person who engages in lobbying must register with the city secretary if,with respect to any client,the
person engages in lobbying activities for compensation.
(b)The following persons are not required to register under subsection (a):
(1)Media outlets. A person who owns, publishes or is employed by:
(A)a newspaper;
(B)any other regularly published periodical;
(C)a radio station;
(D)a television station;
(E)a wire service;or
(F)any other bona fide news medium that in the ordinary course of business disseminates news,
opinions,or paid advertisements that directly or indirectly oppose or promote municipal
questions to seek to influence official action relating thereto,if the person does not engage in
other activities that require registration under Part E.This subsection does not exempt the news
media or a person whose relation to the news media is only incidental to a lobbying effort or if a
position taken or advocated by a media outlet directly impacts,affects,or seeks to influence a
municipal question in which the media outlet has a direct or indirect economic interest.
(2)Mobilizing entiri constitucnty. A person whose only lobbying activity is to encourage or solicit the
members,employees,or owners(including shareholders)of an entity by whom the person is
compensated to communicate directly with one or more city officials to influence municipal questions.
This exception is intended to apply to neighborhood and other similar not-for-profit organizations.
(3)Governmental entities Governmental entities and their officers and employees,provided the
communications relate solely to subjects of governmental interest concerning the respective
governmental bodies and the city.
(4) Unknown municipal questio?ly. A person who does not know and has no reason to know that a
municipal question is pending at the time of contact with a city official.
(5)Dispute revolution. An attorney or other person whose contact with a city official is made solely as
part of resolving a dispute with the city,provided that the contact is solely with city officials who do
not vote on or have final authority over any municipal question involved and so long as such an
6
attorney complies with Rule 4.02 of the Texas Disciplinary Rules of Professional Conduct, as
amended.
Subsection B. Definitions.
The following words and phrases have the meaning ascribed to them in this section unless the context
requires otherwise:
(a)Cite official means the members of the city council,city manager,deputy and assistant city
managers,city secretary.city attorney,assistant city attorneys,department heads,municipal court
judges,and all members of any board,commission or committee of the city,including the board of
any corporation created by the city.
(b)Client means any person on whose behalf lobbying is conducted. In the case of a coalition or
association that employs or retains other persons to conduct lobbying activities,the client is the
coalition or association and not its individual members.
(c)Compensation means money,service, facility or other thing of value or financial benefit that is
received or is to be received in return for or in connection with services rendered or to be rendered.
Compensation does not include a payment made to any individual regularly employed by a person if
(1)the payment ordinarily would be made regardless of whether the individual engaged in lobbying
activities and(2)lobbying activities are not part of the individual's regular responsibilities to the
person making the payment.Compensation does not include the financial gain that a person may
realize as a result of the determination of a municipal question,unless that gain is in the form of a
contingent fee.
(d)Lobby or lobbying means any oral or written communication(including an electronic
communication)to a city official,made directly or indirectly by any person in an effort to influence or
persuade an official to favor or oppose,recommend or not recommend,vote for or against,or take or
refrain from taking action on any municipal question.The term lobby or lobbying does not include a
communication:
(I)merely requesting information or inquiring about the facts or status of any municipal
question,matter,or procedure,and not attempting to influence a city official;
(2)made by a public official or employee acting in his or her official capacity;
(3)made by a representative of a media organization if the purpose of the communication is
gathering and disseminating news and information to the public;
(4)made in a speech,article,publication,or other material that is distributed and made available
to the public,or through radio,television,cable television,or any other medium of mass
communication;
(5)made at a meeting open to the public under the Open Meetings Act;
(6) made in the form of a written comment filed in the course of a public proceeding or any other
communication that is made on the record in a public proceeding;
(7)made in writing as a petition for official action and required to be a public record pursuant to
established city procedures;
(8)made in writing to provide information in response to an oral or written request by a city
official for specific information;
(9)the content of which is compelled by law;
(10)made in response to a public notice soliciting communications from the public and directed
to the official specifically designated in the notice to receive such communications;
(1 l)made on behalf of an individual with regard to that individual's employment or benefits;
(12) made by a fact witness or expert witness at an official proceeding;or
(13)made by a person solely on behalf of that individual,his or her spouse,or his or her minor
children.
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(e)Municipal question means a public policy issue of a discretionary nature pending or impending
before city council or any board or commission,including but not limited to proposed action,or
proposals for action, in the form of ordinances, resolutions,motions,recommendations,reports,
regulations,policies, nominations,appointments,sanctions, and bids, including the adoption of
specifications,awards,grants,or contracts.The term municipal question does not include the day-to-
day application,administration,or execution of city programs and policies.
Subsection C. Registration.
(a)A registration form shall be completed and filed by a person required to register prior to the
commencement of lobbying activity for a client.
(b)A separate registration form must be filed for each client.
(c)The registration shall be on a form prescribed by the city secretary and shall include, to the extent
applicable:
(1)the full name,phone number,permanent address,and nature of the business of:
(A)the registrant;
(B)the client;
(C)any lobbying firm for which the registrant is an agent or employee with respect to the client;
and
(D)each employee or agent of the registrant who has acted or whom the registrant expects to act
as a lobbyist on behalf of the client;
(2)a statement of all municipal questions on which the registrant will lobby for the client.
(d)A registrant shall file an amended registration if the information contained in the current registration
changes or is incorrect.
(e)A registrant may file a termination of registration when no longer required to register.
(Ord.No.23772, § 3,9-21-1999)
• Secs.2-317 —2-319.-Reserved.
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APPENDIX C
Resolution
Approved
Resolution
WHEREAS, the City of Corpus Christi's Investment Policy and Investment
Strategies were adopted pursuant to Resolution No. 022390 on October 24, 1995;
WHEREAS, the Texas Public Funds Investment Act requires the governing body
to annually review, amend as necessary, and reaffirm its investment policy and
investment strategies;
WHEREAS, the Investment Policy and Investment Strategies were previously
reviewed during fiscal year 2013-2014 and reaffirmed pursuant to Resolution No.
030020 on December 11, 2013; and
WHEREAS, the Investment Policy and Investment Strategies were reviewed for
fiscal year 2014-2015 on December 11, 2014; require several amendments to clarify
and correct certain provisions; and must be annually reaffirmed; therefore,
Be it resolved by the City Council of the City of Corpus Christi, Texas,that:
Section 1. The City Council has reviewed the City of Corpus Christi's Investment
Policy and Investment Strategies for the current fiscal year 2014-2015. A copy of the
City of Corpus Christi's Investment Policy, which contains the separate Investment
Strategies, is attached to this resolution as Exhibit A and is incorporated by reference
into this resolution as if set out here in its entirety.
Section 2. The following amendments are made to the Investment Policy and
Investment Strategies to correct and clarify certain provisions:
(a) Cover Page: the date is amended to reflect the date of reaffirmation;
(b) Page i,Table of Contents, Appendix A: the word "Texas" is added preceding
"Public Funds Investment Act";
(c) Page i, Table of Contents, Appendix B: the title of the appendix is changed from
"City's Code of Ethics Ordinance" to "Code of Ethics";
(d) Page 2, section III, entitled "Definitions": the definition of"Authorized City
Representatives" is changed by deleting "officers"and replacing with "Officers"and by
deleting "Deputy Director of Financial Services" and replacing with "Assistant Director of
Financial Services";
(e) Page 2, section III, entitled "Definitions": the definition of"Director of Financial
Services" is changed by deleting "Deputy Director of Financial Services"from the
definition and replacing with "Assistant Director of Financial Services";
(f) Page 12, section VII, entitled"Designation of Responsibility", subpart A, entitled
"Investment Committee", is changed by deleting the reference to "Deputy Director of
Financial Services" in the paragraph and replacing it with "Assistant Director of Financial
Services";
(g) Page 13, section VII, entitled "Designation of Responsibility", subpart C, entitled
"Investment Advisor" is changed by deleting the word "A" in the second sentence of the
paragraph, to read as follows: "The initial contract made under authority of this
subsection may not be for a term longer than two years."; and
(h) Page 15, section XI, entitled "Collateralization", subpart A, entitled "Pledged
Collateral for Time and Demand Deposits" is changed by deleting the first sentence of
the second paragraph, which reads "The market value of pledged collateral for time and
demand deposits Collateral must be at least 102%of the principal plus accrued
interest", and replacing with the following sentence: "The market value of pledged
collateral for time and demand deposits must be at least 102% of the principal plus
accrued interest."
Section 3. As amended by Section 2 of this resolution, the City Council reaffirms the
City of Corpus Christi's Investment Policy and Investment Strategies for the current
fiscal year 2014-2015 and continues the policy and strategies in full force and effect.
ATTEST: CITY OF CORPUS CHRISTI
Rebecca Huerta, City Secretary Nelda Martinez, Mayor
Corpus Christi,Texas
of , 20_
The above resolution was passed by the following vote:
Nelda Martinez
Rudy Garza
Chad Magill
Colleen McIntyre
Lillian Riojas
Brian Rosas
Lucy Rubio
Mark Scott
Carolyn Vaughn
APPENDIX D
Legal Defense and Indemnification of City officers and Employees
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,§ I,7-21-1987;Ord.
No. 19864, § I,7-21-1987)
Editor's note—Formerly numbered§ 39-16.
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