HomeMy WebLinkAbout032821 RES - 07/26/2022Resolution reaffirming the City of Corpus Christi's Investment Policy and
Investment Strategies for fiscal year 2022-2023.
WHEREAS, the City of Corpus Christi's Investment Policy and Investment Strategies
were first 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
and reaffirmed for fiscal year 2021-22 pursuant to Resolution No. 032524 on August 17, 2021;
and
WHEREAS, the Investment Policy and Investment Strategies were reviewed for fiscal
year 2022-23 by the Investment Committee on May 26, 2022; and the documents are being
recommended for approval with style and formatting changes, substantive amendments, and an
updated reissuance date; and are being recommended for reaffirmation by the City Council.
Now, therefore, be it resolved by the City Council of the City of Corpus Christi, Texas:
Section 1. The City Council has reviewed the City of Corpus Christi's Investment Policy and
Investment Strategies for fiscal year 2022-23. A copy of the Investment Policy, which contains
the separate Investment Strategies, for fiscal year 2022-23 is attached to this resolution as
Exhibit A and incorporated by reference into this resolution as if set out here in its entirety.
Section 2. Style and formatting changes, along with substantive amendments, are being made
to the previous year's Investment Policy and Investment Strategies document, with such
changes and amendments as delineated and described below:
(a) Section II, "Scope," the acronym "CAFR" is amended to read "Annual
Comprehensive Financial Report."
(b) Section VI, "Delegation of Authority and Responsibility," subsections B "Investment
Committee" and C "Investment Officers" are both amended to condense the employee
titles referenced in the two subsections to read as follows: "Director of Finance &
Procurement' and "Assistant Director of Finance & Business Analysis" are "Director of
Finance" and "Assistant Director of Finance," respectively.
(c) Section VII, "Authorized Financial Institutions and Broker/Dealers," third paragraph,
is amended to reflect a revision to the Public Funds Investment Act which repealed the
requirement that financial Institutions, brokers/dealers, and money market mutual funds
provide written certification of receipt and review of the City's Investment Policy, such
requirement now only applicable to local government investment pools.
(d) Section VIII, "Authorized Investments," subsection B "Competitive Bidding
Requirement," last paragraph, first sentence, is amended by deleting "At least three bids"
032 821
SCANNED
and replacing it with "Two or more bids" with the exception as to guaranteed investment
contracts. Additionally, the phrase "or offers" is added to the end of the first sentence.
(e) Section IX, "Collateralization," subsection A, item 3, is amended by deleting the item
in its entirety and replacing it with language to read as follows: "3. Irrevocable letters of
credit issued to the City by the Federal Home Loan Bank."
(f) Section XII, "Reporting," third paragraph, the title "Director of Financial Services" is
deleted and replaced with "Director of Finance."
Section 3. With an updated issuance date that coincides with the date this resolution is passed,
the City Council approves the City of Corpus Christi's Investment Policy and Investment
Strategies for fiscal year 2022-2023, appoints the investment officers as named and authorized
in the Investment Policy and Investment Strategies, and reaffirms the continuation of the policy
and strategies in full force and effect.
PASSED AND APPROVED on the day of ��1 2022.
Paulette Guajardo
Roland Barrera
Gil Hernandez
Michael Hunter
Billy Lerma
John Martinez
Ben Molina
Mike Pusley
Greg Smith
ATTEST:
Rebecca Huerta
City Secretary
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Page 2 of 2
032 821
City of Corpus Christi
Investment Policy and
Investment Strategies
Adopted
July 26, 2022
TABLE OF CONTENTS
I. POLICY STATEMENT 1
II. SCOPE 1
III. PRUDENCE 2
IV. OBJECTIVES 2
V. LEGAL LIMITATIONS AND AUTHORITIES 3
VI. DELEGATION OF AUTHORITY AND RESPONSIBILITY 3
VII. AUTHORIZED FINANCIAL INSTITUTIONS AND BROKER/DEALERS 4
VIII. AUTHORIZED INVESTMENTS 5
IX. COLLATERALIZATION 7
X. SAFEKEEPING 8
XI. INTERNAL CONTROLS 8
XII. REPORTING 9
XIII. DEPOSITORIES 10
XIV. AUDITS AND COMPLIANCE WITH LAWS 10
XV. INVESTMENT POLICY ADOPTION 10
XVI. INVESTMENT STRATEGIES 11
APPENDIX
A. RESOLUTION 13
i
CITY OF CORPUS CHRISTI
INVESTMENT POLICY AND INVESTMENT STRATEGIES
Adopted July 26, 2022
This Investment Policy ("Policy") sets forth the specific policies and guidelines and general
strategy for the investment of funds of the City of Corpus Christi ("City") in order to achieve
the City's goals of safety, liquidity, diversification, and yield and to preserve the public trust.
This Policy satisfies the statutory requirements of the Public Funds Investment Act, Texas
Government Code, Chapter 2256 ("Act") to define and adopt a formal investment policy and
strategy and assures compliance with the Act.
I. POLICY STATEMENT
It is the policy of the City that the administration of Its funds and the investment of those funds
shall be handled as its highest public trust. Investments shall be made in a manner which will
provide maximum security of principal invested through risk management and diversification
strategies while meeting the cash flow needs of the City and conforming to all federal, State
and local laws, rules and regulations governing the investment of public funds.
The receipt of a reasonable yield is secondary to the requirements for safety and liquidity.
Earnings from investment will be used in a manner that best serves the interests of the City.
II. SCOPE
This Policy governs the investment of all funds of the City as reported in the Annual
Comprehensive Financial Report, except for the following:
A. Employee's Retirement Fund, and
B. Fireman's Retirement System.
With respect to the funds of non-profit corporations that are established by City Council
resolution and act on behalf of the City in accordance with State law, this Policy shall prevail in
the absence of a specific investment policy adopted by the non-profit corporation. In addition
to this Policy, the investment of bond proceeds and other bond funds (including debt and
reserve funds) of the City or of a non-profit corporation established by the City and acting on
behalf of the City in accordance with State law shall be governed and controlled by their
creating ordinance, resolution or trust indenture, including the authorization of eligible
investments, and by the provisions of the Internal Revenue Code of 1986, as amended,
including all regulations and rulings promulgated thereunder applicable to the issuance of tax-
exempt obligations.
All funds in the investment portfolio ("Portfolio") of the City are managed as a pooled fund
group, referenced in this Policy as the City's Pooled Fund, except the following, which are
managed as separately invested assets:
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A. Texas Utility System Junior Lien Revenue Improvement Bonds Escrow;
B. Airport Passenger Facility Charges (PFC); and
C. Law Enforcement Seized Assets.
III. PRUDENCE
The standard of care established by law to be used in the investment process shall be the
"prudent person standard" and shall be applied In the context of managing the overall
Portfolio, rather than a consideration as to the prudence of a single investment. The standard
states that:
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.
IV. OBJECTIVES
All funds shall be managed and invested with four primary objectives, in order of their priority:
A. Safety
The preservation and safety of principal is the City's foremost objective. Investments shall
be undertaken in a manner that seeks to ensure the preservation of capital in the overall
portfolio. Authorized investments are chosen for their high credit quality and stability.
B. Liquidity
The Portfolio shall remain sufficiently liquid, and retain a liquidity buffer, to assure that the
City meets all reasonably anticipated expenditures. Investment decisions will be based on
anticipated cash flows and only high -credit quality securities will be used for their
marketability.
C. Yield
The Portfolio shall be designed with the objective of attaining a reasonable market yield
taking into account the investment risk constraints and liquidity needs of the City.
D. Diversification
The City will diversify its investments by maturity and market sector in an effort to avoid
incurring unreasonable and avoidable market risks.
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V. LEGAL LIMITATIONS AND AUTHORITIES
Specific investment parameters for the investment of public funds in Texas are found in the
Act. All investments will be made in accordance with the Act, this Policy, and any applicable
financial indentures or trust requirements.
VI. DELEGATION OF AUTHORITY AND RESPONSIBILITY
All participants in the investment process shall seek to act responsibly as custodians of the
public trust.
A. City Council
The City Council has ultimate fiduciary responsibility for all funds. The City Council is
responsible for reviewing and adopting the Policy on no less than an annual basis. The City
Council shall receive and review quarterly investment reports, approved by the Investment
Committee, from the Investment Officers.
B. Investment Committee
An Investment Committee shall meet at least quarterly to review and determine
operational strategies and to monitor investment results. The Investment Committee shall
consist of the City Manager, Chief Financial Officer, Director of Finance & Procurement
('Finance"), Assistant Director of Finance, and Director of Management and Budget. The
Investment Committee shall include In its deliberation such topics as: economic outlook,
diversification, maturity structure, risk, and performance of the portfolio. At least annually,
the Investment Committee shall review, revise, and adopt a list of qualified brokers that
are authorized to engage in investment transactions with the City. The Investment
Committee shall be responsible for monitoring, reviewing, and making recommendations
regarding the Policy to the City Council. The Investment Committee will review quarterly
investment reports before submission to the City Council.
C. Investment Officers
Investment Officers are designated by City Council resolution until such designation is
rescinded. The authority to invest City funds and the execution of any documentation
necessary is granted to the Investment Officers consisting of the Chief Financial Officer,
Director of Finance, Assistant Director of Finance, City Treasurer and Investment Analyst.
The Investment Officers are responsible for the daily operation of the investment program;
shall comply with this Policy, the Act, and all applicable federal, State, and City laws, rules,
and regulations; and will provide complete reports to the Investment Committee on a
quarterly basis. The Investment Officers will retain all documentation on investment
transactions.
Each Investment Officer shall attend at least 10 hours of training within 12 months after
taking office or designation as an Investment Officer and eight hours of investment training
in each succeeding two-year fiscal period. Training must be received from an independent
source approved by the City's Investment Committee and must include education in
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investment controls, security risks, strategy risks, market risks, diversification of the
investment portfolio and compliance with the Act.
The Investment Officers will avoid any transaction that might impair public confidence in
the City. The Investment Officers may not engage in an Investment transaction except as
provided under the terms of this Policy. In order to ensure quality and capability of
investment management, the Investment Officers shall possess sufficient working
knowledge of economics and securities markets, as well as the experience and judgment
necessary to carry out the responsibilities outlined in this Policy.
D. 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.) 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
City Council by ordinance or resolution.
E. Ethics and Conflicts of Interest
Investment Officers shall comply with the City's Code of Ethics which requires disclosure of
financial interests each year. Investment Officers 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. Investment Officers shall
disclose to the City Council any material investment decisions and financial interests in
institutions that conduct investment or banking transactions with the City.
Investment Officers must file a disclosure statement with the Texas Ethics Commission and
City Council if:
1. The Investment Officer has a personal business relationship with a business
organization offering to engage in an investment transaction with the City (as
defined in 2256.005 (i)(1-3)); or
2. The Investment Officer is related within the second degree by affinity or
consanguinity, as determined under Chapter 573 of the Texas Government Code,
to an individual seeking to transact investment business with the City.
VII. AUTHORIZED FINANCIAL INSTITUTIONS AND BROKER/DEALERS
All investment transactions shall be made through the financial institutions or broker/dealers
approved by the Investment Committee. No investment transactions may be entered into with
a brokerage subsidiary of the City's safekeeping bank in order to perfect delivery versus
payment (DVP) requirements for trade independence.
The Investment Officers will provide each authorized financial institution and broker/dealer a
copy of this Policy to ensure that they are familiar with the goals and objectives of the City as
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required by the Act.
Investments shall only be made with local government investment pools which have provided
the City with a written certification executed by a qualified representative of the pool
acknowledging that the pool has:
A. Received, and thoroughly reviewed the Policy; and
B. Implemented reasonable controls and procedures in an effort to preclude investment
transactions not authorized by the Policy, except to the extent that this authorization is
dependent on an analysis of the makeup of the City's Portfolio or requires an interpretation
of subjective investment standards.
The Investment Officers will request the Investment Committee authorize the deletion of
financial institutions or broker/dealers for:
A. Slow response time;
B. Inability to compete with other authorized firms;
C. Insufficient market information on technical or fundamental expectations based on
economic indicators;
D. Failed transactions or continuing operations difficulties; or
E. Unwillingness to abide by this Policy.
VIII. AUTHORIZED INVESTMENTS
A. Investments
Authorized investments under this Policy shall be limited to the instruments listed below
as further described by the Act. If additional types of securities are approved for investment
of public funds by State statute, they will not be eligible for investment by the City until this
Policy has been amended and the amended version adopted by the City Council. The City
is not required to liquidate investments that were authorized Investments at the time of
purchase (2256.017).
1. Obligations of the U.S. Government, Its agencies and instrumentalities, excluding
mortgage backed securities, with a maximum stated maturity of three years
[2256.009(a)(1)].
2. Fully Federal Deposit Insurance Corporation (FDIC) insured or collateralized
depository certificates of deposit of a depository Institution that has its main office
or a branch office in Texas with a maximum maturity of two years (2256.010).
3. Fully collateralized direct repurchase agreements with a defined termination date
secured in accordance with this Policy and placed through a primary government
securities dealer, as defined by the Federal Reserve, or a financial institution doing
business in this State. All repurchase agreement transactions shall be governed in
accordance with the Act. The maximum stated maturity shall be one year with the
exception of flex repurchase agreements used for bond proceeds capital projects.
The flex repurchase agreement transaction shall be matched to the expenditure
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plan of the bonds (2256.011).
4. AAA, or equivalent, rated local government Investment pools defined by the Act
and striving to maintain a $1 net asset value and specifically approved for
participation by a resolution of the City Council (2256.016).
5. AAA -rated, SEC registered no-load money market mutual funds which strive to
maintain a $1 net asset value [2256.014(a)].
6. Fully FDIC insured or collateralized Interest -bearing depository accounts of banks in
Texas [2256.009(a)(7)].
7. General debt obligations of any U.S. states, agencies, counties, cities, and other
political subdivisions of any state rated no less than A by a nationally recognized
rating agency and with a maximum stated maturity of three years [2256.009(a)(5)].
8. FDIC insured brokered certificate of deposit securities from a bank in any U.S. state,
DVP to the City's safekeeping agent, not to exceed two years to maturity. Before
purchase, the Investment Officers must verify the FDIC status of the bank on
www.fdic.gov to assure the bank is FDIC insured [2256.010(b)].
9. Al/P1, or equivalent, rated commercial paper with a maximum maturity of 270 days
subject to meeting one of the two stated conditions In Sec. 2256.013. (2256.013).
10. Guaranteed investment contracts with a maximum maturity of two years and
executed in accordance with the Act (2256.015).
11. Securities lending transactions with primary dealers or banks doing business in
Texas in accordance with the Act (2256.0115).
B. Competitive Bidding Requirement
It is the policy of the City to require competitive bidding for all security purchases and sales,
except for:
1. Transactions with money market mutual funds and local government investment
pools;
2. Treasury and agency securities purchased at issue;
3. Automatic overnight "sweep" transactions with the city depository; and
4. Repurchase agreements.
Two or more bids or offers must be solicited for all other transactions involving individual
securities with the exception of guaranteed Investment contracts, which require at least
three bids or offers. In situations where the exact security Is not offered by other dealers,
offers on the closest comparable investment may be used to establish a fair market price
for the security. Certificates of deposit may be solicited In any manner permitted by the
Act.
C. DVP Requirement
All transactions, excluding local government investment pool and mutual fund
transactions, shall be conducted on a DVP basis.
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IX. COLLATERALIZATION
The City requires that all uninsured collected balances plus accrued interest, if any, in
depository accounts be secured in accordance with the requirements of the Depository
Services Agreement, this Policy, the Public Funds Collateral Act (Texas Government Code,
Chapter 2257), and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
A. Time and Demand Deposit Pledged Collateral
Consistent with State law, the City requires all bank time and demand deposits to be
federally insured and collateralized above federal Insurance coverage with eligible
securities. Depository collateral is pledged to and not owned by the City.
All collateral shall be held by independent third -party custodian(s) approved by the City
under an executed collateral agreement with the pledging bank. The custodian(s) shall
provide a monthly report of the collateral. The value of pledged securities must be at least
102% of deposits including accrued interest.
Eligible collateral securities shall only include:
1. Obligations of the U.S. Government, its agencies and instrumentalities, including
mortgage backed securities and collateralized mortgage obligations passing the
Federal Reserve bank test,
2. Obligations of states, agencies, counties, cities, and other political subdivisions of
any state rated not Tess than A by a nationally recognized rating agency, or
3. Irrevocable letters of credit issued to the City by a federal home loan bank.
The City's Investment Officers reserve the right to accept or reject any form of collateral or
enhancement at their sole discretion.
Collateralization often requires substitution. The substituted collateral's market value will
be calculated and, if its market value is equal to or greater than the required collateral
value, the substitution is allowed. Substitutions should be limited to minimize the City's
transactional recording requirements.
Should the collateral's market value exceed the required amount, the pledging Institution
may request approval from an Investment Officer to reduce collateral. Collateral reductions
may be permitted only if the City's records indicate that the total collateral market value
exceeds the required amount.
B. Repurchase Agreements Owned Collateral
Collateral under a repurchase agreement is owned by the City (2256.011). It will be held by
an independent third -party safekeeping institution approved by the City under an executed
Bond Market Master Repurchase Agreement. Securities (collateral) with a market value
totaling 102% of the principal and accrued Interest of the repurchase agreement is
required, and the third -party is responsible for the monitoring and maintaining of collateral
and margins daily.
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Authorized collateral for repurchase agreements will include only:
1. Cash;
2. Obligations of the U.S. Government, its agencies and instrumentalities including
mortgage -backed securities and CMO which pass the bank test; or
3. Debt obligations of any U.S. state or U.S. state sub -division rated A or better by at
least one nationally recognized rating agency.
X. SAFEKEEPING
The City shall maintain safekeeping with its banking institution or other banks for the
safekeeping of City -owned securities (including those owned under a repurchase agreement
or guaranteed investment contract). All collateral must be held in the City's name and must
be so reflected on the safekeeping receipts. All security transactions shall be settled on a DVP
basis by the safekeeping institution (2256.005).
Securities shall not be held in any brokerage account. Securities shall not be bought from the
City's depository bank in order to provide perfected DVP.
The safekeeping institution shall be required to issue safekeeping receipts listing each specific
security, rate, description, maturity, Committee on Uniform Security Identification Procedures
(CUSIP) number, and other pertinent information which will be maintained by the Investment
Officers.
XI. INTERNAL CONTROLS
The Investment Officers will maintain controls to regulate the activities of the investment
program in accordance with this Policy. The controls shall be designed to prevent loss of funds
due to fraud, employee error, misrepresentation by third parties, unanticipated market
changes, or imprudent actions. Internal controls deemed most important would include:
competitive bidding, control of collusion, separation of duties, safekeeping, delegation of
authority, and documentation. In conjunction with the annual financial audit, a compliance
audit of management controls on investments and adherence to this Policy shall be performed.
A. Cash Flow Forecasting
Cash flow analysis and forecasting is designed to protect and sustain cash flow
requirements of the City. Executive management of the City will inform the Investment
Officers of anticipated cash flows which will be used for cash flow and investment
purposes.
B. Loss of Rating
The Investment Officers shall monitor the credit rating on all authorized investments in the
portfolio which require ratings by policy or law. Ratings will be based upon independent
information from a nationally recognized rating agency. An investment that requires a
minimum rating under the Act does not qualify as an authorized investment during the
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period the investment does not have the minimum rating. The City shall take all prudent
measures that are consistent with this Policy to liquidate an investment that does not have
the minimum rating. If any security falls below the minimum rating required by Policy or
law, the Investment Officers shall notify the Committee of the loss of rating, conditions
affecting the rating and possible loss of principal with liquidation options available, within
one week after the Toss of the required rating (2256.021).
C. Monitoring FDIC Coverage
The Investment Officers shall monitor, on no less than a weekly basis, the status and
ownership of all banks issuing brokered certificates of deposit owned by the City based
upon information from the FDIC. If any bank has been acquired or merged with another
bank in which brokered certificates of deposit are owned by the City, the Investment
Officers shall immediately liquidate any brokered certificate of deposit which places the
City above the FDIC insurance level.
XII. REPORTING
In accordance with the Act (2256.023), not less than quarterly, the Investment Officers shall
prepare and submit to the Investment Committee and City Council a written report of
investment transactions for all funds covered by the Act and this Policy for the preceding
reporting period within a reasonable time after the end of the period. The report must:
A. Describe in detail the investment position of the portfolio on the date of the report;
B. Be prepared jointly by all Investment Officers of the City;
C. Be signed by each Investment Officer of the City;
D. Contain a summary statement of each pooled fund group that states the:
1. Beginning market value for the reporting period;
2. Ending market value for the period; and
3. Fully accrued interest for the reporting period;
E. 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;
F. State the maturity date of each separately Invested asset that has a maturity date;
G. State the account or fund or pooled group fund in City for which each individual
investment was acquired; and
H. State the compliance of the investment portfolio of the City as it relates to:
1. The investment strategy expressed In this Policy; and
2. Relevant provisions of Section 2256.023 of the Act.
The quarterly reports prepared by the Investment Officers shall be formally reviewed at least
annually by an independent auditor, and the result of the review shall be reported to City
Council by that auditor.
In addition to quarterly reports, the Investment Officers will submit to the Director of Finance
the following reports on a monthly basis:
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A. Cash position by bank account;
B. Collateral position; and
C. Investment transaction.
Market prices for market value calculations shall be obtained from nationally recognized
securities databases including those provided by the City's depository bank through its
safekeeping services and Bloomberg Professional Services.
XIII. DEPOSITORIES
The City designates one banking institution for banking services through a competitive process
at least every five years. Written depository agreements shall be executed before funds are
transferred.
XIV. AUDITS AND COMPLIANCE WITH LAWS
Each banking institution agrees to comply with all federal, State, and local laws, rules, and
regulations. 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 of all contracts, invoices, materials, and other data relating to
applicable investments.
XV. INVESTMENT POLICY ADOPTION
The City Council shall review and adopt by resolution its Investment Policy and Investment
Strategies not less than annually, and the approving resolution shall designate any changes
made to the Policy and Strategies.
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XVI. INVESTMENT STRATEGIES
The City's Investment Portfolio ("Portfolio") will be designed and managed based on projected
cash flows to provide for all anticipated and projected cash needs for each fund. The Portfolio
is to be managed pro -actively considering ongoing market changes but is essentially a buy -and -
hold portfolio. Information on expected expenditures from the executive management of the
City will be incorporated into investment decisions. The overall Investment program shall be
designed and managed with a degree of professionalism worthy of public trust. The
investment strategy for funds established after the annual Policy adoption will be managed in
accordance with the terms of this Policy and applicable agreements until a specific strategy is
reviewed and adopted.
A. Pooled Fund Strategy
The City's Pooled Fund is an aggregation of City funds which Include tax receipts, enterprise
revenue, fine and fee revenues, as well as, bond proceeds, grants, gifts, and endowments.
The City's Pooled Fund may include funds from various Corporations associated with the
City which receive income distributions from their pro-rata share of the full fund group.
The City's Pooled Fund is maintained to meet anticipated daily cash needs for City
operations, capital projects, and debt service payments. The objectives of this fund are to:
1. Ensure safety of principal by investing only in high -credit quality investments for
which a strong secondary market exists which are designed to assure on -going
suitability and marketability of such investments;
2. Ensure that anticipated cash flows are matched with adequate investment liquidity;
3. Limit market and credit risk through diversification; and
4. Attain a market yield commensurate with the objectives and restrictions set forth
in this Policy.
The City's Pooled Fund shall have a maximum dollar -weighted average maturity (WAM) of
one year (365 days) designed to meet anticipated cash flow needs. The fund shall be
laddered based on cash flow analysis to provide ongoing liquidity for anticipated needs and
provide for reasonable extension.
A minimum of 15% of the City's Pooled Fund shall be held In cash or cash equivalents for
liquidity and no more than 40% may be invested longer than one year. Changes in City cash
flows may change percentage representations over time. Unless approved by the
Investment Committee, the target percentages specified shall not be exceeded for a
temporary period greater than thirty (30) days without the Investment Officers taking
corrective action.
The risks in the City's Pooled Fund shall be measured quarterly against a risk benchmark
designed to mirror the authorized market investments and the City's cash flow
requirements. Because this fund is dictated by cash flow needs, the benchmark becomes
a measure of risk which reflects the primary market rates matched to the WAM. With a
maximum WAM of one year, the risk benchmark is established as the one-year Treasury
Bill for the comparable period. The fund should track the risk benchmark but will naturally
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lag as market interest rates, which adjust daily, move.
B. Texas Utility System Junior Lien Revenue Improvement Bonds Escrow Fund Strategy
This escrow fund was established pursuant to an escrow agreement dated as of August 29,
2017 with The Bank of New York Mellon Trust Company, N.A. Escrow will be maintained
with The Bank of New York Mellon Trust Company, N.A. In investments authorized by the
Act and this Policy. The objectives of this fund are to:
1. Ensure safety of principal by investing only in high credit quality investments for
which a strong secondary market exists;
2. Ensure that anticipated cash flows are matched with adequate investment liquidity;
3. Manage market and credit risk through diversification of investments and the
requirement of AAA ratings; and
4. Attain a market yield commensurate with the objectives and restrictions set forth
in this Policy and the escrow agreement.
C. Airport Passenger Facility Charges (PFC) Fund Strategy
The Airport PFC Fund is revenue comprised of fees imposed as authorized by The Aviation
Safety and Capacity Expansion Act of 1190 (Public Law 101-508, Title II, Subtitle B). The
revenue is segregated as required by the Passenger Facility Charge Audit Guide for Public
Agencies, issued by the Federal Aviation Administration. The objectives of this fund are to:
1. Ensure safety of principal by investing only in high credit quality investments for
which a strong secondary market exists;
2. Ensure that anticipated cash flows are matched with adequate investment liquidity;
3. Manage market and credit risk through diversification of investments and the
requirement of AAA ratings; and
4. Attain a market yield commensurate with the objectives and restrictions set forth
in this Policy and the escrow agreement.
D. Law Enforcement Seized Assets Fund Strategy
The Law Enforcement Seized Assets Fund is comprised of seized contraband money that,
per the Code of Criminal Procedure, Chapter 59, Article 8, may be deposited in an interest -
bearing bank account in the jurisdiction of the attorney representing the State until final
judgment is rendered concerning the contraband. The objective of this fund is to ensure
safety of principal by investing only in a fully FDIC -insured or collateralized interest -bearing
depository account of banks in Texas. Since the revenue will only be deposited into this
type of investment, there is no liquidity risk, market risk, diversification risk, nor credit risk.
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