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HomeMy WebLinkAboutResolution No. 2026-058CITY OF THE COLONY, TEXAS RESOLUTION NO. 2026 - 05$ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF THE COLONY, TEXAS, ADOPTING THE INVESTMENT POLICY FOR THE CITY OF THE COLONY ATTACHED HERETO AS EXHIBIT "A"; DECLARING THAT THE CITY COUNCIL HAS COMPLETED ITS REVIEW OF THE INVESTMENT POLICY AND INVESTMENT STRATEGIES OF THE CITY AND THAT EXHIBIT "A" RECORDS ANY CHANGES TO EITHER THE INVESTMENT POLICY OR INVESTMENT STRATEGIES; AND PROVIDING AN EFFECTIVE DATE WHEREAS, in accordance with the Public Funds Investment Act, Chapter 2256, Texas Government Code, the City Council of the City of The Colony, Texas by resolution adopted an investment policy; WHEREAS, Section 2256.005, Texas Government Code requires the City Council to review the investment policies and investment strategies not less than annually and to adopt a resolution or order stating the review has been completed and recording any changes made to either the investment policies or investment strategies; WHEREAS, the City Council desire to approve said Investment Policy; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF THE COLONY, TEXAS, THAT: Section 1. The Colony Investment Policy, attached hereto as Exhibit "A" be and the same is hereby adopted and shall govern the investment policies and investment strategies for the City, and shall define the authority of the investment official of the City from and after the effective date of this resolution. Section 2. All provisions of the Resolutions of the City of The Colony, Texas, in conflict with the provisions of this resolution be, and the same are hereby, repealed, and all other provisions of the resolutions of the City not in conflict with the provisions of this resolution shall remain in full force and effect. Section 3. This Resolution shall take effect immediately from and after its adoption and it is so resolved. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF THE COLONY, TEXAS THIS 1sT DAY OF SEPTEMBER 2026. Richard Boyer, Ma City of The Colony, Texas V Tina Stewart, TRMC, CMC, City Secretary APPROVED AS TO FORM: CITY OF THE COLONY THE COLONY ECONOMIC DEVELOPMENT CORPORATION THE COLONY COMMUNITY DEVELOPMENT CORPORATION INVESTMENT POLICY September 1, 2026 Prepared by the Finance Department IV. V. VI VII VIII. IW THE COLONY INVESTMENT POLICY TABLE OF CONTENTS SCOPE OF POLICY 1 A. Funds Included 1 B. Funds Excluded 1 C. Pooling of Funds 1 D. Additional Requirements 1 PRUDENCE 1 OBJECTIVES OF POLICY 2 A. Safety 2 B. Liquidity 2 C. Public Trust/Transparency 2 D. Yield 2 RESPONSIBILITY AND CONTROL 3 A. Delegation 3 B. Investment Officers 3 C. Conflicts of Interest 3 D. Disclosure 3 E. Investment Training 3 AUTHORIZED INVESTMENTS 4 INVESTMENT REPORTS 4 PORTFOLIO AND INVESTMENTASSET PARAMETERS 5 A. Bidding Process for Investments 5 B. Maximum Maturities 5 C. Maximum Dollar -Weighted Maturity 5 D. Diversification 5 E. Performance Standards 5 SELECTION OF DEPOSITORY, BROKER/DEALERS, AND INVESTMENT ADVISORS 5 A. Depository Solicitation Process 5 B. Insurability 6 C. Investment Advisors 6 COLLATERALIZATION 6 A. Insurance or Collateral Pledged 6 B. Collateral Defined 6 C. Audit of Pledged Collateral 6 page D. X. SAFEKEEPING AND CUSTODY OF INVESTMENT ASSETS 6 XI, MANAGEMENT AND INTERNAL CONTROLS 7 XII. INVESTMENT POLICY ADOPTION 7 XIII. INVESTMENT STRATEGY 7 A. Operating Funds 8 APPENDIXA Authorized Government Pools 9 THE COLONY IN TMENT POLICY 410420 REWA This Investment Policy shall govern the investment activities of all funds of the City of The Colony, The Colony Economic Development Corporation, and The Colony Community Development Corporation (collectively herein referred to as "THE COLONY"), excluding any specific funds cited hereafter. This Policy serves to satisfy the state statutory requirement to define and adopt a formal investment policy. A. FUNDS INCLUDED: All financial assets of all current funds of THE COLONY and any new funds created in the future, unless specifically exempted, will be administered in accordance with this Policy. These funds are accounted for in the City's Annual Financial Report and may include: General Fund, Enterprise Funds, Capital Project Funds, Special Revenue Funds, Trust and Agency Funds. B. FUNDS EXCLUDED: This Policy excludes Employee Retirement and Pension Funds administered or sponsored by THE COLONY and excludes bond funds held in trust escrow accounts. THE COLONY will maintain responsibility for these funds as required by Federal and State law and Charters and Codes. C. POOLING OF FUNDS: Except for cash in certain restricted and special funds, THE COLONY will consolidate cash balances from all funds to optimize potential investment earnings. Investment income will be allocated to the various funds based on their respective percentage participation and in accordance with the generally accepted accounting principles. D. ADDITIONAL REQUIREMENTS: In addition to this Policy, bond funds (to include capital project, debt service, and reserve funds) will be managed by the governing debt ordinance and the provisions of the Internal Revenue Code applicable to the issuance of tax-exempt obligations and the investment of debt proceeds. Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, butfor investment, consideringthe probable safety of the capital as well as the probable income to be derived. The standard of prudence to be used by Investment Officers shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio of funds, rather than a consideration as to the prudence of a single investment. Investment Officers acting in accordance with written procedures and this Investment Policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion to the City Manager, and the City Council, and appropriate action is taken by the Investment Officers and their oversight managers to control adverse developments in accordance with the terms of this Policy. The primary objectives of THE COLONY's investment program in order of priority shall be preservation and safety of principal, liquidity, public trust, and yield. A. SAFETY: The foremost and primary objective of THE COLONY's investment program is the preservation and safety of capital. Each investment transaction will seekfirstto ensure that capital losses are avoided, whetherthe loss occurs from the default of a security or from erosion of market value. The objectives will be to mitigate credit risk and interest rate risk. To control credit risk, investments should be limited to the safest types of investments. Financial institutions, broker/dealers and advisors who serve as intermediaries, shall be pre- qualified by THE COLONY. The credit ratings of investment pools and individual securities will be monitored to assure compliance with this Policy and State law. To control interest rate risk, THE COLONY will structure the investment portfolio so that investments mature to meet cash requirements for ongoing operations and will regularly monitor marketable securities. Should an issuer experience a downgrade of its credit rating by a nationally recognized credit rating agency belowthe required minimum rating, all prudent measures will be taken to liquidate the investment. B. LIQUIDITY: THE COLONY's investment portfolio will remain sufficiently liquid to enable THE COLONY to meet operating requirements that might be reasonably anticipated. Liquidity will be achieved by maintaining adequate cash equivalent balances, matching investment maturities with forecasted cash flow funding requirements, and by diversifying maturities. Furthermore, since all possible cash demands cannot be anticipated, the portfolio, or portions thereof may be placed in bank accounts, money market mutual funds or local government investment pools, which offer same day liquidity. C. PUBLIC TRUST/TRANSPARENCY: Investment Officers shall seek to act responsibly as the custodians of public trust. Investment Officers shall avoid any transaction that might impair public confidence in THE COLONY's abilityto govern effectively. To increase public trust and transparency, the Investment Policy will limit investments to those easily understood. Investments are limited to money market accounts of the Depository Bank and local governmental investment pools, and certificates of deposit of up to 1 year in maturity as described below in section V. Authorized Investments. D. YIELD: THE COLONY's investment portfolio will be designed with the objective of regularly meeting or exceeding the optimum rate of return of a reasonable benchmark considering the risk, liquidity, and transparency constraints. Investment Officers will seek to preserve principal, maintain liquidity levels needed, maintain as much transparency as possible and optimize the yield of these funds. However, it is understood that if the yield achieved by THE COLONY is higher than the arbitrage yield, positive arbitrage income will be rebated to the federal government as required by current federal regulations. 2 IV. RESPONSIBILITY AND CONT90L A. DELEGATION: The Director of Finance has oversight management responsibility to establish written procedures and controls for the operation of the investment program, consistent with this Investment Policy. Such procedures shall include explicit delegation of authority to persons responsible for the daily cash management operation, execution of investment transactions, overall portfolio management, and investment reporting. The Director of Finance shall be responsible for all transactions undertaken, and shall establish a system of controls to regulate the activities of the Investment Officers. B. INVESTMENT OFFICERS: The Director of Finance and Assistant Finance Director are the "Investment Officers" of THE COLONY. No person shall engage in an investment transaction except as provided under the terms of this Policy and the procedures established by the Director of Finance. C. CONFLICTS OF INTEREST: Investment Officers and employees involved in the investment process will refrain from personal business activitythat could conflictwith proper execution and management of the investment program, orwhich could impair their ability to make impartial investment decisions. Investment Officers and employees involved in the investment process shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of THE COLONY. D. DISCLOSURE: Investment Officers shall disclose to the City Manager, City Council, Boards of Directors, and the Texas Ethics Commission any financial interests in financial institutions or any relationship within the second degree by affinity or consanguinity to an individual that conducts business with THE COLONY. All Investment Officers shall further disclose any large personal financial investment positions that could be related to the performance of THE COLONY's portfolio. Investment Officers shall subordinate their personal investment transactions to those of this jurisdiction, particularly with regard to the timing of purchases and sales. E. INVESTMENT TRAINING: In order to ensure qualified and capable investment management, the Director of Finance, the Assistant Finance Director, and any other Investment Officers shall have a finance, accounting, or related degree and knowledge of treasury functions. Additionally, Investment Officers must attend investment training not less than once in a two-year period that begins on the first day of the fiscal year and consists of two consecutive fiscal years after that date and receive not less than 10 hours of instruction relating to investment responsibilities. This investment training may be from educational seminars held by Government Finance Officers Association (GFOA), Government Treasurers Organization of Texas (GTOT), Government Finance Officers Association of Texas (GFOAT), American Institute of Certified Public Accountants (AICPA), University of North Texas (UNT), North Central Texas Council of Governments (NCTCOG), and Texas Municipal League (TML). All Investment Officers of THE COLONY shall attend at least one training session relating to their cash management and investment responsibilities within 12 months after assumingthese duties forTHE COLONY. Training must include education in investment controls, security risks, strategy risks, market risks, and compliance with state investment statutes. 3 V. AUTHORIZED INVESTMENT Funds of THE COLONY may be invested in the following investments, as authorized by Chapter 2256 of the Government Code of the State of Texas, known as the "Public Funds Investment Act", and as authorized by this Investment Policy. Investments not specifically listed below are not authorized: A. Money Market Mutual Funds of Local Government Joint Investment Pools established and operating in compliance with the Public Funds Investment Act, and are continuously rated no lower than AAA - m or an equivalent rating by at least one nationally recognized rating service, have a dollar -weighted average maturity of 60 days or less, and invest only in obligations listed in the Public Funds Investment Act. B. Money Market Deposit accounts with bank depository. C. Certificates of Deposits that are issued by a state or national bank that has its main office or branch office in the State of Texas and that a) which are guaranteed or insured by the Federal Deposit Insurance Corporation, b) are secured in compliance with Section IX Collateralization, or c) are executed through a depository institution that has its main office or a branch office in this State that participates in the Certificate of Deposit Account Registry Service (CDARS) and meet the requirements of the Public Funds Investment Act. D. Insured Cash Shelter Accounts executed through a trustee bank that has its main office or a branch office in this State. Only those investments specifically listed in this Policy are authorized. VI.INVE.STMIrN EPORTS The Director of Finance shall submit quarterly an investment report in compliance with the Public Funds Investment Act. This report will be prepared in a manner, which will allow THE COLONY to ascertain whether investment activities during the reporting period have conformed to the Investment Policy. The report should be provided to the City Council, Boards of Directors, and the City Manager. The reports shall be formally reviewed at least annually by an independent auditor in conjunction with the annual audit. The result of the review shall be reported to the City Council and Boards of Directors by that auditor. The quarterly investment report must be presented within 90 days of the end of the quarter reporting period. The Director of Finance is responsible for the recording of investment transactions and the maintenance of the investment records with reconciliation of the accounting records of investments carried out by the Assistant Finance Director. Information to maintain the investment program and the reporting requirements is derived from various sources such as broker/dealer research reports, newspapers, financial on-line market quotes, communication with broker/dealers, government investment pools, and financial consulting services. CI VII. PORTFOI.10 AND INVESTMENTASSET PARAMETERS A. BIDDING PROCESS FOR INVESTMENTS: Investment Officers for THE COLONY shall solicit bids or quotes for certificates of deposit, or other financial institution deposit accounts either orally, in writing, electronically, or in any combination of these methods. The Investment Officers will strive to create a competitive pricing environment for all portfolio transactions. B. MAXIMUM MATURITIES: THE COLONYwill manage its investments to meet anticipated cash flow requirements. THE COLONYwill not directly invest in certificate of deposits maturing more than one year from the date of purchase. C. MAXIMUM DOLLAR -WEIGHTED AVERAGE MATURITY: The maximum dollar -weighted average maturity based on the stated final maturity, authorized by this Investment Policyfor the composite portfolio of THE COLONY, shall be 9 months. D. DIVERSIFICATION: It is the Policy of THE COLONY to diversify its investment portfolios. Assets held in each investment portfolio shall be diversified to eliminate the risk of loss resulting from concentration of assets in a specific maturity or specific issuer. In establishing specific diversification strategies, the following general policies and constraints shall apply: 1) CD maturities and shall be staggered in a way that protects interest income from the volatility of interest rates and that avoids undue concentration of assets in a specific maturity or Institution. Investments shall be selected which provide for stability of income and adequate liquidity. E. PERFORMANCE STANDARDS: The investment portfolio will be managed in accordance with the objectives specified within this Policy. VIII. SELECTLOF p_EPOS11()-RY,�11()-KER1..QEAL_EFA�IDJNVESTME.hIl ADVi_�ORS A. DEPOSITORY SOLICITATION PROCESS: Primary depositories shall be selected through THE COLONY's banking services procurement process, which shall include a formal request for proposal (RFP) issued not less than every five years. In selecting primary depositories, the creditworthiness of institutions shall be considered. No public deposit shall be made except in a qualified public depository as established by state depository laws. THE COLONY may also establish agreements with other financial institutions under separate contract for additional services which are necessary in the administration, collection, investment, and transfer of municipal funds. Such deposits will only be made after the financial institution has completed and returned the required written instruments and depository pledge agreements. 5 B. INSURABILITY: Banks seeking to establish eligibilityforTHE COLONY's deposits, shall submit financial statements, evidence of federal insurance, and other information as required by the Investment Officers of THE COLONY. C. INVESTMENT ADVISORS: Investment Advisors shall adhere to the spirit, philosophy and specific term of this Policy and shall advise within the same "Standard of Care". Selected Investment Advisors must be registered under the Investment Advisors Act of 1940 or with the State Securities Board. A contract with an Investment Advisor may not be for a term longer than two years and must be approved by the City Council, including any renewals or extensions. A. INSURANCE OR COLLATERAL PLEDGED: Collateralization shall be required on depository bank deposits and certificates of deposit, in accordance with the "Public Funds Collateral Act" and depository laws. With the exception of deposits secured with irrevocable letters of credit at 100% of amount, the collateralization level will not be less than 102% of market value of principal and accrued interest, less any FDIC insurance. Evidence of the pledged collateral shall be documented by a tri -party custodial or a master repurchase agreement with the eligible collateral pledged clearly listed in the agreement. Collateral shall be monitored at least monthlyto ensure that the marketvalue of the securities pledged equals or exceeds the related deposit or investment balance. B. COLLATERAL DEFINED: THE COLONY shall only accept, as depository or investment collateral, letters of credit issued by the FHLB or investments stipulated by the Federal Treasury Office of the Comptroller of the Currency, Title 12 - Banks and Banking, Paragraph 9.11. C. AUDIT OF PLEDGED COLLATERAL: All collateral shall be subject to verification and audit by the Director of Finance. X. SAFEKEEPING AND CUSTODY OF INVESTMENT AS5t=7S All security transactions, including collateral for repurchase agreements, entered into by THE COLONY shall be conducted using the delivery vs. payment (DVP) basis. That is, funds shall not be wired or paid until verification has been made that the correct security has been received by the safekeeping bank. The safekeeping bank is responsible for matching up instructions from THE COLONY's Investment Officers on an investment settlementwith what is wired from the broker/dealer, priorto releasing THE COLONY's designated funds for a given purchase. The security shall be held in the name of THE COLONY or held on behalf of THE COLONY in a bank nominee name. Securities will be held by a third party custodian designated bythe Director of Finance and evidenced by safekeeping receipts. The safekeeping bank's records shall assure the notation of THE COLONY's ownership of or explicit claim on the securities. The original copy of all safekeeping receipts shall be delivered to THE COLONY. A safekeeping agreement must be in place, which clearly defines the responsibilities of the safekeeping bank. Wires or ACH transactions to and from government investment M pools, financial institution deposits, and money market mutual funds are the only exceptions to the DVP method of settlement. XI. MAN GEMENT AND INTERNAL CONTROLS The Director of Finance shall establish a system of internal controls which shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees or Investment Officers of THE COLONY. Controls and managerial emphasis deemed most important that shall be employed where practical are: A. Control of collusion. B. Separation of duties. C. Separation of transaction authority from accounting and record keeping. D. Custodian safekeeping receipts records management. E. Avoidance of bearer -form securities. F. Clear delegation of authority. G. Documentation of investment bidding events. H. Written confirmations from broker/dealers and financial institutions. I. Reconcilements and comparisons of security receipts with the investment records. J. Compliance with investment policies. K. Accurate and timely investment reports as required by law and this Policy. L. Validation of investment maturity decisions with supporting cash flow data. M. Adequate training and development of Investment Officers. N. Verification of all investment income and security purchase and sell computations. O. Review of financial condition of all broker/dealers, and depository institutions. P. Information about market conditions, changes, and trends that require adjustments in investment strategies. The above list of internal controls represents only a partial list of a system of internal controls. In conjunction with the annual audit, a process of independent review by an external auditor shall be established. XII. INVESTMENT POLICY ADOPTION THE COLONY's Investment Policy shall be adopted by resolution of the City Council and Boards of Directors. The Policy and general investment strategy statements shall be reviewed on an annual basis by the City Council and Boards of Directors, and any modifications made thereto must be approved by them. XIII. IN_VESTMENJ STRATEGY Effective investment strategy development coordinates the primary objectives of THE COLONY's Investment Policy and cash management procedures. Cash management to increase the available "investment period" will be employed when necessary to enhance the ability of THE COLONY to earn interest income. Maturity selections shall be based on cash flow and market conditions to take advantage of interest rate cycles. THE COLONY's portfolio shall be designed and managed in a manner responsive to the public trust and consistent with the Investment Policy. 7 Each major fund type has varying cash flow requirements and liquidity needs. Therefore specific strategies shall be implemented consideringthe Fund's unique requirements. THE COLONYfunds shall be analyzed and invested according to the following major fund types: A. Operating Fund B. Capital Project Funds and Special Purpose Funds C. Debt Service Funds D. Bond Reserve Funds OVERALL STRATEGY: THE COLONY's basic investment strategy is to utilize investment options that represent suitable risk/return alternatives for excess operating reserves which are easily understood by the public. Therefore, investment of excess operatingfunds shall seekto preserve principal and promote transparency by restricting authorized investment instruments to those investments which are easily understood with suitable and limited credit and market risk. Liquiditywill be maintained by utilizing projected cash flow needs to limit investment maturities and targeting minimum cash balances. Investment marketability will be maintained based on the fund -type strategies to sufficiently and reasonably assure that investments could be liquidated prior to the maturity, if cash needs dictate. THE COLONY shall also diversify its investment portfolio. Whenever practical, assets held in the investment portfolio shall minimize the risk of loss resultingfrom concentration of assets in a specific maturity or specific issuer. THE COLONY will group investment instruments into "fund -type investment groups." These groups will reflect similar needs as to maturity limits, diversity, and liquidity. THE COLONY funds shall seek to achieve a competitive yield appropriate for each strategy. Yield objectives shall at all times be subordinate to the objectives of safety, liquidity and transparency. Tax-exempt debt proceeds shall be invested to optimize the interest earnings retained by THE COLONY, while atthe same time fully complying with all applicable State laws and federal regulations, including the arbitrage rebate regulations. A. OPERATING FUNDS: Operating Funds shall have as their primary objective to assure safety of principal. The secondary objective is to assure that anticipated cash outflows are matched with adequate investment liquidity. The secondary objective is to create a portfolio structure, which will experience minimal volatility during changing economic cycles. Objectives may be accomplished by investing in money market accounts of the depository bank or government investment pools or bank certificates of deposits. 0 APPENDIX A AUTHORIZED LOCAL GO RNMENT IN ESTM NT POO[ S TEXPOOL/TEXPOOL PRIME (Texas Local Government Investment Pools) LOGIC (Local Government Investment Cooperative) TEXASTERM/TEXASDAILY (Local Government Investment Pools)