HomeMy WebLinkAboutResolution No. 88-23 CITY OF THE COLONY, TEXAS
A RESOLUTION ADOPTING RULES GOVERNING THE
CITY'S INVESTMENT PRACTICES; DESIGNATING AN
INVESTMENT OFFICER; DEFINING THE AUTHORITY OF
THE INVESTMENT OFFICER; PROVIDING FOR A
WRITTEN ANNUAL REPORT ON INVESTMENT
TRANSACTIONS; REPEALING CONFLICTING
RESOLUTIONS; AND DECLARING AN EFFECTIVE DATE
WHEREAS, the Public Funds Investment Act of 1987, Article
842a-2, V.T.C.S. (the "Act"), requires that the investment of
public funds shall be made in accordance with written policies
approved by the governing body and that such policies must
address liquidity, diversification, safety of principal, yield,
maturity, and quality and capability of investment management,
with primary emphasis on safety and liquidity; and
WHEREAS, the Act and Article 4413 (34c), V.T.C.S., require
Texas cities to adopt rules governing investment practices,
including designation of an investment officer, definition of the
authority of the investment officer, and provision for an annual
report describing investment transactions; and
WHEREAS, it is the desire of the City Council to establish
and maintain an investments and cash management program to ensure
protection of the City's funds, availability of cash to meet
current City obligations, and maximization of interest earnings
through the investment of idle funds;
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF THE COLONY, TEXAS:
Section 1. That the City hereby adopts the Investment
Rules and Policy of the City of The Colony attached hereto as
Exhibit A.
Section 2. That any and all resolutions, rules,
regulations, policies or provisions in conflict with the
provisions of this Resolution are hereby repealed and rescinded
to the extent of the conflict herewith.
Section 3. This Resolution shall take effect immediately
from and after its adopti~ and it is so ordered.
RESOLVED on this /d~_ day of ~, , 1988.
Don AmUck, Mayor '
AS TO FORM:
John Boyle, City Attorney
CITY OF THE COLONY
INVESTMENT POLICY
AUGUST, 1988
INTRODUCTION
The purpose of this Investment Policy is to identify various policies and
procedures that develop a prudent and systematic investment process. The
initial step toward a prudent investment policy is to organize and formalize
investment-related activities. Related activities which comprise good cash
management include accurate cash projection, the expeditious collection of
revenue, the control of disbursements, cost-effective banking relations, and
a short-term borrowing program which coordinates working capital require-
ments and the purchase of capital assets. In concert with these requirements
are the many facets of an appropriate and secure short-term investment
program.
SCOPE
This Investment Policy is intended to cover all financial assets under the
direct authority of the City of The Colony. These funds include all govern-
mental, proprietary and fiduciary funds that are accounted for in the City of
The Colony Comprehensive Annual Financial Report. All transactions
involving the financial assets and related activity of all the foregoing funds
sha~l be governed by this Investment Policy.
OBJECTIVES
1. Safety of principal is the foremost overriding objective in the management
of financial assets. Each investment transaction shall seek to first ensure
that capital losses are avoided, whether they be from securities defaults
or erosion of market value.
EXHIBIT "A"
2. Investment decisions should not incur unreasonable investment risks in
order to obtain current investment income.
3. The total investment portfolio will remain sufficiently liquid to meet all
financial operating requirements which may be reasonably anticipated.
4. The investment portfolio shall be designed to attain a market-average
rate of return throughout budgeting and economic cycles, always taking
into account governmental investment risk constraints, the cash flow
characteristics of the portfolio, and the state law that restricts the place-
ment of governmental funds.
5. Investments will be diversified to avoid incurring unreasonable and
avoidable risks regarding specific security types or individual financial
institutions.
6. Investments will not be made for the purpose of trading or speculation
as the dominant criteria, such as anticipating an appreciation of capital
through changes in market interest rates.
7. Ail investments shall be made according to the guidance provided by the
"Prudent Person Rule", which obligates a fiduciary to ensure that:
"...investments shall be made with the exercise of that degree
of judgment and care, under circumstances then prevailing,
which persons of prudence, discretion and intelligence excercise
~. in the management of their own affairs, not for speculation
but for investment, considering the probable safety of their
capital as well as the probable income to be derived."
8. The investment portfolio shall be designed with the objective of regularly
exceeding the average return on three-month U. S. Treasury Bills, or
the average rate of Federal Funds, whichever is higher. These indices
are considered benchmarks for riskless investment transactions and,
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therefore, comprise a minimum standard for the portfolio's rate of return.
The investment program shall seek to augment returns above 'this thresh-
hold, consistent with risk limitations identified herein and prudent invest-
ment principles.
9. In the management of the investment portfolio, all purchases of invest-
ments, or any investment practice or procedures will be avoided that are
not specifically authorized under the terms of this document,
10. Ail participants in the investment process shall seek to act responsibly
as custodians of the public trust. Investment officials shall avoid any
transaction that might impair public confidence in the total investment
program. Investment officials shall recognize that the investment port-
folio is subject to public review and evaluation. The overall investment
program shall be designed and managed with a degree of professionalism
that is worthy of the public trust.
11. The City of The Colony will not enter into Repurchase or Reverse
Repurchase Agreements, nor trade in options or futures contracts.
12. The City of The Colony will not deposit or invest funds through third
parties such as brokers or securities dealers.
RESPONSIBILITIES
The Director of Finance, as the chief financial officer, is responsible for
overall supervision of the City's cash management and investment program.
The Director of Finance is designated as the City's Investment Officer and is
responsible for the day-to-day administration of the investment program and
for the duties described below. The City Manager may designate another
City employee to serve as the Investment Officer for a temporary period, or
may serve in that capacity himself.
The Investment Officer and other City employees with investment responsi-
bilities shall be knowledgeable of laws concerning the investment ~of public
funds, current investment practices and investment opportunities available
to the City.
DUTIES OF THE INVESTMENT OFFICER
Duties of the Investment Officer shall include the following:
a. maintain current information as to available cash balances in all
City funds and bank accounts, and as to the amount of idle cash
available for investment;
b. develop and maintain cash flow projections to allow for the prudent
investment of idle funds;
c. make investments in accord with these rules;
d. maintain current information as to investment transactions, including
the maturity date, yield and interest earnings of each investment;
e. ensure that all investments are adequately secured, that safekeeping
receipts are held by the City in accord with these rules, and ensure
that other requirements placed on financial institutions by these
rules are observed; and
f. prepare an annual written report describing investment transactions
for the prior fiscal year, and submit this report to the City Council
by no later than ninety (90) days following the end of each fiscal
year.
REPORTING: INTERIM AND ANNUAL
The Director of Finance shall submit monthly a comprehensive investment
schedule clearly itemizing the total investment portfolio of all funds to the
City Manager and City Council.
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Within ninety (90) days of the end of the fiscal year the Director of Finance
shall present a comprehensive annual report on the investment program and
investment activity. This annual report shall be presented to the City Manager
and City Council. The annual report shall include a review of the activities
and interest rate return of the twelve (12) months, shall suggest policies
and improvements that might enhance the investment program, and include an
investment plan for the ensuing fiscal year.
AUTHORIZED INVESTMENTS
City of The Colony funds may be invested only in the below listed investment
instruments:
a. Obligations of the United States or its agencies and instrumentalities;
b. Direct obligations of the State of Texas or its agencies;
c. Other obligations, the principal and interest on which are uncondi-
tionally guaranteed or insured by the State of Texas or the United
States;
d. Obligations of states, agencies, counties, cities and other political
subdivisions of any state having been rated as to investment quality
by a nationally recognized investment rating firm and having received
a rating of not less than A or its equivalent;
e. Certificates of deposit issued by state and national banks domiciled
in this state that are:
1. Guaranteed or insured by the Federal Deposit Insurance Corpor-
ation, or its successor; or
2. Secured by obligations that are described by Subdivisions (a)-(d)
of this section, which are intended to include all direct agency or
instrumentality issued mortgage backed securities rated AAA by
a nationally recognized rating agency, or by Chapter 726, Acts
of the 67th Legislature, Regular Session, 1981 (Artidle 2529 b-l,
Tex. Rev. Civ. Stat. Ann.) and that have a market value of not
less than the principal amount of the certificates.
INVESTMENT OF BOND FUNDS
a. City of The Colony bond proceeds may be invested in common trust
funds or comparable investment devices owned or administered by
banks domiciled in Texas and whose assets consist exclusively of all
or a combination of the obligations described in subsections (a), (b),
(c), and (d) of the subsection on Authorized Investments. Common
trust funds may only be used if they:
1. Are available;
2. Comply with the provisions of the Tax Reform Act of 1986, as
amended, and other applicable federal regulations governing the
investment of bond proceeds; and
3. Meet the cash flow requirements and the investment needs of the
City of The Colony.
b. Investment of bond proceeds made pursuant to this Section shall be
made only after competitive bids, either orally or in writing, tiave
been solicited from qualified banks. Such bids shall be made in
accordance with the provisions of Section 3(b) of the Public Funds
Investment Act, Art. 842a-2, Tex. Rev. Civ. Stat. Ann.
MATURITY
The City of The Colony shall only invest in instruments whose maturities do
not exceed one (1) year at the time of purchase unless specifically approved
by the City Council.
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QUALIFYING INSTITUTIONS
Except as provided in the section on Investment of Bond Funds, ~inYestments
may be made with or through federally insured banks domiciled in the State
of Texas.
DIVERSIFICATION
Where possible, it is the policy of the City of The Colony to diversify its
investment portfolio. Assets held in the common treasury fund, and other
investment funds, shall be diversified to eliminate the risk of loss resulting
from over concentration of assets in a specific maturity, a specific issuer,
or a specific class of securities. In establishing specific diversification
strategies the following general policies and constraints shall apply:
a. Portfolio maturities shall be staggered in a way that avoids undue
concentration of assets in a specific maturity sector. Maturities
shall be selected which provide for stability of income and reasonable
liquidity;
b. The investment of bond proceeds and other significant amounts of
non-operating funds shall be based on taking competitive bids on
such investments with various maturity dates and investment amounts;
c. Liquidity shall be ensured through planned investment practices to
ensure that the next disbursement date and payroll date are
covered through maturing investments.
COLLATERAL AND SAFEKEEPING
a. Certificate of Deposit. The City of The Colony will accept as collateral
for its certificates of deposit and other evidences of deposit listed
below:
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1. Federal Deposit Insurance Corporation guarantee or insurance;
2. Obligations of the United States or its agencies and 'instrumen-
talities;
3. Direct obligations of the State of Texas or its agencies;
The above listed items constitute the only acceptable means of collat-
eralizing deposits. Collateral securities must be owned outright by
the pledging financial institution.
Certificate of deposit and other evidences of deposit shall be collat-
eralized at 100% of market value or par value, whichever is lower,
for U. S. Treasury bills, notes or bonds with a remaining maturity
of three (3) years or less, and at 105% of market or par, whichever
is lower, for the other listed securities.
Securities pledged as collateral must be retained in a third party
bank in the State of Texas, and the City of The Colony shall be
provided the original safekeeping receipt on each pledged security.
. The City of The Colony, financial institution, and the safekeeping
bank shall operate in accordance a master safekeeping agreement
signed by all three (3) parties. Safekeeping procedures shall be
reviewed annually by the independent auditor.
The City of The Colony must have confirmation from its safekeeping
bank that collateral pledged from a financial institution is in the
City's account before investing in certificates of deposit or other
evidences of deposit at the financial institution. This confirmation
may be oral, but must be followed in writing with the original safe-
keeping receipt provided to the City.
The City Manager or the Investment Officer must approve release of
collateral in writing prior to its removal from the safekee~ping account.
Collateral shall be reviewed on a monthly basis by the City's Invest-
ment Officer and may be audited by the City at any time during
normal business hours of the safekeeping bank. In addition, collateral
shall be reviewed annually for adequacy by the independent auditor.
The financial institutions with which the City of The Colony invests
and/or maintains other deposits shall provide monthly, and as
requested by the City, a listing of the City's certificates of deposit
and other deposits at the financial institution, and a listing of the
collateral pledged to the City marked to current market prices. The
listing shall include total pledged securities itemized by:
Name, type and description of the security;
Safekeeping receipt number;
Par Value;
· Current market value;
Maturity date; and
Moody's or Standard and Poor's Rating (both if available).
The City of The Colony and the financial institution shall assume
joint responsibility for ensuring that the pledged collateral is suf-
ficient.
B. U. S. Government Securities. Ail securities pledged by the City
of the Colony, including U. S. Treasury Bills, notes, or bonds, and
other securities guaranteed by the full faith and credit of the United
States Government shall be purchased on a "delivery versus payment"
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basis. This actually means that the City shall authorize release of
its funds only after it has received notification from the ~ safekeeping
bank that purchased security has been received in the City's safe-
keeping account. This notification may be oral, but must be followed
in writing with the original safekeeping receipt provided to the City.
INVESTMENT POLICY ADOPTION
The City of The Colony Investment Policy shall be formally reviewed and
approved by the City Council within ninety (90) days after the beginning of
each fiscal year.
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