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HomeMy WebLinkAboutR03-118RESOLUTION R03-118 A RESOLUTION OF THE CITY OF PLAINVIEW ADOPTING AN ANNUAL INVESTMENT POLICY WHEREAS, the Public Funds Investment Act (Texas Government Code, Chapter 2256) governs local government investment; and WHEREAS, the Public Fund Investment Act (Section 2256.005a) requires the City to adopt an investment policy and investment strategies by rule, order, ordinance or resolution governing the investment of funds under its control; and WHEREAS, the Public Fund Investment Act (Section 2256.005e), requires the governing body to review and adopt that investment policy and investment strategies by rule, order, ordinance or resolution not less than annually, recording any changes made thereto; and WHEREAS, the City Council has chosen to make certain changes to the Policy as indicated on the attached Exhibit; NOW, THEREFORE, BE IT RESOLVED that the City has complied with the requirements of the Public Funds Investment Act and the Investment Policy, as amended, attached hereto as Exhibit A, is hereby adopted as the Investment Policy of the City. Approved changes to the Policy are marked on the. Exhibit. PASSED, ADOPTED AND APPROVED by the City Council of the City of Plainview this the 8th day of April, 2003. APPROVED AS TO FORM: VV-ally Hatch,/Cibj Att~rn(~'y Resolution R03-118 Investment Policy Page 1 of 10 INVESTMENT POLICY CITY OF PLAINVIEW, TEXAS Adopted ,2003 Resolution R03-'I 18 Investment Policy Page 2 of 10 TABLE OF CONTENTS VI. VII. VIII. IX. Policy Statement Scope Objectives Safety Liquidity Diversification Yield Strategy Delegation of Investment Authority Investment Officer Investment Advisory Committee Standard of Prudence Authorized Investments Competitive Bidding Delivery versus Payment Diversification Collateralization Selection of City Depository and Broker/Dea ers City Depository Security Broker/Dealers Safekeeping and Custody Investment Reporting Ann ual Policy Adoption ATTACHMENTS: Public Funds Investment Act (Texas Government Code 2256) City of Plainview Policy Certification Form Resolution R03-118 Investment Policy Page 3 of '10 City of Plainview, Texas Investment Policy POLICY STATEMENT It is the policy of the City of Plainview (the "City") to invest public funds in a manner which will provide the highest reasonable market return with the maximum security while meeting the daily cash flow demands of the City and to conform to all state and local statutes governing the investment of public funds. It is the intent of the City to be in complete compliance with local law and the Texas Public Funds Investment Act (the "Act") Texas Government Code 2256 and to comply with the Public Funds Collateral Act, Texas Government Code 2257. This Policy satisfies the requirement of the Act, requiring creation and annual adoption of a written investment policy. The receipt of a market rate of return will be secondary to the requirements for safety and liquidity. The earnings from investment will be used in a manner that best serves the public trust. II. SCOPE This Investment Policy shall apply to all the funds and financial assets of the City. These funds are reported in the City's Comprehensive Annual Financial Report (CAFR). It shall apply to all existing and newly created funds unless expressly prohibited by law or so designated by City Council. III. OBJECTIVES The City shall manage and invest its cash and assets with four major objectives, listed in order of priority: safety, liquidity, diversification, and yield. Safety The primary objective of the City's investment program is preservation of capital. Each investment transaction shall be conducted in a manner to avoid capital losses, whether they be from security defaults, safekeeping, or erosion of market value. Liquidity The City's investment portfolio shall be structured to meet all anticipated obligations in a timely manner. This shall be achieved primarily by matching investment maturities with forecasted cash flow liabilities and maintaining additional liquidity for unanticipated liabilities. Diversification The City's portfolio shall be diversified by market sector and maturity in order to minimize risk from over-concentration of assets in a specific maturity, issuer, institution, or market sector. Yield The risk benchmark for the City's portfolio shall be the six-month U.S. Treasury, so designated for its comparability to the City's expected average cash flow pattern. The investment program shall seek to augment returns above this threshold consistent with risk limitations identified herein and prudent investment policies. The City shall maintain a comprehensive cash management program which includes timely collection of accounts receivable, vendor payments in accordance with invoice terms, and prudent investment of assets. Cash management is the process of managing monies in order to insure maximum cash availability and reasonable yield on short-term investments. Resolution R03-118 Investment Policy Page 4 of 10 IV. STRATEGY The City maintains one commingled portfolio for investment purposes which incorporates the specific investment strategy considerations and unique characteristics of the funds in the overall portfolio. The City intends to match investments with projected cash flow analysis and liquidity needs. In no case will the average maturity of the portfolio exceed six (6) months. The maximum final stated maturity of any investment shall not exceed two (2) years with the exception of capital project funds which may extend to three (3) years based on the planned expenditure schedule of the funds. The investment strategy for operating, enterprise and special revenue funds has as its primary objective assurance that anticipated liabilities are matched and adequate investment liquidity provided. A further objective will be minimal volatility. This may be accomplished by purchasing high quality, short- to intermediate-term maturity securities which will complement each other in a laddered maturity structure permitting some extension for yield enhancement. The investment strategy for debt service funds shall have as its primary objective the assurance of available funds adequate to fund the next debt service obligation on a timely basis. Successive debt service dates will be fully funded before exten sion. The investment strategy for debt service reserve funds shall have as its primary objective the ability to generate a revenue stream from high quality securities with a Iow degree of volatility. Securities should be high credit quality and, except as may be required by the bond ordinance specific to an individual issue, of short to intermediate-term maturities. The investment strategy for capital project funds will have as its primary objective assurance that anticipated cash flows are matched and provide adequate liquidity. At least 10% total liquidity is desired to provide flexibility for unanticipated project outlays. Investments for the capital project funds which may extend to three (3) years based on the planned expenditure schedule of the funds. The stated final maturity dates of securities held may not exceed the estimated project completion date. Securities may be sold before they mature if market conditions present an opportunity for the City to benefit. The Investment Officer, and adviser (as applicable), will continuously monitor the contents of the portfolio, the available markets, and the relative value of competing instruments to adjust the portfolio in response to market conditions. V. DELEGATION OF AUTHORITY Investment Officers The Budget Manager/Treasurer and Cash Accountant, acting on behalf of the City, are designated as the "Investment Officers" of the City and responsible for investment management decisions and transactions. The Budget Manager is responsible for considering the quality and capability of staff and investment advisors involved in investment management. All Investment Officers shall attend at least ten (10) hours of training, in accordance with the Act, within twelve (12) months of assuming investment duties and shall attend ten (10) hours of training in every successive two year period. The Investment Officers shall develop and maintain written administrative procedures for the operation of the investment program which are consistent with this Investment Policy. Procedures will include reference to safekeeping, wire transfer agreements, banking services contracts, and other investment related activities. Resolution R03-118 Investment Policy Page 5 of ~J 0 The Investment Officers shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinates. The Investment Officers may temporarily designate additional staff as a liaison/deputy in the event circumstances require timely action and the Investment Officer is not available. No officer or designee may engage in an investment transaction except as provided under the terms of this Policy and the procedures established and all participants in the investment process shall seek to act responsibly as custodians of the public trust. Officers shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Investment Officers shall disclose in writing to the City Manager any material financial interests in financial institutions that conduct buSiness with the City, and any large personal financial/investment positions that could be related to the performance of the City's portfolio. Officers shall subordinate their personal investment transactions to those of the City. The Investment Officers are authorized to direct payments from the banking services depository to pay obligations of the City by check, wire transfer or ACH, or draft. The Budget Manager shall adopt procedures to ensure the safety and integrity of the payment process. Limitation of Personal Liability The Investment Officers and those delegated investment authority under this Policy, when acting in accordance with this Policy and in accord with the Prudent Person Rule, shall be relieved of personal liability in the management of the portfolio provided that deviations from expectations for a specific security's credit risk or market price change or portfolio shifts are reported in a timely manner and that appropriate action is taken to control adverse market effects. Investment Advisory Committee An Investment Advisory Committee consisting of the Investment Officers, the City Manager and Assistant City Manager is responsible for: annually approving an authorized broker/dealer list, quarterly reviewing the City's portfolio and performance reports, quarterly reviewing the investment process for compliance to this Policy, annually reviewing this Policy and recommending any changes to the City Council, VI. STANDARD OF CARE Investments shall be made with judgement and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation but for investments considering the probable safety of their capital as well as the probable income to be derived. VII. AUTHORIZED INVESTMENTS Authorized investments shall be limited to the instruments listed below as authorized by and further defined by the Act, as amended: (1) Obligations of the United States, its agencies and instrumentalities not to exceed two (2) years to stated maturity (except as specified for capital projects to three years), excluding mortgage- backed securities. (2) Fully insured or collateralized certificates of deposit of banks doing business in Texas, and under the terms of a written depository agreement with that bank, not to exceed two years to stated maturity; Resolution R03-118 Investment Policy Page 6 of 10 (3) Fully collateralized repurchase agreements~as defined by the Act not to exceed 180 days to stated maturity and controlled by an executed PSA Master Repurchase Agreement. Repurchase agreements shall be executed only with a primary government securities dealer, as defined by the Federal Reserve. Flex repurchase agreements may be utilized for capital project funds and extend to three (3) years but shall not exceed the planned maturity limits of the issue's expenditure plan. (4) Money market investment accounts in the City's designated banking services depository, (5) Negotiable order of withdrawal (NOW) accounts in the City's designated banking services depository. (6) Constant-dollar local government investment pools as defined by the Act and approved by resolution of the City Council. (7) No-load, SEC registered money market mutual funds as defined by the Act and approved by City Council prior to use. If additional types of securities are approved for investment by public funds by state statute, they will not be eligible for investment by the City until this Policy has been amended and approved by the City Council. ComPetitive Bidding Requirement All securities, including certificates of deposit, will be purchased or sold only after three (3) offers/bids are taken to verify that the City is receiving fair market value/prices for the investment. Delivery versus Payment All security transactions, including collateral for repurchase agreements, shall be conducted on a delivery versus payment (DVP) basis assuring that the City maintains total control over its assets and securities at all times. Diversification Invested funds shall be diversified to minimize risk or loss resulting from over-concentration of assets in a specific maturity, specific issuer, or specific market sector. At a minimum, diversification standards by security type and issuer shall be: Security Type Max % of Portfolin U.S. Treasury obligations U.S. Government agency/instrumentality obligation Certificates of deposit Repurchase agreements Money market mutual funds Local Government Investment Pools Maximum percent ownership of pool 90% 75% 5O% 100% 100% 100% 20% The Investment Officers shall be required to diversify maturities to the extent possible. Matching maturities with cash flow dates will reduce the need to sell securities prior to maturity, thus reducing market risk. Unless matched to a specific requirements, no more than 20% of the total portfolio may be invested for a period greater than one (1) year. VIII. COLLATERALIZATION Depository Collateral All City time and demand deposits shall be secured above FDIC coverage by collateral pledged to the City. In order to anticipate market changes and provide a level of security for City funds, collateral will be maintained and monitored daily by the depository at 102% of the market value of total principal and accrued interest on the deposits. Resolution R03-118 Investment Policy Page 7 of l 0 Collateral and a written collateral agreement are required for any bank holding time or demand deposits. The written agreements shall be executed in compliance with FIRREA.~ Collateral pledged to secure City deposits shall be held by an independent financial institution outside the holding company of the pledging depository in accordance with a collateral agreement signed by authorized representatives of the City, the Depository, and the custodian (with the exception of the Federal Reserve). Written City approval will be required for substitution of collateral. All collateral shall be subject to inspection and audit by the City or the City's independent auditors. Authorized Collateral The City shall accept only the following as collateral for time and demand deposits: A. FDIC (or its successor's) insurance. B. Obligations of the United States, its agencies or instrumentalities, or other evidence of indebtedness of the United States guaranteed as to principal and interest including CMO which pass the bank test. C. Obligations, the principal and interest on which, are guaranteed br insured by the United States or the State of Texas. D. Obligations of other states or of a county, city or other political subdivision of a state having been rated as investment grade by two nationally recognized rating agencies. Repurchase Collateral Al securities purchased under a repurchase agreement will be maintained and monitored daily by the counter-party to assure a 102% margin. The securities shall be held by an independent financial institution approved by the City in accordance with the PSA Master Agreement. IX. SELECTION OF CITY DEPOSITORY AND BROKER/DEALERS City Depository At least every five years a City Depository for banking services shall be selected through a formal request for proposal (RFP) in accordance with the Texas Government Code 105.017. The agreement may be for three years with two possible one year extensions. In selecting a depository, the services, cost of services, credit worthiness, and collateralization by the institutions shall be considered. Other banks from which certificates of deposit are purchased shall submit financial statements, evidence of Federal insurance and execute a written collateral agreement. Security Broker/Dealers All broker/dealers who desire to transact business with the City must supply the following documents which will be maintained by Finance or its investment advisor. · Current audited financial statements · National Association of Securities Dealers (NASD) certification and CRD # · proof of Texas State Securities registration · Other information as required by the Investment Officers Any institution offering financial products (banks, brokers, pools, advisors) shall be provided a copy of this Investment Policy. Before transacting business with the City, each will certify to ] The Financial Institutions Resource and Recovery Act (FIRREA), controls actions in bank closures. The agreement must be wdtten and must be approved by resolution by the bank's board or loan committee. Resolution R03-118 Investment Policy Page 8 of 10 reviewing the Policy and putting in place controls to assure only Policy approved investments will be sold to the City. A sample. City Policy Certification form is attached as an Appendix to this Policy. A list of qualified broker/dealers will be reviewed at least annually by the Investment Advisory Committee. X. SAFEKEEPING AND CUSTODY All securities owned by the City will be safekept at an independent third party custodian approved by the City (normally the City's banking services depository). Securities shall be delivered only on a delivery versus payment basis (DVP). Xl. INVESTMENT REPORTING The Investment Officers shall submit a signed investment report quarterly to the City Council prepared in accordance with the Act. The comprehensive report shall detail holdings and summarize the portfolio in terms of investment securities, risk characteristics and total investment return along with a comparison to budgetary expectations. It shall reflect all deposits and amortized book and market value of securities. Within sixty (60) days of the end of the fiscal year, the Investment Officers shall present an annual report on the portfolio. The annual report shall include quarterly comparisons of the portfolio and returns, Market prices for the calculation of market value will be obtained from independent sources. As part of the annual audit, the City shall perform a compliance audit of management controls and compliance with the Act. Xll. ANNUAL POLICY ADOPTION The City's Investment Policy shall be reviewed and adopted by the City Council at least annually and the resolution adopting the Policy will include all changes made to the Policy. PASSED AND APPROVED this the of ,2003. Resolution R03-118 Investment Policy Page 9 of t0 POLICY CERTIFICATION FORM as required by Texas Government Code 2256.005(k) CITY OF PLAINVIEW (the "City") (the "Firm") I, as a registered principal or authorized representative for the Firm named above, hereby certify that I, and the broker covering this account have received and reviewed the Investment Policy of the City of P a nview, dated We acknowledge that this Firm has implemented reasonable internal procedures and controls in an effort to preclude investment transactions conducted between this Firm and the City that are not authorized by the City's Investment Policy, except to the extent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio or requires an interpretation of subjective ~nvestment standards. Firm: Signature Name: Title: Date: Resolution R03-118 Investment Policy Page 10 of 10