HomeMy WebLinkAboutR-3494-7-17RESOLUTION NO. 3494-7-17(R)
' A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ALLEN, COLLIN
COUNTY, TEXAS, APPROVING AN AMENDED POLICY FOR THE INVESTMENT
OF MUNICIPAL FUNDS; AND PROVIDING AN EFFECTIVE DATE.
WHEREAS, Chapter 2256 TEX. GOVT CODE requires the City Council to annually review its Investment
Policy regarding the investment of City funds and funds under its control; and,
WHEREAS, the City Council readopted the Investment Policy on June 10, 2016; and,
WHEREAS, the Investment Policy is hereby amended to update language as it relates to delegation of duties
and training, add language regarding collateral and the public trust, update language regarding certificates of
deposit as authorized investments, and add or remove authorized broker/dealer/financial institutions/ and/or
banks.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ALLEN,
COLLIN COUNTY, TEXAS, THAT:
SECTION 1. The Investment Policy attached hereto as Exhibit "A" ('Investment Policy") and made a part
hereof for all purposes, has been reviewed and includes any amendments thereto, is hereby adopted as the
Investment Policy of the City of Allen as required by Chapter 2256 of the Texas Cmvenanent Code.
SECTION 2. This resolution shall take effect upon its adoption
' DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF ALLEN, COLLIN
COUNTY, TEXAS, ON THIS THE 11ra DAY OF JULY 2017.
APPROVED:
041tza
Stephen Te 1, MAYOR
ATTEST:
1
1
EXHIBIT A
CITY OF ALLEN, TEXAS
INVESTMENT POLICY
July 11, 2017
Resolution No. 3494-7-17(R), Page 2
PURPOSE
' The purpose of this document is to set forth specific investment policy and strategy guidelines for the
City of Allen in order to achieve the goals of safety, liquidity, yield and public trust for all investment
activity. This policy serves to satisfy the statutory requirement (specifically the Public Funds
Investment Act (PFIA), Chapter 2256, Texas Government Code, as amended, [the "Act"]) to define,
adopt and review a formal investment strategy and policy. Additionally, this policy excludes the
investment of public funds that we invested by a trustee pursuant to Chapter 172 of the Texas Local
Government Code, and Chapter 113 and Chapter 117 of the Texas Trust Code, for the City's retiree
healthcare benefits program. Such funds are invested pursuant to a separate Investment Guidelines
Document as part of a Post -Retirement Health Care Plan Trust.
INVESTMENT STRATEGY
The City of Allen maintains portfolios which utilize four specific investment strategy considerations
designed to address the unique characteristics of the fund groups represented in the portfolios.
Preservation and safety of principal shall be the foremost investment objective in each of the portfolios.
Liquidity is the second objective. Its importance to each fund group is emphasized in the following
paragraphs. Yield and diversification shall also be a consideration and shall be in compliance with
the guidelines set forth in the Investment Policy.
A. Investment strategies for operating funds have as their primary objective to assure that
anticipated cash flows are matched with adequate investment liquidity. The secondary
' objective is to create a portfolio structure which will experience minimal volatility
during economic cycles. This may be accomplished by purchasing high quality, short -
to -medium term securities which will complement each other in a laddered or barbell
maturity structure.
B. Investment strategies for debt service funds shall have as the primary objective the
assurance of investment liquidity adequate to cover the debt service obligation on the
required payment date. If the annual debt service obligation is covered, then securities
may be purchased that have a stated final maturity date which exceeds the debt service
payment date.
C. Investment strategies for reserve funds shall have as the primary objective the ability
to generate a dependable revenue stream to the appropriate fund from securities with a
low to moderate degree of volatility. Securities should be of high quality and, except
as may be required by any bond ordinance specific to an individual issue, of
intermediate to longer -tern maturities.
D. Investment strategies for special projects or special purpose fund portfolios shall have
as their primary objective to assure that anticipated cash flows are matched with
adequate investment liquidity. These portfolios should include at least 10% in highly
liquid securities to allow for flexibility and unanticipated project outlays. The stated
final maturity dates of securities held should not exceed the estimated project
' completion date.
Resolution No. 3494-7-17(R), Page 3
INVESTMENT POLICY
1. SCOPE
This investment policy applies to all financial assets of the City of Allen including component units
reported as follows:
• General Fund
• Enterprise Funds
• Debt Service Funds
• Special Revenue Funds
• Capital Projects Funds
• Internal Service Fund
• Trust and Agency Funds
• Economic Development Corporation
• Community Development Corporation
Funds that are invested by a trustee pursuant to Chapter 172 of the Texas Local Government Code,
and Chapter 113 and Chapter 117 of the Texas Trust Code, for the City's retiree healthcare benefits
program are excluded from this policy.
11. OBJECTIVES
The City of Allen shall manage and invest its cash with the four objectives listed in priority order:
Safety; Liquidity; Yield and Public Trust. Safety of principal invested is always the primary objective.
All investments shall be designed and managed in a manner responsive to the public trust and
consistent with State and Local law.
SAFETY
The primary objective of the City's investment activity is preservation of capital. Each investment
transaction shall be conducted in a manner to avoid capital losses.
LIQUIDITY
The City's investment portfolio shall remain sufficiently liquid to enable the City to meet operating
requirements that may be reasonably anticipated. To the extent possible, the City will attempt to match
its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the
City will not directly invest in securities maturing more than five years from the date of purchase.
YIELD
The investment portfolio shall be designed with the objective of regularly exceeding the average rate
of return on a six-month U.S. Treasury Bill. The City's investment risk constraints and cash flow
' needs shall be taken into consideration.
Resolution No. 3494-7-17(R), Page 4
PUBLIC TRUST
' All participants in the City's investment process shall seek to act responsibly as custodians of the public
trust. Investment officials shall avoid any transaction which might impair public confidence in the
City's ability to govern effectively.
III. RESPONSIBILITY AND CONTROL
DELEGATION OF AUTHORITY AND TRAINING
Authority to manage the City's investment program is derived from a resolution of the City Council.
The Chief Financial Officer (CFO) is designated as the primary investment officer of the City. The
Assistant Chief Financial Officer is designated as secondary investment officer in the absence of the
CFO. The CFO may delegate the day-to-day activities to a responsible individual(s) who has received
the appropriate training required by state statute. The CFO shall be responsible for all transactions
undertaken and shall establish a system of controls and compliance audit to regulate the activities of
subordinate officials and persons authorized to execute investment transactions.
The investment officers and persons authorized to execute investment transactions shall attend training
sessions of at least 10 hours in compliance with Section 2256.008 of the Act within 12 months after
taking office or assuming duties and at least 8 hours every two years thereafter.
SAFEKEEPING AND CUSTODY
' The CFO shall establish written procedures for the operation of the investment program, consistent
with this investment policy. Procedures shall include reference to safekeeping and reporting of the
portfolio market value for securities held in safekeeping, banking service contracts and collateral.
Securities and collateral will be held by a third -party custodian designated by the City or by the Federal
Reserve Bank and held in the City's name as evidenced by safekeeping receipts of the institution with
which the securities are deposited. The market value of the securities and collateral shall be reported
at least monthly by the custodians. Any substitutions and/or releases of collateral must be approved
by the CFO or another person qualified to execute investment transactions designated by the CFO.
All collateral must have a market value of 103% of the original purchase price of the investment (less
FDIC or NCUSIF insurance) plus accrued interest.
PRUDENT INVESTOR RULE
The standard of prudence to be applied by the investment officer shall be the "prudent investor" rule
which states: "Investments shall be made withjudgment 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 investment, considering the probable safety of their capital as well as the
probable income to be derived."
In determining whether an investment officer has exercised prudence with respect to an investment
' decision, the determination shall be made taking into consideration:
A. the investment of all funds, or funds under the entity's control, over which the officer
had responsibility rather than a consideration as to the prudence of a single investment;
and
Resolution No. 3494-7-17(R), Page 5
B. whether the investment decision was consistent with the written investment policy of
the entity.
All participants in the investment program will seek to act responsibly as custodians of the public trust.
Investment staff will avoid any transaction that might impair public confidence in the City's ability to
govern effectively. Investment staff shall recognize that the investment portfolio is subject to public
review and evaluation. The overall program shall be designed and managed with a degree of
professionalism which is worthy of the public trust. Nevertheless, the City recognizes that in a
marketable, diversified portfolio, occasional measured losses are inevitable and must be considered
within the context of the overall portfolio's investment rate of return.
ETHICS AND CONFLICTS OF INTEREST
City staff involved in the investment process shall refrain from personal business activity that could
conflict with proper execution of the investment program, or which could impair the ability to make
impartial investment decisions. An investment officer of the City who has a personal business
relationship and/or a relationship by blood or marriage within the second degree, as defined in the
PFIA Section 2256.005, with a financial organization seeking to sell an investment to the City, shall
file a disclosure statement with the Texas Ethics Commission, the City Council, and the City Manager.
LIABILITY
Investment and management staff acting in accordance with written procedures and this investment
' policy and exercising due diligence shall be relieved of personal responsibility for market price
changes, provided deviations from expectations are reported in a timely fashion and the liquidity and
the sale of the securities are carried out in accordance with the terms of this policy.
INVESTMENT SAFEGUARDS
CASH FLOW: Investment staff of the City will maintain a cash flow analysis which identifies the
present and future cash requirements. The investment portfolio (utilizing cash flow analysis) will
be structured such that the selling of securities prior to maturity for the purpose of meeting daily
cash needs would be on an exception basis only.
SEPARATION OF DUTIES: Investment staff of the City will be responsible for maintaining the
cash flow analysis, determining the amount eligible for investment, and all other administrative
duties necessary in executing and tracking the investments. Authorized Finance management staff
will be responsible for the actual investment decisions.
INTERNAL CONTROL: The CFO shall establish an annual process of independent review by an
external auditor in conjunction with the annual audit. This review will provide internal control by
assuring compliance with policies and procedures.
Resolution No. 3494-7-17(R), Page 6
IV. INVESTMENT PORTFOLIO
' RISK AND DIVERSIFICATION
The City recognizes that investment risks can result from issuer defaults, market price changes or
various technical complications leading to temporary illiquidity. Risk is controlled through portfolio
diversification which shall be achieved by the following general guidelines:
A. risk of issuer default is controlled by limiting investments to those instruments allowed
by the Act, which are described herein;
B. risk of market price changes shall be controlled by avoiding over -concentration of
assets in a specific maturity sector, limitation of the weighted average maturity of
operating funds investments to less than 18 months, and avoidance of over -
concentration of assets in specific instruments other than U.S. Treasury Securities, and
U.S. Agency Obligations or Securities and authorized investment pools.
C. risk of illiquidity due to technical complications shall be controlled by the selection of
securities dealers as described herein.
D. Concentration of credit risk is controlled by limiting the amount of investment with a
single issuer to no more than 35% of the total portfolio with the exception of State
approved investment pools and U.S. Govemment Securities and Agency Obligation.
' E. Custodial credit risk is minimized by requiring pledged securities to be in the name of
the City.
AUTHORIZED INVESTMENTS
Assets of the City may be invested in the following instruments if deemed an authorized investment
pursuant to the Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended:
A. obligations of the United States of America, its agencies and instrumentalities;
B. direct obligations of the State of Texas or its agencies and instrumentalities;
C. collateralized mortgage obligations directly issued by a federal agency or
instrumentality of the United States, the underlying security for which is guaranteed by
an agency or instrumentality of the United States;
D. other obligations, the principal and interest of which are unconditionally guaranteed or
insured by, or backed by the full faith and credit of, the State of Texas or the United
States or the respective agencies and instrumentalities, including obligations that are
fully insured or guaranteed by the Federal Deposit Insurance Corporation or by the
explicit full faith and credit of the United States;
' E. obligations of states, agencies, counties, cities, and other political subdivisions of any
state rated as to investment quality by a nationally recognized investment rating firm
not less than A or its equivalent;
Resolution No. 3494-7-17(R), Page 7
F. Certificates of deposit issued by a depository institution that has its main office or a
branch office in Texas. The certificate of deposit must be guaranteed or insured by the
' Federal Deposit Insurance Corporation (FDIC) or its successor or the National Credit
Union Share Insurance Fund (NCUSIF) or its successor and secured by acceptable
collateral securities in the name of or benefit of the City and have a market value of at
least 103% of the original purchase price (less FDIC or NCUSIF insurance) plus
accrued interest. Additionally, funds invested by the City through a broker that has a
main office or branch office in Texas and is selected from a list approved by the City
as required by section 2656.025 of the Public Funds Investment Act or a depository
institution that has a main office or branch office in Texas and is selected by the City
are authorized investments if the following conditions are met:
a. the broker or depository institution selected by the City m specified above
arranges for the deposit of the funds in certificates of deposit in one or more
federally insured depository institutions, wherever located, for the account of
the City,
b. the full amount of the principal and accrued interest of each of the certificates
of deposit is insured by the United States or an instrumentality of the United
States; and
c. the City appoints a depository bank or a clearing broker registered with the
Securities and Exchange Commission Rule 15c-3 (17CFR, Section 240 15c3-
3) as custodian for the City with respect to the certificates of deposit issued for
account to the City;
' G. Public Funds Investment pools in the State of Texas which follow practices allowed by
the current law and whose investments may consist of CD's, U.S. Treasuries, U.S.
Government Agency Securities, U.S. Govemment Sponsored Corporation's
Instruments, Commercial Paper, Repurchase Agreements, or other investment
instruments permitted by law.
H. Collateralized Repurchase Agreements that are contractual agreements between the
City and commercial banks, trust companies, state or federally chartered savings and
loan associations, and federally chartered savings banks. The Repo issuer sells
acceptable securities to the City and, in turn, the City agrees to resell the securities on
a specific date at a specified amount (original cost plus interest). Repurchase
agreements are required to be backed by acceptable collateral securities in the time of
or benefit of the City and have a market value of at least 103% of the original purchase
price plus accrued interest.
I. Commercial Paper and Banker's Acceptances that have met all requirements of state
law, including ratings, term, and security.
J. No-load money market mutual fund that meets the requirements of state law as an
authorized investment under Chapter 2256 of the PFIA.
' K. Guaranteed investment contracts that meet the requirements of state law as an
authorized investment for bond proceeds and that the governing body of the City has
specifically authorized guaranteed investment contracts as an eligible investment in the
order, ordinance, or resolution authorizing the issuance of bonds
Resolution No. 3494-7-17(R), Page 8
L. The City is not required to liquidate investments that were an authorized investment at
the time of purchase.
' M. If an authorized investment in the City's portfolio is rated in a way that causes it to
become an unauthorized investment, the investment officers of the City shall review
the investment to determine whether it would be more prudent to hold the investment
until its maturity, or to redeem the investment. Officers shall consider the time
remaining until maturity of the investment, the quality of the investment, and the
quality and amounts of collateral which may be securing the investment in determining
the appropriate steps to take.
N. The City requires that all City depository accounts have sufficient pledged collateral,
valued at market, held by a third party custodian designated by the City in the City's
name, and secured at 103% of the City balances less the amount of FDIC or NCUSIF
insurance at all times.
The following is the maximum goal for various types of authorized deposits (shown as a percentage
of total investments) for each type of investment. The percentages are based mainly on the safety and
liquidity of the investment and to obtain the overall highest rate of return with appropriate risk for the
City.
A.
Collateralized Certificates of Deposits (CD's):
50%
B.
Collateralized Repurchase Agreements:
30%
C.
U.S. Treasury Obligations:
100%
D.
Municipal Investment Pool (MIP):
100%
E.
Commercial Bank Savings Accounts:
15%
F.
U.S. Government Agency Securities: non -callable
100%
G.
U.S. Government Agency Securities: callable
70%
H.
U.S. Government Sponsored Corporation's Instruments: non -callable
75%
I.
U.S. Government Sponsored Corporation's Instruments: callable
70%
J.
Commercial Paper:
20%
K.
Banker's Acceptances:
10%
L.
Guaranteed Investment Contracts:
25%
M.
State or Local Governmental Obligations:
30%
N.
Money Market Mutual Funds
15%*
O.
Local Government Investment Pools (LGIP)
100%
• Must comply with percentage restriction in PFIA Section 2256.014(c)
TERM OF INVESTMENTS
The maximum term of any investment may not exceed five (5) years.
TRANSACTION BIDS
' Transaction bids may be obtained orally, in writing, electronically, or in any combination of these
methods. At least three competitive bids for individual security purchases are required, however, this
provision excludes transactions involving money market mutual funds, local government investment
Resolution No. 3494-7-17(R), Page 9
pools, securities issued and deemed to be made at prevailing market rates, or a reinvestment of funds
from a called security with the original broker.
' TRANSACTION SETTLEMENTS
The settlement of all transactions, except investment pool funds and mutual funds, shall be on a
delivery versus payment basis.
V. REPORTING
The CFO shall submit a signed quarterly investment report to the City Council that contains the
information required by the Public Funds Investment Act including but not limited to:
A. describing in detail the investment position of the entity on the date of the report;
B. stating the book value and market value of each separately invested asset at the
beginning and end of the reporting period by the type of asset and fund type invested;
C. stating the maturity date of each separately invested asset that has a maturity date; and
D. stating the compliance of the investment portfolio of the City as it relates to the
investment strategy stated in the City's Investment Policy.
VL SELECTION OF BROKERS AND SECURITY DEALERS
For brokers and dealers of government securities the City may select only those dealers reporting to
the Market Reports Division of the Federal Reserve Board of New York also known as the "Primary
Government Security Dealers," unless a comprehensive credit and capitalization analysis reveals that
other firms are adequately financed to conduct public business. Investment officials shall not
knowingly conduct business with any firm with whom public entities have sustained losses on
investments. All securities dealers shall provide the City with references from public entities which
they are currently serving. The city shall review the list of brokers on an annual basis pursuant to
Section 2256.025 of the Public Funds Investment Act.
All financial institutions and broker/dealers who desire to become qualified bidders for investment
transactions must supply the following as appropriate:
A. audited financial statements
B. proof of National Association of Securities Dealers (NASD) certification
C. proof of state registration
D. certification of having read the City's Investment Policy signed by a qualified
representative of the organization
' E. acknowledgement that the organization has implemented reasonable procedures and
control in an effort to preclude investment activities not authorized by this policy
arising out of investment transactions conducted between the City and the organization.
Resolution No. 3494-7-17(R), Page 10
The list of brokeraldealers, financial institutions, banks, and investment pools shown are authorized to
conduct investment business with the City.
' VII. INVESTMENT POLICY ADOPTION
1
1
The City of Allen Investment Policy shall be adopted by resolution of the City Council. The City
Council shall review this Investment Policy and investment strategies annually and any modifications
made thereto must be approved by the City Council.
Resolution No. 3494-7-17(R), Page 11
I
C
Authorized Broker/Dealer/Financial Institutions/Banks/Investment Pools
American National Bank
Colleen Biggersmff
972-727-5785
colleenbieeerstaff(wanbix.com
720 S. Greenville Ave.,
Admin. Officer
Ext 5929
GregJebwn(amilux.com
Allen, TX 75002
Greg Jebsen
214-863-6179 F
Comerica Bank
Vicky Weatherby
713-507-7022
vmweatheibv(dcomerica.com
MC6548
1508 West Mockingbird Ln
Dallas, TX 75235
Comerica Securities, Inc.
Chris Thant
248-6454173
etheul(dcomerica.com
39400 Woodward Avenue
Institutional Sales
800-327-7058
ksmdemaker-Acomerica.com
#160, MC: 7951
Kyle Rademaker
248-6454167 F
Bloomfield Hills, MI 48304
Financial Northeastern
Samuel Vaughan
973-396-1052
svauehanAlimancialnortheastem.com
8717 Ken Aaron Court
512-550-7671 C
Austin, Texas 78717
866-328-3560 F
First Empire Securities
Luke Donenfeld
800-645-5424 Ext
IdonenfeldAlemoire.com
100Momr Parkway
SVP — Fixed Income
4471
www.lemoire.com
2" Floor
Stategies
Hauppauge, NY 11788
FTN Financial
Zaeh Brewer
713-4354351
Zach.Brewer(a,ftnfinanmal.com
845 Crossover Ln., Ste. 150
281-6424350 C
Memphis, TN 38117
Ladenburg Thalmann &
Steve Non
800-540-7000
SNeri(dladenbum.com
Company
949-223-2911
2020 West Main Street
949-292-2580 C
Suite 650
Irvine, CA 92614
Legacy Texas Bank
Linda McMurtry
+
214-217-7024linda.mem
urtryAlegaevtexas.co m
5000 Legacy Drive
214-843-2242 C
Suite 120
972-801-5797
Plano, TX 75024
Pershing, LLC
Samuel Vaughan
201-413-3330
svauehan(dfinancialnorlheastemcom
One Pershing Plaza
Jersey City, NJ 07399
Stifel Nicolaus & Co., Inc.
Michael B Bell
Michael
bellm(dstifel.com
Fixed Income Inst Sales
Director
214-706-9469
Mbell23(dbloombem.net
5956 Sherry Lane
Nancy Gross
866-779-2415
gmssn(dstifel.com
Suite 875
214-368-4292
rumsAbloomberg.net
Dallas, TX 75225
F
Nancy
515-661-6271
515-661-6334 F
Resolution No. 3494-7-17(R), Page 12
I
Texas Class
Karen Proctor
214-473-0224
Karen.mroctor(o),texasclass.com
2435 N. Central
Regional Director
Expressway
Suite 1200
Richardson, TX 75080
Texas Security Bank
Bonnie Nichols
469-398-4804
bowie.nichols(dtexassecuritvbank.com
1212 Turtle Creek Blvd
Senior Vice President
214-571-9595 F
Dallas, TX 75207
Chief Compliance Officer
TcxPool Participant
Dianne Parker
866-839-7665
dnartker(dhderatedinv.com
Services
866-839-3291
c/o Federated Investors
1001 Texas Avenue
Suite 1400
Houston, TX 77002
TexSTAR
Mary Ann Dunda
214-9534086
Ma Ann.Dunda(aHilltomSecurities.com
1201 Elm Street
Managing Director
804839-7827
Suite 3500
214-753-8878 F
Dallas, TX 75270
Viewpoint Bank
Charles Bangert
Charles
Charles.Baneert()aviewmointbankcom
michael.martin(dviewoointbank.com
321 E. McDermott
VP -Director of Finance
972-801-5762
Allen, TX 75013
Michael Marna
Michael
Treasury Sales Officer
972-801-5884
469-964-7246
C
469-467-1043
F
Wells Fargo Brokerage
Susan T Ward
Dallas
wardst(la.wellsfarmo.com
Services, LLC
Huey Scott
800-937-0998
Haev.H.Scott(a),wellsfarmo.com
1445 Ross Avenue
Susan
Smte 210
214-740-1586
Dallas, TX 75202
214-740-9990
F
Huey
214-7774033
Zions First National Bank
Kathleen Sullivan
801-5244819
onto net
Capital Markets
Assistant Vice President
801-5244659 F
One South Mann Street
17^ Floor
Salt Lake City, UT 84111
Resolution No. 3494-7-17(R), Page 13