HomeMy WebLinkAboutR-3779-9-20 RESOLUTION NO.3779-9-20(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. GOV'T 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 re-adopted the Investment Policy on July 9,2019;and
WHEREAS,the Investment Policy is hereby amended to update the maximum investment percentage allowed
for state and local government obligations, and add or remove authorized broker/dealer/fmancial 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 Government 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
111 COUNTY,TEXAS,ON THIS THE 22''1D DAY OF SEPTEMBER 2020.
APP VED:
epbie Stout,MAY R
ATTEST:
Shelley B. ,CITY SECRETARY
EXHIBIT A
CITY OF ALLEN, TEXAS
INVESTMENT POLICY
September 22, 2020
Resolution No.3779-9-20(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 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. 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-term
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.
INVESTMENT POLICY
I. SCOPE
This investment policy applies to all financial assets of the City of Allen including component units reported as
follows:
• General Fund
Resolution No.3779-9-20(R),Page 3
• 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.
II. 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.
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
Resolution No.3779-9-20(R),Page 4
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 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,
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
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
111 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.
Resolution No. 3779-9-20(R), Page 5
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.
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. Government 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:
Resolution No.3779-9-20(R),Page 6
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;
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 as 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. Government 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 name of or benefit of the City and have a market value of at least
103%of the original purchase price plus accrued interest.
Resolution No. 3779-9-20(R),Page 7
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
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/Insured 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: 50%
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.
Resolution No.3779-9-20(R),Page 8
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 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.
VI. 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
Resolution No.3779-9-20(R),Page 9
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.
The list of brokers/dealers, financial institutions,banks, and investment pools shown are authorized to conduct
investment business with the City.
VII.INVESTMENT POLICY ADOPTION
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.
II
I
Resolution No. 3779-9-20(R),Page 10
Authorized Broker/Dealer/Financial Institutions/Banks/Investment Pools
American National Colleen Biggerstaff 972-727-5785 colleenbiggerstaff@anbtx.com
Bank Admin. Officer Ext 5929 GregJebsenganbtx.com
720 S. Greenville Ave., Greg Jebsen 214-863-6179 F
Allen,TX 75002
Cantor Fitzgerald& Co. John Baldo 713-599-5192 gilbert.ramon@cantor.com
110 East 59th Street, 4th Gilbert Ramon
Floor Charo Ammerman
New York,NY 10022
Comerica Bank Vicky Weatherby 713-507-7022 vmweatherby@comerica.com
MC6548
1508 West Mockingbird
Ln
Dallas,TX 75235
Comerica Securities,Inc. Chris Theut 248-645-4173 ctheut@comerica.com
39400 Woodward Institutional Sales 800-327-7058 ksrademaker@,comerica.com
Avenue Kyle Rademaker 248-645-4167 F
#160,MC: 7951
Bloomfield Hills,MI
48304
Financial Northeastern Samuel Vaughan 973-396-1052 svaughan@financialnortheastern.com
8717 Ken Aaron Court 512-550-7671 C
Austin,Texas 78717 866-328-3560 F
FTN Financial Zach Brewer 713-435-4351 Zach.Brewer@flnfinancial.com
845 Crossover Ln., Ste. 281-642-4350 C
150
Memphis,TN 38117
Hilltop Securities Walt Parrish 214-859-6617 walt.parrish@hilltopsecurities.com
1201 Elm Street, Suite
3500
Dallas,TX 75270
Independent Bank Amy Feagin 214-720-1205 nelrod@ibtx.com
1600 Redbud Blvd. Noah Elrod 469-301-2796
McKinney,TX 75069
Interbank Bill Lawrence 214-584-2417 Bi1l.Lawrence@interbank.com
5307 E.Mockingbird Treasury Services
Ln. Officer
Dallas,TX 75260
Ladenburg Thalmann& Steve Neri 800-540-7000 SNeriAladenburg.com
Company 949-223-2911
2020 West Main Street 949-292-2580 C
Suite 650
Irvine, CA 92614
Prosperity Bank Shatarro Richardson 972-461-7162 shatarro.richardson@prosperitybanku
5851 Legacy Circle 870-949-7667 C sa.com
Suite 1000
Plano,TX 75024
Resolution No. 3779-9-20(R), Page 11
Pershing,LLC Samuel Vaughan 201-413-3330 svaughan@financialnortheastern.com
One Pershing Plaza
Jersey City,NJ 07399
Southside Bank Mary McLarry 903-535-4504 mary.mclarrygsouthside.com
1201 S.Beckham Ave.
Tyler,TX 75701
Stifel Nicolaus& Co., Luke Donenfeld 800-645-5424 lonenfeld@,stifel.com
Inc. Vice President x4471
Fixed Income Capital 631-656-4471
Markets (Direct)
100 Motor Parkway 917-846-8398
2nd Floor (Cell)
Hauppauge,NY 11788
Texas Class Karen Proctor 214-473-4224 Karen.proctor@texasclass.com
2435 N. Central Regional Director
Expressway
Suite 1200
Richardson,TX 75080
Texas Security Bank Bonnie Nichols 469-398-4804 bonnie.nichols(c�texassecuritybank.c
1212 Turtle Creek Blvd Senior Vice President 214-571-9595 F om
Dallas,TX 75207 Chief Compliance
Officer
TexPool Participant Dianne Parker 866-839-7665 dparker@federatedinv.com
Services 866-839-3291
do Federated Investors
1001 Texas Avenue
Suite 1400
Houston,TX 77002
TexSTAR Mary Ann Dunda 214-953-4086 MaryAnn.DundaAHilltopSecurities.
1201 Elm Street Managing Director 800-839-7827 corn
Suite 3500 214-753-8878 F
Dallas,TX 75270
The Baker Group Rick Hansing 405-415-7237 rick@gobaker.com
1601 NW Expressway, Managing Director 800-998-8392
20th Floor 405-831-2429 F
Oklahoma City,OK
73118
Vining Sparks IBG, LP. Anthony Nelson, SVP 800-357-0256 anelson@viningsparks.com
775 Ridge Lake Blvd, Mark Stahl, SVP 206-443-7299 F mstahlgviningsparks.com
2nd Floor
Memphis,TN 38120
Wells Fargo Brokerage Susan T Ward Dallas wardst@wellsfargo.com
Services, LLC Huey Scott 800-937-0998 Huey.H.Scott(a wellsfargo.com
1445 Ross Avenue Susan
Suite 210 214-740-1586
Dallas,TX 75202 214-740-9990
F
Huey
214-777-4033
Resolution No. 3779-9-20(R), Page 12