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HomeMy WebLinkAboutR-2315-8-04RESOLUTION NO. 2315-8-04(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 re -adopted the Investment Policy on January 28, 2003 and again on July 8, 2003; and, WHEREAS, the Investment Policy attached as Exhibit "A" has been reviewed and includes amendments since the re -adoption on July 8, 2003. 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, and is hereby adopted as the Investment Policy of the City of Allen as required by Chapter 2256 TEX. GOVT CODE. ' SECTION 2: This Resolution shall take affect upon its adoption. DULY PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF ALLEN, COLLIN COUNTY, TEXAS, ON THIS THE le DAY OF AUGUST 2004. I:\9 w 111141113111 Stephen Terrell, MAYOR ATTEST: Shelley_B. Ge e, TRMC, CITY SECRETARY I EXHIBIT"A" CITY OF ALLEN, TEXAS INVESTMENT POLICY Resolution No. 23158-04(R) EXHIBIT "A" - Page 2 of 10 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, Chapter 2256, Texas Government Code, as amended, [the "Act']) to define, adopt and review a formal investment strategy and policy. 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. U Resolution No. 23158-04(R) EXHIBIT "A" -Page 3 of 10 INVESTMENT POLICY ' I. SCOPE This investment policy applies to all financial assets of the City of Allen. The funds included are: • General Fund • Enterprise Funds • Debt Service Funds • Special Revenue Funds • Capital Projects Funds • Internal Service Fund • Trust and Agency Funds 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. Resolution No. 23158-04(R) EXHIBIT "A" - Page 4 of 10 ' 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. Ill. 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 Finance Director is designated as the primary investment officer of the City. The Assistant Finance Director is designated as secondary investment officer in the absence of the Finance Director. The Finance Director shall establish written procedures for the operation of the investment program, consistent with this investment policy. Procedures shall include reference to safekeeping, banking service contracts and collateral. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Finance Director. The Finance Director shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. The investment officers shall attend at least one training session relating to the officers' responsibility under the Act within 12 months after taking office or assuming duties. 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. 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. City staff shall disclose to the City Manager any material financial interest in financial institutions that conduct business with the City. An investment officer of the City who has a personal business relationship with an organization seeking to sell an investment to the City shall file a statement with the City Manager disclosing that personal business interest. Resolution No. 2315-8-04(R) EXHIBIT "A" - Page 5 of 10 ' 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 the 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. Finance management staff will be responsible for the actual investment decisions. INTERNAL CONTROL: The Finance Director 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. ' ^ ^ .-'T ^T,r^n.P.^ •^` IV. INVESTMENT PORTFOLIO 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 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 authorized investment pools. risk of illiquidity due to technical complications shall be controlled by the selection of securities dealers as described herein. 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; Resolution No. 2315-8-04(R) EXHIBIT "A" -Page 6 o 10 ' 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 unconditional 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; 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 deposits issued by a state or national bank domiciled in the state or a savings and loan association domiciled in this state and is guaranteed or insured by the Federal Deposit Insurance Corporation or its successor secured by obligations that are described in A through E above; and G. joint investment pools of political subdivisions 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 at least 103% of the original purchase price. I. Commercial Paper, Banker's Acceptances, and Guaranteed Investment Contracts that have met all requirements of state law, including ratings, term, and security. 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): 30% B. Collateralized Repurchase Agreements: 300/6 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% 1. U.S. Government Sponsored Corporation's Instruments: callable 70% ' J. Commercial Paper: 10% K. Banker's Acceptances: 10% L. Guaranteed Investment Contracts: 25% M. State or Local Governmental Obligations: 30% Resolution No. 2315-8-04(R) EXHIBIT "A" - Page 7 of 10 ' TERM OF INVESTMENTS The maximum term of any investment may not exceed five (5) years. V. REPORTING The Finance Director 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 SECURFFY 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 registered principal of the organization E. acknowledgement that the organization has implemented reasonable procedures and control in an effort to preclude imprudent investment activities arising out of investment ' transactions conducted between the City and the organization. The list of brokers/dealers and investment pools shown in Exhibit A are authorized to conduct investment business with the City. Resolution No. 2315-8-04(R) EXHIBIT "A" - Page 8 of 10 I 11 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. Resolution No. 2315-8-04(R) EXHIBIT "A" - Page 9 of 10 Resolution No. 2315-8-04(R) EXHIBIT "A" - Page 10 of 10 EXHIBIT A Bank of America First Southwest Asset Management Inc. Patricia A. Hall TexSTAR, Nikki Smith 901 Main Street, 63`d Floor 325 North St. Paul Street, Suite 800 TXI-492-63-05 Dallas, TX 75201 Dallas, TX 75202-3714 214-953-4066 214-209-3485 214-953-8878 Fax 214-209-1917 In nsmithnfirstsw.com Patricia.a.hall(u7bankofamerica.com Gilford Securities First Empire Securities Steve Ned Leo Triolo 2020 Main Street, Suite 650 1393 Veterans Memorial Hwy Irvine, CA 92614 Hauppauge, NY 11788-3000 800-540-7000 800-645-5424 949-852-7002 Fax 631-979-0448 In sneri(awinstarmail.com Itrioloa,bloomberg.net Wells Fargo Brokerage Services, LLC The Benchmark Company, LLC Margot H. Strong Rick Mazzola 1445 Ross Avenue, Suite 210 750 Lexington Avenue, 241h Floor 2nd Floor New York, NY 10022 Dallas, TX 75202 877-207-8882 214-7774018 212-223-7363 Fax rm=ola(a),benchmarkcao.com 214-740-9990 Fax margot.h.strong(a>wellsfargo.com rm=ola(tilbloomberg.nei Robert Denenberg Linsco Private Ledger Corp. Senior Vice President at American National Bank Southwest Securities Inc. Tim Wilson 1201 Elm Street, Suite 3600 720 S. Greenville Dallas, TX 75270-2180 Allen, TX 75002 214-859-6605 214-863-5928 Fax 214-859-6628 214-863-6149 Fax rdenenberg(a),swst.com timwi Ison(t),anbl x.com Dianne Parker Zion Bank Capital Markets Texpool Participant Services Kathleen Sullivan c/o Lehman Brothers One South Main Street 1111 Bagby, Suite 2350 Salt Lake City, UT 84111 Houston, TX 77002 801-524-8950 866-839-7665 801-524-2627 Fax In 866-839-3291 &UMP ibloomberg.net Dimne.parker(@,Iehman.com Coastal Securities, Tony D. Sekaly 5555 San Felipe, Suite 2200 Houston, TX 77056 800-6814121 ' 713-4354534 Fax tone.sekalv(ii),coastalsecurities.com Resolution No. 2315-8-04(R) EXHIBIT "A" - Page 10 of 10