R-3387-6-16RESOLUTION NO. 3387-6-16(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 PROVmING AN EFFECTIVE
DATE.
WHEREAS, Chapter 2256 TEX. GOVT CODE requires the City Comcil 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 April 14, 2015; and,
WHEREAS, the Investment Policy is hereby amended to remove a duplicated sentence regarding
delegation of authority and training, add and update instrument language for diversification and risk
avoidance, update authorized investments and allowable allocation percentage per investment, add
additional language for ethics and conflicts of interests required by PFIA, and add or remove authorized
broker/dexter/financial institutions/ and/or banks; and
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
COUNTY, TEXAS, ON THIS THE 14ru DAY OF JUNE 2016.
ATTEST:
�
Shelley B. George, CITY SECRET Y
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APPROVED:
Stephen Wrrell, MAYOR
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EXHIBIT A
CITY OF ALLEN, TEXAS
INVESTMENT POLICY
June 14, 2016
Resolution No. 3387-6--16(R), Page 2
EXHIBTT A
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
Fonds 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.
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.
Resolution No. 3387-6-16(R), Page 3
H
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EXHIBIT A
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
• Enterprise Funds
• Debt Service Funds
• Special Revenue Funds
• Capital Projects Funds
• Internal Service Fund
• Trost 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 Trost. 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.
Resolution No. 3357-6--16(R), Page 4
EXHIBIT A
' 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 Finance Director is designated as secondary investment officer in the absence
of the CFO. No person may engage in an investment transaction except as provided under the
terms of this policy and the procedures established by the CFO. 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.
' The investment officers shall attend training sessions within the fiscal year time period in
compliance with Section 2256.008 of the Act. New investment officers shall attend training within
12 months after taking office or assuming duties.
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.
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."
Resolution No. 3387-6-16(R), Page 5
EXHIBIT A
' 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.
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: hlvestment 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.
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Resolution No. 3387-6--16(R), Page 6
EXHIBIT A
' 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.
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 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, including obligations
Resolution No. 3387-6-16(R), Page 7
EXIMIT A
' 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 deposits and share certificates meeting the requirements of the Public
Funds Investment Act, Chapter 2256, Texas Government Code, as amended (the
"PFIA"), (i) that me issued by a depository institution that has its main office or a
branch office in the state of Texas, that are guaranteed or insured by the Federal
Deposit Insurance Corporation or the National Credit Union Share Insurance Fund,
or are secured as to principal in the name of or benefit of the City by obligations
that are described in A through E above or an irrevocable standby letter of credit
from a Federal Home Loan Bank in the United States for the benefit of the City.
All pledged securities acceptable pursuant to state law or letters of credit shall have
a market value of at least 103% of the original price plus accrued interest;
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 tum, 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.
1. 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.
Resolution No. 3387-6--16(R), Page 8
EXHIBIT A
M. The City shall take all prudent measures that are consistent with its investment policy
to liquidate an investment that no longer has the required minimum rating. The City
shall establish procedures to monitor rating changes of its investments.
N. The City requires that all City depository accounts have sufficient pledging, valued at
market, and shall be secured at 103% of the City balances less the amount of FDIC
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%
1.
U.S. Government Sponsored Corporation's Instruments: callable
70%
J.
Cornmemial 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. It is recommended to obtain at least three competitive bids for individual security
purchases, 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.
Resolution No. 3387-6-16(R), Page 9
EXHIBIT A
' 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 finn 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
Resolution No. 3387-6-16(R), Page 10
..1�r
' 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.
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The list of brokers/dealers, financial institutions, banks, and investment pools shown me
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.
Resolution No. 3387-6--16(R), Page 11
EXHIBIT A
Authorized Broker/Dealer/Financial Institutions/Banks/Investment Pools
American National Bank
Colleen Biggerstaff
972-727-5785 Ext
colleenbiggerstaff(manbtx.com
7205. Greenville Ave.,
Admin. Officer
5929
Grep,JebsenC4Danbtx.com
Allen,TX 75002
Greg Jebsen
214-863-6179 F
Coastal Securities
Tony D. Sekaly
800-681-4121
tone.sekalv(acoastalsecurities.com
tds(icoastalsecurities.com
920 Memorial City Way—
Zach Brewer
713-435-4534 F
111h Floor
800-489-3232
zsb@coastalsecuri[les.com
Houston, TX 77024
Comerica Bank
Rosie G. Fayson
214-589-5694
rafayson(atcomerica.com
MC6548
VP -Texas Market
469-235-7710 C
1508 West Mockingbird Ln
Municipal Banking
214-589-5450 F
Dallas, TX 75235
Comerica Securities, Inc.
Chris Theut
248-645-4173
ctheut0comerica.com
39400 Woodward Avenue
Institutional Sales
800-327-7058
ksrademaker(ulcomerlca.com
8160, MC: 7951
Kyle Rademaker
2486454167 F
Bloomfield Hills, MI 48304
First Empire Securities
Chris Reda
800-645-5424
creda(dlempire.com
100 Motor Parkway
VP -Fixed Income Strategies
www.lempire.com
2M Floor
Hauppauge, NY 11788
Ladenburg Thalmann &
Steve Neri
800-540-7000
SNeri(alladenburg.com
Company
949-223-2911
2020 West Main Street
949-292-2580 C
Suite 650
Irvine, CA 92614
Legacy Texas Bank
LJnda McMurtry
214-217-7024
linda.mcmurtrv@IeRacytexas.com
5000 Legacy Drive
214-843-2242 C
Suite 120
972-801-5797
Plano, TX 75024
Stifel Nicolaus & Co., Inc.
Michael B Bell
Michael
bellmPstifel.com
Fixed Income Inst Sales
Director
214-706-9469
Mbe1123(Mbloomberg.net
5956 Sherry Lane
Nancy Gruss
866-779-2415
grussn@stifel.com
Suite 875
214-368-4292 F
ngruss0bloomberg.net
Dallas, TX 75225
Nancy
515-661-6271
515-661-6334 F
Texas Class
Karen Proctor
214-473-4224
Karen. oroctorgitexasclass.com
2435 N. Central
Regional Director
Expressway
Suite 1200
Richardson, TX 75080
Resolution No. 3387-6-16(R), Page 12
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EXHBIT A
Texas Security Bank
Bonnie Nichols
469-398-4804
bonnie.nichols@texassecuritvbank.com
1212 Turtle Creek Blvd
Senior Vice President
214-571-9595 F
Dallas, TX 75207
Chief Compliance Officer
TexPool Participant
Dianne Parker
866-839-7665
doartkert6lfederatedinv.com
Services
866-839-3291
c/o Federated Investors
1001 Texas Avenue
Suite 1400
Houston, TX 77002
T"STAR
Mary Ann Dunda
214-953-4086
MarvAnn.DundagDHilltoo5ecurities.com
1201 Elm Street
Managing Director
800-839-7827
Suite 3500
214-753-8878 F
Dallas, TX 75270
Viewpoint Bank
Charles Bangert
Charles
Charles.BangertCaviewoointbank.com
michael.martin/dviewoointbank com
321 E. McDermott
VP -Director of Finance
972-801-5762
Allen, TX 75013
Michael Martin
Michael
Treasury Sales Officer
972-801-5884
469-964-7246 C
469-467-1043 F
Wells Fargo Brokerage
Susan T Ward
Dallas
wardst#Dwelisfargo.com
Services, LLC
Huey Scott
800-937-0998
Huey.H.ScottgDwellsfargo.com
1445 Ross Avenue
Susan
Suite 210
214-740-1586
Dallas, TX 75202
214-740-9990 F
Huey
214-777-4033
Zions First National Bank
Kathleen Sullivan
801-524-4819
tump0bloomberg.net
Capital Markets
Assistant Vice President
801-524-4659 F
One South Main Street
17'h Floor
Salt Lake City, UT 84111
Resolution No. 3387-6--16(R), Page 13