HomeMy WebLinkAboutResolution No. 2012-13 R�SOLUTION NO. R2012-13
A RESOLUTION OP' TH� CITY COUNCIL OT THE CITY
OT TRI�NDSWOOD, T�XAS, APPROVING TH� PUBLIC
FUNDS MANAGEMENT AND INVESTMENT POLICY.
.. X Y. % Y % 'X X
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FRIENDSWOOD,
TEXAS:
Section 1. The Public Funds Management and Investment Policy attached hereto and made a
part hereof for all purposes be, and it is hereby, approved as the Official Public Funds
Management and Investrnent Policy of the City of Friendswood, Texas.
Section 2. The City Secretary is hereby directed to place on said Investment Policy an
endorsement, which shall be signed by the City Secretary, which shall read as follows:
"The Investment Policy of the City of Friendswood, Texas,
approved by City Council the 4th day of June 2012"
Such Investment Policy, as thus endorsed, shall be kept on file in the office of the City Secretaiy
as a public record.
PASSED,APPROVED, AND RESOLV�D, this the 4th day of Juue 2012.
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Kevin IVI. Holland
Mayor
ATTEST:
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Melinda Welsh, TRMC ;U�� ��Q�'.
City Secretary : ;p;
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�'F OF TE�'P' •
CITY OF FRIENDSWOOD, TEXAS
INVESTMGNT POLICY
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1. Polic,y - It is the policy of the City of Friends�vood that, giving due regard to the safety and
risk of investment,all available funds shall be invested in conformance with these legal and
administrative guideliues. The City' s portfolio shall be designed and managed in a manner
responsive to the highest piiblic trust and cousistent with this policy. Investments sliall be
made in a mannerwhich will provide the ma�imwn securiry ofprincipal invested through
limitatio��s and diversification while meeting the daily cash Flow needs of the City. The
receipt of a market rate of return will be secondaiy to the requirements for safety and
liquidity. This policy will adopt passive inveshnent strategies designed to minimize
administrative espenses while obtaiuing inarket-average rates of return a��d incurring
minimal risks. It is the intent ofthe City to be in complete compliance�vith local law and the
Tesas Public Funds Investinent Act.
IL Scope-This investment policy applies to all financial assets and fimds placed for investment
by the City. The City commingles its fimds for investment purposes for efficiency and
inveshnent opportimity. These fimds are defined in the City' s Comprehensive Annual
Financial Repoirt (CAFR) and include:
General Fund
Special Revenue Ftmds
Debt Service Funds
Enterprise Funds
Trust and Agency Fiuids
And any new funds created by the City,unless specifically esempted by the City Council and
this policy.
investment income will be allocated to the varioiis fiuids based on their respective
participation and in accordance with generally accepted accounting principles. This
Investment Policy shall apply to all transactions involving the financial assets and related
activity for all the foregoing funds. Ho�vever, this policy does not apply to tlie assets
administered for the benefit of the City by outside agencies under defen�ed compensation.
LLI. Objectives - The investment policy of the City sliall be governed by these primary
objectives: safety, lic�uidity and yield. The suitability of each investment decision will be
made on the basis of these objectives.
A. Safet,y - The foremost objective of the investment program shall be to assure the
safety oFthe invested fimds. investments shall be undertaken in a manner that seeks
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to ensure the preservation of capital while mii�imizing credit rate and interest rate
risk. Investment for speculation puiposes is prohibited.
l. CreditRiskandConcenfiationofCreditRisk—TlteCitywillminimizecredit
risk, the risk of loss due to the failure of the issuer or backer of the
investment, and concentration of credit risk, the risk of loss attributed to the
magnitude of invesUnent in a single issuer.
2. Interest Rate Risk—the city�vill manage tlie risk that the interest earnings and
the market value of investments in the portfolio �vill fall due to changes in
general interest rates.
B. Liquidity -Funds will be invested with maturities necessary to maintain sufficient
liquidity to provide adequate and timely working fimds.
C. Yield — Return on investment is of least iinpoiKance compared to the safety and
liquidiry objectives described above.
1V. Legal Limitations,Responsibilities and L�vestment Authority-Authority and parameters
for the investment of public funds in Texas are found in the Public Fimds investment Act,
Chapter 2256, Te�as Government Code (tlie"AcY').
The Interlocal Cooperation Act, Chapter 791, Texas Government Code, authorizes
local governments in Texas to participate in investment pools established thereunder.
That statute and refereuce to authorized investment in iirvestment pools in the Act,is
primary authority for use ofinvestment pools bypolitical subdivisions oftlie State of
Tesas.
V. Delegation of Im�estment Autliority -The Director of Administrative Services is
designated as the Investment Officer of the City and is responsible for the
implementation of these policies, and for assuring that investment mTnagement
decisions and activities fully comply herewith. The Investmei�t Officer shall develop
and maintain adminisU ative procedures for the operation ofthe investment program,
�vhich are in sU ict accordance with this investment policy, as approved by the City
CounciL The Investment Officer shall comply with training requirements of the
Public Funds Investment Act Tl�e iuvestment h�aining session shall be pirovided by
an independent source approved by the City Council or Investment Committee. An
"independent source"from which investment training shall be obtained shall include
a professional organization,an institute of higher learning or any otlier sponsor,other
than a Business Organization with whom the City may engage iu �u ii�vestment
transaction. The Investment Officer shall designate a staff person as a liaison/deputy
in the event circumstances require timely action and tlie Investment Officer is not
available. The appointment shall be approved by City Council. However, no officer
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or designee may engage in an investment trausaction e�cept as provided under the
teruis of this policy and the procedures established by the Tnvestment Officer and
approved by the City Manager.
VI. Standards -To be obseived.
A. Prudence-The standard of prudence used by the City of Friendswood shall
be the"Prudent Person Rule"and shall be applied in the conteYt ofmanaging
tlie overall poitfolio. This standard states: "tlie person designated as
Investment Officer shall exercise the judgment and care, under prevailing
circumstances, that a prudent person would esercise in the management of
the person' s own affairs." In determiuing whether the Investment Officer
has exercised pnidence with respect to an invesUnent decision, the
determination shall be made taking into consideration:
1. The invesUnent of all funds under tlie City's control, over which the
officer had responsibility; �ud
2. Whether the investment decision was consistent with the written
investment policy of the City.
B. Ethics - Officers and employees involved in the investment process shall refiain
firom personal business activity that could conflict with the proper execution and
management of the investment program, or that could impair their ability to make
impairtial decisions. Employees and investment officials shall disclose, in writing,
any material interests,including personal business relationships, with any financial
institution with which it is proposed that the City conduct business. For the purposes
of this section, an investment officer has a personal business relationship witli a
business organization if: (I) the investment officer owns 10 percent or more ofthe
voting stock or shares ofthe business organization or owns$5,000 or more ofthe fair
market value of the business organization; (2) fiinds received by the invesuuent
officer from the business organization exceed 10 percent ofthe investme��t officer' s
gross income for the previous yeai; or (3) the investment officer has acquired fiom
the business organization during the previous year investments with a book value of
$2,500 or more for the persoual account ofthe investment officer.
C. Liquidity - To meet the investment objectives of the City, the maturity of
investments shall be taigeted to coincide with the cash flo�v needs ofthe City. Fuuds
oftlie City shall be invested in instruments wliose matucities do not exceed approved
periods as determined by their policy. Unless matched to a specific requirement,the
Investment Officer may not invest more than 30%ofthe portfolio for a period greater
than hvo (2) years. The Investment Officer may not invest in any portion of the
po��tfolio for a period greater than three (3)years.
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D. Diversificatiou-The i��vestmeut portfolio shall be diversified to minimize the risk of
loss resulting from over-coucentration of assets in a specitic maturity,specitic issuer
or specific class of securities. Nevertheless, the City recognizes that in a diversified
portfolio,occasioual measured interest losses are inevitable,and must be consiciered
within the context of the overall portfolio' s investment return. At a minimum,
diversiFication standards by security type and issuer shall be:
Securitv Tvoe Maximum% of Pot4folio
U.S. Treaswies& securities with the
U.S. Govermnent's guarantee Not To Exceed 75%
U.S. Government Agencies and
instrumentaliYies Not To Exceed 75%
Certificates of Deposit Not To Exceed 75%
Money Market Funds Not To Exceed 30%
Local Government Investment Pools Not To Exceed 75%"
"(No more than 50% shall be invested in any single pool.)
E. Yield - The core of investments shall be limited to relatively low risk securities in
anticipation of earning a fair rehu�n relative to the risk being assumed. The earnings
fiom investments shall be used in a manner that best seives the public trust and
interests of the City in compliance with applicable covenants or other legal
restrictions.
F. Safelceeping and Custody -To protect against potential fi•aud and embezzlement,
the cash and investments ofthe City ofFriendswood shall be secured by Uie City,or
through third paiTy custody and safekeepiug procedures as hereiu desiguated. 'Ihe
third party custodian shall be required to issue safekeepiugreceipts to the Cirylisting
each specific secm�iry,description, maturity,cusip number, yield and/or coupon and
other pertinent information. Each safekeeping receipt shall clearly indicate that the
instrwnent is held for the City ofFriendswood. All safekeeping anangements shall
be documented by the Investment Officer.
All investment transactions shall be executed on "deliveiy vs. paymenY' basis to
ensure that securities are deposited in the eligible financial institutions prior to the
release of funds.
VII. Internal Controls - The City Coimcil shall establish an annual process of independent
review by an external auditor. This review shall provide internal contirol by assuring
compliance with policies and procedw•es.
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VIII. luvestment Committee- Upon adoption of this policy an Investment Committee shall be
established. Members include three unpaid private sector financial professionals(esample:
banker, broker,CPA)appointed by the Ciry Council to serve staggered three-year terma The
Investment Conunittee shall serve in au advisory capacity only. The Committee shall
perform sach duties assigned to it by this Policy and such other duties as may, fi�om tiine to
time, be assigned to it by the City Council.
Tlie liivestment Committee shall meet at least quarterly. It may meet more often as desired.
Two members may request a meeting. Two members constitute a�uorum.
The Investment Committee is charged �vith the duty of detennining general investment
strategies for the City and monitoring results. It sliall include in its deliberations such topics
as economic outlook, iuvestment strategies, poi�tfolio diversification aud maturiry structure,
potential risks to City fiuids, authorized depositories, brokers/dealers and the target rate of
retum on the investment portfolio.
IX. Authorized Iuvestments-Specific sectu�ity instruments are authorized under the provisions
ofthe Public Funds Investment Act. The conservative philosophy employed by the City is to
ehoose investmevts in a manner which ensures safety, while promoting diversity of market
sector and maturity. The choice of high-grade goverument instruments is designed to
provide for the safety of principal, return an acceptable yield and assure marketability. City
funds may be iuvested in the following:
A. Obligations of the U.S. Government, its agencies and instrumentalities and
govermnent sponsoring enterprises (GSEs), not to exceed three (3) years to stated
maturities, escluding collateralized mortgage obligations (CMOs).
B. Certificates of deposit issued by a depository institution that has its main office or a
branch office in Texas, guaranteed or insured by the Federal Deposit Insurance
Corporation, or collateralized, iu accordance �vitli Section 2256.010, the Tesas
Government Code, in face amounts not to exceed $250,000 (or the current FD1C
limit)unless collateralized aud not to exceed tM�ee(3)yeais to stated maturity. Both
principal and interest earned on the investment will be guaranteed, insured or
collateralized as stated above.
C. No-load money market mutual fiinds that are registered and regulated by the
Securities and Exchange Commission subject to the limitations coutained in Section
2256.014, Texas Governutent Code.
D. Local Government Investment Pools, such as TexPool Investment Pool (TexPool),
Lone Star Investrnent Pool (LSIP) and '"^z„�=�,4 Texas CLASS investment pool,
provided such pools comply witli Chapter 2256, Sections .016, .017, A 18 and .019,
Texas Government Code.
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E. Commercial Paper in accordance with Section 2256.013, of tlie Local Government
Code. The stated maturity miist be 270 days or fe�ver fiom the date of its issuance,
rated not less than A-1 or P-1 or an equivalent rating by at least rivo uationally
recognized credit ratiug agencies or one national recognized credit rating agency and
is fully secured by an irrevocable letter of credit issued by a bank organized an
existing under the laws of the United State or any state.
X. Authm•ized Financial Dealers and I��stitutions-The investment Officer shall maintain a
list offinancial institutions authorized to provide investment services. in addition,a list shall
also be maintained ofappiroved security broker/dealers selected by credit wo�thiness who are
authocized to provide investment services in the State ofTexas. These may indude primary
dealers or regional dealers that qualify under Securities&Eschange Commission Rule 15C3-
1 (miiform net capital rule).
All financial institutions and broker/dealers who desire to become qualified bidders for
investment h�ansactions must supply the I��vestment Officer with the following: audited
finaneial statements, proof of National Association of Security Dealers certification and
proof of state registratiou.
A written copy of the invesunent policy shall be presented to any person offering to engage
in an investment transaction with the City. For purposes of this subsection, "a business
organization includes investmeut pools. The qualified representative of the business
organization offering to engage in an investment transaction with"the City"shall e�ecute a
written insh�umenY' (Exhibit "A") "to the effect that the business organization has: (I)
received and reviewed the investment policy of the City; and (2) acknowledged that the
business organization has implemented reasonable procedures and controls in an effoi�t to
preclude investment u�ansactions conducted behveen"the City"and the oiganization that are
not authorized by"the City' s"investment policy,except to the extent tliat this authorization
is dependent on an analysis of the makeup oP the City' s "entire portfolio or requires an
inteipretation of subjective investment standards."
XL Competitive Biddi�g Requirement - Securities may be purchased or sold only after a
reasonable revie�v of the offers/bids, to verify that the City is receiving fair market
v�lue/price for tl�e investment.
XII. Methods to Monitor the Maricet Price of Investments-The market price of investments
acquired with public fimds �vill be monitored through one ofthe following methods: (1)
accessing financial information provided by the safekeeping custodian via communication
soft�vare;(2)obtaining pricing i��formation as provided iu financial publications,such as the
Wall Street Journal; and (3) obtaining pricing iuformation fi•om qualified broker/dealers or
financial institution representatives.
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X1I1. Reporting -The Investment Officer shall prepare and submit to the City Manager and City
Council a qua��terly report of investment traosactions for all fimds of the City. The report
shall include all information as required by Section 2256A23 of the Act.
XIV. Limitation of Personal Liability-The Investment Off cer and those delegated investment
authority under this policy, when acting in accordance with the�vritten procedures and this
policy and in accord �vith the Prudent Person Rule, shall be relieved of personal
responsibility and liability iu the management ofthe portfolio provided that deviations from
expectations for a specific security' s credit risk or market price chauge or po�tfolio shifts are
reported in a timely manner and that appropriate action is taken to control adveise market
effects.
XV. Investment Strategy -The City of Friends�vood shall maintain a portfolio wliich involves
investment strategy considerations,designed to address the unique characteristics ofthe fund
groups represented in the portfolio. The objectives of each fund group must be considered in
context of the structure of the overall portfolio.
A. Operating Funds - Livestment strategies for operating fimds have as their primary
objective to assure that anticipated cash flows are matched with adequate investment
liquidity. The seconda�y objective is to create a poitfolio structure which will
experience minimal volatility during economic cycles. This may be accomplislied by
purchasing high quality, shoit to medium term securities whicli will couiplemenk
each other.
B. Capital and Special Projects Funds - Primaty strategy for these fund types is to
assure that anticipated cash requirements are matched to ensiire adequate Iiquidity at
the time ofpaymeut. A portion ofinvestments(at least I 0%)should be highly liquid
to allow for flexibiliry aud iinanticipated project outlays. The stated final maturiry
date of any security held should not esceed the estimated project completion date.
C. Debt Service Fund - Investment strategies for debt service fimds�vill have as their
primary objective the assurance of investment liquidity adequate to cover the debt
service obligation on the required payment date.
D. Overall Short-term Strategy-The City uses a consolidated cash system where cash
is commingled and ownership tracked by equity accounts. From tliis a considerable
amount is available for investment in a highly liquid local government investment
pool. Interest earnings are apportioned back based ou equity in the pooL Use of the
pool enables short-term interfund borrowing during the course ofthe year using"due-
to/due-from" accolmting methodology. This gives considerable fle�ibility to the
inunediate cash needs of an individual fund.
E. Bond Proceeds-E�clusive of all other City investments,up to 100%ofthe proceeds
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fi�om a bond sale may be invested in a separ�te pooled (LGIP) accoimt, and are not
subject to the liquidity and diversificatiou limitations found elsewhere iu this policy.
XVT. Intent - It is the stated intent of this Policy to adhere by and to be in conformance with the
statute kno�vn as the Public Funds investment Act, Chapter 2256,Tesas Government Code,
as amended by House Bill 2799 enacted by the 75th Tesas Legislature. Specific
interpretation of a section contrary to this intent shall not void the remaining Policy.
XVII. Adoption - This Investment Policy shall be formally adopted by Resolution of the City
CounciL The Policy shall be reviewed on an annual basis by the City Manager and City
Coimcil.
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TEXAS PUBLIC FUNDS INVESTMENT ACT
CERTIFICATION BY BUSINESS ORGANIZATION
This certification is executed on behalf of the City of Friendsvood (the Investor) and
(the Business Organization) pursuant to the Public
Funds Investment Act, Chapter 2256, Tesas Government Code (the Act), in connection with
investment G�ansactions conducted behveen the investor and the Business Orgauization.
The undersigned Qualified Representative of the Business Organization liereby certifies on
behalf of the Business Organization that:
1. The undersigned is a Qualified Representative ofthe Business Organization offerivg to
enter in an investment transaction with the Tnvestor as such terms are used in the Public
Funds investment Act, Cliapter 2256, Texas Government Code; and
2. The Qualified Representative of tlie Business Organization has received and reviewed the
Investment Policy fiirnished by the Investor; and
3. The Qualified Representative of the Business Organization has implemented reasonable
procedwes and controls in an effort to preclude investment transactions conducted
between the Business Organization and the Investor that are not authorized by the City of
Friendswood' s Investment Policy, escept to the eYtent that this authorization is
dependent on an analysis of the makeup of the City' s entire portfolio or requires an
inteipretation of subjective investment standards.
Qualified Representative of the Business Organization
Signature:
Name:
Title:
Date:
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LIST OF QUALIFIED BROKERS
AUTHORIZED TO �NUAGG IIV INVESTMENT 'TRANSAC'I'IONS
WITH THE CITY OF FRIENDSWOOD
l. BOSC, Inc.
2. Coastal Securities LTD
3. First Southwest Compa�ry
4. Wells Fargo Brokerage Seivices, LLC
The above list of broker/dealers and Financial institutions were approved by the Investment
Committee at a regular meetiug, and are qualified to engage in inveshnent h�ansactions witli tlie
City of Friendswood, as required by the Texas Public Funds Investment Act, Chapter 2256,
Section .025.
Name: Cindy S. Edge, Investment Officer
Date: June 4, 2012
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