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HomeMy WebLinkAboutResolution No. 99-09 RESOLUTION NO. R99-9 A RE50LUTION OF THE CITY COUNCIL OF THE CITY OF FRIENDSWOOD, TEXAS, APPROVING THE PUBLIC FUNDS NIANAGEMENT AND INVESTMENT POLICY WITH AMENDMENTS. * * * * * * * * * * 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 Investment 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 lst day of March, 1999. Such Investment Policy, as thus endorsed, shall be kept on file in the office of the City Secretary as a public record. PASSED, APPROVED, AND RESOLVED this the lst day of March, 1999. Mayor Harold L. Whitake City of Friendswood ATTEST: � � Deloris McKenzie, MC City Secretary R99.9/LST03 EXHIBIT "A" _ . _ - - CITY OF FRIENDSWOOD, TEXAS INVESTMENT POLICY (LTpdated to Reflect 2/99 Amendments Recommended by Investment Committee) I. Poticy - It is the policy of the City of Friendswood that, giving due regard to the safety and risk of investment, all available funds shall be invested in conformance with these legal and administrative guidelines. The City's portfolio shall be designed and managed in a manner responsive to the highest public trust and consistent with this policy. Investments shall be made in a manner which will provide the maximum security of principal invested through limitations and diversification while meeting the daily cash flow needs of the City. The receipt of a market rate of return will be secondary to the requirements for safety and liquidity. This policy will adopt passive investment strategies designed to minimize administrative e�enses while obtaining market-average rates of return and incurring minimal risks. It is the intent of the City to be in complete compliance with local law and the Texas Public Funds Investment Act. II. Scope - This investment policy applies to a11 financial assets and funds placed for investment by the City. The City commingles its funds into one pooled investment fund for investment purposes for efficiency and maximum investment opportunity. These funds are defined in the City's Comprehensive Annual Financial Report (CAFR) and include: General Fund Special Revenue Funds Debt Service Fund Enterprise Fund Trust and Agency Funds And any new funds created by the City,unless specifically exempted by the City Council and this policy. III. Objectives-The investment policy of the City shall be governed by these primary objectives: safety, liquidity and yield. The suitability of each investment decision will be made on the basis of these objectives. A. Safety - The foremost objective of the investment program sha11 be to assure the safety of the invested funds. Investments sha11 be undertaken in a manner that seeks to ensure the preservation of capital. B. Liquidity - Funds will be invested with maturities necessary to maintain sufficient liquidity to provide adequate and timely working funds. C. Yield - Return on investment is of least importance compared to the safety and liquidity objectives described above. Investment for speculation purposes is Page 1 prohibited. IV. Legal Limitations,Responsibilities and Investment Authority-Authority and parameters for the investment of public funds in Texas are found in the Public Funds Investment Act, Chapter 2256, Texas Government Code (the "Act"). The Interlocal Cooperation Act, Chapter 791, Texas Government Code, authorizes local governments in Texas to participate in investment pools established thereunder. That statute and reference to authorized investment in investment pools in the Act, is primary authority for use of investment pools by political subdivisions of the State of Texas. V. Delegation of Investment Authority-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 management decisions and activities fully comply herewith. The Investment Officer shall develop and maintain administrative procedures for the operation of the investment program which are in strict accordance with this investment policy, as approved by the City Council. The Investment Officer sha11 comply with training requirements of the Public Funds Investment Act. The investment training session shall be provided by an independent source approved by the City Council or Investment Committee. An "independent source" from which investment training sha11 be obtained sha11 include a professional organization, an institute of higher learning or any other sponsor, other than a Business Organization with whom the City may engage in an investment transaction. The Investment Officer shall designate a staff person as a liaison/deputy in the event circumstances require timely action and the Investment Officer is not available. The appointment shall be approved_by City Council. However, no officer or designee may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Investment Officer and approved by the City Manager VI. Standards - To be observed. . A. Prudence- The standard of prudence used by the City of Friendswood sha11 be the "Prudent Person Rule" and shall be applied in the context of managing the overall portfolio. This standard states: "the person designated as Investment Officer sha11 exercise the judgment and care,under prevailing circumstances, that a prudent person would exercise in the management of the person's own affairs." In determining whether the Investment Officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration: 1. The investment of all funds under the City's control, over which the officer had responsibility; and 2. Whether the investment decision was consistent with the written investment policy of the City. Page 2 B. Ethics - Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials sha11 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 with a business organization if: (1) the investment officer owns 10 percent or more of the voting stock or shares of the business organization or owns$5,000 or more of the fair market value of the business organization;(2)funds received by the investment officer from the business organization exceed 10 percent of the investment officer's gross income for the previous year; or (3) the investment officer has acquired from the business organization during the previous year investments with a book value of $2,500 or more for the personal account of the investment officer. C. Liquidity-To meet the investment objectives of the City,the maturity of investments shall be targeted to coincide with the cash flow needs of the City. Funds of the City shall be invested in instruments whose maturities 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% of the portfolio for a period greater than two (2)years. Unless matched to a specific requirement,the Investment Officer may not invest in any portion of the portfolio for a period greater than three(3) years. D. Diversification - The investment portfolio sha11 be diversified to minimize the risk of loss resulting from over concentration of assets in a specific maturity, specific issuer or specific class of securities. Nevertheless, the City recognizes that in a diversified portfolio, occasional measured interest losses are inevitable, and must be considered within the context of the overall portfolio's investment return. At a minimum, diversification standards by security type and issuer shall be: U.S. Treasuries& securities with the U.S. Government's guarantee Not To Exceed (NTE) 75% U.S. Government Agencies and instrumentalities NTE 75% Certificates of Deposit NTE 75% Money Market Funds NTE 30% Local Government Investment Pools NTE 75%* *(No more than 40% shall be invested in any single pool.) Page 3 E. Yield - The core of investments sha11 be limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. The earnings from investments shall be used in a manner that best serves the public trust and interests of the City in compliance with applicable covenants or other legal restrictions. F. Safekeeping and Custody - To protect against potential fraud and embezzlement, the cash and investments of the City of Friendswood sha11 be secured by the City, or through third party custody and safekeeping procedures as herein designated. The third party custodian sha11 be required to issue safekeeping receipts to the City listing each specific security, description, maturity, cusip number, yield andlor coupon and other pertinent information. Each safekeeping receipt sha11 clearly indicate that the instrument is held for the City of Friendswood. All safekeeping arrangements shall be documented by the Investment Officer. All investment transactions shall be executed on a "delivery 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 Council sha11 establish an annual process of independent review by an external auditor. This review shall provide internal control by assuring compliance with policies and procedures. VIII. Investment Committee - Upon adoption ofthis policy an Investment Committee shall be established. Members include three unpaid private sector investment professionals appointed by the City Council to serve staggered two-year terms. The Investment Committee sha11 serve in an advisory capacity only. The Committee sha11 perform such duties assigned to it by this Policy and such other duties as may, from time to time, be assigned to it by the City Council. The Investment Committee shall meet at least quarterly. It may meet more often as desired. Two members may request a meeting. Two members constitute a quorum. The Investment Committee is charged with the duty of determining general investment strategies for the City and monitoring results. It sha11 include in its deliberations such topics as economic outlook, investment strategies, portfolio diversification and maturity structure, potential risks to City funds, authorized depositories, brokers/dealers and the target rate of return on the investment portfolio. IX. Authorized Investments - Specific security instruments are authorized under the provisions of the Public Funds Investment Act. The conservative philosophy employed by the City is to choose investments in a manner which ensures safety, while promoting diversity of market Page 4 sector and maturity. The choice of high-grade government instruments is designed to provide for the safety of principal, return an acceptable yield and assure marketability. City funds may be invested in the following: A. Obligations of the U.S. Government, its agencies and instrumentalities, not to exceed three (3)years to stated maturities. B. Certificates of deposit issued by a state or national bank or a savings and loan association domiciled in the State of Texas, guaranteed or insured by the Federal Deposit Insurance Corporation, or collateralized, in accordance with Section 2256.010,the Texa.s Government Code, in face amounts not to exceed $100,000 and not to exceed three (3)vears to stated maturitX. Both principal and interest earned on the investment will be ,guaranteed. insured or collateralized as stated above. C. No-load money market mutual funds registered and regulated by the Securities and Exchange Commission, subject to the limitations contained in Section 2256.014, Texas Government Code. D. TeacPool Investment Pool (Te}cPool),Lone Star Investment Pool(LSIP) and the Loca1 Government Investment Cooperative (LOGIC), provided such pools comply with Chapter 2256, Sections .016, .017, .018 and .019, Texas Government Code. X. Authorized Financial Dealers and Institutions - The Investment Officer shall maintain a list of financial institutions authorized to provide investment services. In addition, a list shall also be maintained of approved security broker/dealers selected by credit worthiness who aze authorized to provide investment services in the State of Te�ras. These may include "primary" dealers or regional dealers that qualify under Securities&Exchange Commission Rule 15C3- 1 (uniform net capital rule). All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Investment Officer with the following: audited financial statements, proof of National Association of Security Dealers certification and proof of state registration. A written copy of the investment 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 investment pools. The qualified representative of the business organization offering to engage in an investment transaction with" the City "shall execute a written instrument" (E�ibit"A") "to the effect that the business organization has: (1)received and reviewed the investment policy of the City; and (2) acknowledged that the business organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between" the City "and the organization that are not authorized by" the City's "investment policy, except to the extent that this authorization is Page 5 dependent on an analysis of the makeup of' the City's "entire portfolio or requires an interpretation of subjective investment standards." XI. Competitive Bidding Requirement - Securities may be purchased or sold only after a reasonable_review of the offers/bids,to verify that the City is receiving fair market value/price for the investment. XII. Methods to Monitor the Market Price of Investments - The market price of investments acquired with public funds will be monitored through one of the following methods: (1) accessing financial information provided by the safekeeping custodian via communication software; (2) obtaining pricing information as provided in financial publications, such as the Wall Street Journal; and (3) obtaining pricing information from qualified broker/dealers or financial institution representatives. XIII. Reporting - The Investment Officer sha11 prepare and submit to the City Mana.ger and City Council a quarterly report of investment transactions for a11 funds of the City. The report shall include all information as required by Section 2256.023 of the Act. XIV. Limitation of Personal Liability - The Investment Of�icer and those delegated investment authority under this policy,when acting in accordance with the written procedures and this policy and in accord with the Prudent Person Rule, shall be relieved of personal responsibility and liability in the management of the portfolio provided that deviations from expectations for a specific security's credit risk or market price change or portfolio shifts are reported in a timely manner and that appropriate action is taken to control adverse market effects. XV. Investment Strategy - The City of Friendswood shall maintain a portfolio which involves investment strategy considerations, designed to address the unique characteristics of the fund groups represented in the portfolio. The objectives of each fund group must be considered in conte�of the structure of the overall portfolio. A. Operating Funds - 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. B. Capital and Special Projects Funds - Primary strategy for these fund types is to assure that anticipated cash requirements are matched to ensure adequate liquidity at the time of payment. A portion of investments(at least 10%) should be highly liquid to a11ow for flexibility and unanticipated project outlays. The stated final maturity date of any security held should not exceed the estimated project completion date. Page 6 C. Debt Service Fund - Investment strategies for debt service funds will 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 this a considerable amount is available for investment in a highly liquid local government investment pool. Interest earnings are apportioned back based on equity in the pool. Use of the pool enables short-term interfund borrowing during the cowse of the yea.r using "due- to/due-from" accounting methodology. This gives considerable fle�cibility to the immediate cash needs of an individual fund. XVI. Intent - It is the stated intent of this Policy to adhere by and to be in conformance with the statute known as the Public Funds Investment Act, Chapter 2256, Texas Government Code, as amended by House Bill 2799 enacted by the 75th Texas Legislature. Specific interpretation of a section contrary to this intent sha11 not void the remaining Policy. XVII. Adoption - This Investment Policy sha11 be formally adopted by Resolution of the City Council. The Policy shall be reviewed on an annual basis by the City Manager and City Council. . Page 7 TEXAS PUBLIC FUNDS INVESTMENT ACT CERTIFICATION BY BUSINESS ORGANIZATION This certification is executed on behalf of the City of Friendswood (the Investor) and (the Business Organization) pursuant to the Public Funds Investment Act, Chapter 2256, Texas Government Code (the Act), in connection with investment transact'ions conducted between the Investor and the Business Organization. The undersigned Qualified Representative of the Business Organization hereby certifies on behalf of the Business Organization that: 1. The undersigned is a Qualified Representative of the Business Organization offering to enter in an investment transaction with the Investor as such terms are used in the Public Funds Investment Act, Chapter 2256, Texas Government Code; and 2. The Qualified Representative of the Business Organization has received and reviewed the Investment Policy furnished by the Investor; and 3. The Qualified Representative of the Business Organization has implemented reasonable procedures 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, except to the e�ctent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio or requires an interpretation of subjective investment standards. Qualified Representative of the Business Organization Name: Title: Date: Page 8 LIST OF QUALIFIED BROKERS AUTHORIZED TO ENGAGE IN INVESTMENT TRANSACTIONS WITH THE CITY OF FRIENDSWOOD ✓ A. G. Edwards ✓ Chase Securities of Texas, Inc. ✓ Dean Witter Reynolds ✓ EVEREN Securities ✓ Merrill Lynch ✓ Paine Webber ✓ Rauscher Pierce Refsnes, Inc. The above list of broker/dealers and financial institutions were approved by the Investment Committee at a regular meeting, and are qualified to engage in investment transactions with the City of Friendswood, as required by the Texas Public Funds Investment Act, Chapter 2256, Section .025. Name: Investment Officer Date: Page 9