HomeMy WebLinkAboutResolution No. 97-47 x.�soLU�rioN rro. R9 7-4 7
A R�SOY.UTION �F THE CTT'Y COUNCIL OF THE CTfY (��
FRIENDS'V11'O4D, TEXAS, APP1taVING A P'UBLIC FUNDS
NIANAGLMENT AND INVESTMENT PALICY.
* x� * � *
BE IT R�SQLVED BY THE CITY C�UNCIL OF THE �TTY OF FRIENDSWOOU,
TEXAS:
Ssction 1. The Public l�unds 1Vlanagement and Investir�ent Poiicy attached herato az�
made a part hereof for ail purposes be, and it is hereby, appro�ved as the afC�cial Public �nds
Management and Investrneni Po�icy o�'the City of Friendswood, Texas.
ti n . The City Secretacy is hercby directed to place on said Investm�rn Policy an
endorsement, which sball be signed by the City Secretar�r, v�rhich shall read as fallaws:
"The Investment Policy of the Ciry of Friendswood, Texas, approved by City
Cotulcil thel7tYday Of November, Y997."
Such Investment Policy, as thus endorsed, shall be kept on file in the affice of the Ciry Secretary
as a public record.
PASSED, APPROVED, and k�SaLVED this 17thday of _November ,
1997, �
Harold Y.. Whitakcr
Mayor
ATTBST
. ,
Deloris McKenzi�, RM
Ciry Secretar�
CITY OF FRIENDSWOOD, TEXAS
INVESTMENT POLICY
(Updated to Reflect 1997 Amendments to the Public Funds lnvestment Act)
I. Policy- 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 expenses 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 all fmancial assets and funds placed for investment by the
City. The City commingles its funds into one pooled investment fund for inveshnent purposes for
efficiency and maximum investment opportunity. These funds are defined in the C ity'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 crea.ted 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 investrnent program shall be to assure the safety of the
invested funds. Investments shall 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 prohibited.
IV. Legal Limitations,Responsibilities and Investment Authority-AuthoriTy and parameters for the
inveshnent of public funds in Texas are found in the Public Funds Investment Act, Chapter 2256,
Texas Government Code(the"Act").
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The Interlocal Cooperation Act,Cl�apter 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 Investrnent
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 shall 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 shall be
obtained shall include a professional organization,an institute of higher learning or any other sponsor,
other than a Business Organization with whom the C ity may engage in an investment transaction. The
Investment O�cer shall designate a staffperson as a liaison/deputy in the event circumstances require
timely action and the Investment Officer is not available. The appointment shall be approv�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 proceciures 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 shall be the"Prudent
Person Rule" and shall be applied in the context of managing the overall portfolio. Ttus
standard states: "the person designated as Investment Officer shall 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.
B. Etlucs-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 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 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
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investment officer from the business organization excced 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)yea.rs.
D. Diversification - The investment portfolio shall 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 60%
Certificates of Deposit NTE 30%
Money Market Funds NTE 30%
Local Government Investment Pools NTE 75%*
*(No more than 40%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 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 shall be secured by the City, or through third
party custody and safekeeping procedures as herein designated. The third party custodian
shall be required to issue safekeeping receipts to the City listing each spe�ific security,
description, maturity, cusip number, yield and/or coupon and other pertinent information.
Each safekeeping receipt shall clearly indicate that the instrument is held for the City of
Friendswood. All safekeeping anangements shall be documented by the Investment Officer.
All investment transactions shall be executed on a"delivery vs.payment"basis to ensure that
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securities are deposited in the eligible financial institutions prior to the release of funds.
VII. Internal Controls-The City Council shall 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 of this policy an Investment Committee shall be established.
Members include three unpaid private sector investment professionals appointed by the City Council.
The Investment Committee shall serve in an advisory capacity only. The Committee shall 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 investrnent strategies for
the City and monitoring results. It shall 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 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 Texas Government
Code, in face amounts not to exceed $100,000 and not to exceed eighteen (18) months to
stated maturity.
C. Naload 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. TexPool Investment Pool (TexPool), Lone Star Investment Pool (LSIP) and the Local
Government Investment Cooperative(LOGIC), provided such pools comply with Chapter
2256, Sections .016, .017, .018 and .019, Texas Government Code.
X. Authori7.ed �nancial 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 are authorized to
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provide investment services in the State of Texas. These may include"primary"dealers or regional
dealers that qualify under Securities&Exchange Commission Rule 1 SC3-1 (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"(Exhibit"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 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.
I�iIII. Methods to Monitor the Market Price of Investments-The market price of investments acyuired
with public funds will be monitored through one of the following methods: (1) accessing financial
information provided by the safekeeping custodian via communication software (such as
GEOPAC.PC, offered by Texas Commerce Bank National Association); (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.
I�IIII. Reporting-The Investment Officer shall prepare and submit to the City Manager and City Council
a quarterly report of investment transactions for all 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 Officer and those delegated investrnent 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 context of the structure of
the overall portfolio.
A. Operating�nds-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
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during economic cycles. This may be accamplished by purchasing high quality, short to
medium terzn 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 inveshnents (at least 10%) should be highly liquid to allow for flexibility and
unanticipated project outlays. The stated final maturity date of any security held should not
excced the estimated project cornpletion date.
C. Debt Service Fund-Inveshnent 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
cornmingled and ownership tracked by equity accounts. From this a considerable amount is
available for investment in a highly liquid local govemment investment pool. Interest earnings
are apportioned back based on equity in the pool. Use of the pool enables short-term interfund
bonowing during the course of the year using"due-to/due-from" accounting methodology.
This gives considerable flexibility 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 BiI12799 enacted by the 75th Texas 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 Council.
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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, Te�s Government Code (the Act), in connection with
investment transactions 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 aze used in the Public
Funds Investment Act, Chapter 2256, Te�cas 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 extent 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:
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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: /��
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