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HomeMy WebLinkAboutResolution No. 96-24 RESOLUTION NO. R96-24 A RESOLUTION OF THE CITY OF FRIENDS�OOD, TEXAS, ADOPTING AN INVESTMBNT POLIGR IN CONFORMANCE WITH LEGAL AND ADMINISTRATNE GUIDELINSS. * * * �e * * * � * * �e WHEREAS, 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 the legal and administrative guideline set forth in the City of Friendswood, Texas Investment Policy. 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 need of principal invested through limitations and diversification while meeting the daily cash flow needs of the City. It is the intent of the City to be in complete compliance with the local law and the Texas Public Funds Investment Act. NOW, TFiERSF'ORE, BB IT RESOLVED SY THE CITY COUNCIL, OF THE CITY OF FRIE..NDSWOOD, TSXAS: The City of Friendswood hereby adopts the Investment Policy attached hereto as Exhibit "A". PASSED, APPROV$D, AND RESOLV�.I this 23rd day of Sept�r, 1996. � �� Evelyn . Newm n Mayor ATTEST: � � r Deioris McKenzie, TRM City Secretary CC: R.E.C. R.R. 9/25/96 R96.24/LST03 EXHIBIT "A" CITY OF FRIENDSWOOD, TEXAS INVESTMENT POLICY 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 conforxnance 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 far safety and liquidity. This policy will adopt passive investment strategies designed to minimi�.�administrative expenses while obtaining mazket-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 financial assets and funds placed for investment by the City. The City commingles its funds into one pooled investment fund for investrnent 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 Capital Projects 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 Ciry 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 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 investrnent is of least importance compared to the safery and liquidity objectives described above. Investment for speculation purposes is prohibited. IV. Legal Limita6ons,Responsibilities and Investment Authority-Authority and parameters for the investment of public funds in T�as are found in the Public Funds Investment Act,Chapter 2256,Texas Government Code(the"Act"). Page 1 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 inveshnent in investment pools in the Act,is primary authoriry for use of inveshnent 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 annroved by the C�Council. The Investment Officer shall comply with training requirements of the Public Funds Investment Act. The Investment Officer shall designate a staff person as a liaison/deputy in the event circumstances require timely action and the Inveshnent Officer is not available. The annointment sha11 be an,�roved by�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 standazd 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. This standard states:"Inveshnents shall be made with judgement and care,under circumstances then prevailing,which persons of prudence,discretion, and intelligence exercise in the management of their own affairs,not far speculation,but for investment,considering the probable safety of their capital as well as the expected incorne to be derived." In deternuning whether the Investment Officer has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration: l. 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. Ethics-Officers and employees involved in the investrnent process sha11 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. They shall further disclose any personal fmancial/investment positions that could be related to the performance of the investrnent portfolio. G 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 Page 2 30% of the portfolio for a period greater than two (2) years. Unless matched to a specific requirement,the Investrnent Officer may not invest in any portion of the portfolio for a period greater than three(3)years. 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°/a* *(No more than 40%shall be invested in any�gle nool� E. Yield-The core of investments shall be limited to relatively low risk securities in anticipation of eazning a fair return relative to the risk being assumed. The earnings from investments shall be used in a manner that best serves the public tnist 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 Ciry 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 specific 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 arrangements shall be documented by the Investment Officer. All investment transactions shall be executed on a"delivery vs. payment"basis to ensure that securities are deposited in the eligible fmancial institutions prior to the release of funds. VIL Internal Controls- The C�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 Investrnent Committee shall be established. Members include three un�aid private sector investment professionals appointed by the City Council. The Investment Committee shall serve in an advisory capacity only. The Committee shall perform such Page 3 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 dury of deternvning general investment strategies for the Ciry 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 e�ccced$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. Te�'ool 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. Authorized Financial Dealers and Institutions - The Investment Officer shall maintain a list of fmancial 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 provide investment services in the State of Texas. 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 fmancial statements,proof of National Association of Security Dealers certification and proof of state registration. Every broker/dealer with whom the City transacts business shall be provided a copy of this Investment Policy to assure that they are familiar with the goals and objectives of the investment program. The broker/dealer shall be required to return a copy of the Certification Form(E�ibit"A"), signed by a Page 4 registered principal,certifying that the policy has been received and reviewed. 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. Reporting-The Investrnent Officer shall prepare and submit to the City Manager and Ciry 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. XIII. Limitation of Personal Liability-The Investment Officer 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 responsibiliry 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. XIV. Investment Strategy-The City of Friendswood shall maintain a portfolio which involves invesirnent 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 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 allow for flexibility and unanticipated project outlays. The stated final maturity date of any securiry held should not exceed the estimated project completion date. C. Debt Service Fund-Investment strategies for debt service funds will have as their prunary 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 equiry accounts. From this a considerable amount is available for investment in a highly liquid local government investment pool. Interest earnings aze apportioned back based on equiry in the pool. Use of the pool enables short-term interfund borrowing during the course of the year using"due-to/due-from" accounting methodology. This gives considerable fle�bility to the immediate cash needs of an individual fund. XV. Intent - It is the stated intent of this Policy to adhere by and to be in conforxnance with the statute known as the Public Funds Investment Act, Chapter 2256, Texas Government Code,as amended by House Bill 2459 enacted by the 74th Texas Legislature. Specific interpretation of a section contrary to Page 5 this intent shall not void the remaining Policy. XVL 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 6 EXHIBIT "A" BROKER/DEALER CERTIFICATION FORM as required by Texas Government Code 2256.005(k) CITY OF FRIENDSWOOD, TEXAS (the "City") The City acknowledges that the only means the firm has to preclude"imprudent investment activities arising out of transactions between the firm and the City"is to confirm that all provisions of the City's investment policy are followed in investment transactions conducted between the firm and the City, and, the second paragraph below should be read accordingly. I, as registered principal for the firm do hereby certify that I, and the broker covering this account, , have received and both have thoroughly reviewed the investment policy for the City. We acknowledge that this firm has implemented reasonable internal procedures and controls in an effort to preclude imprudent investment activity between this firm and the City arising from transactions between the City and the firm. Signature Name: Title: Date: Page 7