R2017-191 2017-09-25 RESOLUTION NO. R2017-191
A Resolution of The City Council of the City of Pearland, Texas,
adopting an Amended Investment Policy, Investment Strategy and
approved Brokers in accordance with Chapter 2256 of the Government
Code ("Public Funds Investment Act").
WHEREAS,the Public Funds Investment Act codified in Government Code Chapter
2256 governs local government investment; and
WHEREAS, the Public Fund Investment Act (Section 2256.005a), as amended,
requires the City to adopt an Investment Policy and Investment Strategy by rule, order,
ordinance or resolution governing the investment of funds under its control; and
WHEREAS, the Public Fund Investment Act (Section 2256.005e), requires the
governing body to review and adopt that Investment Policy and Investment Strategy by
rule, order, ordinance or resolution not less than annually, recording any changes made
thereto; now, therefore,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS:
Section 1. That the City of Pearland has complied with the requirements of the
Public Funds Investment Act and the Investment Policy. The modified Investment Policy,
Investment Strategy and approved Brokers are attached hereto as Exhibit"A", Exhibit"B"
and Exhibit "C" and are hereby adopted effective immediately, except that the revised
Investment Training requirements contained in Section 2.07 of the Investment Policy shall,
in accordance with state law, become effective beginning September 1, 2015.
PASSED, APPROVED, AND ADOPTED this 25th day of September, A.D., 2017.
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MAYOR
RESOLUTION NO. R2017-191
ATTEST:
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• . SEC' TARY
APPROVED AS TO FORM:
DARRIN M. COKER
CITY ATTORNEY
2
Resolution No. R2017-191
Exhibit"A"
CITY OF PEARLAND, TEXAS
OE lis, PE"
41 44.,.
PEARLAND
a T E X A S A
eSr. t 89
INVESTMENT POLICY
AND
INVESTMENT STRATEGY
ADOPTED FEBRUARY 12, 2007
Revised February 2008
Revised April 2009
Revised June 2011
Revised June 2012
Revised August 2013
Revised August 2014
Revised August 2015
Revised August 2016
TABLE OF CONTENTS
1.0 INVESTMENT AUTHORITY AND SCOPE OF POLICY
1.01 Purpose
1.02 Policy
1.03 Scope
1.04 Delegation of Responsibility
1.05 Ethics & Conflict of Interest
1.06 Investment Committee
2.0 INVESTMENT OBJECTIVES
2.01 Objective
2.02 Safety of Principal
2.03 Liquidity
2.04 Diversification
2.05 Yield
2.06 Maturity
2.07 Investment Training
2.08 Quality and Capability of Investment Management
2.09 Investment Strategy
2.10 Cash Management
3.0 AUTHORIZED INVESTMENT
3.01 Authorized Investments
3.02 Certificates of Deposit
3.03 Unauthorized Investments
3.04 Investments with Required Ratings
4.0 INVESTMENT CONTROLS
4.01 Selection of Investment Broker/Dealers
4.02 Certification
4.03 Delivery vs. Payment
4.04 Internal Control and Annual Audit
4.05 Standard of Care
4.06 Competitive Bidding
4.07 Portfolio Diversification
4.08 Electronic Funds Transfer
4.09 Selling of Securities before Maturity
5.0 ARBITRAGE
6.0 INVESTMENT REPORTING
7.0 INVESTMENT COLLATERAL AND SAFEKEEPING
7.01 Collateral or Insurance
7.02 Safekeeping of City Securities
8.0 INVESTMENT POLICY ADOPTION
GLOSSARY
ATTACHMENT A - Broker/Dealer Certification
ATTACHMENT B - Approved List of Broker/Dealers
CITY OF PEARLAND
INVESTMENT POLICY
1.0 INVESTMENT AUTHORITY AND SCOPE OF POLICY
1.01 Purpose
To establish and provide specific policy and guidelines for the conduct of
the investment program of the City of Pearland.
1.02 Policy
It is the policy of the City of Pearland (the "City") to invest public funds in
a manner, which will provide safety of principal while earning the highest
reasonable market return in meeting the daily cash flow demands of the
City. All funds will be invested in compliance with all state and local
statutes and all Governmental Accounting Standards Board Statements,
and related financial accounting standards.
This policy satisfies the requirement of the Public Funds Investment Act
(PFIA), Texas Government Code 2256.
1.03 Scope
This Investment Policy shall apply to all the funds and investments of the
City as well as any other funds held in custody by the City, and include
the following funds:
1. General Fund
2. Special Revenue Funds
3. Capital Project Funds
4. Enterprise Funds
5. Trust & Agency Funds
6. Debt Service Funds
7. Internal Service Funds
8. Component Units, excluding those that have adopted a separate
investment policy.
Current component units include:
a. Pearland Economic Development Corporation
b. Tax Increment Reinvestment Zone #2
c. Development Authority of Pearland
9. Any other funds or component units as created by the City.
These funds, as well as funds that may be created from time-to-time, shall
be administered in accordance with the provisions of this policy. All funds
invested under this policy shall be considered as a pooled group for
investment purposes.
Deferred compensation and the retirement. system assets the City sets
aside or holds for its employees are not subject to this policy.
1.04 Delegation of Investment Authority
The Director of Finance, Assistant Director of Finance, and Accounting
Supervisor are hereby designated as Investment Officers for the City. The
City may use other employees or the services of a contractor to aid the
investment officer(s) in the execution of their duties. Otherwise, unless
authorized by law, no other individual(s) has the authority to deposit,
withdraw, transfer or manage the investments of the City. The City may
designate a registered investment advisor to invest for the City and act as
an additional Investment Officer. Authority granted to a person(s) to
deposit, withdraw, invest, transfer or manage the City's investments is
effective until rescinded by City Council or until termination of the person's
employment or contract.
The Director of Finance is responsible for the management of the
investment program. The Investment Officers are responsible for the daily
operations of the investment function. The Director of Finance shall be
responsible for all transactions undertaken and shall establish a system of
controls to regulate the activities of subordinate officials.
1.05 Ethics and Conflict of Interest
Investment Officers shall refrain from personal business activities that
could conflict with the proper execution of the investment program, or
which could impair their ability to make impartial investment decisions.
Investment Officers who have a personal business relationship with a
business organization seeking to sell an investment to the City and who
have anyone related within the second degree by affinity or consanguinity
to an individual seeking to sell an investment to the City shall file a
statement disclosing that personal interest to the Director of Finance, City
Manager, the City Council and.the Texas Ethics Commission.
An Investment Officer has a personal business relationship with a business
organization if:
1) the investment officer owns 10% 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% 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 yearinvestments with a book value of $2,500 or
more for the personal account of the investment officer.
1.06 Investment Committee
The City shall establish an Investment Committee for the purpose of
reviewing investment policies and procedures, investment strategies, and
investment performance. The members of the Committee shall consist of
the City Manager, Assistant City Manager as designated by the City
Manager, Director of Finance, and Assistant Director of Finance. The City
Manager shall be the Chairman of the Committee.
The Investment Committee shall review quarterly investment reports and
annually review the recommended changes to the Investment Policy and
Investment Strategy and review the list of brokers authorized to engage
in investment transactions with the City.
2.0 INVESTMENT OBJECTIVES AND STRATEGY
2.01 Objective
City investments shall be made in accordance with federal and state laws,
this Investment Policy and ordinances of the City. The City's investment
portfolio shall be designed with the objective of attaining a market rate of
return in accordance with its designated benchmark based on the City's
cash flow requirements throughout budgetary and economic cycles,
commensurate with. the City's investment risk constraints and the cash
flow characteristics of the portfolio.
2.02 Safety of Principal
The primary objective of the City's investment program is to ensure the
safety of all funds. To attain this objective, it is the City's intent to invest
in the safest types of securities, pre-qualify broker/dealers„ and advisors
and to hold all investments until maturity in order to ensure the return of .
all invested principal unless as stipulated in Section 4.09 of the policy.
2.03 Liquidity
The City's investment must be based on a cash flow analysis, which will
provide the liquidity necessary to pay all expected and unexpected
obligations. Liquidity shall be achieved by matching investment maturities
with budgetary and economic cycles. A portion of the portfolio will be
maintained in liquid short-term investments that can be converted to cash
if necessary to meet disbursement.requirements. Investment pools and
no-load money market mutual funds provide daily liquidity and may be
utilized as a competitive yield alternative to fixed maturity investments.
2.04 Diversification
The City of Pearland shall diversify its portfolio to eliminate the risk of loss
resulting from over concentration of assets in a specific maturity, a specific
issuer or a specific class of investments. Investment shall always be
selected that provide for stability of income and reasonable liquidity.
2.05 Yield
It will be the objective of the City to earn a reasonable market yield
throughout budgetary and economic cycles within the parameters
imposed by its safety and liquidity objectives, investment strategies, and
state and federal law. Return on investment is of secondary importance
to safety and liquidity objectives. The yield and level of risk for the
portfolio will be benchmarked against the yield of the one-year Treasury
Bill during the comparable period as well as against an agency note with
approximately the same maturity as the weighted average maturity of the
portfolio.
2.06 Maturity
The portfolio shall be structured primarily to meet City obligations and
secondly to achieve a reasonable return of interest. The maximum
.allowable stated maturity of any individual investment owned by the City
shall be five (5) years from date of purchase. The settlement date is
considered the date of purchase. However, the City may collateralize its
demand deposit accounts, certificates of deposits, and repurchase
agreements using longer-dated investments not to exceed thirty (30)
years.
The maximum weighted average maturity based on the overall portfolio
shall be 30 months, or 900 days.
2.07 Investment Training
Investment Officers shall take (a) 10 hours of training within 12 months
after taking office or assuming duties and (b) not less than 8 hours of
training in a two year period that begins on the first day of the fiscal year
and consists of the two consecutive fiscal years after that date. Training
shall include education in investment controls, security risks, strategy
risks, market risks, diversification, and compliance. Training must be
provided by an independent source approved by the governing body or
designated Investment Committee. For these purposes, courses or
seminars offered by the Government Finance Officers Association,
Government Finance Officers Association of Texas, Texas Municipal
League, Southwest School of Government Finance, University of North
Texas, Texas Association of Counties, Treasury Management Association,
or the Government Treasurers Organization of Texas will satisfy the
training requirements. An external auditor shall review documentation of
training hours annually.
2.08 Quality and Capability of Investment Management
Investment Officers shall at all times be cognizant of the standard of care
and the investment objectives as set forth in the Public Funds Investment
Act and the City's Investment Policy.
The City shall provide investment training as required by the Act to ensure
the quality and capability of investment management. Staff sets the
standard of training required, which may be over the 10 hours as required
by the Act.
2.09 Investment Strategy
In accordance with the Act (2256.005(d)) a separate written investment
strategy shall be developed for each portfolio/fund or pooled group of
funds under the City's control. The strategy shall be reviewed on an annual
basis with formal action by the City Council stating that the strategy has
been reviewed and recording any changes made.
2.10 Cash Management
Effective cash management is recognized as essential to good fiscal
management. Cash management is defined as the process of managing
monies in order to ensure maximum cash availability to the City for
investment use. The City shall maintain a comprehensive cash
management program that includes collection of accounts receivable,
prudent investment of its available cash, disbursement of payments in
accordance with invoice terms and the management of banking services.
3.0 AUTHORIZED INVESTMENTS
3.01 Authorized Investments
Authorized investments under this policy shall be limited to the
instruments listed below as authorized and defined by the Public Funds
Investment Act.
A. Obligations of the United. States or its agencies and instrumentalities.
B. Obligations of the State of Texas or its agencies and instrumentalities
C. Other obligations, the principal and interest of which are
unconditionally guaranteed or insured by, or backed by the full faith
and credit of the State of Texas or the United States or their respective
agencies and instrumentalities.
D. 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.
E. Collateralized certificates of deposit of banks or savings banks doing
business in Texas, collateralized to 102% and guaranteed or insured
by the Federal Deposit Insurance Corporation or its successor; or
secured by obligations of the United State Government, including
mortgage backed securities, which pass the bank test, but excluding
those mortgage backed securities defined in Section 2256.009(b) of
the Act.
F. Constant dollar local government investment pools as defined by the
Act (2256.016 and 2256.019) and approved by City Council resolution.
G. AAA-rated, SEC registered no-load money market mutual funds and
no-load mutual fund including funds that invest in commercial paper
and as further defined in Sections 2256.013 and 2256.014 of the Act.
H. Collateralized repurchase agreements as defined by the Public Funds
Investment Act placed through a primary government securities dealer
or a financial institution doing business in this state with a defined
maturity date and as further defined in Section 2256.011 of the Act.
I. Interest bearing bank deposits that are guaranteed or insured by the
Federal Deposit Insurance. Corporation (FDIC) and checking accounts
that are fully collateralized at 102% of the ledger balance.
J. Certificates of deposit through the Certificate of Deposit Account
Registry Service (CDARS) program.
3.02 Certificates of Deposit
A. Depository certificates of deposit (CD) may be purchased from any
depository institution located in the State of Texas.
It is not necessary for a Texas depository institution to be on the City's
approved broker/dealer list as CD's are considered depository in
nature. Prior to purchase, however, all agreements with the depository
institution must be completed prior to. the purchase of a .CD from the
depository institution.
B. All CD's, whether purchased from a brokerage firm or a depository
institution require three bids.
C. Amounts purchased over the FDIC limit whether from a depository
institution or brokerage firm must be collateralized.
3.03. Unauthorized Investments
Specifically prohibited investments are:
1. Collateralized mortgage obligations
2. Commercial Paper, excluding Pools which invest in Commercial Paper
3. All swaps including but not limited to even-basis swaps, interest rate
swaps
4. Forwards and futures
5. Options
6. Foreign Exchange
7. Planned amortization classes (PAC)
8. Regular floaters tied to government securities
9. Investments withvarious interest rate caps, floors, and collars
10. Investment pools in which the City would own more than 10% of the
market value of the pool
11. Any other investments that are not on the authorized investment list
3.04 Investments with Required Ratings
Investments with minimum required ratings such as investment pools and
no-load mutual funds do not qualify as authorized investments during the
period the investment does not have the minimum rating. Investment
ratings shall be checked monthly online by an Investment Officer to
ensure that the ratings have not been downgraded. The City shall take all
prudent measures that are consistent with its investment policy to
liquidate investments that do not have the minimum rating.
4.0 INVESTMENT CONTROLS
4.01 Selection of Investment Broker/Dealers
The Investment Officers will maintain a list of financial institutions,
primary broker/dealers, and local government investment pools
authorized by the City Council to provide investment services to the City.
Annually, the City Council will approve the list of financial institutions and
broker/dealers authorized to conduct business with the City. Investment
Officers shall not conduct business with any firm not approved by City
Council, except for the purchase of CD's from Texas depository
institutions.
All financial institutions and broker/dealers who desire to become qualified
bidders for investment services must fill out an application and return it
to the City by the stated day and time. After review of all applicants, a
list of selected financial institutions and broker/dealers will beprepared
by the Investment Officers and reviewed by the Investment Committee.
The following may be required with the application: most recent audited
financial statement, list of local government clients, and statements of
qualifications. Additions to the approved broker/dealer list will be made at
,a minimum bi-annually.
Criteria used in the selection of the authorized broker/dealers will include,
but are not limited to material litigation against the firm, regulatory status
of the dealer, completed packet, references from local government clients,
background and expertise in investment of public funds.
Up to ten firms shall be selected to appear on the City's approved list. If,
after a firm is selected, they no longer qualify to appear on the City's
approved dealer list, or provide services inconsistent with acceptable
levels, the Investment Officers may recommend City Council to remove
the firm from the approved list and replace it with the next qualified
candidate based on the previous Request for Investment Services ranking.
Should an approved bank merge with or be acquired by another bank
while on the City's approved list, the new bankmust agree to meet the
same collateralization and certification requirements, or the bank shall be
removed from the approved list.
4.02 Certification
A written copy of this Investment Policy shall be presented to any firm
seeking to engage in a financial transaction with the City. The authorized
representative of the firm shall execute a written instrument substantially
in the form of Attachment A of this Policy and to the effect that the
representative has:
1. received and thoroughly reviewed the investment policy, of the City;
and
2. acknowledged that the organization has implemented reasonable
procedures and controls in effort to preclude investment transactions
that are not authorized by the City's Investment Policy except to the
extent that the authorization is dependent on an analysis of the
makeup of the City's entire portfolioor requires interpretation of
subjective investment standards.
The Investment Officer(s) may not transact business with any firm that
has not executed and returned this certification. (2256.005(1)).
The City may contract with 'a registered investment advisor for the
management of the City's portfolio. The advisor shall review the Policy
and execute all transactions in accordance with the provisions and controls
of the Policy.
4.03 Delivery, vs. Payment Settlement
It shall be the policy of the City that all securities shall be purchased on a
"Delivery vs. Payment" (DVP) basis, except for investment pools and
mutual funds. By so doing, City funds are not released until the City or
its approved custodian has received the securities purchased or pledged.
4.04 Internal Control and Annual Audit
The Director of Finance or designee shall establish 'a system of internal
controls. The controls shall be designed to prevent losses of public funds
arising from fraud, employee error, misrepresentation of third parties, or
imprudent actions by employees or Investment Officers of the City.
Controls and managerial emphasis deemed most important include the
following:
Imperative Controls:
A. Safekeeping receipts and record management
B. Documentation of investment bidding
C. Written confirmations
D. Reconciliation and comparisons of security receipts with
investments and bank records
E. Compliance with investment policies
F. Accurate and timely reporting
G. Adequate training and development of Investment Officers
Controls Where Practical
A. Control of collusion
B. Segregation of duties
C. Clear delegation of authority
D. Staying informed about market conditions, changes and trends
that require adjustments in investment strategies.
The City, in conjunction with its annual financial audit, shall perform a
compliance audit of management controls on investments and adherence
to the City's established investment policies. This annual audit shall be
performed by an external auditor and will include formal review of the
quarterly reports.
4.05 Standard of Care
Investments shall be made with judgment and care, under prevailing
circumstances, that a person of prudence, discretion, and intelligence
would exercise in the management of the person's own affairs, not for
speculation, but for investment, considering the probable safety of capital
and the probable income to be derived.
In determining whether an 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 over which the officer had responsibility
rather than a consideration as to the prudence of a single investment;
and
2. whether the investment decision was consistent with the City's
Investment Policy.
The Director of Finance and the Investment Officers are not personally
responsible for changes in the market.
4.06 Competitive Bidding
All purchases of investments will be placed after receiving competitive
quotes from at least three financial institutions, broker/dealers,
investment pools or any combination thereof. Quotes will be accepted
either written or electronically, or a combination thereof. An exception to
this rule may be made when time limitations preclude the bidding process.
The investment will be made with the broker/dealer offering the greatest
return and quality to the City. If three bids/offers are solicited but three
responses are not received within the time frame specified in the
solicitation of the bid/offer, the Investment Officer may act based on the
responses received as long as the solicitation of and failure to receive the
bids/offers is documented. Any investments purchased must have the
signature of at least two Investment Officers, when both are present.
4.07 Portfolio Diversification
The City will diversify its investments by security type, institution, and
broker/dealer. Requests for bids/offers from broker/dealers shall rotate .
among approved broker/dealers to ensure that the same brokers are not
solicited for every bid/offer request, and to ensure competition among
broker/dealers.
With the exception of U.S Treasury Securities and interest bearing
checking accounts that are fully collateralized, no more than 75% of the
City's total investment portfolio will be invested in a single security type.
If the City elects to participate in more than one investment pool, the total
percent invested in all pools shall not exceed the maximum percent
allowed.
Diversification requirements are as follows:
Investment Type Maximum Investment %
Repurchase Agreements Up to 50%
Certificates of Deposit** Up to 50%
US Treasury Bills/Notes Up to 100%
Other US Government Securities Up to 50%
Authorized Investment Pools Up to 75% in total
CDARS Program Up to 25%
No-Load MM Mutual Funds Up to 50%
No-Load Mutual Funds Per PFIA
Sweep Accounts/DDA*** Up to 100%
** FDIC coverage or fully collateralized
*** Fully collateralized at 102% of value
4.08 Electronic Funds Transfer
The City may use electronic means to transfer or invest all funds collected
or controlled by the City.
4.09 Selling Of Securities Before Maturity
While it is the City's intent to hold securities to maturity to ensure safety
of principal, if the City needs to sell securities in order to meet
disbursement needs or to take advantage of interest rates, the City
Manager and the Director of Finance must both approve the sale of the
security.
5.0 Arbitrage
Arbitrage rebate provisions require that the City compute earnings on
investments from each issue of bonds on an annual basis to determine if
a rebate to the IRS is required. The City is required to perform specific
calculations relative to the actual yield earned on the investment of the
funds and the yield that could have been earned if the funds had been
invested at a rate equal to the yield on the bonds sold by the City. The
regulations require extreme precisionin the monitoring and recording
facets of the investments as a whole, and particularly as it relates to yields
and computations to insure compliance. Failure to comply can dictate that
the bonds become taxable, retroactively from the date of issuance, or
subject the City to severe penalties.
The City's investment position as it relates to arbitrage regulations is as
follows: Investments on bond proceeds will be made with safety of
principal and liquidity in mind, but with a competitive rate of return. When
project timing and cash flows allow, bond proceeds may be invested in
instruments allowed under Section 3.0, if the investment can be
purchased solely with the individual bond proceeds, and not commingled
with operating funds or multiple issues. All investments purchased with
bond funds shall be documented clearly and reported to the City's
arbitrage consultant for tracking and review. Arbitrage rebate calculations.
will be performed annually on all debt issues and funds set aside annually
for any positive arbitrage. Arbitrage will be rebated to the IRS, as
necessary.
6.0 Investment Reporting
The Investment Officers shall report to City Council on no less than a
quarterly basis in accordance with the,Act (2256.023). The report shall
include a detailed listing of all purchases, sales, and payments and a
description of each security held as well as management summary
information.
The report must be prepared and signed by all Investment Officers and
contain a statement of compliance with regard to the City's Investment
' Policy and the Act (2256.023).
Market prices used to determine market value in the investment reports
shall be obtained from an independent source.
7.0 INVESTMENT COLLATERAL AND SAFEKEEPING
7.01 Collateral
The Investment Officer(s) or Investment Advisor shall ensure that all City
funds in time and demand deposits, certificates of deposits and/or
repurchase agreements are insured or collateralized consistent with the
Public Funds Collateral Act (Texas Government Code 2257) and federal
law as well as the then current bank depository contract. The City chooses
to accept collateral based on the list of investments authorized under the
Public Funds Investment Act. The right of collateral substitution is granted
with the approval of the Director or Assistant Director. of Finance. The
Director or Assistant Director of Finance may approve and release pledged
collateral. The City shall request additional collateral in the event
Investment Officer(s) deems that deposits or investments are not
sufficiently protected by the pledged collateral.
Collateral will equal 102% of the ledger balance of time and demand
deposits, plus principal and accrued interest on certificates of deposit, and
repurchase agreements and be held by an independent party outside the
bank's or counter-parties' holding company. Pledged collateral will be
evidenced by original safekeeping receipts, which are held at the Federal
Reserve Bank and readily available to the City. The City's bank and/or
counter-party will be responsible for the monitoring and maintaining of
margin levels at all times.
7.02 Safekeeping
All City securities shall be held in independent safekeeping by the City,
the City's depository. bank or a City approved custodian in a third party
financial institution. All safekeeping will be evidenced by original
safekeeping receipts. Safekeeping receipts shall be maintained by the
Investment Officer(s), and shall be available for review upon request.
8.0 INVESTMENT POLICY ADOPTION
The City's Investment Policy shall be adopted by resolution annually by
the City Council.. The policy shall be reviewed annually by the Investment
Committee. Any modifications made thereto must be approved by the City
Council 'and documented by formal action.
GLOSSARY
Accrued Interest: Term designating the interest due on a bond or other fixed
income security that must be paid by the buyer of a security to its seller.
Agency: A security, almost always debt, issued by a corporation sponsored by
the U.S. Government. Examples: bonds of the Tennessee Valley Authority.
Agency Notes: One to two year obligations offered ata discount from par by
U.S. Government Agencies, such as the Federal National Mortgage Association,
the Federal Home Administration, and the Farm Credit System.
Bid: The price offered by a buyer of securities when you are selling securities,
you ask for a bid.
Broker: A broker brings buyers and sellers together for a commission.
Certificate of Deposit (CD): A time deposit with a specific maturity evidenced
by a certificate:
Collateral: Evidence of deposit or other property, which a borrower pledges to
secure repayment of a loan. Also refers to securities pledged by a bank to
secure deposits of public monies.
0
Component Unit: Based on generally accepted account principles, the
Pearland Economic Development Corporation, TIRZ #2, and the Development
Authority of Pearland are considered component units of the City, and as such
are included in the City's annual financial reports.
Confirmation: Commonly called a "confirm." The confirmation is a notice to a
customer that payment is due on a purchase, or that net proceeds are available
on a sale of securities. Federal securities law requires that a confirmation be
sent promptly following each purchase and sale.
Conflict of Interest: Term used to describe a financial situation where a
person prejudicially places personal affairs before those of constituents that the
person is supposed to serve or represent.
Coupon: (a) The annual rate of interest that a bond's issuer promises to pay
the bondholder on the bond's face value. (b) A certificate attached to a bond
evidencing interest due on a payment date.
Current Maturity: Used to designate the remaining lifetime of an already
outstanding bond.
Dealer: A dealer, as opposed to a broker, acts as a principal in all transactions,
buying and selling for his own account.
Delivery versus Payment: Delivery of securities first, with an exchange of
money for the securities after delivery.
Derivatives: (a) Financial instruments whose return profile is linked to, or
derived from, the movement of one or more underlying indices or securities,
and may include a leveraging factor, or (2) financial contracts based upon
notional amounts whose value is derived from an underlying index or security.
Discount: The difference between the cost price of a security and its maturity
value when quoted at lower than face value. A security selling below original
offering price shortly after sale also is considered to be at a discount.
Discount Securities:. Non-interest bearing money market instruments that are
issued at a discount and redeemed at maturity for full face value. Example:
U.S. Treasury Bills. .
Discount Yield: Measurement of return that computes interest on face value
of security rather than on the dollar amount invested. Used in figuring yield on
U.S. Treasury Bills.
Diversification: Dividing investment funds among a variety of securities ,
offering independent returns.
Equivalent Bond Yield: Used to compare the discount yield on money market
securities to the coupon yield on government bonds.
Face Value: The dollar amount that appears on the face of the bond certificate.
It is the dollar amount the issuer promises to pay to the holder at maturity. Also
called par value.
Federal Credit Agencies: Agencies of the Federal government set up to supply
credit to various classes of institutions and individuals. Examples: S&L's, small
business firms, students, farmers, farm cooperatives.
Federal Deposit Insurance Corporation (FDIC): A federal agency that
insures bank deposits, currently up to $250,000 per depositor.
Federal Funds Rate: The rate of interest at which Fed funds are traded. This
rate is currently pegged by the Federal Reserve through open-market •
operations.
Federal Farm Credit Bank (FFCB): Fiscal agent for the Farm Credit System,
a public government sponsored enterprise (GSE) created in 1916 to lend to
agricultural and rural America. Funds for loans are obtained through the
issuance of Farm Credit Debt Securities.
Federal Home Loan Bank (FHLB): Government sponsored wholesale banks
(currently 12 regional banks), which lend funds and provide correspondent
banking services to member commercial banks, thrift institutions, credit unions,
and insurance companies. The mission of the FHLB is to liquefy the housing
related assets of its members who must purchase stock in their district Bank.
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac):
Public government sponsored enterprise (GSE) created in 1970 to expand the
secondary market for mortgages in the US. Along with other GSEs, Freddie Mac
buys mortgages on the secondary market, pools them, and sells them as a
mortgage-backed security to investors on the open market. This secondary
mortgage market increases the supply of money available for mortgage lending
and increases the money available for new home purchases.
Federal National Mortgage Association (FNMA or Fannie Mae): FNMA is
a federal corporation working under the auspices of the Department of Housing
and Urban Development (HUD). It, is the largest single provider of residential
mortgage funds in the United States. FNMA, is a private stockholder-owned
corporation. The corporation's purchases include a variety of adjustable
mortgages and second loans, in addition to fixed-rate mortgages. FNMA's
securities are also highly liquid and are widely accepted. FNMA assumes and
guarantees that all security holders will receive timely payment of principal and
interest.
Federal Open Market Committee (FOMC): Consists of the seven members
of the Federal Reserve Board and five of the twelve Federal Reserve Bank
Presidents. The Committee periodically meets to set Federal Reserve guidelines
regarding purchases and sales of Government Securities in the open market as
a means of influencing the volume of bank credit and money.
Federal Reserve System: The central bank of the United States created by
Congress and consisting of a seven member Board of Governors in Washington
D.C.; 12 regional banks and about 5,700 commercial banks that are members
of the system.
Financial Assets: Cash and other assets that, in the normal course of
operations, will become cash.
Government National Mortgage Association (GNMA or Ginnie Mae): A
fixed income security that represents an undivided interest in a pool of federally
insured mortgages put together by GNMA. GNMA securities are commonly
backed by FHA or VA mortgages.
Liquidity: A liquid assets is one that can be converted easily and rapidly into
cash without a substantial loss of value. In the money market, a security is said
to be liquid if the spread between bid and asked prices is narrow and reasonable
sizes can be done at those quotes.
Local Government Investment Pool (LGIP): An entity created under the
public fundsinvestment act to invest public funds jointly on behalf of the entities
that participate in the pool and whose investment objectives in order of priority
are 1) preservation and safety of principal, 2) liquidity, and 3) yield.
Market Value: The price at which a security is trading and could presumably
be purchased or sold.
Master Repurchase Agreement: A written contract covering all future
transactions between the parties to repurchase-reverse repurchase agreements
that establishes each party's rights in the transactions.
Maturity: The date upon which the principal or stated value of an investment
becomes due and payable.
Money Market: The market in which short-term debt instruments (bills,
commercial paper, etc.) with a one-year maturity or less, and often 30-days or
less, are issued and traded.
Offer: The price asked by a seller of securities.
Overnight Repo: A repurchase agreement with expiration set for the following
business day.
Par Value: The dollar amount that appears on the face of the bond certificate.
It is the dollar amount the issuer promises to pay to the holder at maturity.
Also, called face value.
Portfolio: Collection of securities held by an investor.
Primary Dealer: A designation given by the Federal Reserve System to
commercial banks or broker/dealers who meet specific criteria, including capital
requirements and participation in Treasury auctions.
Principal: The face amount (par value) of a debt security.
Rate of Return: The yield obtainable on a security based on its purchase price
or its current market price. For bonds and notes, it is the coupon rate divided
by the price.
Repurchase Agreement (REPO): A holder of securities sells these securities
to an investor with an agreement to repurchase them at a fixed price on a fixed
date.
Safekeeping: A services to customers rendered by banks for a fee whereby
securities and valuables of all types and descriptions are held in the bank's vault
for protection.
Secondary Market: A market made for the purchase and sale of outstanding
issues following the initial distribution.
Securities and Exchange Commission: Agency created by Congress to
protect investors in security related transactions by administering securities
legislation.
Sell: To transfer ownership for a monetary consideration. The term is used in
conjunction with the disposition of stocks, bonds, or other financial assets.
Structured Notes: Notes issued by Government Sponsored Enterprises (FFCB,
FHLB, FHLMC, FNMA, SLMA, etc.) and Corporations that have imbedded options
(e.g.: call features, step-up coupons, floating rate coupons, derivative based
returns) into their debt structure. Their market performance is impacted by the
fluctuation of interest rates, the volatility of the imbedded options and shifts in
the shape of the yield curve.
Treasury Bills: A non-interest bearing discount security issued by the U.S.
Treasury to finance the national debt. Most bills are issued to mature in three
months, six months, or one year.
Treasury Bonds: Long-term coupon bearing U.S. Treasury Securities issued
as direct obligations of the U. S. Government and having initial maturities of
more than 10 years.
Treasury Notes: Medium-term coupon-bearing U.S. Treasury securities issued
as direct obligations of the U.S. Government and having initial maturities from
two to ten years.
Uniform Net Capital Rule: Securities and Exchange Commission requirement
that member firms as well as nonmember broker-dealers in securities maintain
a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net
capital rule and net capital ratio.
ATTACHMENT A
CERTIFICATION BY BUSINESS ORGANIZATION
This certification is executed on behalf of City of Pearland (the Investor) and
(the Business Organization) pursuant to
the Public Funds Investment Act, Chapter 2256, Texas 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 into 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
imprudent investment transactions conducted between the Business
Organization and the Investor that are not authorized by the entity's
investment policy, except to the extent that this authorization is
dependent on an analysis of the makeup of the entity's entire portfolio or
required an interpretation of subjective investment standards.
4. The Business Organization will rely upon instructions from only the
persons authorized on behalf of the City of Pearland as stated in the
Investment Policy and City's resolution designating investment officers.
Qualified Representative of the Business Organization
Signature:
Name:
Title:
Date:
ATTACHMENT B
APPROVED/AUTHORIZED LIST OF BROKER/DEALERS
First Southwest Company
Wells Fargo Securities
CastleOak Securities
SAMCO Securities
Oppenheimer & Co.
Cantor Fitzgerald & Co.
National Alliance Securites
Ladenburg Thalmann
FTN Financial
Certificates of deposit may be purchased from Texas depository institutions, which are not on the
approved broker/list, as they are considered depository in nature. Certificates of deposit purchased
from brokerage firms, however, must be on the approved broker/dealer list as they fall under the
Public Funds Investment Act. All deposits over the FDIC limit must be collateralized.
Exhibit B
CITY OF PEARLAND
INVESTMENT STRATEGY
The City of Pearland shall adopt by resolution a separate written
investment strategy for each of the funds under its control. For
Investment purposes, the City shall use a "Pooled Fund Group" which
means that all funds under the City's control shall be treated as one
fund.
INVESTMENT STRATEGY
I. Suitability
Investments are to be purchased based on the financial requirements
of the City. The City of Pearland shall strive to maintain the level of
investment of all fund balances, reserves and bond funds as close as
possible to 100%. Any investment eligible in the Investment Policy is
suitable for all City funds, including component units.
IL Safety of Principal
Investments of the City shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio. All
investments shall be of high quality with no perceived default risk. It
is the City's full intent, at the time of purchase, to hold all investments
until maturity in order to ensure the return of all invested principal.
III. Liquidity
The City's investment portfolio will remain sufficiently liquid to enable
the City to meet all operating requirements that might be reasonably
anticipated. Liquidity shall be achieved by matching investment
maturities with budgetary and economic cycles, and forecasted cash
flow requirements. A portion of the portfolio will be maintained in
liquid short-term securities that can be converted to cash if necessary
to meet disbursement requirements. Investment pools and money
market mutual funds provide daily liquidity and may be utilized as a
competitive yield alternative to fixed maturity investments.
IV. Marketability
The City shall invest in securities that, if the need arises, can be
liquidated before maturity. Investments will never be prematurely
Page 1 of 2
sold at less than book value plus accrued interest, without the
approval of the Director of Finance and the City Manager.
V. Diversification
The City will diversify its investments by security type and by
broker/dealer. With the exception of U.S. Treasury securities and fully
collateralized demand deposit accounts, no more than 75% of the
City's total investment portfolio will be invested in a single security
type.
VI. Yield
The investment portfolio shall obtain a competitive rate of return
throughout budgetary and economic cycles, commensurate with the
investment risk constraints and the cash flow needs. The City shall
attempt to obtain an acceptable return provided that the requirements
of safety and liquidity are first met. The yield of the one-year U.S.
Treasury Bill shall be a yield objective or benchmark as well as
benchmarked against an agency note with maturity, which
approximates the weighted average maturity of the portfolio.
Page 2 of 2
ATTACHMENT B
APPROVED/AUTHORIZED LIST OF BROKER/DEALERS
Comerica Securities
Duncan Williams
First Southwest Company
Wells Fargo Securities
CastleOak Securities
Gilford Securities
SAMCO Securities
Oppenheimer & Co.
Certificates of deposit may be purchased from Texas depository institutions, which are not on the
approved broker/list, as they are considered depository in nature. Certificates of deposit purchased
from brokerage firms, however, must be on the approved broker/dealer list as they fall under the
Public Funds Investment Act. All deposits over the FDIC limit must be collateralized.
RES'PONSIVE ` » • RESULTS-ORIENTED TRUST-BUILDERS. ACCOUNTABLE
pF City Secretary's Office
(9. ti tIl 3519 Liberty Drive
Pearland, Texas 77581
A\ 6 Tel: 281.652.1653
"A`: s Fax: 281.652.1719
sr pearlandtx.gov
May 8, 2018
Betsy Hosko
209 Gothic Court Suite 109
Franklin, TN 37067
Ref: Public Information Request
Dear Ms. Hosko:
On April 30, 2018 you submitted a written request for public information subject to the
Public Information Act:
"See Attached"
The City has concluded its search for any existing documents to fill your request. "The
requested documents do not exist," per Kim Yates Receptionist, Juan Chavez Assistant
Manager, Darlene Outlaw Office Assistant and Laurie Rodriguez Pretreatment
Coordinator. However, if you feel there are documents that are responsive, a written
inquiry should be submitted to the City Secretary's Office describing in further detail any
documents you feel exist.
If I can be of any further assistance, do not hesitate to contact me at (281) 652-1653.
Respectfully,
Daisy Mata
Records Coordinator