Loading...
R96-19 04-08-96 RESOLUTION NO. R96-19 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, ADOPTING AN INVESTMENT POLICY IN ACCORDANCE WITH CHAPTER 2256 OF THE GOVERNMENT CODE ("PUBLIC FUNDS INVESTMENT ACT") FOR PURPOSES OF INVESTING CITY FUNDS IN STATE AUTHORIZED SECURITIES. WHEREAS, the legislature of the State of Texas amended Chapter 2256 of the Government Code ("Public Funds Investment Act") which requires the City to adopt an investment policy by which public funds may be invested in a safe and prudent manner to ensure the highest rate of return while limiting the risk of loss; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That the City of Pearland Investment Policy, attached hereto as Exhibit "A" and made a part hereof for all purposes, is hereby adopted as the investment policy of the City of Pearland in accordance with the Public Funds Investment Act, as amended. PASSED, APPROVED, AND ADOPTED this ~ day of  , A.D., 1996. ATTEST: Y~~ D~A C. BENIT'~ AP~OVED AS TO FORM: TOM REID MAYOR City of Pearland Investment Policy Each year the City adopts a budget that includes forecasted revenues and estimated expenditures for the year. This document is static and does not reflect the dynamic interrelationship that exists when time is introduced into the equation. Timin~ of cash receipts and cash dispersements ~enerally create a favorable cash position for the City since receipts of certain revenues occur in the be~innin~ of the year and are applied to expenses occurrin~ rateably throughout the year. Also cash raised through the sellin~ of debt instruments to finance capital projects add to these balances since the completion of the projects typically la~ several months behind the receipt of cash. These cash balances represent opportunities for additional earnings through investmen~ activities. This policy will identify acceptable risks the! City is willin~ to incur when earnin~ a return by investing the funds under its control. It is prudent action to invest these funds in securities that will yield the highest rate of return while limitin~ our risk of loss to a mar~in that is acceptable. Objective statement Investment securities eligible for consideration must be backed by the full faith and credit of the United States or the State of Texas. These securities must be of a maturity that matches the cash requirements of the City, and 90% should be less than one year in length. The exception will be funds for capital projects that will be used to fund activities taking more than one year to complete. In this event the securities should have maturity dates that match the cash needs of the capital projects. The Investment Officer and Advisory committee shall only invest in securities that are fully understood and for which associated risk can be readily calculated. Investments shall be made with judgement and care under circumstances then prevailin~ which a person of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considerin~ the probable safety of their capital as well as the probable Page 2 income to be derived. The standard of prudence to be used by the investment official shall be the "prudent person" standard and shall be applied in the context of managing the overall portfolio. Responsibility The City Manager shall appoint an Investment Officer to carry out this policy and perform as portfolio manager on a continuing basis. Should the Investment Officer have a personal business relationship with an entity seeking to either sell an investment to the City, or act as the depository bank, he or she shall file a statement disclosin9 that relationship. The officer must similarly reveal any relationships with sellers of investment securities and depository bank officials that fall within the second degree of affinity or consanguinity. An Advisory Committee composed of the City Manager, and both Assistant City Managers will be formed to oversee the actions of the Investment Officer and report their findings to the City Council as needed. In the event a relationship such as the one described above exists, the investment officer shall abstain from participating in the decision, and the committee shall execute the transaction. Reporting requirements Reports The investment officer shall submit written quarterly reports to the Advisory Committee. The report shall contain information about each transaction in the portfolio, as well as the beginning market Value, additions and deletions, and ending market value for each individual security. The report will list securities by fund indicating maturity dates, interest rates, and state compliance with City policy. Audits The Accounting Firm employed by the City to conduct the annual audit of its financial statements shall also comment on the Investment Officers compliance with this policy. Page 3 Portfolio Management The following list represents authorized investment securities under this policy; Obligations of the United States or its agencies and instrumentalities. Direct obligations of the State of Texas or its Agencies Other obligations guaranteed or insured by the State of Texas or the United States. Certificates of deposit issued by State and National banks or Savings and Loan Associations domiciled in the State and insured in full by the Federal Deposit Insurance Corporation. Collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States. A fully collateralized (by obligations described as authorized in this policy) repurchase agreement is an authorized investment if it has a defined termination date, and the collateral securing it is held by a third party selected and approved by the City. The City shall invest its funds in a public funds investment pool if the pool agrees to invest in only those securities described in the Public Funds Investment Act. Additionally, the pool must comply with the reporting as described in that act, and adhere to a (no more than) 180 day weighted average maturity schedule. Prohibited Investments Interest only strips Principal only strips Collaterilized mortgage obligations with a maturity date of greater than 10 years Collateralized mortgage obligations with an inverse floating interest rate Any investment not specifically identified as an "authorized investment" by this policy Collateralization Page 4 Repurchase agreements will be secured by collateral held by a third party, and should consist of securities that would be eligible for inclusion in the portfolio under this policy. The collateral should be equal to 102% of the market value of the purchased repurchase agreement to protect against market fluctuations. When the aggregate value of Certificate of Deposit's held by any one bank exceeds the cap established by the FDIC the remainder should be secured by collateral that would be eligible for purchase by the portfolio under this policyl Safekeeping All instruments purchased by the City shall be held by a third party in Safekeeping. This Safekeeping shall be done by an institution designated as primary agent and shall be conducted on a delivery versus payment basis. The primary agent shall furnish the City with a receipt listing the.specific instrument, rate, maturity, market value and other pertinent information. Delivery vs Payment Transactions in the portfolio shall be by transfer of funds through the automated clearing house. Each broker the City selects will be established as a vendor with the depository bank and funds will only be released when the purchased security is delivered and the depository bank has our faxed letter of authorization. Bidding The Investment Officer shall solicit bids either orally, written, electronically, or any of these methods in combination for the selection of investment securities. At least three bids shall be ~olicited to a~ure a competitive rate of return for the securities purchased. Page 5 Maturities Requirements for liquidity will be the primary factor driving the length of maturity of securities purchased for the portfolio. Those funds identified for operations, and typically have an operating cycle of less than one year, such as General Fund, Water and Sewer Funds, and Pearland Economic Development Corporation shall invest primarily in securities with a maturity of less than one year. Funds in a capital account that have a operating cycle covering more than one year may use securities that have a maturity of longer than one year. In any case maturities must be tied to cash requirements. Diversification Achieving the lowest risk factor for the portfolio requires investing in more than one type of security in order to ameliorate the risk of a decline in market value in a particular security class. This strategy should prevent an adverse effect on the over all value of the City's portfolio in the event of such an occurrence. So in addition to diversification of maturities the investments shall be diversified as to types as well. Selection of Brokers To carry out this policy the City will use the depository bank chosen by the City Council, a qualified firm for safekeeping, and Investment Brokers to assist in purchasing securities. Brokers shall be primary brokers, registered with the Securities and Exchange Commission of the United States, the National Association of Security Dealers, and the State of Texas Securities Board. Investment firms will be invited to complete the City's questionnaire to be used in the evaluation of firms in the process of broker selection. At least three firms should be qualified as brokers to be used for the purchase of securities. The firms selected must provide a written statement certifying Page 6 that they have received and thoroughly understand the City of Pearland's investment policy and have implemented reasonable procedures and controls in an effort to preclude imprudent or non-compliant investment activities arising from investment transactions. CITY OF PEARLAND, TEXAS Broker/Dealer Request for Information To be considered for a designation of Authorized Financial Broker/Dealer for the City of Pearland please respond to the items below: Provide the information requested below to describe your organization: Name of Organization: Address (National Headquarters): National Headquarters Telephone Number: National Headquarters Fax Number: Local Telephone Number: Local Fax Number: Primary Representative/Partner in Charge: o Do you have a current financial statement with auditor's opinion thereon available? If yes, please furnish. What was your capital position as of the last day of the previous month? Is your organization a primary dealer in U.S. Government Securities? Broker/Dealer Questionaire Page 2 Does your organization allow the client to select the third party custodian, if applicable? Does your organization have written policies/procedures outlining methods and standards of operation? If so, please provide. 6. Firm licenses and registrations: What reports, transactions, confirmations, and paper trail will we receive? 8. Do you participate in the SPIC Insurance program?