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R2002-0136 09-16-02 RESOLUTION NO. R2002-136 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS, ADOPTING AN AMENDED 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 22,56 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; and WHEREAS, City Council finds that said policy should be amended pursuant to recommendations made by the City's auditors; now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PEARLAND, TEXAS: Section 1. That the City of Pearland's Amended Investment Policy, attached hereto as Exhibit "A" and made a part hereof for all purposes, is hereby adopted as the invest- ment policy of the City of Pearland in accordance with the Public Funds Investment Act, as amended. PASSED, APPROVED, AND ADOPTED this A.D., 2002. ATTEST: ¥0 16 day of September TOM REID MAYOR RESOLUTION NO. R2002-136 APPROVED AS TO FORM: DARRIN M. COKER- - ' CITY ATTORNEY INVESTMENT POLICY CITY OF PEARLAND, TEXAS Adopted Septem~,er 16, 2002 City of Pearland Investment,Policy - August 2002 TABLE OF CONTENTS 1.0 INVESTMENT AUTHORITY AND SCOPE OF POLICY 1.01'Purpose 1.02 Scope of Policy 1.03 Delegation of Responsibility 1.04 Investment Committee 2.0 INVESTMENT OBJECTIVES 2.01 Objective 2.02 Safety of Principal 2.03 Liquidity / 2.04Diversification 2.05 Yield 2.06 Maturity 2.07 Quality and Capability of Investment Managemem 2.08 Investment Strategy AUTllORIZED INVESTMENT 3.01 Authorized Investments 3.02 Unauthorized Investments 4.0 INVESTMENT CONTROLS 4.01 Financial Intermediaries 4.02 Delivery vs. Paymem 4.03 Audit Control 4.04 Standard of Care 4.os 5.0 INVESTMENT REPORTING 5.0 Quarterly Reporting 6.0 INVESTMENT COLLATERAL AND SAFEKEEPING 6.01 Collateral or Ims,.,..mace 6.02 Safekeeping of City Securities ?,0 INVgSTM NT POLICY ATTACHMENT A - Broker/Dealer Certification ATTACHMENT B - Public Funds Investment Act (Texas Government Code 2256) City of Pearland Investmem Policy - August 2002 CITY OF PEARLAND INVESTMENT POLICY 1.0 1.01 1.02 1.03 1.04 INVESTMENT AUTHORITY AND SCOPE OF POLICY Purpose It is the policy of the City of Pearl~ (the "City") to invest public funds in a manner which will provide the highest reasonable market return with the maximum security while meeting the daily cash flow don.ands of the City and gonforming to all stat~ ~ local statutes governing the investment of public funds'. This pohcy satisfies the requirement of the Public Funds Investment Act (the "Act"), Texas Government Code 2256 which requires the creation and annual adoption of a written investment policy. The City Council .qhall no less than annually review and adopt the Investment Policy and its incorporated strategies. Any changes to the Policy will be detailed in the adopting resolution. Scope of Policy This Investment Policy shall apply to all the fi~n_d_s and investments of the City as well as any other funds held in custody by the City, unless expressly prohibited by law or so designated by City Delegation of Investment Authority The Director of Finance and Assip~nt Finance Director are hereby designated as Investment Officers for the City. The Director of Finance may designate, in writing, individuals who may assist in the Investment Officer's absence to deposit, withdraw, invest, transfer or manage in any other manner the funds of the City. Otherwise no individual has the authority to perform such duties. The City may designate a registered investment advisor to invest for the City and act as an additional Investment Officer. The Investment Officers shall be responsible for all transactions undertaken and .qhail establish a system of controls to regulate the activities of subordinate officials. Any personal or business relationship between investment officers and a financial entity seeking to do business with the City must be disclosed to the Texas Ethics Commission and City Council. (2256.005 (I)). 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, 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 anmmily roview the list of brokers authorized to engage in investment transactions with the City. 2.0 2.01 INVESTMENT OBJECTIVES ~ STRATI~CI~r Objective City investments .qhall 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 at~ ~n~ng a __morket rate of r~urn in accordance with its desi~.m~_nted parameters ~__ based on tim City's gash flow requirements and comm~lsurate with the City's investment risk constraints. City of Pearl,and Investment Policy - August 2002 2.02 2.04 2.06 2.07 2.08 Safety of Principal The primary objective of the City's investment program is to ensure the safety of all funds and to avoid speculative investing. The City's investment must be based on a cash flow analysis which provides the liquidity necessary to pay all expected and unexpected obligations 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. Yield It will be the objective of the City to earn a reasonable market yield within the parameters imposed by its safety and liquidity objectives, investment strategies, and state and federal law. The yield and level of risk for the portfolio will be benchnmrked agsln~ the yield of the one-year Treasury obligation during the comparable period. 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 three (3) years. The maximum dollar weighted average maturity of the overall portfolio shall be one year. Quality and Capability of Investment Management The City shall provide investment training as required by the ACt through courses and seminars offered by professional organiTations and associations and approved by the City. The Investment Officers shall receive not less than 10 hours of investment training every 2 years. (2256.008). Investment Strategy In accordance with the Act (2256.005(d)) a written investment strategy ~hall be developed for each portfolio.under the City's control. The City commingles its ~ for investlnelR ~. The overall stmteg~ of thc commingled portfolio slm_li incorporate the objectives of the fimds then represented in the portfolio. In accordance with the City's objectives, the City shnl! invest primarily in high credit quality securities and liquid investment alternatives to assure safety and liquidity. The City will u6117¢ cash flow analysis to identify ~ llabililie$ for longer term The structure and rearmament of the overall portfolio will address the varying needs, goals and objectives of each fund. Investment strategies for ope~__'ng funds are designed to asna-e that anticipated ~sh flows are matched with adequate liquidity. This may be accomplished by purchasing high quality, short-to-medium term securities that will complement each other in a laddatat maim/fy sWactute and assure the nmrkelability of those/nvestments should liqukh'ty needs arise. Investments are to be chosen in a m~nner that promotes ~ by r~__?ket sector, Investment strategies for Debt Service Funds will prim~a_61y assure investment liquidity adequate to cover the debt service obli~__~on for each consecutive debt service payment Investments sha!i progressively fund each succeeding debt service. Effective c-ash management is recogni?exl as essential to good fiscal managcmellt. 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 maintM~l a comprehensive cash management program that includes collection of accounts receivable, prudent inves/ment of its City of Pcarland Investment Policy - August 2002 available cash, disbursement of payments in accordance with invoice terms and the management of banking services. 3.0 3.01 3.02 AUTHORIZED INVESTMENTS 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. Obligations of the United States or its agencies and instrumentalities, excluding mortgage backed securities, with a stated maturity not to exceed three years. Collat~alfliz~ certificates of deposit of banks or savings banks doing business in Texas, collate~liTed to 102%, with a stated maturity not to exceed one year, and 1. guaranteed or insured by the Federal Deposit Insurance Corporation or its successov, or 2. 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 Am Constant dollar local government investment pools as defined by'the Act (2256.016 and 2256.019) and approved by City Council resolution. D. SEC registered money market mutual funds. 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 maturity date not to exceed one year. Flex repurchase agt~m~s used for bond funds may extend beyond one year but be limited by the expenditure plan of the bond funds. Unauthorized Investments Specifically prohibited investments are collateralized mortgage obligations as defined by the Act (2256.009Co)). 4.0 INVESTMENT CONTROLS 4.01 Financial Intermediaries 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 Aaaclunent 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 au analysis of the makeup of the City's entire portfolio or requires interpretation of subjective investment standards.. The investment officer may not transact business with any firm that ha~ not executed and rean~ed this certification~ (2256.005(1). The City will solicit proposals for bank depository services at least every five years. City of Pearland Investment Policy - August 2002 4.02 4.03 4.04 The City may contract with a registered investment advisor for the marm_gement of the City's portfolio. The advisor shall review the Policy and execute ali transactions in accordance with the provisions and controls of the Policy. Delivery vs. Payment Settlement It shall be the policy of the City that all securities .qhall be purchased on a "Delivery vs. Payment" (DVP) basis. By so doing, City funds are not released until the City or its approved custodian has received the securities purchased. Audit Control There will be (1) an annual compliance audit of management controls on investments and the City's adherence to this Investmem Policy as well as (2) an anmJal Igview by the external auditor of quarterly investment reports. (2256.005(m) and 2256.023(d)). Standard of Care Investments shall be made with judgment and care, under prevailing cir¢-m.qtances, 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 baa exercised prudence with respect to an investment decision, the determination nhali 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. Competitive Bidding All investment transactions will made on a competitive basis to assure that the City obtains fair 5.0 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 the Investment Offcers 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 repons shall be obtained from an independent source. 6.0 6.01 INVESTMENT COLLATERAL AND SAFEKEEPING Collateral The Investment Officer or Investment Advisor shall ensure that all City funds in time and demand deposits and/or repurchase agreements are insured or coHateraliT~xl consistent with the Public Funds Collateral Act (Texas Government Code 2257) and federal law as well as the then current bank depository contract. The authorized insurance or collateral types are. restricted to: 1. FDIC insurance coverage or its successor; or City of Pear[and Investment Policy - August 2002 6.02 Obligations of the United States, its agencies or mentalities inchuting mortgage. backed securities which pass the b~nk test. (2257,021) Collateral will equal 102% of time and dem~d deposits 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, The ~nk and/or coumer-party will be responsible for the monitoring and maimaining cfi margin levels at all times. 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. '/.0 INVESTMENT POLICY ADOPTION The City's investment policy shall be adopted ~nn~lly by the City Council A written resolution approving that review and changes to the policy from the review will be passed and recorded by the Council. City of Pearland Investment Policy - August 2002 ATTACHMENT A CERTIFICATION FORM As required by Texas Government Code 2256.005 (k) City of Pearland, Texas (the "City") (the "Firm") I, as an authorized representative of this Firm, do hereby certify that I have received and thoroughly reviewed the Investment Policy of the City of Pearland. I acknowledge that the Firm, has implemented reasonable internal procedures and controls in an effort to preclude investment transactions conducted between the City and the Firm 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. Signature Name Title Date City of Pearland Investment Policy - August 2002 Investment Policy Revisions 2002 There have been a number of major changes made to the Investment Policy of the City of Pearland. These changes were designed to bring the Policy into complete compliance with the state governing law, to assure the safety of public funds, to improve readability, and to add market sectors not previously utilized. The major changes are summarized below. Investment Authority and Scope of Policy The new policy statement stresses the importance of safety for the portfolio and emphasizes a reasonable yield instead of a maximum yield goal. It also ties the portfolio management to the cash flow of funds in the City. Designation of funds and authority over those funds is assigned to the City Council instead of the Finance Director. The Assistant Finance Director position is designated an investment officer along with the Finance Director and is added as a member to the Investment Committee. Investment Objectives and Strategy The overall objective has been broadened from compliance with statutes to attainment of a market rate of return in accordance with parameters and cash flow requirements. The one year US Treasury has been designated as the benchmark for the portfolio replacing the 90 day Treasury Bill in order to better reflect the recognized weighted average maturity of the portfolio and the City's cash flow. The Investment Strategy statement has been rewritten for a commingled portfolio but still reflecting the same criteria previously adopted by the Council. The goal of the debt service funds however have been more succinctly defined to always cover the next upcoming debt service payment. Authorized Investments The list of authorized investments has been expanded to include SEC registered and regulated money market mutual funds. These will be used as the sweep vehicle under the new bank contract. The use of flex repurchase agreements has been more clearly defined allowing for longer agreements to conform to use with capital bond funds. Conditions on certificates of deposits have been expanded to include collateralization requirements. Investment Controls Use of an investment advisor has been added to the Policy and the requirement for competitive bidding has been added. Collateral requirements have been defined for safety and clarity. Investment Policy Adoption A new section has been added noting the need for annual adoption of the Policy by the City Council. • INVESTMENT POLICY CITY OF PEARLAND, TEXAS Revised July 9, 2004 Investment Policy Page of 1 TABLE OF CONTENTS 1.0 INVESTMENT AUTHORITY AND SCOPE OF POLICY 1.01 Purpose 9 1.02_Funds Included �itar e. 0 �1- `'o 1.03 Investment Officer bk-eifir ©4 1.04 Investment Committee 2.0 INVESTMENT OBJECTIVES 2.01 General Statement Gioacc, ut- 2.02 Safety and -Maintenance of-Ade-quats Liquidity 4 j 2.OtDiversificatio n --- c.. 2.04 Yield U 2.05 Maturity 2.06 Quality and Capability of Investment Management 2.07 Investment Strategies 3.0 INVESTMENT TYPES 3.01 Authorized r;QGW 3.02 Prohibited Page 3 3 3 4 4 4 4 4 5 5 6 4.0 INVESTMENT RESPONSIBILITY ANR CONTROL 4.01 Investment Institut-armBefin ed L.S- -�^'"--anik-A- 6 4.02 Qualifications for Approval of-Braker/Dealers 7 4.0Delivery vs. Payment 7 4.043Audit Control 7 4.0 St ndard fe 7 5 5.0 INVESTMENT REPORTING 5.01 Quarterly Reporting 542-Monrteei g 6.0 INVESTMENT COLLATERAL AND SAFEKEEPING 6.01 Collateral of Insurance 6.02 Safekeeping 06 et, - Attachments A -I -through A-6 latitet it Attachment B - -PF7 8 8 8 9 10-15 16 Investment Policy Page of 1 2 1.0 INVESTMENT AUTHORITY AND SCOPE OF POLICY 1.01 Purpose It is the policy of the City of Pearland (the "City") to invest public funds in a manner which will provide the highest reasonable market return with the maximum security while meeting the daily cash flow demands of the City and conforming to all state and local. statutes governing the investment of public funds. The purpose of this policy is to satisfyies the requirements of the laws of the Sate of Texas including, but not limited to, the Local the Texas Government Code Chapter 2256 (the Public Funds Investment Act, the "Act") requrrrng definition creation and adoption of a written formal investment policy. In 1997,.the 75 th Texas Legislature passed House Bill 2799, further amending the Public Investment Act. The City Council shall no less than annually take formal action to stating adopt that -the Investment Policy and its incorporated strategies have -been reviewed. 1.02 Funds Included This policy shall apply to all the financial assets, i.e. monies, of all fundsfunds -and investments of the City of Pearland, Texas, whether currently existing or hereinafter created as well as any other funds held in custody by the Director of FinanceCity, unless expressly prohibited by law. 1.03 Investment Officer The Director of Finance and Assistant Finance Director are is -hereby designated as the Investment Officers for the City of Pearland, Texas. The Investment Officer may invest city funds, under the direction of the City Manager er the Investment Committee, that arc not immediately required to pay obligations of the City. In accordance with statutes, the investment officers will attend approved investment training for a total of ten hours every two years. If the Investme� t Officer h ^Any personal or business relationship with any entity or is related within the second degree by affinity er consanguinity to and .individual seeking to sell an investment to the City, between the investment officer and a financial entity seeking to do business with the City must file a statement disclosing that personal business interest or relationship with must be disclosed to the Texas Ethics Commission and City Council of the City of Pearland. (Reference Government Code 2256 005 (I)). The Director of Finance, i.e. City Treasurer, may designate in writing individuals who may assist in the Investment Officer's absence; to deposit, withdraw, invest, transfer or manage in any other manner the funds of the City. Otherwise no individual has the authority to perfoinn such duties. The City may designate a registered investment advisor to invest for the City and act as an additional Investment Officer, Investment Policy 020i 1 latatt Page of 1 3 1.04 Investment Committee In addition to a City Investment Officer, tThe City of Pearland shall have 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, Director of Finance, and Assistant Director of Finance. The City Manager shall be the Chairman of the Committee. The Investment Committee shall annually review, revise and adopt athe —list of qualified brokers that are authorized to engage in investment transactions with the City of Pearland. 2.0 INVESTMENT OBJECTIVES 2.01 General Statement 1. City investments shall be made in accordance with federal and state laws, this investment policy and ordinances of the City Council of the City of Pearland, Texas. The City's investment portfolio shall be designed with the objective of attaining a market rate of return in accordance with its designated benchmaik 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 and Maintenance of Adequate Liquidity The primary objective of the City's investment program of Pearland is to ensure the safety of principal in all funds and to avoid speculative investing. The City's investment must be based on a cash flow analysis structured in conformance with an asset/liability management plan, which provides fee -the liquidity necessary to pay all expected and unexpected obligations as they become due. 2.03 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. 2.04 Yield 2. It will be the objective of the City to earn a reasonable market yield -the maximum rate of return allowed on its investments within the policies imposed by its safety and liquidity objectives, Investment Policy Page of l 4 investment strategies for each fund, and state and federal law governing investment of public funds. The risk benchmark for the portfolio shall be the yield of the one-year Treasury obligation during the comparable period. 2.05 Maturity The Pportfolio maturities shall be structured primarily to first meet City obligations and secondly to achieve the highest a reasonable return of interest The maximum allowable stated maturity of any individual investment owned by the City of Pearland shall be three (3) years. Foi pooled funds tThe maximum average dollar weighted average maturity allowed of the overall portfolio i-sshall be one year 90 days. 2.06 Quality and Capability of Investment Management The City of Pearland shall provide investment training as required by the pPublic fFunds Investment aAct and periodic training in investments for the City Investment Officer through courses and seminars offered by professional organizations and associations. The Investment Officers and designated individuals shall receive not less than 10 hours of investment training every 2 years approved by the City Council or the Investment Committee. (Reference Government Code Sec. 2256.008). 2.07 Investment Strategies The maximum dollar weighted average maturity of the portfolio will not exceed 180 days, dependent on market conditions, to accomplish these gea-1& In accordance with the Public Funds Investment Act, Section 2256.005(d), a separate written investment strategy shall be developed for each poitfolio.under the of the funds under the City's of Pearland's 5 control. Each investment strategy must describe the investment • • (1)understanding of the suitability of the investment to the financial requirements of the City; (2)preservation and safety of. principal; (3)liquidity; (1)marketability of the investment if the need arises to liquidate the investment before maturity; (5)yield. • Investment Policy Page of 1 5 reviewed by City Council at least annually. The City may commingles its funds for investment purposes. The overall strategy of the commingled portfolio shall incorporate the objectives of the funds then represented in the portfolio. -In accordance with the City's objectives in order of priority as discussed in section 2.07 of this Policy, the City shall invest primarily in high credit quality securities and liquid investment alternatives to assure safety anci liquiditymoney market funds or authorized investment pools. The City will utilize cash flow analysis to identify expected liabilities for longer term investments. The structure and management of the overall portfolio will address the varying needs, goals and objectives of each fund. Investment strategies for operating funds are designed to assure that anticipated cash flows are matched with adequate liquidity. This may be accomplished by purchasing high quality, short -to -medium term securities that will complement each other in a laddered maturity structure and assure the marketability of those investments should liquidity needs arise. Investments are to be chosen in a manner that promotes diversity by market sector, credit and maturity. Investment strategies for Debt Service Fundswill primarily assure investment liquidity adequate to cover the debt service obligation for each consecutive debt service payment. Investments shall progressively fund each succeeding debt service. 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 prop am 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. • because of the common characte the funds. The overall strategy of the commingled portfolio shall incorporate the objectives of the funds then represented in the portfolio. 3.0 INVESTMENT TYPES 3.01 Authorized Investments The • • • • Investment Policy Page of 1 Authorized investments under this policy shall be limited to the instruments listed below as authorized and defined by the Public Funds Investment A.ct. A. de 2256._009(b), °Obligations of the United States or its agencies and instrumentalities are authorized investments excluding mortgage backed securities, with a stated maturity not to exceed three years. B. Collateralized certificates of deposit if issued by of a state or national banks or savings banks domiciled doing business in this state Texas or a savings and loan association domiciled in this state and is, collateralized to 102%, with a stated maturity not to exceed one year, and. 1. guaranteed or insured by the Federal Deposit Insurance Corporation or its successor; 2. secured by obligations of the United State Government that are described by section 2256._009(a) of the Public Funds Investment Act, including mortgage backed securities ' market value of not less than the principal amount of the certificates, but excluding those mortgage backed securities of the nature described by Section 2256.009(b) of the Public Funds Investment Act er• or 3. secured .in any other manner and amount provided by law for deposits of the C. Eligible investment-peelsConstant dollar local government investment pools; as defined by the Public Funds Investment Act, Sec. (2256.016- and 2256.019), if City Council and the Investment Committee by ordinance authorize investment in the particular leeb_ SEC registered money market mutual funds. D E Collateralized prepurchase Aagreements as defined by the Public Funds Investment Act authorized investment that has a defined termination date; is secured by obligations; requires the securities being purchased by the City, to be pled-ged and held • It. ei.. placed through a primary government securities dealer; or a financial institution doing business in this state with a maturity date not to exceed one yearT Hex repurchase agreements u sed for bond funds may extend beyond one year but be limited by the expenditure plan o f the bond funds Investment Policy Page of 1 3.02 Prohibited The City of Pearland's Investment Officer has no authori-ty to use any of the investment instruments that aie not specifically authorized above. Specifically prohibited investments are collateralized mortgage obligations as defined by the Act (2256.009(b)).: 11.01Investment Institutions Defined • 1/4 following institutions of groups consistent with federal and state law and the c-urrent depository bank contract: 1.Depository Bank; :1�1•�T ..,,thatnrn• • • 3.Public funds investment pools; or 4:1. Government securities brokers and dealers. 47024.01 Broker/Dealers In accordance with 2256._005(k), aA written copy of this investment policy shall be presented to any person seeking to tell to the City an authorized investment to engage in a financial transaction with the City. The qualified authorized representative of such a the --business organization seek to sell authorized investment shall execute a written instrument substantially to the effort effect that the qualified 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 Policyimprudent investment activities arising out of investment transactions conducted between the City and the organization except to the extent that the authorization is dependent on an analysis of the makeup of the City's entire portfolio or requires interpretation of subjective investment standards.. 3.aA list of qualified broker/dealers shall be maintained by the Investment Committee and shall include no more than 5eight (8) dealersfirms. 1 Investment Policy Page of 1 8 The investment officer may not buy any securities from a person transact business with any firrn who that has not delivered to the City an instrument in substantially the form provided above according to Section 2256. 005(1) this certification. (2256.005(1).7 4.034.02 Delivery vs. Payment It shall be the policy of the City that all Treasury Bills, Notes and Bonds and Government Agencies' securities shall be purchased using the on a Delivery vs. Payment" (DVP) method basis.through the Federal Reserve System. By so doing, City funds .are not released until the City has received, through the Federal Reserve wire, the securities purchased. 4:044.03 Audit Control In addition, City Council, at a minimum shall have an annual financial audit of all City funds by an independent auditing firm, as well as 'I here will be an annual compliance audit of of management controls on investments and adherence to the entity's established this ilnvestment pPoliciesy along with a review of quarteily reports in accordance with 2256.005(m) and 2256.023(d). 4.054.04 Standard of Care In accordance with Government Code 2256.006, ilnvestments 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. Investment of funds shall be governed b-y the following investment objectives, in order of priority; pieservation and safety of principal; liquidity; and yield. 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, or funds under the City's control, 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 written ilnvestment pPolicy of the City. :-04.0 INVESTMENT REPORTING 5.01 Quarterly Reporting Investment Policy Page of 1 9 The Investment Officers shall report to City Council on no less than a quarterly basis in. acccordance with the Act (2256.023)statistics, listing the type and description of investment in detail, the brokc.i/dealer used for purchase, the yield to maturity, the stated maturity date, and the previous and current market value. In addition, IThe report shall include a detailed listing of all purchases, sales and payments, and description of each security held as well as management summary information. The report must be prepared and signed by the Investment Officers and contain a statement of compliance with regard to the City's anyestment strategy expressed in the City's pPolicy and relevant provision of Chapter 2256 of the Texas Government Code. Market prices used to determine market value in the investment reports shall be obtained from an independent source. 5.02 Menitofing In accordance with Texas Government Code, Sec. 2256.05, the Investment Officer shall develop methods to monitor the market price of investments acquired with public funds. Such methods may include but not be limited, to the use of a third party or pricing in the Wall Street Journal. 6&INVESTMENT COLLATERAL AND SAFEKEEPING 6.01 Collateral or Insurance The Investment Officer shall ensure that all City funds are insured or fully -collateralized Of insured consistent with federal and state law and the then current current bank depository contract in one or more of the following manners: 1. FDIC insurance coverage; 2. obligations of the United States or its agencies and instrumentalities. Collateral will equal 102% of time and demand deposits and he held by an independent party outside the bank's holding company. Pledged collateral will be evidenced by original safekeeping receipts and the bank will be responsible for the monitoring and maintaining of margin levels at all times. 6.02 Safekeeping All purchased City securities shall be held in independent safekeeping by the City, or a City approved account in a third party financial institution, or with the Federal Reserve Bank. 1 Investment Policy Page of 1 10 held in safekeeping by either the City or a City account in a third party financial institution. All pledged securities by the Depository Bank shall be held in safekeeping by the City or a City account in a third party financial institution, or with a Federal Reserve Bank. Investment Policy Page of 1 11 _ATTACHMENT A 1 INVESTMENT STRATEGY GENERAL FUND Taking into account the objectives in eider of priority as discussed in section 2.07 of this policy, the City shall invest its monies in- money market accounts, Texpeel, Lone Star or other authorized investment pools. To the extent that cash flow requirements can be forecasted, the City will. attempt to identify funds that can be invested for periods of greater than 90 days and upon identification of these • • • • • approved investments if the yield exceeds the amount being earned on liquid investments. ATTACHMENT A 2 • • • • • • City shall invest its monies in money market accounts, Texpool, Lone Star or other authorized • • identify funds that can be invested for periods of greater than 90 days and upon identification of these funds will invest in fixed term investments such as certificates ef deposit; Treasury notes or similar appiovecl investments if the yield exceeds the amount being earned on liquid investments. ATTACHMENT A 3 INVLSTMVIENT STRATECY DEBT SERVICE FUND Taking into account the objectives in order of pt-iefity as discussed in section 2.07 of this policy, the City shalt invest its monies in money market accounts, Texpool, Lone Star or other authorized investor . identify funds that can be invested for periods ef greater than 90 days and upon identification of these • • approved investments if the yield exceeds the amount being earned on liquid investments. ATTACHMENT A 4 INVESTMENT STRATEGY CAPITAL PROJECTS FUNDS Taking into account the ob-}ectives inorb of priori-ty as discuss d in section 2.07 of this policy, the City shall invest its monies in money market accounts Texpool, Lone Star or othei authorized • • • • funds will invest in fixed term investments such as certificates of deposit, Treasury notes or similar • res • Investment Policy Page of 1 12 ATTACHMENT A 5 INVESTMENT STRATEGY WATER & SEWER FUND • 0 Q7• -ef *ems policy, the City shall invest its monies in money market accosts, Texpeel, Lone S-tar or other authorized • �.• • ram;,.,;�i • • ».. identify funds that can be invested for .periods of greater than 90 days and upon identification of these funds will invest in fixed term investments such as certificates of depesit; Treasury notes or similar ATTACHMENT A 6 INVESTMENT STRATEGY BOND PROCEEDS FUND • • • • • • kwes-t-4ts oriies in�r'roncy ol, Lone Star of —other authorized investment p•ols. To the extent that cash flow requirements can be forecasted, the City will attempt to identify funds that can be in -vested for periods ef greater than 90 days arid upon identification of these • • • • • s-er • old exceeds the amount being earned on liquid investments. The Bond Economic Development Corporation. Investment Policy Page of 1 13 ATTACHMENT B CERTIFICATION FORM As required by Texas Government Code 2256.005 (k) City of Pearland, Texas (the "City") (the "Firm") I, as a qualified representative of this firm, a business organization seeking to sell an authorized investment to the City do hereby certify that I have received and thoroughly reviewed the Investment Policy of the City. I acknowledge that the Firm, has implemented reasonable internal procedures and controls in an effort to preclude investment transactions conducted between the City and the :Firm 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. I, as qualified representative of , a business organization ,seeking to sell -an au hhei-ized investment te the City of Pearland, Texas, (the "City"), do hereby certify • 1 1 t g 1 <, ,• l the iny st ten ,� «. li ., he City. I acknowledge that , my business organization, has l�R-7[jlli▪ IL.1G 1t.LtiLIIL4 jJt JV ,. .uuLv„ �.1au a. JiSL. vas, iaa •LL viL'JL. �� j Suva• b Signature Name Title Date • • Investment Policy Page of 1 14