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A RESOLUTIC)N �F THE TAX iNCREMENT REiNVESTMENT Z()NE Nf). 2
(TIRZ), A[�OPTING AN AMENDE� INVESTMENT POLICY, INVESTMEN�
STRATEGY AND APPROVED BRC7KERS IN A�CGORDANCE WITH
CHAPTER 2256 OF THE G�UVER�VMENT C+�[3E ("PUBLIC FUNDS
INVESTMENT ACT").
W�f�F��AS, the� Public Funds Inwestment Act codified in Gavernmer�t Code Chap�er
2256 governs local governrr�ent inves#ment; and
WHEREAS, the Public Fur�d Investment Act {Section 2256.005a), as amended,
requires the TIRZ to adopt an Investrr�ent �Policy and Investment Strategy by rule, order,
ardinance or resolution governing the investrr�ent of fur�ds �nder i#s contral; and
WV�4EREAS, the Publdc Fund f�vestment Act (Sectian 2255.Q05e), requires the
go�rerning bo�1y to review and adopt that Investment Poliey anc� Investment Strategy by
rule, order, ordir�ance ar resolution not less than �r�nuafly, recc�rding any c'�anges made
thereta; now, therefore,
BE IT EiESOLVE� BY THE TIRZ BOARD� C7F DIRECTORS.
Section 1. That the TIRZ f�as complEed with the requirements of the Puk�l�c Funds
InvestmentAct and the Investment Policy. The madifiied Investment Policy, Inv�s# Strategy
and appraved Brokers are attached hereto as Exh�bit'°A°, Exhibit "B" and Exhibit "C" and
are hereby adopted effective immediately.
PASSEC►, APPR(�VED, AND ADOPTED this 7��day af June, ,q..D., 2{}10.
-�
NI�EL HARRISON
TIRZ No. 2 CHAIV�MA'�I
ATT�ST: �
,� I��
� �� ; � ,,, �
M�KE PYBURN
TfRZ Np. 2 SE�RETARY
Exhibit "A"
Resol�rtion I�c�. RTf RZ-2010-a7
T�4X INC�EMlENT RE�N'VESTMENT ZONE �IQ. 2
PEARLAND, �EXAS
INV�ESTME�T POLICY
A 1�1 D
�1�+11fE5TMENT STRATEGY
AD�PT�� FEBRUARY 12, 24Q7
Revised February 2Q0�8
Revised Ap►ril Z009
TASLE QF COMTEN�S
1.0 INVESTMENT AI�TH�RITY AIV� SCOPE �F P�LICY
1.01 Purpose
1.OZ PQlicy
1.03 Scop�
1.�4 Delegation of °esponsibility
1.05 Ethics 8� Cor�flict of Interest
1.06 Investment Committee
2.0 �NVESTMENT �BJECTIVES
2.01 Obyeetive
2.�2 Safe�y �f Principal
2.03 Liquidity
2.a� I�iversification
2.05 Yield
2,06 Mat�urity
2.�7 Inv�stment Training
�.U$ Quality and Capability of Investment Manag�ment
2.0� Inves�ment Stratec�. y
2.1a Cash Managernent
3.0 AUTHORIZED INVESTMENT
3.01 Au�h�rized Investments
3.02 Unau�horized Investments
3.03 I�vestments with Required Ratings
4.0 TMVES'�MENT COh1TR�L�
4.a1 Sel�ctior� of Inv�stment B�akerJDealers
4,02 Certification
4.03 Delivery vs. Payment
4.04 Internal Control and Annu�al Audit
4.05 Standar� of �Car�
4.06 Competitive Bidding
4.�7 Portfalio Diversi�ication
4.�8 Electronic Funds TranSfer
4.09 Sellir�g o� Se�urities before M�turity
5.a A�B�TRAGE
6.0 INVESTMENT REPORTING
7.4 INVESTMENT CC)�.LAT�RAL AND SQFEKEERIMJG
7.01 Collateral or Insurance
7.aZ Safekeeping of Securities
$.0 INVESTMENT POLICY ADQPTION
GLQSSARY
ATTACHM'ENT A - Broker/Dealer Certifica�ion
ATTACHM�NT B- Ap}�roved List of Broker/[7ealers
TAX IE�ICREMENT REIIVVESTMEI�iT Z()NE NQ. 2
INVESTMENT POLICY
1.0 IIVVESTME�+lT AUTHORITY AND SCQPE QF PQ'LICY
1.Q1 Purpose
To ��tak�iish� and �rovide sp�ci�i� �alicy ai�d guidelines for the conduc� af
the investmen� program of the Tax Incr�ment Reinvestment Zone No. 2.
i,Q2 Policy
T� is the �olicy of the Tax Increment R�inv�stment Zo�e �Jo. 2(the
"TIRZ'") tc� inuest public funds in a rnanner, which vvi11 provi�e safety of
principal while earning the hi�hest reasor�ab�e market return in meetir�g
the daily cash F�ow demands of the TIRZ. All funds will be inv�st�d in
compliance with all state and local statutes and al9 Gove�
Acca�nting Standards 8oard Stateme�ts, and �elated financial
accounting standards.
This policy satisfies the requ�rement of the P�blic Funds Inr�estment Act
(PFIA}, Texas Governm�nt Code 2�56.
1.03 Scope
This Inuestment Policy sl�all apply to all the f�nds and i�ues�ments of �he
TIRZ as well as any other fur�ds held in c�ustody by the TIRZ, and includ�
the following funds:
1. Tax Increment Reinvestment Zor�e No. Z
2, Any ath�r funds as created by the TIRZ.
These funds, as well as funds th�t may be created from time-t�-time,
shal1 be administered in accardance with the provisions of th�s policy. AI�
funds ir�vested under this policy shall be cansidered as a pooled grou�
for ira�es�ment purposes.
Deferred compensation and the r�etirement system �ssets the TIRZ sets
aside or holds �ar its �mployees �re not subjec� to t1�is palicy.
1.Q4 Delegation of Investment Authority
The Director of Finar�c�, Assistant Qirector of Fin�nce, and Senior
Acco�ntant are hereby designated as Investrnent Officers far the TIR�.
The T�RZ may use �th�r emplayees or the seruices of a contractor to a9d
the investcnent officer(s) in the execution of their duties. C7therwise,
u�less authorize� by law, no ather ir�dividual(s) has t�e authority to
deposit, withdraw, transfer or manage tt�e investments of the TIRZ. Th�
TI�.Z may designate a registered investment advisor to invest for the
TIRZ and ac� as an additional Inves�mer�t Officer. Authority granted to a
p�rson{s) to deposit W6t�'1C��'dW invest, trarasfer or manage the TIRZ's
investments is effectiue until rescinded by TIRZ boar� or unti6
termjn�t�or� of fihe p�rson's empl�yrrient or contrac�.
The Dir�c�or of �inance is respor�sible far �he m�nager�ent af the
investment p� T�e In��stment Officers are responsible �or �he
daily operations of the inv�stment functio�. Th� Director �f Finan�e shal�
b� �es�onsible for ala transactions t�ndertaken ��ud shall establish a
syste� of controls to reg�late the activities �f subc�rdinate offiic�als.
1.05 Ethics and Conflict af Interest
Investment Officers shall refrai� from personal �usiness aetivities that
cou1d canflict with the proper exec+�tion af the inWestment program, �r
whic� could impair their ability to make impartial i��restment decisions.
Ir�vestment Office�s who have a p�rsona� business relatior�s�ip with a
busines� organizati�n seeking to sell an investment to the TIRZ and who
have anyone rela�ed wit�in the second degree by a�finity or
consar�guinity to �ra ir�di�idual seeking tc� sell an in�restment to the TIRZ
sh�ll file a statement disclasing that personal interes� ko the Director of
Financ�, City Manager, the City Council an� the Texas Ethics
Commission.
An Investment Office� has a per�onal busfness relationship with a
b�siness organization if:
1) the investmer�t officer Qwns 10% or more of th� voting stock ar
shares of tFte �usiness organization or awns $5,�00 ar mQre of the
fair mark�t vapue of the busin�ss organization;
2) funds received by the in�estrnent officer frorru the business
organization exceed 1�°/Q of the investm�nt of�icer's gross income for
khe previaus y�ar; or
3} the investment officer has acquired from the business organizatior�
duri�g the previous ye�r investr�ents with a boo� v�lue oF �2,50Q or
mor� �or the p�rsanal acco�nt of th� investment afficer.
1.OG Investmen� Committee
Th� City shall estab�ish an In�estment Committee for the purpose of
reviewing investment palicies and procedures, investmer�t strat�gies,
and investment perfc�rmance. The members of the Commi�tee shall
consist of the City Manager, Assi��ant City Manager as design�ted by the
City Manager, �irector of Finance, and AssiStant Direct�r af Financ�.
The City N'lanager s�all be t�e Chaerman of the Commit�ee.
T�e Investment Corr�mittee shall review quarterly investmen� repor�s
and an�ually revi�vv th� recommer�ded changes to the Investment Pol�cy
and Investment Strategy �r+d review the I�st oE brokers �authorized to
�ngage in investment transac�ions with the TIRZ.
2.0 INVESTMENT �BJECTI'IJES AND► STRATEGY
2.01 Q b� e�t%ve
TIRZ �nvestme�ts shall be mad� in acco�dance with federal and state
laws, this Investrnent Policy and orddnances of the TIRZ, The TIRZ's
investrrment portfalia shall be designed witf� the objective of attair�ing a
market ra�e of retuo in �ccordance with its designated bench�n�rk
based on the TIRZ cash flow requirements throughout budgetary and
econamic cycles, commensurate with the TIRZ investment risk
constraints and the cas� flow charact�ristics of the portfc�lio.
2.DZ Safety at Pr�ncipal
Th+e prirriary objective of the TIRZ investment program is to �nsure th�
safety of �II funds. Ta attaire this objective, it is th� TIRZ intent to invest
in the safest types of securities, pre-qualify brol�er/dealers, financial
institutions, and advisors and to hold all i�vestmenks u�til maturity i�
Qa'der to ensure the retur� of all invested principa� unless as stipu�ated in
Section 4.09 of the policy.
�.�03 Liquidity
The TIRZ i�vestmer�t must be based on a cash flo�^r ar�alysis, which will
provide the I+quidity necessary to pay all expected and ur�expected
obligatianso Liquidity shall be achieved by matchi�g investment
maturities with budgetary and econ�mic cyckes. A partion afi the portfolio
will be maintained ir� liquid short-tercn investments that can be
converted to cash iE necessary t4 meet disb�rseme�t requirem�nts.
Investment pools and �a-laad money market mutual funds provide daily
liqu�di�y and may be utilized �5 �a cora°lpetitive yield alternatiWe ta fixe�
maturity in�+estments.
2.04 Diwersificatian
The Tax Increm�nt f�einvestment Zone I�o. 2 sh�all diversify its portfolio
to e�iminate the risk Qf Ipss resulting firam over concentration af assets in
a specifac maturity, a specific issuer or a speci�i� class of rnvestrr�oents.
Investrnent shall always be selected that provid� fa�' st�bility rf ir�corne
and reas�n�ble liquidity.
2.05 Yi�eld
It wifl be th�e objective of the TIRZ to earn a reasonable market yiel�
throughout b�adgetary and economic cycles within the parameters
impased by its safe�y ar�d liquidity objectives, investment strategies, and
stat� a��� feder iaw. Re�urn on inv�stn�ent is o� sei.c�ndaiy impor�ance
to sa�ety and liquidity objectiU�s. The yield and level of risk for the
part�aYio +rvil� 'be benc�m�rked against the yield of the onesyear Treasury
Bill during the camparable periad as well as against an agency note with
appraxir��tely the same maturity as th� weighted aver�age maturi�y o�
the portfolio,
�.06 Maturity
The partfolio shall b� structured �rirn�riiy to meet TIRZ abligatians and
secon�ly ta achieve a reasonable re�urn of int�rest. �he maximum
�Ilowab6e stated maturo�y of ar,y ir�dividual investment owned by the
TIRZ shall be �l�ree (3} years from date of purc�hase. The settlement
date is consid�red the date af pu�c�ase. Hawever, the TIRZ may
collateralize its certificates of deposits and e agreements �sin�
longer-�ated in�ves�ments not to exceed thirty (30) years.
Ti�e maximum weighted average �n�turity based on the ov�r�ll portfalio
shall be 18 rnonths, ar 547,5 d�ys,
2.07 Investment Tr�ining
Investmer�t Officers shall take (a) iD f�ours of training within 12 manths
afit�r taking offic� or assuming duties and (b} c�ot less than 10 hours of
training every 2 ye�rs. �"rarning shafl ir�cl��e ed�cation in investment
carotrQls, security risks, strategy ris{�s, m�rket risks, diversifi�atiar�, and
compliance. Trainir�g r�nust be provi�ed by an independent source
approved by the governbng body or designated Travestment Com�nittee.
For these purpases, courses or �erninars offered by th� Governmer�t
Finance Officers Association, Gc�vern�n�nt �inance t}fificers Asspciation of
Texas, Texas Municipal League, Sauthwes� Scf�ool of Gc�vernment
Finance, IJniversity of North Texas, Texas Associa�ian of Cour�ties,
�reas�ry Mar�age�nent Associati�n, or the GoWernment Treasurers
�drg�nization of T�xas will satisfy th� tr�i�ing requ�reme�ts. An external
auditor shall review documer�tatian af training hours annualfy.
2.Q8 Quality and Capab�ility of In�es'tmer�t Nlanagement
Investment Officers sE�ali a� aIC �imes �e cognizant of fhe s�andard of
care and the tnvestrr�ent objectives as set forth in the Pub1i� Funds
Investmen� Ac� and the TIRZ Investment Policy.
The TIRZ shall provid� inuestm�nt training as required by the Act to
ensure ��e quality and capability of investmec�t management. Staf� sets
the 5tandard of traini�g req�aired, w�ich may be c�v�r the 10 hburs as
requi� by t�e Act.
2.49 Inv�estment Strategy
Tn accord�c�ce with the Act (2256.Qfl5(d)) a separate written investment
strategy sha�l be develaped far each portfolro/fund or �ooled �roup of
funds under t�e TIRZ cor�trol. Zhe strategy shal� be reviewed on an
annual basis with forma� actian by the TIRZ �statir�g that tf�e strategy has
been revie�ed ar�d recording any changes made.
2.10 Cash Management
Effectiv�e cash management is recognize� as essential to gQad �iscal
management. Cash manager�ent ds defaned as the process o� managing
monies in arder to ensure maximum cash availability to th� TIRZ for
investment use. The TIRZ shall rr�aintain a comprei�er�sive cash
management pragram t1�at includes collection of accounts receivable,
prudent investment af its available cash, disbursemen� of paymec�ts in
aeco�danee v�rit� invoic� terms and the managemer�t of banking services,
3,0 AUTHOR�ZED INVESTMENTS
3.01 A�thorized Tnvestments
Autharized investmer�ts under this policy sk�all be limited to the
instruments liste� belaw as authorized and defined by the Public Funds
Investment Act.
A. Obl�gations of the United States or its agencies and instrumentalities.
�, Obliga�ions of th� State of Texas or its agencies and 6nstrumenta�fti�s
C. Other obligations, th� prinCipal and interest of whdch are
unconditionally guaranteed or insured by, or b�cked by the full faith
and eredit of th� State of Texas or the 'United States or t�eir
respective ager�c�e5 and �n�trurnentali�ies.
D. Col6atera'lized certificates of deposit of banks o� savings banks �oing
busir�ess in Texas, collateralized to 10Z%, and guara�teed or ins�red
by fihe �ederaB Deposi� I�surance Corporatian a� its successor; or
seeu�ed by �biigations of the United State Government, includ�ng
martgage back�d sec�riti�s, whieh pass khe bank test, �ut excluding
those mor�gage bac�ced securities defined in S�ction 225�6.��9(b) af
the Act.
E. Constant dollar Vocal government i�vestment poals as defined by th�
Act (2256,016 and 2256.f�19) �nd a�pproved by TIR� board
resol�ttion.
�, AAA-rated, SEC re�istered no-lQad money market mutual funds and
no-load mut�ai furad and as further defined in Section 22S5.Q14 af
the Ac�,
G. Callateralized repurchase agreerr�ents as defined by the Public Funds
Inv�estment Ac� placed thraugh a primary gaWernmer�t securities
dealer or a financial institution do�r�g business iro �his state w�t� a
define�l maturi�y date �nd �s further defined in Section 2256.011 of
th� Act.
H. Interest bearir�g checking accou�ts that are fully colla�era�ized at
102% af the ledger ba�anc�.
3.C}2 Una�thoriz�d Investmen�s
Specifically prohibited investm�nts are:
1. Collateralized martgage abfigatic�n$
2. Cammercial Paper, includir�g Poals which invest in Commercial Paper
3. All svuaps in�luding but nc�t limited to even-ba�is swaps, interest rate
swa ps
4. Forwards and futures
5. Qptions
6. Foreign �x�hange
7. Pdanned amortizat�on c�asses (PA�)
�. R�g�lar floaters tied to governmer�t se�urities
9. Investments with various interest rate caps, floors, and col�ars
iQ. In�+estrnent poo1s in which the TIRZ would Qwn r�ore than 10% of
�he market vaiu�e of the pool
11. Any other �nvestments that are nat an the a�uthorized investment list
3.03 Investments with Required Rati�gs
Inves�r�e+�ts wi�h minimum requ�red ratings such as inves�r�ent pools
and no-Iaad mutual funds do not qualify as arathorized inv�stments
during �f�e period th� investment dQes not have th� minimum r
The TIRZ shall take afl prudent m,easur�s �hat are consist��t with its
investment p�licy to liquid�t� inv�strrfents t1��t dc� not h�ve the
minimum ratin�.
4.Q �MV�ST�f��iT CONTR4LS
4.01 Selection of In�restment Broker/Dealers
The znvestment Officers will rr�aintain a list of financial institutions,
primary broker/dealers, and local gavernment investme�t poals
autl�orczed by tl�e TIRZ to provide inves�ment services. Ar�nualiy, �he
TI�Z will �pprove the list of finan�i�l institutions �r�d bro�Cer/dealers
autharized ko conduc� business with the T�RZ. Investment �fficers shall
not cflnduct business with �ny firm not �pproved by TIRZ,
The City will prepare a Request for Investm�nt Services every twa years
at a minimum and notice af said re�uest will be published in the City's
official paper. All financi�l institutions and broker/de�le�rs who desire tc�
become qualified bidder� �or investmer�� services o fill out �he
applicatiQn and � it t� the City by the stated day and time. After
review c�f all ap�licants, a list af selected financial institutions and
broker/dealers will be prepared by th� Inves�rnent C}fficers �nd re�riew�d
�y the Investmer�t �Cammittee. The fiol�owing may be required with the
applicatian: most recent audited financial statemer�t, fist of loca�
government clie�ts, a�d statements af qualifications,
Criteria used in the sel�ct►on of th� authorized broker/d�al�rs will
include, but �re not limited to material litig�tion against the firm,
r�gulatory status af the deafer, completed packet, references �rom local
governr�ent clier�ts, background and e�pertise in investment of pubaic
f�unds,
The top six to seven firms sl��ll be selected to appear ar� the TIRZ
approved list. Tf, after a firm is selected, they no longer qualify to
appe�r an the TIRZ �ppravec� d��ler fist, ar provide ser�ices incor�sistent
with acceptable levels, the Investment Officers may reeommend TIRZ
bo�rd to remove the �irrn fram the ap�raved list and replace it with the
next q�alified candidate based �n the previous Request for Investment
Services rankang, Shau1d an approved bank m�rge with 4r b� acquired
by another bank while on the TIRZ approv�d list, t�e new bank r�ust
agree tb meet the same co1lateralizatian and c�rtification requir�ments,
or the bank shall be remaved �From the approved list.
4.Q� Cer�ifi�cation
A written co�y of this Investment Pol�cy sha11 be presented to any firm
seeking ta engage in a fi�ancia� transaction with the TIRZ. The
a�thorized represe�tative Qf the fi� shall exec�te a writt�n inst�t�mer��
substantially in the farrru of Attachment A of t�is Palicy �nd to the e�fect
that the representative h�s:
1. reeeive� and th�ro�ghly reviewed the �nvestment policy af the TIRZ;
a ra d
2. acknflw9edged that th� organizatian has impiemented reasonable
praced�ures and controls in e�fort to pr�clude inv�stmen� tra�asactions
that are not �uthorized by the T�RZ Investment Policy except to th�
�xtent that the authorizatior� is dependent on an analysis af the
makeup of the TIRZ entire portfolia o� requires interpretation of
s�bjeeti�� investment standards.
The Investment Off�cer{s) may nc�t trar�sact busin�ss wit� any �irm that
has nat executed an� r��urn�d this certificatiQn. (2256.QQ5(�).
The TIRZ may contract with a registered i�vestment adv�isor for th�
management oF th� TIRZ pr�rtfolio. The adUisar shall review the Policy
and� execute all t� in accorda�ce with the �rovisio�s and
controls of tl�e Poiicy.
4.03 Delivery vs. P�yment Settler�ent
T� s��ll be the po�icy of ti�e TIRZ tY�at �I� securities shall be purchased on
a"Deli�ery Vs. �ayment" (DVP} ba�is, except for �nvestment poofs ar�d
m�tual funds. By so d�ing, TI�2Z funds are not re�eased �ntil the TTRZ
ar its ap�raved c�stodian has received the securities purch�se� ar
pledged.
4.04 I�ternal Control an�! Annual Audit
Th� Di��ctor of Finance or desigr�ee shall establish a system afi int�rnal
con�rals. The coo�trols shall be designed to prevent losses of public funds
arasing from fraud, empCoyee errar, misrepresentation of third parti�s, Qr
imprudent actions by er�ployees �f Investmer�t C}fficers of the TiRZ.
Cantrols and managerial emphasis d��med mast important includ� the
following :
Imperative Controls:
A. SaEekeeping receipts and reeord managerr��nt
�. �ocumentatioc� of investment bidding
C. Writ�en confirma�ions
D. Reconciliati�n and comp�risons of security receipts with
inves�ments and bank records
E. Compli��ce with investm�nt policies
F. Accurate and timely repor�ing
G. Adequate training and devela�ment of Inuestment Officers
Contrals Wh�r� �ractica�
A. Cantrol of collusion
B. S�gr�gatifln of du�ties
C. Clear delegatian o� authority
D. S�aying informed about market conditic�ns, changes and trends
that requir� adjust�nen�s in �nvestme�t strategies,
The TIRZ, in conjunctior� with its an�rival financial audit, shall perfiorm a
�ampliance audit of management controls on investmec�ts ar�d adherence
ta the TIRZ est�blished investmer�� �olicies. This �r�nual audit shail be
perforrned by an ex�erna! auditor and will include forma� review of the
quarterly reports.
4,OS Standard of Care
Investments shall be made with �udgment and care, under prevailing
circums�ances, t�at a person o� prudence, d�scretion, and intelliger�ce
wauld exercise in the ra�anagement of t�e perso�'s own affairs, not for
specul�tion, but for ir�v�s�men�, �onsidering the probable safe�y of
ca�ital and the probable income ta be derived.
In deterr�ining whether �r� investment officer has exercised prud�nc�
with �espect ta an in�restme�t decision, the determination shall be made
ta�king into co�sideration:
1. the qnves�ment of all funds over which the affic�r had responsibijity
rather ti�an a consideration as �o the prudence of a single
investment; and
2. whet�er the investment decision was consistent with the TIRZ
Investme�t Po�'icy,
The Director of Finance and the Inv�st�er�t Officers are not �ers�nally
respa�si'�le Eor �hanges in the �narket.
4.06 Com�etit�ve Bi�ding
Ali Rurch�ses of ir�vestments will be place� aft�r rec�iving competitive
c�uotes from at least three financial institutions, broker/deal�rs,
investment pools ar any com�ination thereof. Quotes will be accepted
ei�her written or elect�onically, or a combinatior, thereof. An exceptian
to this rule m�y be m�c�e when time iimifiatic�ns preelude t�� bidding
pracess.
The investme�t will be made with the broker/dealer ofifering the grea�est
ret�rn and quality to th� TIRZ. If three bidsJofifers are solicited but
t�r�e respo�ses �are not received within the time frame sp�ci�ied in the
solicitation c�f khe bid/o�fer, the Investment Officer may act based on �he
respanses receiv�d as lang as khe salicitation af ��d f�ilure to receive
the bids/offers is documented. Any i�vestments purchased must i�ave
the signature of at least twa Investment Officers, when both are present.
4.07 Portfolio Qiversificativn
TE�e ��R� will div�rsify i�s inves�men�s by securi�y type, ir�stitutian, and
broker/dealer. Requests for bids/offers frorn broker/dealers shall ratate
among appro�ed broker/dea9ers t� ensure tl�at the same �rakers are not
solicit�d for �uery bid/offer request, ar�d to enst�re competitiar� among
broker/de�lers.
With tF�e exception of U.S Tr�asury Securities and inkerest bearing
checking accounts that are fully collateralized, no mare thar� 75% of the
TIRZ total investment portfolio wi11 be invested in a single security type.
If the TIRZ elecks to particip�ate in more than one invest�ent pool, t'�e
�o�al percent invested in �II pc�als shall not exceed the rr�aximum �ercer�t
allow�d.
Diversifie�tiar� requirements are as follaws;
Investment TXpe
Rept�rchase Agreements
C�rtifi�ates of Deposit
US Tce�sury Bells/No'�es
Other US Gover�ment Securities
Authorized Investment Poofs
Na-Load MM Mutual Funds
No-Load Mutual Fun��
Sweep Accounts/DDA**
*� Fu�ly collateralized �t 102°10 af value
Maximum Investment %
Up to 50%
U� to 50%
Up ta 100%
Up to 75°,/0
Up to 75°fo in totaV
Up to 5Q°/a
Per PFIA
Up ta 100°l0
�.�18 Elec�rvnic Funds Transfer
The TIRZ may use electronic rr�eans to �ransfer or invest afl funds
collected ar control�ed �y t'he TIRZ.
4.�Q9 Sel�eng C}f Securities Befare Ma�urity
W�if� it is th� TTRZ intent to hQld se�urities to ��turity to ensure safety
of princ�pal, if the T�RZ needs �c� sa'!e securities in order to rne�t
disbursement n�eds or to �ake advantage of i�t�rest rat�s, the City
Nlanager and �he Director o� �ir�ance mus� �oth approve the sale aF the
sec�rify.
5.Q Arbitrage
Arbitrag� r�bate provisiQns require that t�ie TIRZ compute earnings on
in�estments fro�m each issue of bon�s on an annual basis t� determ�ne if
a rebate ta th� IRS is required. The TIRZ is required to perform specific
calculations relative to the actual yield earned on the ir�vestment of the
funds and the yield that ca�ld have b2�n ear��d if the funds had beer�
invested at a rate equal to the y�eld Qn the �ands sold by the TIRZ. The
regukations require extr�me precisian in the monitoring and recordin�
facets of the investments as a whole, and particularly as it rel�tes to
yields and computations to i�asur� compliance. Failure ta comply ca�
dictate th�t the bonds become taxable, retroactiveiy from the date of
issuance, o� subject �he TIRZ to severe �ena�ties.
The TIRZ investment position as it relate� to arbitrage r�gulations is as
follows, Investmen�s o� bond proceeds wiil be made with safety of
princip�l and liquidiky in mind, but with � car�petitive rate of return.
When prQject timing and eash flow� allaw, bond proceeds may be
invest�d ir� instruments allowed under Section 3.q, if the �nvestmen� can
be p�rchase� solely with the indiuidual bond �roceeds, and not
co�m�r�gled wi�h aperatir�g funds or rnuftiple issues. ARI investments
purchased wi�h bond funds shall be docur�ented clearly and re�orted to
the TIRZ arbitrage eonsultant for tracking and review. Arbitrage r�bate
calc+�lations will be performed ar�nually on all debt issues and funds set
aside annually for any posi�ive arbEtrage. Arbitrage will be reba�ed to
the IRS, as necessary.
6.a Inrrestme�t Repor�ing
The Inve�trnen� Officers sl�all report to the TIRZ �o less thar� a quarterly
basis ir� accordance with the Act (2Z55,0�3}. Tl�e r�pflrt shall i�clude a
detaile� listing af all purchases, sales, and payments and a descriptian of
each sec�rity held as well as management summary information.
Tt�e report m�st be prepared an� signed by �II Investmen� Of�icers and
contair� a statement aF compliance with regard to the TIRZ Investment
Policy and the Act (2�56.4�3).
Market prices used to determine market value in the invest�nent �°ep�rts
shall �e abtained fram an ir�depend�nt sc�urce,
7.0 INVESTME�IT CD�.LATERAL ANC! SAFEKEEPIIVG
7.01 Coflateral
The Investm�nt Officer(s) or Investment Advisor sn�ll er�st�re th�t all
TIRZ funds in time �nd demand deposits, �ertificates af depasits ar�d/or
repurchase agreemer�ts are insured or ct�llateralized consistent with the
Pub�ic Funds Colla�er�a! Act {Texas Gavernment Code 2257} ar�d feder�l
Baw as well as the then current bank depository contract. The TIRZ
chooses to accept callateral base� an the list of investments au�thorized
�nder the Public Fur�ds Inv�stment Act. T�� rig�� of coilateral
substitution is granted �vit�t the approvaf af the Direct�r or Assistant
Dire�tor of Finance. The Directar or AssiStant Director o� 'Financ� may
approve a�d re�ease pledged callateral. The TIRZ shall request
additianal colla�eral ir� the event Investrr�ent Officer(s) deems tnat
deposits or investmer�ts are not sufficiently pratected by the pledged
co�lateral.
Co1lat�ral will e�ual 10Z% of the ledger balanc� €�f t�me and dernand
depasit�, plus principal and accrued interest or� c�rtificates of deposit,
and repurchase agreements and �e held by an �ndependent party
outside t�e bank's or caunter-parties' holding co�mpany. Ple�ged
c�llateral will be evidenc�d by ariginal safekeeping receipts, which are
held at th� Fe�eral Reserve Bank and readily avaiiable to the TIRZ, The
bank and/or counter-pasrty will be responsibCe for the mar�itoring and
maintaining of margin levels at all tirnes.
7.02 Safekeeping
All TIRZ sec�rities shalf be held in independen� saf�keeping by the T�RZ,
th� TIRZ depository bar�k or a TIR� approved c�astodi�n in � thirc[ p�rty
financia! �nstitution. All safekeeping will b� evidenced �y original
safe�eeping receipts, Saf�k��pang receipts shall be maint�ined by the
Investment QfifiFCer(s), and shall be available for review +apan request.
8.0 �N1IESTMENT ROLICY AD�PTION
Ti�e TIRZ Investment Palicy shal! be adopted by � annualiy by
the TIRZ board. The palicy shall be reviewed annually by the Investment
Committe�. A,ny modif�catians made thereto must by approved by �he
TIRZ board and dc�cumented by forrnal actior�.
G'L�SSA�RY
Accrued In�erest; Term desigr�atir�g �i�� interes� due on a�ond or other
fixed income security that must be paid by th� buyer of a security to �ts seller.
A�ency: A security, �Imost always debt, issued by � corparation sponsored
by the U.S. Gove�nme�at. Examples: bonds af the Tennessee Valley Authority.
Agency Notes: Or�e to two ye�r obligations affered at a discour�t frorr� par by
U.S. Governm�nt Agencies, suc'� as the Federal Nationa� Mortgage Associatian,
the Federal Home Administration, and �he Farrr� Credit System.
Bitf: Tt�� priee �ffrered �y a k�uyer c�� securi�ies — wt�en you are s�1lir�g
securities, you ask fQr a bid.
�roker: A bra4�er brings buyers and sellers together far a comm�ssic�n.
Certificate of �eposit (CD):
evi�enced by a certificate.
Collateral: Evider�ce of depasit
to secure repayment of a loar�.
secur� deposits of public monies.
A time d�posit with a sp�cific maturity
or �t9�er property, whic� a bt�rrower pledg�s
Also refers to securities pledged by a banl� to
Cornponen'� Unit: Based on generally accepked account principle�, the
Pearland Economic Development CarporatiQn, TIRZ #2, and the Tax Increment
Reinvestmen� Zone No. 2 are con�idered camponent uni�s c�f the City, and as
such are i�cluded in the City's annua� financial repor�s.
Confirrt�at�on: Cpmmonly calle� a"con�irm.'" Th� co�firmation is a notice to
a customer that payment is dUe an a purchase, ar that net proce�ds are
available or� a sal� of securities. Federal securities law � tha� a
confirrr��tion be sent promptly following each purchase and sale,
Conflict of Int�erest: Term used to describe a fnancial situatic�n where a
person prejudicial�y places persau�al a�faurs before those o� consti�uents that
the person is supposed ta serve ar represent.
Caupan: (a) T�e annuaY rate of �nterest that a bond's iss�er prom�ses to pa�y
the bondhalder on the bond's �ace va1u�. (b} A c�r�i�icate attached to � bond
evidenc�ng interest due on a payrr�en� date.
�urrent Maturity: Used to designate the remaining lifetime of an already
outstanding band.
D��ler: A d�al�r, as oppased to a broker, ac�s as a p�incipal in al9
transactio�s, buying and sefling for his own accaunt,
Delivery versus Paymen�: Delivery of securities firs�, with an �x�hange of
money for t'�� s�curities after de{ivery.
Deri�►atives: (a} Financial instruments whos� return profiile is lin�ed to, or
derived firom, the movement �f crne or more ur�derlying indie�s or securities,
and may �nclude � leve�raging factor, car (2} financial contracts based upon
notior��l ar�ounts whose value is der�ved from an underlying ir�dex or security.
Discount: The differenc� between the cost pric� c�f a security arad its mat�rity
value when quoted at lower th�n �ace uafue, A security selling below c�r9ginal
offering price shortly after sale also is considered to be at a discounk.
Discaunt Securities: Non-interest bearing money market instru�r+ents th�t
are issued at a diseount and r�deemed at matUrity for full face value.
Example: U.S, Treasury Bills.
Discaunt `�lie�d: Measurement of return tha� computes in�erest on face value
af security rather than on the dollar amaunt inv�st�d. Used in figuring y�eld
an U.S. Treasury Bills.
D��ersification: aiveding ir�vestment f�nds arnong � variety of securities
offering independen� returns.
Equivalent B4nd Yield; Used to eompare the discaunt yield on money
market securi�ies to tl�e co�upon yield on governme�� bor�ds.
Face Value: The doalar amount that appears or� the face of �he bond
certificate. It is khe dollar arr�c�unt the issue�' promises to pay tc� the halder at
m�turity. AEso �alled p�r value.
�ederal Cre�dit Agencies: Agencies Qf t'�e Federal government set up to
supply credit �o various cla�ses of in5titutions and i�dividuals. Ex�r�p1es:
S&L's, small business firms, students, farmers, farm cooperatives.
Feder�l Deposit Insuranc+e Corporatiorr (Fa�C). A federal agency that
insures bar�k deposits, currently up to �10Q,000 per �epositor.
F�dera! Funds Rate: The rate of interest at which Fed funds are traded.
This rate is c�rrently pegged by the Federal aeserve through o�en-market
operatio�s.
Federa1 Home �,oan Bank (FF�L.B); Goverr�ment sporwsored whal�sale bar�ks
(�currently 1� reg�on�l banks), which lend funds �nd provic�e correspondent
banking services to member commercial bank5, thrif� ir�s�itutions, credit
unians, and insurance companies. The mission af the FHLB is to lique�y the
housing relat�d assets of its members whQ must purchase �toc�c in their
distri�t B�nk.
Federa� Nativnal Mortgag�e Association (FNMA or Fannie Mae): FNMA is
a feder�l �orporation �rv�rking �nder th� auspic�s of tne Departm�nt of
Housing a�d Urban Dev�loprnent (HUD}. It is th� largest single provider �f
re�idential r�aartgage funds i� th� United States. F�1MA, is a priv�te
stoe�Cholder-owned corporatian. T�e corparatio�'s purch�se� ir�eiude a variety
of adj�stable rnortgages and second laans, in addition to fixed-rate mortgages.
FNMA's securities are also �ighly liqu9d and are wid�ly acc�pk�d. FNMA
assumes and guarar�tees that all security hc�lders will receive time6y payment
Of }�ri�cipal �nd interest.
Federal Open Market Cornmi'�tee (FQMC�: Consists of t)�e seve� mer�bers
of the Federal Reserw� Bc�ard and fi�e of the twelve �ederal Reserve Bank
Presidents. The Committee peric�dically rneets to set Federal Reserve
�uidelines regard�ng purcha�es and sales of Government 5ecurities in the open
market as a mear�s of infBuencing the vofume of �ank credit and money.
Feder°al Reserve System: The central bar�k of the United States created by
Congress and cflnsusting of a sewer� member Boar� of Governors in Washington
D.C., 12 regional banks and about 5,7Q0 cornmercial banks that are members
of the system.
�inancial Assets: Cash and oth�r assets that, in the norrna{ caurse of
oper�tions, will becQme cash.
Government National Mlortg�ge Assaciativn (C�JMA or Ginni� Mae): A
fixed incame security thak c�e�resents an undivided interest in �a pool of
f�derally insured mortgages put to�ether by GNMA. G�JMA sec�arities are
com�rnonly backed by FHA o� VA mor�gages.
�Liquic�ity: A liquid assets is one that can be canverted easiwy and rapidly into
Gash witho�ut a substantial loss of value. In the mQney market, a securi�y is
said tc� b� lic�uid if the sp� between bid and asked pr�ces is n�rraw and
reasanabie sizes can be dor�e at those quo�es.
Lacal Go�ernment �nvestment Pool (�GIP): An e�tity created under the
public funds investm�nt ac� �o invest public fun�s �ointly on behalf of the
�nti�ies that participate in the pool and whose investment objectives in c�rder
of �riority �are 1) �reser�vation and s�fety of principal, Z) liquidity, and 3) yield.
Market Valu�: The price a� whieh a security as trading and could pr�surnably
be purchased or sald,
Master Repurch�ase Agreement: A writter� contract eovering all future
tr�r�sactions between khe parties to repurch�se-reverse repurehase
agreements that est�bfishes each party's rights in t�e transactions.
M�tu�it}i; The date �p�n which the prvncipaf ar sta�ed value of an i�vestment
became� due and p�yable,
Maney Market: The rn�rket in whic� short-term debt instruments (bills,
commercial paper, etc.) with a one-year maturity os� less, and often 30-days ar
less, �re issued and traded.
�ffer: The po ask�d �y a sell�r of securities.
C�vern�ght iiepo: A repurch�se agreement with expiratiar� set far the
following business dayo
Par Vafue: The dollar amount that appears on the face of the bor�d
certifica�e. It is the dollar amount the issuer promises to pay to the holder at
maturity. l�lso called face va9ue.
Porffolia; Col�ectiar� of securities �held by an investor.
Prirr�ary Dealer: A designation given by the Federa� Reserve System to
cornmercias �aroks or broker/dealers who rneet specific criteria, ir�cluding
c�pit�l requ�rements and participatio� ir� Treasury auctions.
P� The face amount (par value) of a d�bt security.
R�te afi Return: TY�e yield abtaina�le on a secur�ty based c�n its purchase
price �r its curren� market pr4c�, Far bonds and notes, it is the coupon rate
divided by the �rice,
Ftepurchase ,�greement (R�P�O): A halder of securities sells these
securi�ies �o an investar with an agreement to repurchase them at a fixed
price or� a fixed date.
Safekeeping: A servi�es tc� cust�mers rendered by banks fQr a�ee whereby
securities and val�aables of all types �n� deseriptions are held in the bank's
vault for prot�ctia�.
S�e�ondary (+�arket: A market made for the purchase and sale of ou�standing
i�sues fol9owi�ug the iroitial distributioc�.
SecG��ties and Exchange �Comrnissian:: Agency created by Co�gress to
protect investors in security rela�ed �ransactions by admin�stering securities
legsslation.
Sell: To tra��sfer owr��r�s}�i� far a�tlonetar con�9d�ratiof�. Tf�� term is used in
canjunetion with the disposition o� stocks, bonds, or other financi�l assets.
�truc�ured Notes; Nates issued by Gov�rnment Spansored Er�t�rpris�s
(FHLB, F�1MA, SLMA, etc.) anci Corpor�tions that have imbedd�ed options (e.g.:
ca�l features, step-up coupons, floating rate coupons, deriva�ive based returns)
into their �'ebt structure. Their market pe� is imp�ct�d by th�
fluctuatior, of interest rates, the volatility of the imbedded options and shifts in
the shape of th� yield curve.
T�easury Bi1�s: A nan-interest bearing d�scaunt security is$ued by the LI.S.
Treasury to finance �he national debt, MQSt biils are issued t� mature ir� three
mon�hs, six manths, or or�e year.
Treasury Bands: Long-term coupon bearin� U,S. Treasury Securit�es issued
as direct obligatior�s af the U. S. Governmer�t and havir�g �nitial maturities of
more than 1� years.
Treasury Notes: Medium caupo� U.S. Treasury s�curiti�s
4ssued as direct obligations cf the U.S. Goverc�ment and having initial
maturities frc�m two tc� ten years.
Uniform Net Capi�al Rule: Securities and �xchange Cammission
requirement t�at member firms as well as nonmember bral�er-dealers in
securities maintain a�naxirr�um ratio of in�ebt��ness to Viquid capi�al �f 15 �o
1; alsa calf�d net ca�it�l rule ar�d net C�pital ratiQ.
ATTACHMENT A
CERTIFICAT�C?N BY BUSINESS OEtGANIZAT��!'W
Thi� certification is executed on behalf af City of Pearland (the Investor) and
(tY�� Business Organization) ,�ursuant to
tt�e Pi�blic Fur�ds Ir�vestrfi�er�t Act, Cri��ter 2256, Texas Gaverrl�rnen� Code �th�
Ac�) in connection with inves�me�rt transactions conducted between the
In��stor and the B�sin�ss Organization.
The un�ersigned C�ualified Representative o� the Business Qrganization hereby
certifies on beh�lf of the Business Organizat3on th�t:
1. T�e undersic�ned is a Qualifi�d R��res�ntative of th� Business
�rgar�izatifln offe�°4ng to ent�r inta an investment transac�ion with the
In�estor as such terms are used in the Public Funds Inveskment Aet,
Chapte� 2�56, T�xas Gavernm�nt Code and
2. The Qualified Representative af khe Business Orga�ization has recei�ved
and reviewe� the Investme�t Policy f�ur�ishec� by the Investor and
3, The Qualified Representa�ive of the Business Organization has
implerr�ented reasonable pracedures and cantrols in an e�fort �a pr�clu�e
impruden� irovestment tra�sactions conducted betw�en the B�siness
arg�niz�tion and the I�vestor that are r�ot authc�rize�l by the entity's
investment policy, except ta the exte�t that this authorization is
dependent on an analysis of the rnakeup of the enkity's entire partfolia or
require� an interpretation of subjective investmerr� standards.
4. The Business �rgar�iz�tion wcll rely upon instructions from anly the
p�rsons �uthorized �r� beh�lf t�f t�e City of P��rland as st�t�d in the
Inuestrc�ent Policy and City's resolution designating i�vestment officers.
Q�alified Repre�entatirre aF the Business Grg�nization
Siqn�ture:
Name:
Title:
D�te:
AT�ACHMENT �
APP�t{)VED/AU�HOR�ZED! LIST OF BROKERJDEAL�RS
Coastal Securi�ies, LP
D�ncan-Williams, Inc,
Frost Bank
Wells Fargo Ban�c
Pear�a�nd State Bank
Comeri�� Sec�ariti�s
Firs� Southwest Company
Exhibit "�"
F�esol�tion No. �TiRZ-2010-07
7AX ��CREMENT REINVESTMEI�IT ZONE NO. 2
INVESTMENT STRATEGY
Th� Tax Increm�nt Reir�vestmen� Zone No. 2("�i IRZ") sh�ll adQpt by
resolutian a separate written investment strategy far each c�f the funds
u�der its control, �or Inve�t�nent purpases, the TIRZ shall use a
"Pooled F�and Group" which means that all funds under the TIRZ's
contrc�l shall �e tr2ated as one fund.
�NVESTMENT STRATEG`w'
I. Suitability
Tnvestments are t� be purchased b�sed �n the financial requirements
of �he TIRZ. �he TIRZ s'�all strive to mair�tain the level of investment
o� �II fund balances, reserves and bcand funds as close as possib�e to
100%. Any investment eligibfe i� the Inv�stment Palicy is suitable for
all TiR.Z funds, ineluding com�on�nt units.
II. Sa�fety of Principal
�nvestr�ents of �he TIRZ shall �e undertaken in a manner ti�at seeks to
ensur� the preservation of capital in the overail portfolio. All
inv�stments sh�ll be of high quality with na perceived default risk. It
is the TTRZ's f�ll intent, at the time of purchase, to hold aBl
investments until maturity in arder to ensure the retur� of all invested
principa�.
I�I. Liquidity
The TIRZ's inv�stment portfolia will r�ma�n sufificiently liquid to enable
the TIRZ to me�t all operati�g requirements that might be reason��ly
anticipated. Liquidity shall be achie+red by matching investment
maturities with t�udget�ry and ecQnomic cycfes, and f�recasted cash
flovu requiremen�s. A portion of the portfolio will be m�intained in
Iiquid s9�ort-term securit�es that can be canverted to cash if necessary
to meet disbursement re�uiremer�ts. Inv�s�r��nt poofs and mon�y
mark�t mutual funds provide dai�y liquidity an� may be u�iliz�d as a
competitive yield alternative to fixed� maturity investments.
IV. Market�b�lity
The TIRZ shall ir,vest ir� securiti�s t�at, if t'�� need aris�s, ca� b�
liquidated b��ore maturity. Investrr�enrs will neve� be prematu�'ely
s�ld at Ie�s thar� boo� v�lue plus accrued interest, wi�hout the
approval of the Director of Finance and t�e City Manager.
V. Diversif�cation
T�e TFRZ w
hroker/d�ale
col€at2r�lized
TI RZ's tota I
type.
VI. Yield
ill diversity its investments by securi�y type and �y
r. With the exception oF U.S. Treasury securities and fully
demar�d depasi� accounts, no more than 75% af the
investment partfolia will be invested in a sir�gle se�urity
T�e investment portfolio sh�ll obtain a competitive rate o� retu�
throughout budgetary and economic cyc9es, commens�arate with the
investme�ot risk ca�strain�s and th� cash flaw needs, �he TIRZ shall
attempt to obtain an aec�ptable return provided that the requirements
o� safety and liquidity �re first met. The yield of the an�-year U.S.
Tr�asury Bill shall be a yield objective or �enchrnark as wel� as
benchrr�arked against an� agency note wit� maturiky, which
approxim�tes �he weighted av�rage maturity of khe portfolic�.
Exhibit "C"
R�solution Na. RTIRZ-2Q� 0-p7
ATTACI�MENT B
APPFtOVED/AUTHORIZED LIST QF BROKERJDEALER5
Coastaf S�curRties, LR
Dunea�n-Williams, Inc.
Frost Bank
Vtl�fls Farga Bank
Pearland State Bank
Comerica Secu�ities
First Southwest Cornpany
Pursuant to the PFIA, the TIRZ must approve a list of broker/dealers with which the
TIRZ can do business. The Investment Officer can only do business with those
businesses as approved. The TIRZ investment policy states that "the TIRZ will prepare
a Request of Investments Services every two years at a minimum...." In March 2009,
the City sent out requests for proposals and updated its approved broker/dealers as
listed in Exhibit B of the policy. There are no proposed changes to the approved
broker/dealer list.
The City's Investment Committee met on April 21, 2010 to review the policy, strategy,
and brokers. The City also approved the policy, strategy, and brokers on April 26,
2010.
RECOMMENDED ACTION
Consideration and approval of the Resolution adopting the TIRZ Investment Policy,
Investment Strategy, and Approved Broker/Dealers.
Revised 2007-01-09