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HomeMy WebLinkAboutRes 121603-V - Amend Investment PlanRESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GEORGETOWN, TEXAS, AMENDING THE EXISTING CITY OF GEORGETOWN INVESTMENT POLICY EFFECTIVE DECEMBER 16, 2003. WHEREAS, the goal of the City of Georgetown is to implement an investment policy that utilizes all current municipal investment practices, while ensuring the safety and availability of all funds entrusted to the City in compliance with state federal, state and local laws; and WHEREAS, the City Council of the City of Georgetown has reviewed the investment policy; and WHEREAS, the City Council of the City of Georgetown wishes to amend its Investment Policy (as last amended February 25, 2003); and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF GEORGETOWN, TEXAS, THAT: SECTION 1. The facts and recitations contained in the preamble of this resolution are hereby found and declared to be true and correct, and are incorporated by reference herein and expressly made a part hereof, as if copied verbatim. The City Council hereby finds that this ordinance implements the following policy of the Century Plan - Policy Plan Element: 1. Finance Policy Statement 13.00, which states: "All municipal operations are conducted in an efficient business -like manner and sufficient financial resources for both current and future needs are provided", and further finds that the enactment of this ordinance is not inconsistent or in conflict with any other Century Plan Policies, as required by Section 2.03 of the Administrative Chapter of the Policy Plan, SECTION 2. The Investment Policy attached as Exhibit "A' is hereby adopted by the City Council of the City of Georgetown, Texas. SECTION 3. This resolution shall be effective immediately upon adoption. RESOLVED this 161h day of December, 2003. ATTEST: THE ITY OF GEORGETOWN: rdra-L-ee 6`k 1 j By: GaEg Nelon `g4 ity Secretary Mayor APPROVED AS TO FORM: E. Carls, Brown & Carls, L.L.P. City Attorney Dec. 16, 2003 Investment Resolution No. 121603-V Page 1 of 1 1.1 SCOPE This investment policy applies to all financial assets of the City of Georgetown, Texas, held in all funds. 1.2 STATEMENT OF CASH MANAGEMENT PHILOSOPHY The City of Georgetown will maintain a comprehensive cash management program to include the effective collection of all accounts receivable, the prompt deposit of receipts to the City's bank accounts, the payment of obligations to comply with state law and in accord with vendor invoices, and the prudent investment of idle funds in accord with this policy. 1.3 OBJECTIVES The City's investment program will be conducted to accomplish the following objectives, listed in priority order: 1. Safety. The City will give priority to the preservation and safety of the principal invested. Investments will be made in a manner that will mitigate credit risk and interest rate risk. 2. Liquidity, The City will maintain the availability of sufficient cash to pay obligations of the City when they are due. 3. Yield. The City will invest idle cash at the highest possible rate of return, consistent with state and local laws and the objectives of safety and liquidity listed above. It is also the objective of the City of Georgetown to diversify its investments to eliminate the risk of loss resulting from over concentration of assets in a specific maturity, a specific issuer or a specific class of securities. It is the intent of the City of Georgetown to invest its funds to maturity. •'liq Irwin 1 1 + • + elglONFUa.ITF*T4 HOP Investments will be made with judgment and care, under circumstances then prevailing, that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital and the probable income to be derived. The City Council recognizes that in maintaining a diversified portfolio occasional measured losses due to market volatility are inevitable and must be considered within the context of the overall portfolio's investment return, provided that adequate diversification has been implemented. 2.2 ETHICS & CONFLICT OF INTEREST City of Georgetown Investment Policy Page 1 Dec.16, 2003 Investment Resolution No. 121603-V Officers and employees involved in the investment process will refrain from personal business activity that could conflict with the proper execution of the investment program, or which could impair their ability to make impartial investment decisions. The Officer and his/her employees will comply with all disclosure and reporting requirements of Section 2256.005 (1) of the Texas Government Code, 23 DELEGATION OF AUTHORITY The Director of Finance and Administration, as the City's chief financial officer, is responsible for overall management of the City's investment program and is designated as the City's Investment Officer. The Controller, Director of Support Services and Chief Accountant may also conduct day- to-day operations at the direction of the Director of Finance and Administration. Accordingly, the Director of Finance and Administration and designees are responsible for day-to-day administration of the investment program and for the duties listed below: 1. Maintain current information as to available cash balances in City accounts, and as to the amount of idle cash available for investment; 2. Make investments and maintain written procedures for the operation and internal control of the investment program consistent with this policy; 3. Ensure that all investments are adequately secured; and 4. Attend training as required by Section 2256,008 (a) of the Texas Government Code and ensure that any staff executing transactions covered by this policy attend the required training. The investment training shall be attended not less than once in a two-year period and receive not less than 10 hours of instruction relating to investment responsibilities under this policy. The training must be sponsored by a recognized professional trade association or accredited college or university or its affiliate including, but not limited to: Texas Municipal League Government Finance Officers Association of Texas (GFOAT) Government Finance Officers Association of US and Canada Government Treasurers Association of Texas University of North Texas Texas Tech University Center for Professional Development Unless authorized by state or local laws as provided above, no person may deposit, withdraw, transfer or manage in any other manner the funds of the City of Georgetown. City of Georgetown Investment Policy Page 2 Dec. 16, 2003 Investment Resolution No. 121603-V SECTION 3: INVESTMENT STRATEGIES 3.1 OPERATING FUNDS Operating Funds are defined as cash and investments used for day to day operations that do not fall into one of the other categories. Operating funds will be invested in a manner suitable for funds requiring a high degree of liquidity. Investments of Operating Funds shall be limited to a weighted average maturity no greater than one year, and all investment instruments must meet credit and safety criteria as required by the Public Funds Investment Act and this policy. Involuntary liquidation of Operating Fund investments is unlikely due to their short term nature. However, should a liquidation of investments prior to maturity be necessary, their short term nature will make material losses unlikely. Operating Fund investments will be diverse and include Certificates of Deposit, U.S. treasuries and agencies, investment pools and money market mutual funds. Investment of Operating Funds will be structured to attain the highest possible yield given the liquidity and safety requirements. 3.2 CONTINGENCY RESERVES (or operating reserves) Contingency Reserves are the minimum fund balance/working capital requirements as defined by Council in the Annual Operating Plan. Contingency Reserve balances may be used to cover any cash operating shortfalls due the timing of bond issues, revenue receipts, etc. Investments of these funds may exceed 24 months with prior approval of. the City Manager if short term cash flow needs are not evident. Any one security may not exceed 36 months in maturity length. The weighted average maturity for these funds may not exceed 24 months. Involuntary liquidation of Contingency Reserve investments is unlikely due to their nature. However, should a liquidation of investments prior to maturity be necessary, the comparatively longer term nature of some of the investments could result in material losses depending on financial and economic conditions. Contingency Reserve investments will be diverse and include C.D.'s, U.S. treasuries and agencies, investment pools and money market mutual funds. Investment of Contingency Reserves will be structured to attain the highest possible yield given the liquidity and safety requirements. 3.3 DEBT 3.3.1 Reserves. Debt reserves are defined as bond reserve funds required to be set aside in accordance with bond covenants. The City's bond covenants do not require the City to maintain any reserve funds, therefore, the City investments are not adversely affected by any reserve requirement conditions. 3.3.2 Interest & Sinking (or debt service funds). Interest and sinking funds are defined as those funds accumulated to meet periodic payments required by bond and note maturity schedules. The investment maturities are limited by pertinent debt service requirements and tax laws limiting accumulation and earnings for such funds. Involuntary liquidation of investments is highly unlikely due to the nature of these funds. Interest and sinking fund investments will be diverse and include C.D.'s, U.S. treasuries and agencies, investment pools and money market mutual funds. City of Georgetown Investment Policy Dec. 16, 2003 Investment Resolution No. 121603-V 3.4 BOND PROCEEDS (capital improvement funds) Bond proceed funds are defined as those funds received from the sales of City of Georgetown bonds or notes and not otherwise set aside for debt service or reserve purposes. These funds typically include money to fund infrastructure construction or other large projects. The investment maturities are limited by pertinent project draw requirements and tax laws governing earnings for such funds, but may not have a weiqhted averaqe maturitv in excess of one year, with no single security greater than 24 months, unless a flexible repurchase agreement is used in accordance with Section 4.1.5 of this policy. Involuntary liquidation of investment is highly unlikely. Bond proceed investments will be diverse and include C.D.'s, U.S. treasuries and agencies, investment pools and money market mutual funds. 4.1 ALLOWABLE INVESTMENTS The City of Georgetown funds may be invested in the following instruments: 4.1.1 Certificates of Deposit. Certificates of Deposit issued by the City's Depository/Depositories. All certificates of deposits in excess of the FDIC insured amount must be collateralized as described by Section 2256,009 (a) of the Code. Collateral must be held by a third party and in accordance with Section 5.4 of this policy. 4.1.2 U.S. Treasuries and Agencies. Obligations of the United States of America, its agencies and instrumentalities. 4.1.3 Investment Pools. Investment pools that meet the following criteria: a. An investment pool must provide an offering circular or other similar disclosure instruments and provide monthly and transaction reporting as required by Section 2256.016 of the Texas Government Code. b. Investment in a new pool will require the approval of the City Council. c. A public funds investment pool created to function as a money market mutual fund must (1) mark its portfolio to market daily, (2) include in its investment objectives the maintenance of a stable net asset value of $1 for each share and (3) be continuously rated no lower than AAA or at an equivalent rating by at least one nationally recognized rating service. 4.1.4. Money Market Mutual Funds. No-load money market mutual funds if the fund: a. Is regulated by the Securities and Exchange Commission; b. Marks its portfolio to market daily; c. Includes in its investment objectives the maintenance of a stable net asset value of $1 for each share; d. Has a dollar -weighted average stated maturity of 90 days or fewer; e. Is continuously rated no lower than AAA or at an equivalent rating by at least one nationally recognized rating service. 4.1.5. Repurchase Agreements. Fully collateralized repurchase agreements that: a. Have a defined termination date; b. Are secured by obligations as allowed by the PFIA and this policy; c. Require third party safekeeping of all securities prior to the release of any funds; City of Georgetown Investment Policy Page 4 Dec. 16, 2003 Investment Resolution No. 121603-V d. Are placed through a primary dealer or financial institution doing business in this state; and e. Do not create a reverse repurchase agreement by the City. f. Construction, capital improvement and bond proceed funds may utilize a flexible repurchase agreement that allows expenditure -related withdrawal of funds, without penalty, with an average life and termination date limitation based on the anticipated draw schedule. 4.1.6. Other Investments. Other investments as approved by the City Council and not prohibited by law. 4.2 COMPLIANCE WITH STATE LAW All authorized investments outlined above must meet the requirements of the Public Funds Investment Act, Section 2256 of the Texas Government Code. No investment may be made in any instrument except as provided above. 4.3 CASH ON HAND Cash resources required for the immediate needs of the City and not otherwise available for longer term investment will be placed in checking account(s) at the City's Depository/ Depositories. Such checking account(s) will earn interest at the highest rate(s) provided in the respective depository contract(s). 4.4 LENGTH OF INVESTMENTS The following general constraints will apply. Maturities exceeding 24 months will require authorization by the City Manager, with no single maturity greater than 36 months. Maturities will be staggered to avoid undue concentration of assets in a specific maturity sector and maturities selected will provide for stability of income and reasonable liquidity. In no instance shall the maximum stated maturity be greater than its longest stated debt service requirement unless further restricted in Section 3, Investment Strategies, of this policy; bond covenants or state law. SECTION 5: SAFEKEEPING AND CUSTODY 5.1 AUTHORIZED DEALERS Authorized investments in U.S. treasuries and agencies may be purchased only through brokers/dealers who are licensed and in good standing with the Texas Department of Securities, the Securities Exchange Commission, the National Association of Securities Dealers or other applicable self -regulatory organization. The Investment Officer will maintain a list of approved security broker/dealers selected principally on the basis of evidenced credit worthiness who are authorized to provide investment services. The list is approved and included in Attachment "A" of this policy. Before engaging in investment transactions with a broker/dealer, Investment Pool or Money Market Mutual Fund, the Investment Officer will have received from said firma signed Certification Form. This form will attest that the individual responsible for the City 's account with that firm has received and reviewed the City's Investment Policy and that the brokerage firm has implemented reasonable procedures and controls in an effort to preclude imprudent activities arising out of investment transactions conducted between the City and the brokerage firm. The letter must be signed by a qualified representative as defined by Section 2256.002, of the Texas Government Code. City of Georgetown Investment Policy Page 5 Dec. 16, 2003 Investment Resolution No. 121603-V "Qualified Representative" means a person who holds a position with a business organization who is authorized to act on behalf of the business organization and who is one of the following: (1) a business organization doing business that is regulated by or registered with a securities commission, a person who is registered under the rules of the National Association of Securities Dealers; (2) for a state or federal bank, a savings bank or state or federal credit union, a member of the loan committee for the bank or branch of the bank or a person authorized by corporate resolution to act on behalf of and bind the banking institution; (3) for an investment pool, the person authorized by the elected official or board with authority to administer the activities of the investment pool to sign the written instrument on behalf of the investment pool, or (4) for an investment management firm registered under the Investment Advisers Act of 1940 or, if not subject of registration under the Act, registered with the State Securities Board, a person who is an officer or principal of the investment management firm. 5.2 AUTHORIZED FINANCIAL INSTITUTIONS Certificates of Deposit may be purchased at qualified City depositories. The City must have a written agreement with the qualified depository and that depository must meet all State Law for deposit of public funds. The City's Depository/Depositories will be selected every two years, unless otherwise provided by law. 5.3 INTERNAL CONTROLS All investment transactions will be documented by the Investment Officer, The Investment Officer may make investments orally, but will follow promptly with a written confirmation to the financial institution or broker/ dealer, with a copy of such confirmation retained in the City's files. On investments in U.S. treasuries and agencies, the Investment Officer will take competitive bids. At least two (2) quotations will be taken for each such investment made. Market value of the portfolio and each security will be monitored at least quarterly through industry standard publications/sources for market data such as, but not limited to, The Wail Street Journal. Market value may also be determined through the City's investment software application, which uses industry standard publications/sources for its market data. 5.4 SAFEKEEPING All securities purchased by the City under this policy must be designated as assets of the City, must be conducted on a delivery -versus -payment (DVP) basis, and must be protected through the use of a third -parry custody/safekeeping agent. The City will enter into a formal agreement with an institution of such size and expertise as is necessary to provide the services needed to protect and secure the investment assets of the City. City of Georgetown Investment Policy Dec. 16, 2003 Investment Resolution No. 121603-V 5.5 COLLATERALIZATION To the extent not insured by federal agencies that secure deposits, City of Georgetown funds (including cash on hand and C.D.'S) must be collateralized by collateral securities in compliance with the Texas Public Funds Collateral Act and pertinent federal banking regulations. Only securities proscribed as eligible investments under the Public Funds Investment Act qualify as pledged securities. Securities pledged as collateral must be retained in a third parry bank in the State of Texas in the City's name. The City will be provided the original safekeeping receipt on each pledged security. The City, financial institution, and the safekeeping bank(s) will operate in accordance with a master safekeeping agreement signed by each of the parties. The contract and/or agreement governing the collateral pledge must be approved by the financial institution's board of directors, loan committee, or other designated committee and documented as approved in the minutes of the meeting. The City's Investment Officer must approve in writing the release of collateral prior to its removal from the safekeeping account in accordance with the terms of depository agreement. The financial institution(s) with which the city invests and/or maintains deposits will provide monthly a listing of the collateral pledged to the City marked to current market prices. The listing will include total pledged securities itemized by name, type and description of the security; safekeeping receipt number; par value; current market value; maturity date, if available; and Moody's or Standard & Poor's rating, if available. 6.1 QUARTERLY REPORTING The Investment Officer shall prepare and submit to the Council a quarterly report on investment transactions for all funds covered by this policy. The report will be prepared in compliance with the Public Funds Investment Act, and generally accepted accounting principles. The report will cover the investment position of the City at the end of the each fiscal quarter. The contents will include at a minimum: 1. Beginning, ending and significant changes in market value of the portfolio; 2. Beginning and ending market value and book value, maturity date, type of funds, interest coupon, accrued interest and yield for each separate security; and 3. A statement as to the compliance with this policy and state law. 6.2 ANNUAL REPORTING Within 90 days following the end of the fiscal year, the Investment Officer will present to the City Council a comprehensive annual report on the investment program and investment activity. In addition to the information required for quarterly reporting, the annual report will include a review of the activities and return for the twelve months, suggest policy revisions and improvements that might enhance the investment program, and include an investment plan for the ensuing fiscal year. In order to evaluate portfolio performance of funds subject to this policy, the City of Georgetown portfolio will be compared against appropriately competitive and reasonable benchmarks, including money market mutual funds or investment pools of similar make-up and maturities. City of Georgetown Investment Policy Dec. 16, 2003 Investment Resolution No. 121603-V 6A COMPLIANCE A compliance audit of management controls and adherence to this policy as it relates to the City of Georgetown's investments and investing activity will be performed on an annual basis in conjunction with the City's annual financial audit. SECTION 7: POLICY REVIEW AND AMENDMENTS This investment policy will be reviewed by the City Council of the City of Georgetown on at least an annual basis as required by the Public Funds Investment Act and make amendments as necessary. The Council will review the policy as part of the annual investment report presented by staff. City of Georgetown Investment Policy Dec. 16, 2003 Investment Resolution No. 121603-V CITY OF GEORGETOWN INVESTMENT POLICY Attachment "A" December 16, 2003 Merrill Lynch A.G. Edwards & Son, Inc. UBS Paine Webber, Inc. Morgan Stanley Dean Witter Bank of America Vining Sparks Duncan Williams Pryor, Counts & Co ... '--.. Salomon Smith Barney SW Securities The brokers meet City investment policy requirements of: a) providing a signed certification that the entity has received and reviewed the City's investment policy; and b) certifying the entity is licensed and in good standing with the Securities & Exchange Commission. City of Georgetown Investment Policy Dec. 16, 2003 Investment Resolution No. 121603-V