It is the policy of the city to invest public funds in a manner which will provide the highest investment return with maximum security while meeting the daily cash flow demands of the city and conforming to the Public Funds Investment Act. The receipt of a market rate of return will be secondary to the requirement for safety and liquidity.
(Ordinance 10-4, sec. 1, adopted 4/20/10)
This investment policy applies to all financial assets of the city. The city commingles its funds into one pooled investment fund for efficiency and maximum investment opportunity. These funds are defined in the city’s comprehensive annual financial report and include the general fund and the water/wastewater enterprise fund as well as any new funds created by the city unless specifically exempted from this policy by the city council.
(Ordinance 10-4, sec. 2, adopted 4/20/10)
(a)
Investments shall be made with judgment and care, under circumstances then prevailing, which 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 as well as the probable income to be derived.
(b)
The standard of prudence to be used by the investment officer shall be the “prudent person” standard and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures of the investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security’s credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
(Ordinance 10-4, sec. 3, adopted 4/20/10)
It is the policy of the city that all funds shall be managed and invested with three primary objectives, listed in the order of their priority: safety, liquidity, and yield (return). These objectives encompass:
(1)
Safety of principal.
Safety of principal is the foremost objective of the city. Investments of the city shall be undertaken in a manner that seeks to insure the preservation of capital in the overall portfolio. A diversification strategy is a key element of the city’s investment policy in that it reduces the likelihood of large capital losses attributable to individual securities leading to an overall reduction in the city’s assets. Diversification will be accomplished through the investment in eligible mutual funds which hold a portfolio of individual securities backed by numerous issuers. All mutual fund investments must be insured by the Securities Investor Protection Corporation (SIPC), a nonprofit corporation established by the U.S. Congress.
(2)
Liquidity.
The city’s investment portfolio must remain sufficiently liquid to enable the city to meet all operating requirements which might be reasonably anticipated. Mutual fund investments must allow for electronic transfer of funds on a next-business-day basis and be accessible via the internet.
(3)
Return on investment.
The city’s investment portfolio shall be designed with the objective of attaining a rate of return throughout the budgeting and economic cycles, commensurate with the city’s investment risk constraints and the cash flow characteristics of the portfolio.
(Ordinance 10-4, sec. 4, adopted 4/20/10)
(a)
The city council shall designate by resolution or ordinance the investment officer of the city who is responsible for investment management decisions and activities. The investment officer shall develop and maintain written administrative procedures for the operation of the investment program which are consistent with this investment policy.
(b)
The investment officer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials and staff. The mayor shall serve as interim investment officer in the event circumstances require timely action and the investment officer is not available.
(Ordinance 10-4, sec. 5, adopted 4/20/10)
Officers and employees involved in the investment process shall refrain from personal business activities that could conflict with proper execution of the investment program or which could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the city council any material financial interest in financial institutions that conduct business within this jurisdiction and they shall further disclose any large personal financial/investment positions that could be related to the performance of the city, particularly with regards to the time of purchases and sales.
(Ordinance 10-4, sec. 6, adopted 4/20/10)
The city secretary will maintain a list of financial institutions authorized to provide investment services. In addition, a list will be maintained of approved security brokers/dealers selected by credit worthiness who are authorized to provide investment services in the state. These may include “primary” dealers or regional dealers that qualify under the Securities and Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule). No public deposits shall be made except in a qualified public depository as established by state law. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which the city invests.
(Ordinance 10-4, sec. 7, adopted 4/20/10)
(a)
The city is permitted to invest only in the following subset of eligible investments empowered under The Public Funds Investment Act:
(1)
Obligations of the United States Government or its agencies and instrumentalities;
(2)
Direct obligations of the state or its agencies;
(3)
Other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the state or the United States or their respective agencies and instrumentalities;
(4)
Certificate deposits issued by state and national banks domiciled in the state and collateralized or fully insured by FDIC or US Government Securities;
(5)
SEC registered, no-load money market mutual funds with a dollar weighted average portfolio maturity of 90 days or less whose assets consist exclusively of the U.S. government securities and whose investment objectives include seeking to maintain a stable net asset value of $1 per share.
(6)
Texas Local Government investment pools as defined by the Public Funds Investment Act.
(b)
If additional types of securities are approved for investment by public fund by state statutes, they will not be eligible for investment by the city until this policy has been amended and the amended version approved by the city council.
(Ordinance 10-4, sec. 8, adopted 4/20/10)
Nothing in this policy is to be construed as limiting the city’s rights to acquire real property as authorized under the Local Government Code, chapter 271 or through eminent domain or other authorized methods.
(Ordinance 10-4, sec. 9, adopted 4/20/10)
Each quarter, the investment officer and any employees designated by the investment officer shall prepare and submit to the city council a written report of all investment transactions. The report will include the following information:
(1)
A detailed description of the investment position of the city at the end of the quarter;
(2)
A summary statement of each pooled fund group that states the beginning market value for the quarter, additions and changes to the market value during the period, and ending market value for the period;
(3)
State the book value and market value of each separately invested asset at the beginning and end of the quarter by the type of asset and fund type invested;
(4)
State the maturity date of each separately invested asset that has a maturity date;
(5)
State the fund or pooled group fund for which each individual asset was acquired;
(6)
Demonstrate compliance with the investment strategy established in this policy and by the Public Funds Investment Act. The report should also include the yield on each fund or pooled group fund. This report must be prepared and signed by all investment officers of the city.
(Ordinance 10-4, sec. 10, adopted 4/20/10)