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HomeMy WebLinkAboutRes 2013-04.1 Adopting Investment Policy and StrategiesCity of West University Place Harris County, Texas RESOLUTION NO. 2013 -04.1 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST UNIVERSITY PLACE, TEXAS, ADOPTING THE CITY OF WEST UNIVERSITY PLACE'S INVESTMENT POUCY AND INVESTMENT STRATEGIES IN ACCORDANCE WITH THE PUBLIC FUNDS INVESTMENT ACT; DESIGNATING AN INVESTMENT OFFICER; AND PROVIDING FORTHE EFFECTIVE DATE THEREOF. BE IT RESOLVED BYTHE CITY COUNCIL OFTHE CITY OF WEST UNIVERSITY PLACE, TEXAS: Section I: That the City Council of the City of West University Place, Texas, has reviewed the Citys Investment Policy and Investment Strategies and the policy and strategies adopted in Section 2 hereof records any changes made by the City Council to either such douement. Section 2: That the City Council of the City of West University Place, Texas, hereby adopts the Investment Pdicy, Including the Investment Strategies, of the Cry of West University Place, which is attached hereto as Exhibit °A" and incorporatetl herein for all intents and purposes. Section 3: The City Council of the City of West University Place, Texas, hereby designates these individuals named In Exhibit A 0 to Investment Pdicy as the investment of vials of Me City who are responsible M the investment of the City's funds con6stay with the Investment Pi adopted pursuant to Section 2 of this resolution. Section 4: This resolution shall take effect immediately from and after its passage by the City Council of Me City of West University Place. INTRODUCED, READ ad PASSED, by Me affirmative We of Me City Council of the City of West University Place this the M2 day of April, 2013. g APPOVED: nz, Qty Secretary RL RECOMMENDED: APPROVED AS TO FORM: Michael Ros ,City Manager Alan Petrov, City Attorney CITY OF WEST UNIVERSITY PLACE, TEXAS INVESTMENT POLICY City of West University Place Investment Policy Table of Continue I. Policy IL Purpose BL Scope IV. General Oldectives A. Safety B. Liquidity C. Public Trust D. Yield V. Standards of Care A. Prudence B. Ethics and Conflicts of Interest C. Delegation of Authority D. Training E. Interval Controls VI. Safekeeping and Custody A. Authorized Fireencial Dealers and Institutions B. Competitive Bids C, Delivery vs. Payment VII. Suitableand Autboroedhoestments A. Eligible Investments B. Collituralizanon C. Existing Investments VIIL Investment Parameters A. Diversification B. Maximum Maturines a. Investmervt Strategies X. Reporting A. Methods B. Perfnruance Standards C. Marking m Market EXHIBITS A - Authorzed Investment Officials 4 B- Statement of Eddies and Conflicts of Interest 10 C— Approved BmkerlDealers, Finvmial Inoimtions and Investment Pools 11 D— Certification by Business Organization 12 E— Investrundsuategy 13 City of West Uravera try Place I. Policy It is the policy of the City of West University Place (the "City") in admwister and invest its funds in a manner that will preserve the principal and maintain the liquidity while meeting the daily cash flow requirements of the City The City will conform to all federal, sure and local statutes, rates and regulations governing the investment of the City's funds. The City's policy is to hold investments to maturity: however, securities may be sold in order to minimize the potential loss of principal on a security whose credit quality has declined; to swap into another security which would improve the quality, yield or target duration of the portfolio; or to meet =anticipated liquidity needs of the portfolio. Not less than annually, City Council shdn adopt a written commitment by resolution stating that it has reviewed the Investment Policy and investment strategies and that the written instrument ea adopted shall record any changes made to me investment Policy or Investment strategies. 11. Purpose The purpose of dust policy is to comply with Chapter 2256 of the Texas Government Code ("Public Foods Investment Au "), which requires each entity to adopt a written vestment policy regarding the investment of its foods and fonds trader its control She investment policy addresses Ne methods, pmcedouses and practices that must be exercised to ensure effective and judicious fiscal management f the carry's funds. III. Scope This inves==t policy applies to all financial assets of the City. These funds are counted for in me City's Comprehensive A ®uidFinancial Report and include all financial assets of all funds managed by the City, Including but not limited to tax revenues, charges for services, bond proceeds, interest income, loans and funds received by the City where the City performs' a custodial function. However, this policy does not apply in the assets administered for the benefit of the City by outside agencies under deferred compensation programs or other retirement programs. The City will consolidate cash balances from all foods to maximize Investment eamings, (except as othernise repotted by covenants in bond ordinances, credit agreements as defined in V.T.C.A., Government Cc& ¢ 1391.001 or other applicable regulations). Investment income will be allocated m the various funds based on their respective participation read in accordance with generally accepted accounting Principles. City of West Castors try Place IV. General Objectives The primary objectives, in priority order, of the Cky's investment activities shall be safety, liquidity, and yield: A. Safety — Safety of the principal is the foremost objective of the investment program, Investments shall be undertaken in a moaner that seeks in uce the preservation of capital is the overall portfolio, The objective will beet minimize credit risk and interest rate risk. i. Credit Risk and Concentration of Credit Risk — The City will minimize credit risk, the risk of loss due to the failure of the security, issuer or backer, and cam entztion of credit risk, fire risk of loss attributed to Me magnitude of investment in a single issuer, by: • Limiting investments to me safest types of securities, • Ise qualifying the fieuncial institutions, broker/dealers, mustraredumes, and advisers with which the City will do bus and; • Diversifying the investment portfolio so that potential losses on individual securities will be comindzed. in Interest Rate Risk — The City will manage the risk Mat the market value of securities in the portfolio will fail due in changes M general intuut rates, by: • Structuring the investment portfolio so that securities mature to meet cash regnirwwnents for ongoing operations, thereby voiding the need he sell securities on the open market prior to maturity, • Investing operating funds primmih in shorter -term securities, money market mutual foods, or similar investment pools, and; • Diversify maturities and stagger purchase dates to minimize the impact of market movements over time. B. Liquidity — The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so fast securities marine intrament with cash needs to meet anticipated demands. Furthermore, since all possible cash demands cannot be anticipated, a portion of the portfolio will be invested in money market mutual funds or local government investment pools that offer sameday, liquidity for short -term foods. Additionally, a portion of fae portfolio will consist of securities with active secondary or resale markets. C. Public Trust — All participants in Me City's mveslment process shall seek to act responsibly as custodians of Me public trust. Investment officers City of West University Place shall avoid any transaction that might impair public confidence in the City's ability to graven effectively. D. Yield —The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into amount the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of coming a fair mtwn relative to the risk being assumed. Securities shall not be sold prior m maturity with the following exceptions. • A security with declining credit may be sold early in minimize loss of principal • Liquidity needs of the portfolio require that the security besold V. Standards of Care A. Prudence - The standard of prudence to be used by investing officials shall be the "prudent investor' talc This role state fast'Tnvestments 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 vaament considering the probable safety of their capital as well as the probable income to be derived." The determination of whether an investing official has exercised prudence with respect to an investment decision shall be applied in the context of managing an overall portfolio rather than a consideration as to the prudence of a single investment. Investment officers acting in accordance with written procedures and the investment policy aM exercising sing due diligence shall be relieved of personal responsibility far an individual security's credit risk or mmke[ price changes, provided that deviations from expectations are reported an a timely fashion and appropriate action is taken to control unfavorable developments. B. Ethics and Cooflicus of Interest - Officers and employees involved in the investment process shall refrain from pesonal business activity that could conflict with proper execution and management of the investment program, or that could impair Heir ability in make impartial investment decisions. Employees and investment officials shall disclose to the City any material interests in financial institutions that conduct business with the City. They shall burble disclose my personal formccal/mvestmem positions that could be related to the performance of the invesment Portfolio. (See Exhibit B.) City of West University Place Furthermore, an investment official who has a personal business relationship with an organization seeking to sell an investment to the City shall File a statement disclosing that personal business interest. An vestment official who is related within the second degree by affinity or ruangumity m an individual seeking to sell an investment to the City shall file a statement disclosing drat relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the City Council. Delegation of Authority - Authority to manage the City's investment program is Standard to the Fhand Director, hereinafter referred to as investment allied, and derived from the following: City Charter Arcicie VIE Section 7.01c. Responsibility for the operation of the investment program is hereby delegated w the investment officer, who shall ad w cordamce with established procedures and internal controls for the operation of the investment program consistent with this investment policy. This policy includes explicit delegation of authority to pounds responsible for investment transactions. (See Exhibit A) No person may engage in an investment transaction except as provided under the terms of this Policy and fie procedures established by the invesnnda officer. The investment officer shall be responsible for all transactions undertaken and shall establish a system of coadmis to regulate activities of subordinate officials. D. Training - Investment officials must complete at least 10 hours of anvestment ruining within 12 months of taking office or assuming duties, d shall attend an investment trailing session not less than once in a two year period and receive not less than 10 hours of interaction relating to investment responsibilities. The City shall provide the training through domes and offered by professional organizations and associations In scimitars broom the quality and capability of the City's investment persomml making investment decisions in compliance with Public Funds Investment Ad (PFIA). Professional organizations and associations that may provide investment valuing included the Government Treasurer's Organization of Texas, fie University of North Texas, the Government Finance Officers Association of Texas, or the Texas Municipal @ague. E. Internal Controls - The Finance Direcor is responsible for establishing and maintaining an internal control swemre designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The i to and control stadnre shall be designed to provide reasonable assurance that these objectives we met. The concept of reasonable assuance recognizes that (a) the cost of a demand should oat exceed the benefits likely in be derived and (b) the valuation of costs and benefits requires estimates mod judgments by management. Therefore, the Finance Director shall City of West University Place investment Policy establish a process for annual independent review by or external auditor m assure compliance with policies and procedures. h. Safekeeping and Custody A. Authorized Financial Dealers and kmlibLBons The investment officer will maintain a list of financial inatimtions and security broker/dealers amhodzed to provide investment services (Exhibit O) to the City. This list shall be reviewed, revised as necessary and adopted at least annually. No public deposit shall be made except in a qualified public depository as established by state laws. Those firms that request to become qualified bidders for securities transactions will be required to provide 1) a completed broker/dealer questionnaire (Exhibit D) that provides information regarding creditworthiness, experience and separation, and 2) a certification suing the firm has received, read and understood the Entity's investment policy and agree to comply with We policy. Authorized forms may include primary dealers or regional dealers that qualify under Securities & Exchange Commission Rule 1503 -1 (Uniform Net Capital Rule), and qualified depositories. All investment providers, including financial Institutions, banks, money madras mutual funds, and local government investment parts, must sign a coordination acknowledging that the organization bas received and reviewed the Entity's inveswem policy and that reasonable procedures and controls have been implemented in preclude investment transactions that are not authorized by We Entity's policy. B. Competitive Bids —The City's policy requires competitive bidding for all individual security purchases and sales except for a) univas i as with money market mutual funds and local government investment pools and b) treasury and agency secadties purchased at issue through an approved broker/dealer or financial Institution. C, Delivery vs. Payment —All trades with the exception of investment gaols and mutual fiends will be executed by delivery vs. payment (DVP) W ensure that securities are deposited or an eligible financial institution prior to the unhorse of foods. Securities and wllaterul will be held in the City's me by u thhd -party, custodian as evidenced by safekeeping receipts of the institution with which the securities are deposited V1I. Suitable and Authorized Investments A. Eligible Investments — Assets of the City may be invested in the following instruments described below. All of these investments are authorized by the Public Fund Investment Act. Only those instruments listed in Wig section are authorized. City of West University Place 1. Obligations of line United States of America, its agencies and ins unwitalities 2. Certificates of Deposit issued by a depository institution that has its main office or a branch in Texas. The certificate of deposit must be guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fond or its successor and secured by obligations in a answer and amount as provided by law. In addition, certificates of deposit obtained through a depository institution which are fully collateralized under a pledge agreement approved by the City we authorized investments. 3. No -load Money Market Mutual Funds that 1) we registered and regulated by the Securities and Exchange Commission, 2) have a dollar weighted average stated maturity of 90 days or less. 3) seek to maintain a net asset value of $List per share and 4) we rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service. 4. Local Government Investment Pools, authorized by a separate computer, which meet the requirements of Chapter 2256016 of the Public Funds Investment Act and are rated no lower Wan AAA or an equivalent rating by at least one nationally recognized rating service. B. Collateralization — Collateralization will be required on all funds on deposit with a depository bank, other man in estmests. In order to anticipate marketchauges and provide a level of security total] funds, the eollateradization level will be one hundred two percent (102%) of market value of protected and seemed interest or the deposits, less an amount atsmedbythe FDIC. Securities pledged as collateral will be held an the City's name by an independent third party with whom doe City has a current custodial agreement, The Finance Doe tsar is responsible for entering mm collaterallzation agreements with third party custadisns - in compliance with this Policy. The agreements are to specify the acceptable investment securities for collateral, including pmvisiona reflation to possession f the collateral, me substitution or release of investment securities, ownership of securities, and me method of valuation of securities. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City and retained. Collateral shall be reviewed at least quarterly to assure that themazket value of the pledged securities is adequate. C. Existing Investments; — Any investment ennenty held that does not meet me guidelines of this policy, but were authorized investments at the time of purchase, is not required to be liquidated; however, the City shell take City of West UNvemity Place all pmdant measures consistent with this Investment Policy to liquidate an investment that does not or no longer quakes as an carbonized investment. VIII. Investment Parameters A. Diversification -The investments shall be diversified by security type and Institution. With the exception of U.S. Treasury securities and autlrmized pools, the City will diversify the entire portfolio m comply wit the investment analogy; however, in no case shall any single investment transaction be more than five Percent (5 %) of the entire portfolio. B. Maximum Maturlfies - To the extent possible, the City shall attempt to match its investments with anticipated rush flow requirements. Uidess matched in a specific cash flow, the City will net directly invest in securities maturing more than duce (3) years firm the date of purchase. The composite portfolio will have a weighted average maturity of 365 days or less. This dollar weighted average maturity will be calculated using the stated final maturity dazes of each security. M Investment Strategies The City mountains separate port olicas for individual funds or groups of foods that are managed according to the terms of this Policy and the corresponding invention strategies listed in Exhibit E'`` The investment strategy for portfolios established after the annual Investment Policy review and adoption will be managed in accordance with the terms of this Policy and applicable agreements until the next annual review when a specific strategy will be adopted. The City maintains a pealed fund group that is an aggregation of the majority of City foods including tax receipts, enterprise fiord revenues, fine and fee revenues, as well as some, but not all, bond proceeds, and grants. This portfolio is maintained to meet anticipated daily cash needs for City operations, capital projects and debt service. In order to ensure tlm ability of the City to meet obligations and to minimize pourniinl liquidation losses, the dollar weighted average stated maturity of the invention portfolio shall not exceed one (1) you. The objectives of this portfolio are to msure safety of principal; ensure adequate investment liquidity; limit market and credit risk through diversification; and attain the best feasible yield in accordance with the objectives and restrictiom set for in this Policy. City of West Univers iry Place R. Reporting A. Methods - The investment officer shall prepare an investment report at least quarterly, including a management .summary that provides an analysis of the status of the current investment portfolio and transactions made over the last quarter. This management stationary will be prepared inamor er consistent with fie requirement of Section 2256.023 (Internal Management Reports) of due PFIA, and that will allow the City to ascertain whether investment activities timing late reporting period have conformed to the investment policy. The report should be provided to the City Council. At independent auditor shall formally review the quarterly reports prepared under this section at least annually, and that auditor shall report the results of the review to City Council B. Performance Standards - The investment portfolio shall be managed in accordance with the objectives specified in this policy (safety, liquidity, and yield). The portfolio should obtain a market average ante of rearm during a markereconomic environment of stable interest Yates. The vestment officer shall determine whether makes yields are being achieved by comparing the portfolio market yield to the time (S) month U.S. Treasury Bill, the six (6) month U S. Treasury Bill and the two (2) yen U.S. Treasury Note. C. Marking b Market - The market value of the portfolio shall be calculated at least monthly and a statement of the market value of the portfolio shall be issued at least quauerly. The market value of each vestment shall be obtained from a such as due Wall Street Journal, a reputable brokerage firm or security pricing service and repeated on the investment reports. City of West University Place EME[In A City or West University Place Authorized Investment Officials Rhonda Daugherty, CPA, Finance Director Renee Dobbs, Treasurer City of West University Place EXffiEITB City of West University Place Statement of Ethics and Conflicts of Interest Investment officials for the City of West University Place shall refrain from per mml business relationships seem business organizations that could conduct was the proper execution of the vestment program, o which could impair then ability to make pattial Investment decisions. This would only apply to personal business relationships with business organizations that have been approved by City Council to conduct investment transactions with the City of Wen University Place. An Investment official Is considered to have a personal business relationship with a business ingan zzoon if (D The investment official owns 10 percent or more of the voting stook or shares of the business organization or owns 55,000 or more of the fah contest value of the business. f2) Funds received by the movement official from me business organization exceed 10 Damon of the investment official's gross income for the previous year. (9) The investment official has acquired from the business ofganization during me previous year investments with a bank value of $2.500 or more for the personal account of the investment official. I do hereby cmIdy that I do not have a personal business relationship with any business organization approved to conduct investment transactions wffi the City of Wen University Place, nor am I related within the second degree by affinity or consanguinity, as determined under Chapter SYi, to an individual seeking to sell an Investment to the City of West University Place as of the date of this musics . City of West University Place investment Officials Rhonda Daugheny, CPA, Finance Director Dar Renew Dobbs, Treasurer Date LaToya Jasper, Controller Date City of West University Place EXHIBIT C City of West University Place Approved BrokerMealers, Financial Institutions and Investment Pools Brok rMatalers Coastal Securities Fast Southwest Company Public Depositories 1P Marean Chare, NA (Primary) Investment Pools TexPOUI City of West University Place Inveswent Policy EXFIBIT B City of West University Place Certitirat3ou by Business Organization Idmel City of West University Place, Texas (Arm' Dexignartd/nvesrminr mid) 38W University Blvd. West University Plane, TX 97W5 Dear Moe (Investmenr Wiese): This certification is executed on behalf of the City of West University Place, Texas (Me Investor) and (Me Business Organization), pmmiam to the prMlir. Flmds Investment Act, Chapter P25fi, Texas Onvemment fudr.. (the Act) in connection with investment transactions conducted between the Investor and Business Organization. The undersigned Registered Principal of the Business Organization hereby certifies on behalf of the Business Organization Mat I. The undersigned is a Registeel Principal of the Business Organization offering to enter an investment transaction with the Investor (Note as such terms are used in the Public Funds Investment Act, chapter 2256, Texas local (lovemment Cade) and; 2. The Registered principal of Me Business Organization has received and reviewed the Investment Policy rumished by Me Investor and 3. The Registered Principal of Me Business Organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the Business Organization and Me Investor Mat are not authorized by Me Investor's vestment policy, except to the extent that Nis authorization is dependent on an analysis of Me makeup of the Investor's entire poAfollo or requires and interpretation of Me subjective investment standards. Registered Principal Broker Assigned to the Account Primed Name Tide Date City of West University Place EXHIBIT E INVESTMENT STRATEGY The City of West University's investment portfolio will be designed and managed to sure that it will meet all the requirements established by the City of West University's vestment polity and the Public Foods Investment Ad. The overall investment strategy outlined in the investment policy has been fuller refined to this investment strategy statement by the following had types. Operating Funds: Operating Funds generally have greater cash Flow needs than other hands types. The operating fund portfolio may consist of any approved investment type wild the understanding that the f anmal requirements of the operating foods will dictate the maturity dales of the investment. At utmost importance is rue preservation and safety of the investment principal. Additionally each investment will be viewed for its liquidity and marketability of the investment if the need arises to liquidate the investment before maturity. The final determining famous for the investment strategy will be the diversification of the investment portfolio and the yield of the investment. To achieve shoo unit needs of one (1) to one hundred and eighty (180) days, funds will be invested in approved investment pools. For longer term needs of six (6) months to five (5) years, funds will be invested In approved investments with objectives prorit ed as follows: 1) understanding the suitability of the investment to the financial requirements of the City of West University Place 2) preservation and safety of principal; 3) liquidity; 4) marketability of the investment if the need arises to liquidate the investment before maturity; 5) diversifiaationoftheinvestmentpodfolio ;and 6) yield. City of West University Place (Confimued) Debt Service [hands: The debt service requirement m am usually semi- aual. thus allowing the vestment strategy m minor debt obligation payment dates. The strategy for debt smite finds allows greater flexibility since the actual requirements are known into the future. Investments will still meet the adopted policies; however, planning maturity dates to match debt requirement dates will be the primary objective. The investment instruments will be primarily in approved investment types with minorities at six or twelve months established to match debt requirement dates. Shorter -tetra investment may be used m meet these objectives and longer -term vestmerts may be used when fund balance reserves exceed one year's debt service requirements. To achieve this strategy, the following. objectives are prioritized to evaluate investment opportunities: 1) understanding the suitability of the investru nt to the financial requirements of the City of West University Place; 2) preservation and safety of principal; 3) yield; 4) marketability, of the investment if the need mises to liquidam the investment before maturity. 5) diversification of the investment portfolio; and 6) liquidity . 14 City of West University Place INVESTMENT STRATEGY (Continued) Capital Improvement Spuds: Bond proceeds can be invested over the life of the project; however, the exact disbursement of the funds u not always known. The investment objective of the capital improvement fund is to schedule maturities to maximize investment earnings while preserving principle. The key to an effective strategy is to be aware of the project needs and match mammies to the period funds are needed. The investment objective for capital projects funds is still m match investment maturities with funding needs. As shin -teen needs are mimmizN investment maturities will be moved into approved investment pools to meet financial requirements, Longer brat needs will be invested with the following objectives as Prioritized for capital improvement fwd: 1) wders ambing the solubility of the investment to the fimncial requirements of the City of West University Place; 2) preservation and safety of principal: 3) diversification of the investment pin folio; 4) yield; 5) liquidity; and 6) marketability of the investment if the need arises to liquidate the investment before maturity. City of West University Place INVESTMENT STRATEGY (Confinoed) Reserve Funds: Certain reserve funds have been established as required by bond covenants. The vestment objective is to invest reserve funds to the extent that maturities are established to the limit of the Investment policy or to the road of the bond requirements whichever is shatter. The v erall investment strategy for reserve fonds will not rely o vestment facts; however, W use of pools is not prohibited. longer-term investment objectives me prioritized as follows: 1) undrostanding the suitability of the investment to the financial requirements of the City of West University Place; 2) diversification of the investment portfolio; 3) preservation and safety of principal; 4) yield; bj liquidity; and 6) mzdtetability of the investment if the need arises m liquidate the investment before mamrdy.