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HomeMy WebLinkAbout2013 Investment PolicyCITY OF WEST UNIVERSITY PLACE, TEXAS INVESTMENT POLICY City of West University Place Investment Policy Table of Contents 1. Policy II. Purpose M. scope N. General Objectives A. Safety B. Liquidity C. Public Trust D. Yield V. Stendardsof Care A. Prudence B. Ethics and Conflicts of Interest C. Delegation of Anthony D. Training E. Internal Controls VL Safekeeping and Custody A. Authorized Financial Dealers and Institutions B. Competitive Bids C. Delivery vs. Payment VD. Suitable and Authorized Investments A- Eligible Im^eslmems B. Conatmilization C. Existing Investments Val. Investment Parameters A. Diversification B. Maximum Maturities ix. Investmentstrategies X. Repotting A. Methods B. Pertonnance Standards C. Markingto Market f. 1: A- Authorized Investment Officials 9 B - Statement of Ethics and Conflicts of Interest to C— Approved Broker/ Dealers, Im andal Institutions and Investment Pools I I D —Ce tificatom by Business Organization 12 B— investment strategy 13 City of West University Place I. Policy It is the policy of the City of West University Plate (the "City") to administer and vest its funds in a main then will preserve the principal and maintain the liquidity while meeting the daily cash Row requirements of the City. The City will common to A] federal, state and local routines, miles and regulations governing the investment of the City's finds, The City's policy is to hold investments to maturity; however, securities may be sold in order to minimize the potential loss of principal our a security whose credit quality has declined; to swap into another security which would improve me quality, yield or target duration of fire portfolio; or to meet unanticipated liquidity needs of the Profiles Not less than annually, City Council shall adopt a written instrument by resolution stating that it has reviewed the Investment Policy ardi investment strategies and Nat the written instrument to adopted shall record any chmtges made to the Investment Policy or investment strategies. II. Purpose The propose of this policy is to comply with Chapter 2256 of the Texas Government Code ("Public Funds Investment AcC), which requites each crafty, to adopt a written vestment policy regarding the investment of its fords and funds under its control. The investment policy addresses Ne meWOds, procedures and practices that must be IXPKIaed to emare effective and judicious fiscal arrangement of Ne entity's fiords. UI. Scope This investment policy applies to all financial assets of me City. These foods are accounted for in the City's Comprehensive Annual Financial Report and include all financial assets of all funds managed by the City, including but not Rrtd[ed to tax revenues, charges for services, bond proceeds, interest income, loans and foods convivial by the City where the City performs a custodial function. However, this policy does not apply to fire assets administered for the benefit of me City by outside agencies under deferred compensation programs or other retirement programs. The City will consolidate cash balances from at[ fuels to namannize investment earnings, (except as otherwise required by cavernous in bond ord trances, credit agreemem as defined in V.T.CA., Government Code ¢ 1391001 or otter applicable regulations). Investment income will be allocated to me various funds based on their respective participation and in accordance with generally accepted accounting principles. City of West University Place W. General Objectives The primary objectives, in priority order, of the City's awcomeant activities shall be safety, liquidity, and yield: A. Safet y — Saddy of fire principal is the foremost objective of the investment program. Investments shall be undertaken in a maater that seeks to ensure the preservation of capital in me overall portfolio. The objective will be to minimize credit risk and interest rate risk. Credit Risk and Concentration of Credit Rink — The City will minimize credit disk, the risk of loss due to the failure of the security issuer or backer, and concentration of credit risk, the risk of loss attributed to the magnitude of investment in a single issuer, by: Limiting InveslmrnU to the saksl types of scarifics, • Prequalifying the financial institutions, broker /dealers, intermediaries, and advisers with which the City will do business, and; • Diversifying the investment portfolio so that painting losses on individual securities will be minimized. ii. Interest Rate Risk— The City will manage me risk that the market value of securities in the portfolio will fail due to changes in general interest rates, by: • Structuring the investment portfolio so that securities mature to meet cash requirements fun ongoing operations, thereby voiding the need to sell securities on the open market prior to maturity. • Investing operating funds primarily in shorter -terra securties, money market mutual funds, or similar investment pools, and; Diversify matmities and stagger purchase dates to minimize me • impact of market movements over fire. R. Liquidity — The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by stmauting the portfolio so that securities mmme concurrent with cash needs to meet anticipated demands. Furthermore, since all posvible cash demands cannon be anticipated, a portion of the portfolio will be invested in money mmket mutual fulls or local government investment pools that offer someday liquidity for short-term funds. Additionally, a portion of the portfolio will consist of securities with stove secondary or reside markets. C. Nblic Trust— All participants in the City's investment process shall seek to act responsibly as custodians of die public true. Investment officers City of WestOnivemity Place Investment Poliev shall avoid any transaction that might impair public confidence in the City's ability to govern effectively. Yield — The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account 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 limits in relatively low risk securities in anticipation of earning a fair ream celifivetotheriskbeingassumed. Secvriries shall notbe sold prior to maturity, with the following exceptions: • A security with derdmmg credit maybe sold early m minimize loss of principal • Liquidity needs of the portfolio require that the security be sold V. Standards of Care A. Prudence - The standard of p udenee to be used by investing officials shall he the 'prudent inverter" cola This rule states that "Investments shall be made with judgment and c under circumstances then prevailing, which persons of prudence, discrefion and intelligence exercise in the management of flick own affairs, not for speculation, but for investment, 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 vestment decision shall be applied in the context of managing an overall portfolio tither than a comidwetion as to the prudence of a single investment Investment officers acting in accordance with written procedures and the vestment policy and exercising due diligence shall be relieved of personal responsibility for as individual security's credit risk or market price changes, provided that deviations from expectations are reported in a purely fashion and appropriate action is taken to control unfavorable developments. B. Ethics and Conflicts of Interest - Officers and employees involved in the investment process shall refrain it= personal business activity that could coNlict with proper execution and management of the investment program, or that could impair their ability to make impattial investment decisions. Employees and investment officials shall disclose to the City any material Interests of financial instinu ens that conduct business with the City. They shall father disclose any personal financial /investment positions that could be related to the performance of the investment portfolio. (See Exhibit B.) City of Wait University Plain 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 investment official who is related within are second degree by affinity or consanguinity to an individual seeking to sell an m vestment w the city shall file a statement disclosing that 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 granted to the Finance Dhaetoa hereinafter referred to as vestment officer, and derived from the following: City Charier Article V4 Section yday Responsibility delegated to h for the operation of who investment in program is hereby delegated to the investment officer, who shall as N acwrdans with envest hed procedures and internal controls for the operation of rise investment pogrom comiatent with this investment policy. This policy includes explicit delegation of authority to person engage responsible a for investment transactions. (See Exhibit u No person may engage in a investment transaction except y Provided undo the trews of Ws policy and me procedures responsible by the thvestmentdemake The vestment officer s shall be responsible for all teractiviom undertaken and shall establish a system of connote m regulate activities of subordinate officials. D- Training - Investment officials most complete at least 10 hours of vestment training within 12 months of taking office or assuming duties, and shall attend an investment training session not leas than once in a two year period and receive not less Nan 10 hours of instruction relating to Investment responsibilities. The City shall provide the trotting though courses deal seminars offered by professional organizations and associations in order to aware the quality and capability of the City's vestment personnel making investment dadsims in compliance with Public Foods investment Act (PFIA). Professional organilatioro and associaticard that may provide investment training included the Government Treasurer's Organization of Texas, the University of North Texas, the Government Finance Officers Association of Texas, or fire Texas Municipal league E. Internal Controls - The Finanw Director is responsible for establishing and maintaining m Ntemal control structure designed to ensure that the assets of the entity are protected from loss, theft, or misuse. The internal conewl structure shall be designed to provide reasonable assurance that these objectives are met The concept of reasonable assurance recognizes that (a) the cost of a control should not exceed the benefits likely to be derived and (b) the valuation of costs and benefits requhe a estimates and judgments by management. Therefore, the Finance Director shall City Of West University Place Investment Policy establish a process for demand independent review by an external audit to assure compliance with policies and procedures, V[. Safekeeping and Caudally A. Authorized Financial Dealers and Institutions The investment officer will maintain a list of financial institutions and security broker /dealers authorized to provide investment services (Exhibit C) to the City. This list shall be reviewed. revised as necessary and adopted a least annually. No public deposit shall be made except in a qualified public depository as established by state laws. Those firms Nat request to become qualified bidders for securities transactions will be required m provide t) a completed brokeddealer questiontmhe (Exhibit D) Nat provides information regarding creditworthiness, experience and reputation, and 2) a certification stating the firm has received, read and understood the Entity's investment policy and agree an comply with the policy. Authorized firms may include primary dealers or regional dealers Nat qualify under Securities & Exchange Commission Role 15031 (Uniform Net Capital Rule), and qualified depositories. All investment providers, including financial institutions, banks, money market mutual funds, and local government investment pools, must sign a cens ication acknowledging that the organization has received and reviewed the Emily's Nveswent policy and that reasonable procedures arW controls have been implemented to produde investment transactions that are not authorized by me Entity's policy. B. Competitive Bids -The City's policy requires comparative bidding for all individual secondly purchases and sales except for a) transactions wit money nomad mutual funds and local government investment pools arm If treasury and agency securities purchased at issue through an approved bmkeddealr or financial institution. C. Delivery vs. Payment -All trades with the exception of investment pools and mutual funds will be executed by delivery vs. payment ()VP) to create that securities are deposited in an eligible f ancial institution prior W me release of funds Securities and collateral will be held in due City's me by a Wed -party custodian as evidenced by safekeeping receipts of the institution wif which me securities are deposited. VII. Suitable and Authorised Investments A. Eligible Investments - Assets of the City may be invested in the following instruments described below. All of these investments we authorized by the Public Funds Investment Act. Only Nose instruments hur d In fie section are abandoned. City of west University Place Investment Poliev 1. Obligations of the United States of America, its agencies and instrumentalities 2. Certificates of Deposit issued by a depository institution that has its m office or a branch in Texas. The cenificate of deposit must be guaranteed or insured by the Federal Deposit Insurance Corporation or its successor or floe National Credit Union Share hemance Fund 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 wder a pledge agreement approved by the City use authorized investments. 3. No -load Money Market Mutual Funds that 1) are registered and regulated by the Securities and Exchange Commission, 2) have a dollar weighted average staled maturity of 90 days or less. 3) seek to maintain a net asset value of $1.00. per share and 4) are rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service. 4. Focal Government Investment Pools, authorized by a separate resolution, which meet the requirements of Chapter 2256.016 of the Public Fund, Investment Act and are rated no lower than AAA or an equivalent rating by at leant one nationally recognized rating service. B. Collateralizstion — Collasselization will be required on all funds on deposit with a depositary back, other thin investments. In order ta anticipate market changes and provide a level of security for all foods, the collateralization level will be one hundred two percent (102'%) of marker value of principal and acemed interest on the deposits, less an amount burned by the FDIC. Securities pledged as collateral will be held in the City's name by an independent third party with whom the City has a current custodial agreement. The Finance Dir«tar is responsible for entering into collateratization agreements with third party custodians in compliance with this Policy. The agreements we to specify the acceptable investment examines for collateral, including provisions mdation to Possession f the collateral, the substitution or release of investment securities, ownership of cooties, and the 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 the market value of the pledged securities is adequate C. Existing Investments —Any investment correctly held that does not meet the guidelines of this policy, but were authorized investments at the time of purchase, is not required to be liquidated; however. the City shall one City of West University Place all prudent measures consistent with this hivestment Policy to liquidate an vestment that does not or no longer qualifies as an authorized mvestment. UIL Investment Parameters A. Diversification - The investments shall be diversified by security type and histimtlon. With the exception of U.S. Treasury securities and authorized pools, the City will diversify the entire portfolio to comply with to investment strategy; however, in no use shall any single investment narrowing be more Nan five percent (5%) of the entire pouf slio. B. Maximum Maturities - To she extent possible, due City shall attempt to match its investments with anticipated each flow requirements. Unless inewbed m a specific cash flow, the City will not directly invest in securities maturing more then three (3) years from 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 Mal maturity dates of each security. M Investment Strategies The City maintains separate portfolios for individual funds or groups of funds that are managed according to the terms of Nis Policy and she corresponding vestment strategies listed in Exhibit E The investment strategy for portfolios established after the annual hivestraenu Policy review and adopMn 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 pooled fund group that is an aggregation of the majority of City fulls including tax receipts, enterprise fund revenues, fine and fee revenues, a s well as some, but not all, bond proceed, and grants. This portfolio is malntalned to meet anticipated daily cash needs for City operations, capital projects and debt service, In order to ensure the ability of the City to meet obligations and to minimize potential liquidation losses, the dollar- weighted average stated maturity of the investment portfolio shall not leered one (1) year. The objectives of this portfolio are to ensure safety of Principal; ensure adequate investment liquidity; limit market and credit risk Nrough diversification; and attain the best feasible yield in accordance with the objectives and connections set for in this Policy. City of West University Place X. Reporting A. Methods — The investment offices shall prepare an investment report at least quarterly, including a management summary that provides an analysis of file stairs of the current investment portfolio and transactions made over We last quarter This management summary will be prepared in a warmer consistent with due requirements of Section 2256 -023 (internal Management Reports) investment nt PPIA, and timing will allow, the City m that communist whether iwstmentt activities during Ne should breporting period have City Coon to the investment polity. The report should be provided to the City Council. im independent auditor shall formally review the quarterly reports prepared under this section at least manually, and that auditor shall report the results of the review to City Council. B. Performance Standards — The investment portfolio shall be managed in metrical with fire objectives specified an this policy (safety, liquidity, and yield). The portfolio should obtam a market average rate of return during a marketleconomic environment of stable interest rates. The investment officer shall determine whether almost yields are being achieved by comparing the portfolio market yield to the three (3) month U.S. Treasury Bill, the six (6) month U.S. Treasury Bill and the two (2) year U.S. Treasury Note. C, Marking to Market — The market value of fire portfolio shall be calculated at least monthly and a statement of the market value of the portfolio shall be issued at least quarterly. The market value of each vestment shall be obtained from a source such as Ne Wall Snen Journal, a reputable brokerage firm or security pricing service and repotted on 0e investment repcnas. City of West University Place EXHIBIT A City of West University Place Authorizes] Investment Officials Rhonda Daugherty, CPA, Finance Director Renea Dobbs, Trersmer City of West University Place Investment Policy EXMIT B City of West University Place Statement of Ethics and Conflict of Interest Inwstnmeut officials for me City of West University Haw shall refrain Drum personal business relationships with business organizations that could conflict with due proper execution of the vestment pregam, or which could import their ability to make partial investment decisions. This would only apply to Forecast business relationships with business organ cations that have been approved by City Council to conduct investment transactions with the City of West University Plan. An investment official is considered to have a personal business relationship with a business organization if. (1) The invesment official owns 10 percent or more of the come stock or shams of the business unitarianism or owns $5.000 or more of the fair market value of the business. (2) Funds received by the investment official been the business organiaatim exceed 10 percent of the investment official's gross income for the previous year (3) The Investment official has acquired from the business organization during the previous year investments with a book value of $2.500 or more for the personal account of the investment official I do hereby certify that I do not have a Personal business relationship with any business organization approved to conduct investment uanmections with the City of West University Place, nor m I related within the second degree by affinity or consanguinity, as determined under Chapter 593, to an individual mocking in sell an investment to the City of West University Place as of the date of Pis statement, City of West University Place Investment Officials Rhonda Daugherty, CPA, Finance Director Dow Renee Dobbs. Treasurer Date JaTOya Jasper, Compeller Date City of West Carvers. ity Place EXIDBIT C City of West University Place Approved Broker/Dealers, Financial Institutions and Investment Pools Brokrs/Dealem Coastal Securities First Southwest Company Public Depositories JP Morgan Chase., NA (Primary) Investment Pools TexPool City of West University Place Investment Policy EXHIBIT D City of West University Place Certification by Business Organization (dame) City of West University Place, Texas (Atfn: Designated investment oficla) 380OUnivenity Bivd. Wes[University Place,TX 79005 Tarr Mtls.(investmenr official) This certification is executed on behalf of Inc City of West University Place, Texas (the Investor) and (the Business Organization), pursuant N tee Public Foods Investment Act, Chapter 2256. Texas Government Cade. (the Act) in erection with tnvestment transactions conducted between the Investor and Business Organization. The undersigned Registered Principal of the Business Organization hereby coatings on behalf of the Business Organization that I. no undersigned is a Registered Principal of the Business Organisation offering to enter an investment transaction with tee Investor (Note: as such terms are used in the Public Funds Investment ArL chapter 2256, Texas local Government Code) and; 2. The Registered Principal of the Business Organization has received and reviewed the InvestmrotPolicy fumisMA by the Investor and; 3. The Registered Principal of tee Business Organization has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the Business Organization and the Investor that are not authorized by the Investor's vestment policy, except to the extent Nat this i mhndva0 m Is dependent on an analysis of the makeup of the investor's entire portfolio or requires and interpretation of the subjective investment standards, Registered Principal Broker Amigtxd belie Account Signed By: Printed Name Tandy 6e4 City of West University Place EXHIBIT E INIWSTi11EMI SMAMGY The City of West University's investment portfolio will be designed and managed to ensure flat It will meet all the requirements established by the City of West University's vestment policy and den Public Prods investment Act The overall investment strategy outlined in the investment policy has been further refined in this investment strategy statement by the following fund types. Operating Funds: Operating Fonds generally have greater rash Bow needs man other funds types. The operating fund pndfolio may consist of any approved investment type with the under.anding that the financial requirements of the operating funds will dictate the maturity dates of the investment. At utmost imponmce iz the preservation and safety of the Invesunent principal. Additionally each investment will be viewed for its liquidity and merkeability of the itivemment if the need arises to liquidate the investment before matnity. The final determining factors for the investment strategy will be the diversification of the investment portfolio and the yield of the investment. To achieve short man needs of one (1) to one hundred and eighty (180) days, fonds will be invested in approved investment pools. For longer term needs of six (6) months to five (5) years, lands will be Invested in approved investments with objectives prioritized 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 We need mines to liquidate this investment before maturity; S) diversiicationofthemvestmentp tifolio;and 6) yield. City of West University Place (Continued) Debt Service nods: The debt service requirements are usually semi annual. thus allowing the investment strategy to mirror debt obligation payment dazes. The strategy for debt service funds allows greater flexibility since the actual requirements are known into the future. fir estmwts 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 matunties at six or twelve months established to match debt requbement date.. Shearer lend investment may be used to meet these objectives and baler -term investments may be used when fired balance reserves exceed one year's debt service requirements. To achieve this strategy fire followings objectives are prioritized in evaluate investment opportunities: 1) understanding the suitability of the investment to the financial requirement of the City of West University Place; 2) preservation adi safety of principal; 3) yield; 4) marketability of the investment if the need arises to liquidate the investment before maturity; 5) diversification of the investment portfolio; aM b) liquidity. City of West University Place IN{'ESTNIENT STRATEGY (Continued) Capital Improvement Funds: Bond towards can be invested over the life of the project; however, the exact disbursement of the funds is not alwnys known The investmrnt objective of the capital Improvement fords is to schedule minorities to newribroze investment earnings wbile Preserving principle. The key to an effective strategy is to be aware of the project needs and match matmlum to the period fiords are needed. The imedment objective for capital projects funds is still to match investmrnt matttdtie. wilb funding needs. As shop -term needs are recognized investment maturities will be moved into approved Investment pools to meet financial requirements. Longer -term needs will be invested with the following objectives as primitaed for capital hnpmvemern funds: q wdestmtding due suitability, of the investment o doe financial requirements of the City of West University Place; 'L) Preservation and safety of principal; 3) diversification of the investment portfolio; 4) yield; 5) liquidity; said 6) markerability of the Investment if the need arises to liquidate the investment before maturity. City of West University Place INVESTMENT STRATEGY (Continued) Reserve Funds: Certain eeserve funds have been established as required by bond covenants. The vestment objective is to invest reserve foods to the extent that maturities we established to Ne limit of the investment policy or to the end of the bond requirements whichever is shorter. The overall investment strategy for reserve fonds will not rely on investment pools; however, the use of pools is not prohibited. Unger term investment objectives are prioritized as follows: 1) understanding the suitability of the investment to the financial requirements of the City of West University Place; 2) diversification of the investmentponfolio; 3) preservation and safety of principal; 4) yield; 5) liquidity; and 6) marketability of the investment if the need arises to liquidate the mvestment before maturity.