Loading...
10 - City Investment PolicyItem No. 10 TO: Mayor, Mayor Pro Tem, & City Council Grayson Path, City Manager FROM: Gene Anderson, Finance Director SUBJECT: CITY INVESTMENT POLICY 2022 DATE: January 24, 2022 BACKGROUND: As required under the Local Government Code Section 2256.005, the City has a written investment policy. The policy serves as a guide regarding investment objectives and strategies. The policy addresses issues such as policy scope, prudence, training, conflicts of interest, suitable investments, collateralization, diversification, and reporting. STATUS OF ISSUE: The investment policy states that annually the City Council will review and re -adopt the investment policy approving any changes. There are no proposed changes to the policy for the 2022 year except for updating the funds covered by the policy. The policy complies with Chapter 2256 of the Local Government Code also known as the Public Funds Investment Act. BUDGET: Not affected by this policy. RECOMMENDATION: Motion to adopt the City investment policy as submitted. INVESTMENT POLICY January 2022 1.0 POLICY AND INVESTMENT STRATEGY It is the policy of the City of Paris to invest public funds in a manner which will provide first: safety of principal, second: liquidity, and third: return on investment consistent with the need for safety and liquidity, fourth: meet the daily cash flow demands of the entity, and fifth: conform to all state and local statues governing the investment of public funds, including but not limited to, the Public Funds Investment Act, Chapter 2256, Local Government Code. Investment strategies for operating funds have as their primary objective to assure that anticipated flows are matched with adequate investment liquidity. The secondary objective is to create a portfolio structure which will experience minimal volatility during economic cycles. This may be accomplished by purchasing high quality, short to medium securities which will complement each other in a laddered maturity structure. The dollar weighted average maturity target will be two years or less. Investment strategies for debt service funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date. Securities purchased shall not have a stated final maturity which exceeds the debt service payment date. Investment strategies for debt service reserve funds shall have as the primary objective the ability to generate a dependable revenue stream to the appropriate debt service fund from securities with a low degree of volatility. Securities should be of high quality and consistent with bond ordinance requirements. Short to medium maturities generally meet these requirements. Investment strategies for special projects or special purpose funds will have as their primary objective to assure that anticipated cash flows are matched with adequate investment liquidity. The stated final maturity dates of securities held should not exceed the estimated project or purpose completion date. 2.0 SCOPE This investment policy applies to the funds listed below. These funds are accounted for in the City's Comprehensive Annual Financial Report. 2.1 Consolidated Cash Funds 2.1.01 General Fund 2.1.03 Cox Field Airport Fund 2.1.04 American Rescue Plan Act Fund 2.1.05 Coronavirus Relief Fund 2.1.06 Tax & Rev CO 2021Construction Fund 2.1.07 COP Evidence Fund 2.1.08 COP Housing Foundation Fund 2.1.10 Water and Sewer Fund 2.1.11 Capital Projects Fund 2.1.12 Main Street Events Fund 2.1.13 Equipment Replacement Fund 2.1.16 TWDB Loan Fund 2.1.17 Main Street Advisory Bd Fund 2.1.18 Main Street BIG Fund 2.1.19 Vacant Building Reg. Fund 2.1.20 Mun. Ct. Local Traffic Fee Fund 2.1.21 Child Safety Fund 2.1.22 Local Truancy & Prevention Fund 2.1.23 PEG Channel Fund 2.1.24 Lake Crook Park Restoration Fund 2.1.25 Grant Fund 2.1.26 Mun. Ct. Jury Fund 2.1.27 Water Contract Fund 2.1.28 Parks Donations 2.1.29 Passing School Bus Fund 2.1.30 Community Development Fund 2.1.31 State Consolidated Fee Fund 2.1.32 Auto Theft Program Fund 2.1.33 Municipal Court Technology Fund 2.1.34 Municipal Court Security Fund 2.1.35 Municipal Court Child Safety Fund 2.1.36 Municipal Court Time Payment Fund 2.1.37 Police Confiscated Funds -Gambling 2.1.38 Police Judicial Forfeitures Fund 2.1.39 Equitable Sharing Forfeitures 2.1.40 Special Purpose Grants -HOT Fund 2.1.41 Grand Theater Donations Fund 2.1.44 GO Bonds 2016 Construction Fund 2.1.45 Sanitation Fund 2.1.46 GO Bonds 2017 Construction Fund 2.1.47 GO Bonds 2018 Construction Fund 2.1.49 Civic Center Construction Fund 2.1.50 W&S Revenue Bond Reserve Fund 2.1.51 TWDB I & S Fund 2.1.53 2010 Tax & Revenue I&S Fund 2.1.59 2010 GO/W&S Refunding Bonds I&S Fund 2.1.60 2012 GO Refunding Bonds I&S Fund 2.1.61 Interlocal Cooperative Agreement I&S Fund 2.1.62 GO Bonds 2013 I&S Fund 2.1.63 GO Bonds 2016 I&S Fund 2.1.64 GO Bonds 2017 I&S Fund 2.1.65 GO Bonds 2018 I&S Fund 2.1.66 GO Bonds 2018 Const. Fund 2.1.67 Hotel Tax I&S Fund 2.1.68 Tax Note Series 2020 I&S Fund 2.1.69 Tax & Rev CO 2021 I&S Fund 2.1.72 Library Memorial Fund 2.1.79 Library Expendable Fund 2.1.80 Library Permanent Fund 2.1.85 Consolidated Payroll 2.2 Non -Consolidated Cash Funds 2.2.00 All Other Funds 2.2.02 Economic Development Fund 2.2.03 TexPool 2.2.04 LOGIC Investment Pool 3. PRUDENCE 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. 3.1 The standard of prudence to be used by investment officials 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 and 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. The governing body of the investing entity retains the ultimate responsibility as fiduciaries of the assets of the entity. 4.0 OBJECTIVE The primary objectives, in priority order, of the City's investment activities shall be: 4.1 SAFETY: Safety of principal is the foremost objective of the investment program. Investments of the City shall be undertaken in a manner that seeks to insure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio. 4.2 LIQUIDITY: The City's investment portfolio will remain sufficiently liquid to enable the City of meet all operating requirements which might be reasonably anticipated. 4.3 RETURN ON INVESTMENTS: The City's investment portfolio will be designed with the objective of attaining a rate of return throughout budgetary and economic cycles, commensurate with the City's investment risk constraints and the cash flow characteristics of the portfolio. 5.0 DELEGATION OF AUTHORITY AND TRAINING Authority to manage the City's investment program is derived from the City's charter and reconfirmed by adoption of this policy by the City Council. Management responsibility for the investment program is hereby delegated to the Director of Finance who shall be responsible for all transactions undertaken. The Finance Director may utilize appropriate staff personnel to assist in this area when necessary. Procedures and controls to regulate the details of the investment program may be developed by the Finance Director as needed. The investment officer shall attend at least one training session relating to the officer's responsibility under the Act within 12 months of assuming duties and complete at least 10 hours of training every two years thereafter. Such training shall be provided by any independent source outside the City such as the Texas Municipal League or the Government Finance Officers Association. 6.0 CONFLICTS Officers and employees involved in the investment process shall refrain from personal business activity 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 Manager any material financial interests 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 regard to the time of purchases and sales. The investment officer must file a disclosure statement with the Texas Ethics Commission and the governing body if the officer has a personal business relationship (as defined in 2256.005 (i) (1-3) with a business organization offering to engage in an investment transaction with the City. A disclosure statement must also be filed by the investment officer if the investment officer is related within the second degree by affinity or consanguinity as determined under Chapter 573 of the Texas Government Code, to an individual seeking to transact investment business with the entity. 7.0 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The Finance Director will maintain a list of financial institutions authorized to provide investment services. No public deposit shall be made except in a qualified public depository as established by state law. All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must supply the Finance Director with the following: audited financial statement, proof of National Association of Security Dealers certification, trading resolution, proof of state registration, completed broker/dealer questionnaire if requested, and certification of having read entity's investment policy. An annual review of the financial condition and registrations of qualified bidders will be conducted by the Finance Director. A current audited financial statement is required to be on file for each financial institution and broker/dealer in which the City of Paris invests. 8.0 AUTHORIZED/SUITABLE INVESTMENTS The City of Paris is empowered by statue to invest in the Types of securities authorized by Chapter 2256 of the Government Code. Even if allowed by the Public Funds Investment Act, the City of Paris will not invest in securities known as "collateralized debt obligations" which are pools of debt that include sub- prime mortgages. 9.0 COLLATERALIZATION Collateralization will be required on two types of investments: certificates of deposit and repurchase (and reverse) agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 100% of market value of principal and accrued interest. The City of Paris chooses to limit collateral to the extent it is limited by Article 105 Revised Civil Statues of Texas. Collateral will always be held by an independent third party with whom the entity has a current custodial agreement. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the entity and retained. The right of collateral substitution is granted. 10.0 SAFEKEEPING AND CUSTODY All security transactions, including collateral for repurchase agreements, entered into by the City of Paris shall be conducted on a delivery -versus -payment (DVP) basis. Securities will be held by a third party custodian designated by the Finance Director and evidenced by safekeeping receipts. 11.0 DIVERSIFICATION The City of Paris will diversify its investments by security type and institution. With the exception of obligations of the United States or its agencies and authorized pools, no more than 50% of the City of Paris total investment portfolio will be invested in a single financial institution with the exception of its local depository. 12.0 MAXIMUM MATURITIES To the extent possible, the City of Paris will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the City of Paris will not directly invest in securities maturing more than 10 years from the date of purchase. However, the City of Paris may collateralize its repurchase agreements using longer -dated investments not to exceed 15 years to maturity. Reserve funds may be invested in securities exceeding 10 years if the maturity of such investments is made to coincide as nearly as practicable with the expected use of the funds. 13.0 INTERNAL CONTROL The Finance Director shall establish an annual process of independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. 14.0 PERFORMANCE STANDARDS The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. 14.1 MARKET YIELD (BENCHMARK: The City of Paris investment strategy is active. Given this strategy, the basis used by the Finance Director to determine whether market yields are being achieved shall be the six-month U.S. Treasury Bill and the Average Fed Funds rate. 15.0 REPORTING The Finance Director is charged with the responsibility of including a market report on investment activity and returns in the City of Paris' Financial Report. Reports must include all information required by Section 2256.023 of the statute. 16.0 The market price of acquired investments shall be monitored by using information found in the Wall Street Journal and/or through Bloomberg Information Services, and/or through a securities dealer's trading desk. 17.0 INVESTMENT POLICY ADOPTION The City of Paris investment policy shall be adopted by resolution of the City Council. The policy shall be reviewed and re -adopted annually by the City Council and any modifications made thereto must be approved by the City Council.