1990-009-RES WHEREAS, it is the desire of the City Council of Paris to adopt an investment policy; and,
RESOLUTION NO. 90-009
WHEREAS, it is the desire of the City Council of the City of
Paris to adopt an investment policy; and,
WHEREAS, the Director of Finance for the City of Paris has
presented the proposed policies regarding an investment policy
for consideration which meet the requirements set forth in
Article 842a of Vernon's Texas Civil Statutes; and,
WHEREAS, the City Council desires to adopt such policies as
official policies regarding investment of funds and the same
shall be incorporated into the Uniform Policy and Procedures
Manual of the City of Paris; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS,
That the investment policies attached hereto as Exhibit A, be,
and they are hereby adopted as official policies of the City of
Paris and the same shall be incorporated into the Uniform Policy
and Procedures Manual of the City of Paris.
BE IT FURTHER RESOLVED, That the City Manager of the City of
Paris, Michael E. Malone, be, and he is hereby directed to
implement the policies hereby approved.
Passed and adopted this 12th day of February, 1990.
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Eric S. ifford, Mayor
ATTEST:
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APPROVED AS TO FORM:
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UNIFORM POLICY AND PROCEDURES MANUAL
21: Accounting and Auditing
21:01 Investment Policy
01.1 Date of Last Revision
A. 02-01-90
01.2 Definitions
A. "City" means the City of Paris Director of Finance who has
the responsibility for investing City funds.
B. "Deposit Accounts" means demand deposit accounts, time
deposit accounts, savings accounts, certificate of deposit
accounts, or any other similar account offered by any
Depository Institution.
C. "Depository Instituti on" means any commerci a 1 bank
authori zed to accept funds from the pub 1 i c for deposit,
whether federally or state chartered.
D. "Mark~t,..Average Rate of Return" means the average interest
rate earned on three month United States Treasury Bills.
E. "Person" means any depository institution, corporation,
general partnership, Trust, association, group,
individual, or entity.
F. "Primary Dealer" means a dealer in securities issued or
guaranteed by the United States government which dealer
regularly reports to the Federal Reserve Bank of New York
its sales of such securities.
G. "Repurchase Agreement" means an agreement entered into by
and between the City and any person whereby the City
agrees to purchase a security or securities from the other
party that the other party wi 11 repurchase the securities
or any portion of the securities from the City at a later
point in time at a fixed price.
H. "Reverse Repurchase Agreement" means any agreement entered
into by and between the City and any Person whereby the
City agrees to sella security or securities to other
party and simultaneously agrees to repurchase the
securities or any other portion of the securities from the
other party at a later point in time at a fixed price and
an agreed upon interest rate.
21:01-1
EXHIBIT A
01.3 Purpose
A. The purpose of thi s investment pol icy is to provi de the
City with specific policy guidelines so that the absolute
return on invested capital may be maximized while the risk
to invested capital may be minimized.
B. Safety of principal is the foremost objective of the
investment pol i cy of the City of Pari s. Each transacti on
shall seek to first ensure that capital losses are avoided
whether they be from defaults or erosion of market value.
C. A secondary objective of this investment policy is to
obtain a Market-Average Rate of Return on investment.
D. Another secondary objective of this investment policy, of
equal importance with attaining an acceptable return on
investment, is liquidity to the extent needed to pay the
City's obligations as they become due.
01.4 Scope
A. This investment policy applies to all financial assets of
the City of Pari s. These assets are accounted for in the
City's annual financial report and include:
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1. the general fund
2. special revenue funds
3. capital project funds
4. trust and agency funds, to the extent not required by
1 aw or exi sti ng contract to by kept segregated and
managed separately;
5. debt service funds, including reserves and sinking
funds, to the extent not required by law or existing
contract to be kept segregated and managed separately;
6. any new fund created by the City, unless specifically
exempted from thi s pol icy by the City Council or by
law.
B. This policy does not apply the Firemen's Relief and
Retirement Fund. Policy for said Fund being established
by the Pension Board itself.
01.5 Basic Policy
A. All City officials having either a direct or indirect role
in the process of i nvesti ng City funds shall act
responsibly as custodians of the public trust.
21:01-2
B. The standard of care to be used by investment officials
s ha 11 be that of the "prudent person, II whi ch an overall
portfo 1 i o. ,Investment offi cers acti ng in accordance with
written procedures and exercising due diligence shall be
relieved of personal responsibility for losses resulting
from an i ndi vi dua 1 security, provi ded that devi ati ons from
expectation are reported in a timely fashion and
appropriate action is taken to control adverse
developments.
C. Investments shall be made in accordance with the Public
Funds Investment Act of 1987 as recorded in Article
842a-2, Sections 1-7 of Vernon's Civil Statutes.
D. Management responsibility for the investment process shall
rest with the City's Director of Finance.
E. The City's investments shall be revi ewed annually by the
Citt s independent audi tor as part of the annual audit
process. Any irregularities shall be reported directly to
the City Council through the audit report and/or verbally
through attendance at a regular or special City Council
meeting.
F. The City shall deposit its funds only in deposit accounts
that ..::are insured by the Federal Deposit Insurance
Corporation or fully collaterized by securities which are
authorized by law to be used to collateralize the City's
deposits.
G. The City shall not purchase or sell any securiti es issued
or guaranteed by the Federal government from or to any
person (other than a depos itory i nstituti on meeti ng the
requirements of "F" above) unless such person is a primary
dealer or is a securities dealer (1) which is registered
under the provisions of Section 15 of the Securities
Exchange Act of 1934 (2) which is registered as a
securities dealer under the Securities Act of the State of
Texas.
H. In all cases in which the City purchases securities,
i nc 1 udi ng purchase under repurchase agreements, the Ci ty
must receive delivery of the securities prior to or at the
same time as it releases its funds for payment. In all
cases in which the City sells securities, including sales
under reverse repurchase agreements, the City must receive
payment in full for the securities prior to or at the same
time as it delivers the securities to the buyer.
I. In order to insure safety of principal, and to insure that
any Repurchase Agreement entered into by the City with any
Person wi 11 be characteri zed as a purchase and a
subsequent resale of a security by the City rather than as
21:01-3
a secured loan, the Ci ty shall not advance any funds for
security purchases pursuant to any Repurchase Agreement
unless and until the City has obtained possession of (i)
the securities or (ii) a trust receipt clearly evidencing
that the securities have been delivered to a reputable
trustee or other fiduciary custodian on behalf of the City
and are being held for the City as the sole owner of such
securities. Such trustee or other fiduciary shall not be
affiliated with the seller.
J. Because use of reverse repurchase agreements enta i 1 s some
risk arising from fluctuation in interest rates generally
and some risk that the party contracting with the City may
default in its obligation, the City may enter into such an
agreement on ly if the other party to the agreement is a
Primary Dealer, and only if the term of the agreement does
not exceed one hundred and eighty (180) days.
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Art. 842a BONDS-COUNTY, MUNICIPAL, ETC.
TlUe Z2
The provisions of this Act shall be cumulative of all other provisions of the Civil
Statutes of the State of Texas, affecting the investment of funds or moneys by fiduciar.
ies, guardians, administrators, trustees and receivers, building and loan associations,
savings departments of banks, incorporated and doing business under the laws of Texas,
commercial banks; savings banks and trust companies, chartered and doing business
under the laws of Texas, insurance companies of any kind and character, chartered and
transacting business under the laws of Texas, and all corporate creatures, organized and
doing business under the laws of Texas.
It is hereby declared to be the legislative intent to enact a separate provision of this Act
independent of all other provisions, and the fact that any phrase, sentence, or clause of
this Act shall be4eclared unconstitutional, shall in no event affect the validity of any, of
the provisions heteof.
Amended by Acts 1973, 63rd Leg., p. 1252, ch. 455, I 2, eff. June 14, 1973.
112 U.s.c.A. f 1701 It aeq.
J 12 UAC.A. 11724 It aeq.
112 U.s.C.A. I 2001 It .eq. .
Croll RelerenceI
School Depository Act, securities provided for
by thla article as approved securitiel, see V.T.
e.A. Education Code, I 23.73(4)(B).
Art. 842a-1. Obligations wholly 'or partly Insured by United States or state, Invest-
ment ml
Crou References
Certificates of title for motor vehicles, diapoa~
tien and Investment of fees, see art. 6687-1,
f 67(b).
Art. 842a-2. Public Funds Investment Act
Short TItle
See. 1. . This Act may be cited as the Public Funds Investment Act of 1987.
Authorized InTeatments ~;
Text a/subsec. (a) as amended by 'Xcts'1989, , r1stLeg., ch. i9, gland Acts
1989, nst Leg., ch. G28, g 1
Sec. 2. (a) An incorporated city or town, a county, a public school district, a district or
. authority created under Article III, Section 52(b)(1) or (2), or Article XVI, Section 59, of
the Texas Constitution, an institution of higher education as defined by Section 61.093 of
the Education Code, a hospital district, a fresh water supply district, or any nonprofit
corporation acting on behalf of any of those entities may, in accordance with this Act,
purchase, sell, and invest its. funds and funds under its control in the folloWing:
(1) obligations of the United States or its agencies and instrumentalities;
(2) direct obligations of the State of TeXas or its agencies;
(3) other obligations, the principal of and interest on which are unconditionally guaran.
teed or insllred by the State of Texas or the United States or its agencies and instrumen.
talities;
(4) obligations of states, agencies, counties, cities, and other political subdivisions of
any state having been rated as to investment quality by a nationally recognized invest-
ment rating firm and having received a rating of not less than A or its equivalent;
(6) certificates of deposit issued by state and national banks domiciled in this state that
are:
(A) guaranteed or insured by the Federal Deposit Insurance Corporation, or its succes.
sor; or
(B) secured by obligations that are descn'bed by Subdivisions (1)-(4) of this subsection,
which are intended to include all direct federal agency or instrumentality issued mortgage
286 '
BONDS-COUNTY, MUNICIPAL, Ere Art. 842a-2
Title 22
backed securities that have a market value of not less than the principal amount of the
certificates or in any other manner and amount provided by law for deposits of the
investing entities;
(6) certificates of deposit issued by savings and loan associations domiciled in this state
that are:
(A) guaranteed or insured by the Federal Savings and Loan Insurance Corporation, or
ita succeaaor; or
(B) secured by obligations that are described by Subdivisions (l)-{4) of this subsection,
which are intended to include all direct federal agency or instrumentality issued mortgage
backed securities that have a market value of not less than the principal amount of the
certificates or in any other manner and amount provided by law for deposits of the
investing entitiesj
(7) prime domestic bankers' acceptances;
(8) commercial paper with a stated maturity of 270 days or less from the date of its
issuance that either: .
(A) is rated not less than A-I, P-l, or the ,equivalent by at least two nationally
recognized credit rating agencies; or .
(B) is rated at least A-I, P-l, or the equivalent by at least one nationally recognized
credit rating agency and is fully secured by an irrevocable letter of credit issued by a
bank organized and existing under the lawa of the United States or any state thereofj
and .~,
(9) fully collateralized repurchase agreementa having a defined termination date, se- .
cured by obligations desen"bed by Subdivision (1) of this subsection, pledged with a third
party selected or approved by the political entity, and placed through a primary govern-
ment securities dealer, as deflDed by the Federal Reserve, or a bank domiciled in this
state.
Text of mNec. (a) as amended by Act& 1989, 71st Leg., ch. 693, 9 4, and Act.!
1989, 71st Leg., ch. 750, 11
See. 2. (a) An incorporated city or town, a county, a public school distric~ an
institution of higher education as defined by Section 61.003 of the Education Code, any
nonprofit corporation or public funds investment pool created under The Interlocal
Cooperation Act (Article 4413(32e), Vernon's Texas Civil Statutes) acting on behalf of any
of those entities, or a navigation district organized under Article III, Section 52, or Article
XVI, Section 59, of the Texas Constitution may, in accordance with this Act purchase,
sell, and invest ita funds and funds under ita control in. the following;
(1) obligations of the United States or its agencies and instrumentalitiesj
(2) direct obligations of the State of Texas or ita agencies;
(3) other obligations, the principal of and interest on which are unconditionally guaran-
teed or insured by the State of Texas or the United States;
(4) obligations of states, agencies, coilnties, cities, and other political subdivisions of
any state having been rated as to investment quality by a nationally recognized invest-
ment rating fll'lIl and having received a rating of not less than A or its equivalen~
(5) certificates of deposit issued by state and national banks domiciled in this state that
are:
(A) guaranteed or insured by the Federal Deposit Insurance Corporation, or its succes-
sor; or
(B) secured by obligations that are desen"bed by Subdivisions (1)-(4) of this subsection,
which are intended to include all direct agency or instrumentality issued mortgage backed
securities rated AAJ.. by a nationally recognized rating agency, or by Chapter 726, Acta of
the 67th Legislature, 'Regular Session, 1981 (Article 2529b-l, Vernon's Texas Civll
Statutes), and that have a market value of not leas than the principal amount of the
certificates;
(6) fully eolIa:teralized direct repurchase agreementa having a dermed termination date,
secured by obligations desen"bed by Subdivision (1) of this subsection, pledged with a third
party selected or approved by the political entity, and placed through a primary govern.
287
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Art. 842a-2 BONDS-COUNTY, MUNICIPAL, ETC.
T1Ue 22
ment securities dealer, lIB defined by the Federal Reserve, or a bank domiciled in this
state; and
(7) certificates of deposit issued by savings and loan lIBsociations domiciled in this state
that are:
(A) guaranteed or insured by the Federal Savings and Ulan Insurance Corporation or
its successor; or
(B) secured by obligations that are described by Subdivisions (l){ 4). of this Bubsection,
which are intended toJnclude all direct federal agency or instrumentality issued mortgage
badced securities that have a market value of not less than the principal amount of the
certificates.
(b) In addition to investment in obligations, certificates, or agreements described in
Subsection (a) of this section, bond proceeds of an incorporated city or town, a county, a
public school district, or a navigation district, or local revenue of an institution of higher
education, may be invested in common trust funds or comparable investment devices
owned or administered by banks domiciled in this state and whose lIBsets consist
exclnaively of all or a combination of the obligations descn'bed by Subsection (a) of this
section. Common trust funds of banks domiciled in this state may be used if they:
(1) are available;'
(2) comply with the provisions of the Internal Revenue Code of 1986 and applicable
federal regulationa governing the investment of bond proceeds; and
(3) meet the cash flow requirements and the investment needs .of the political subdivi.
sion or institution.
(c) In this section:
(1) "Bond proceeds" includes but is not limited to proceeds from the sale of bonds and
reserves and funds maintained for debt service purposes.
(2) "Prime domestic bankers' acceptances" means a bankers' acceptance With a stated
maturity of 270 days or less from the date of its issuance that will be, in accordance with
its terms, liquidated in full at maturity, that is eligible for collateral for borrowing from a
Federal Reserve Bank, and that is accepted by a bank organized and existing under the
laws of the United States or any state, the short-term obligations of which (or of a bank
holding company of which the bank is the largest subsidiary) are rated at lellBt A-I, P-I,
or the equivalent by at lellBt one nationally recognized credit rating agency.
(3) "RepurehllBe agreement" m~ans a, simultaneona agreement to buy, hold for a'
specified time, and then sell back at a future date, obligations described by Subsection
(aXI) of this section, the principal and interest of which are guaranteed by the United
States or any of its agencies, in market value of not less than the principal amount of the
funds disbursed. The term includes direct security repurchllBe agreements and reverse
security repurehllBe agreements.
....w..
Tezt of subsec. (d) effective August g8, 1989, for institutions of higher
education and in effect for entities other than institutions of higher edu.
cation upon approval of constitutional amendment proposed by Acts 1989,
11st Leg., S.J.R. No. 59, as provided in Acts '1989, 118t Leg., eh. 628, 9 5
(d) In addition to the investments described by Subsection (a) of this section, an entity
listed in that subsection may, in accordance with this Act, purchllBe, sell, and invest its
funds and funds under its control in an SECregistered, no-load money market mutual
fund with a dollar.weighted average portfolio maturity of 120 days or less whose lIBsets
consist exclusively of the obligationa that are descn'bed by Subsection (a) of this section
and whose investment objectives include seeking to maintain a stable net lIBset value of n
per share. No enti listed in Subs 'on a of this section is authorized by this Act to
invest in the a gate more than 20 rcent 0 . e un a ance,
e n roce , ID mone mar e mutual fu 'bed in this su see on or Ul
mY-ea I n or un un er I n exc u in bond rocee .
mar e mutua ID an a xeee s rcent of 'the total assets of the
money mar e mutual fund.
288
BONDS-COUNTY. MUNICIPAL. ETC.
TlUe 22
Art. 842a-2
Biela
Sec. 3. (a) InveStments under Section 2(b) of this Act may be made only after
competitive bids are solicited from at least three banks as provided by this section. The
bids may be solicited orally. .
(b) An incorporated city or town or a public school district must attempt to solicit bids
initially from banks located within its boundaries. If there are not three banks available
for the investments within the city's, town's, or public school district's boundaries, the
city, town, or public school district may solicit bids from banks located within the county
or counties in which the city. town, or public school district is located in addition to those
banks, if any, that are located within the boundaries of the city, town, or public school
district. If there a{e not three banks available for the investments within the boundaries
of the city. town, "bf public school distric~ or of the county or counties in which it is
located, the city, town, or public school district may solicit bids from any bank within the
state in addition to those banks, if any, that are located within the boundaries of the city,
town, public school distric~ county, or counties.
(c) A county must attempt to solicit bids initially from banks' located within its
boundaries. If there are not three banks available for the investments within the county,
the county may solicit bids from any bank within the state in addition to those banks, if
any, that are located within the boundaries of the county.
(d) An institution of higher education as defined by Section 61.003 of the Education
Code or a navigation district must solicit bids from at least three banks located within the
state.
(e) A nonprofit corporation acting on behalf of an incorporated city or town, a coun~, a
public school district, or an institution of higher education as defined by Section 61.003 of
the Education Code shall follow the procedures identified in Subsection (b), (c), or (d) of
this section, as applicable to the entity on behalf of which the nonprofit corporation is
acting. .
(f) If a bank has notified a governmental entity or nonprofit corporation that it is
unable or unwilling to bid for investments under Section 2(b) of this Ac~ the governmen-
tal entity or nonprofit corporation that receives the notification may presume that the
bank is unable or unwilling to bid for the investments until the bank notifies the
governmental entity or nonprofit corporation otherwise in writing.
Standard or Care
See. 4. Investments shall be made with judgment and care, under circumstances then
prevailing, that persons of prudence, discretion, and intelligence exercise in the manage-
ment of their own affairs, not for speeulation, but for investmen~ considering the
probable safety of their capital as well as the probable income to be derived.
Written Policies
See. 5. (a) Investments shall be made in accordance with written policies approved by
the governing body. The investment policies must addre88 Iiguiditv, diversification,
-safety. of principal. yipaturity, and quality and capability of mvestment management,
with primary emphas18 on safety and liquidity.
(b) A governing body may provide in its written policies that bids for certificates of
deposit be solicited orally, in writing, electronically, or in any combination of those
methods:
Nonappllcatlon to Retirement Funela
See. 6. This Act does not apply to the investment of funds under the control of a
public retirement system, as defined by Section 12.001(2), Title 110B, Revised Statutes.
Authority Is Additional
See. 7. The authority granted by this Act is in addition to that granted by other law.
Acts 1987, 70th Ltg., ch. 889, if 1 to 7, elf. Aug. 81, 1987. See. 2 amended by Acts 1989, 71lt Ltg.,
ch. 628, 11, eff. Aug. 28, 1989; Sec. 2(a) amended by Acts 1989, 71st Leg., ch. 89, t 1, eff. April 26,
1989; Acts 1989, 718t Leg., ch. 698, f 4, elf. Aug. 28, 1989; Acta 1989, 718t Leg., ch' 750, f 1, elf.
289
BONDS-COUNTY, MUNICIPAL, ETC.
Title Z2
June 16, 1989: See. 2(b) amended by Acta 1989, 71at Leg., eh. 760, f I, eft. June 16, 1989; See. 8(d)
amended by Acta 1989, 7lat Leg., eh. 760, f 2, eff. June 16, 1989: See. 6 amended by Acta 1989, 71a,t
Lfg., eh. 628, f 2, eft. Aug. 28, 1989.
Hlatorleal Note
Acta 1989, 71at Leg., eh. 628, f 6 provldea:
"ThIa Act taltea eftect immediately, except
that Subaectlon (d), Section 2, Public Funda III-
veabnent Act of 1987 (Article 84.2&-2, Vernon'a
Twa CIvIl Statutea), u added by Section 1 of
thia Act, taltea effect: (1) Immediately with re-
aped to inatitutiona of higher education: and (2)
only if the conatitulblal amendment proposed
by the 7llt Legislature, Regular Seaaion, 1989,
[Sl.R. 69] authorizing local governmenta to in-
veat their funda u provided by law is approved
by the votera with respect to all other entitiea.
U that amendment is not approved, Subaectlon
(d) of Section 2 baa no effect for entitiea other
than inatitutiona of higher education."
Title of Act:
An Act relating to the Inveatment of public
funda. Acta 1987, 70th Leg., eh. 889.
Art. 842a-2
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Crime control and prevention districts, bolrd.
may not Inveat lunda otherwiae than u lpecified
by this article or art. 836 or 837, aee art. 237Oc-
4, f 6.09.
Navigation distrlcta, lnveatment of bond pro-
eeeda, aee V.T.C.A. Water Code, f 60.347.
PoUtica1lubdivialona group benefit! program,
Investmenta, lee V.T.C.A. Local Government.
Code, f 172.009. .
Pnblie Funda Collateral Act, aee art. 2629d.
Twa High-Spee4 Rail Authority, lnveatment
of funda, aee art. 6674v.2, f 20.
Noles of Decl.lons
Validity
1. Validity
Inaofar u this article purporta to authorize
Crou lWerencea . Ill/ political corporationa and politica1lubdiviaiona to
College and unlveralty funda, Inveatment ac- invest public funda in bank-orlented money mar-
cording to this act, aee V.T.C.A. Education Code, ket mutual funda or other lecuritiea of private
I 61.003(b). : entitie., it conflicts with article nI, aection 62, of
County funda, Investmenta, lee V.T.C.A. Local the Tew Conatitution. Op.Atty.Gen.l988, No.
Government Code, f 116.112. JM-976.
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290
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