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09-B Investment Pol Res DRAFT F:ALICEIRESWORKICURRENTI Investment Pol Res Ian 2005 December 29, 2004 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS, AFFIRMING THAT THE CITY OF PARIS HAS COMPLIED WITH THE REQUIREMENTS OF THE PUBLIC FUNDS INVESTMENT ACT; AMENDING THE CITY'S INVESTMENT POLICY; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Chapter 2256 ofthe Texas Government Code, commonly known as the "Public Funds Investment Act, " requires the chief financial offer ofthe City to attend investment training; and, WHEREAS, the City of Paris approves of the investment training course sponsored by the Texas Municipal League or any other independent source; and, WHEREAS, the chief financial officer ofthe City of Paris has attended an investment training course sponsored by the Texas Municipal League or other independent source, as required by the Public Funds Investment Act; and, WHEREAS, the Public Funds Investment Act requires the City to adopt an investment policy by rule, order, ordinance, or resolution; and, WHEREAS, the City Council of the City of Paris did heretofore, on the 12th day of February, 1990, in Resolution No, 90-009, adopt an investment policy, which was amended on the 13th day of November, 1995, by Resolution No, 95-122; the 9th day of March, 1998, by Resolution No, 98-036; the lIth day of January, 1999, by Resolution No, 99-003; the 12th day of February 2001, by Resolution No, 2001-010; the 14th day ofJanuary, 2002, by Resolution No, 2002-021, the 13th day of January, 2003, by Resolution No, 2003-005; and the 12th day of January, 2004, by resolution No, 2004-001; and it is deemed appropriate that such policy be further amended; and, WHEREAS, the investment policy and incorporated revisions comply with the Public Funds Investment Act and authorize the investment of City funds in safe and prudent investments; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS: Section 1. That the findings set out in the preamble to this resolution are hereby in all things approved, Section 2. That the City of Paris has complied with the requirements of the Public Funds Investment Act Section 3. That the Investment Policy be, and the same is hereby, amended to the form shown in Exhibit A, attached hereto, Section 4. That this resolution shall be effective from and after its date of passage, PASSED AND APPROVED this 10th day of January, 2005, Curtis Fendley, Mayor ATTEST: Sherian Dixon, Assistant City Clerk APPROVED AS TO FORM: Larry W, Schenk, City Attorney INVESTMENT POLICY Revised January 2005 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 the highest investment return with the maximum security while meeting the daily cash flow demands of the entity and conforming to all state and local statutes governing the investment of public funds. 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 2.1.10 2.1.11 2.1.12 2.1.20 2.1.21 2.1.22 2.1.26 2.1.40 2.1.41 2.1.42 2.1.50 2.1.58 2.1.72 2.1. 73 2.1.74 2.1. 75 2.1. 76 2.1.77 General Fund Water and Sewer Fund Capital Projects Fund WW /SS Revenue Bond 2000 Construction Fund Special Revenue Child Safety Fund Health Department CJD Grant Fund CO 1993 Construction Fund Tax & Revenue CO 2000 Construction CO Series 2002 Construction Fund Consolidated Payroll 2003 GO Refunding Bonds I & S Library Memorial Fund J. A. Love Trust Fund J. P. Poteet Trust Fund Wilbor-Deshong Trust Fund Gibbs Memorial Vaughan Memorial EXHIBIT A. 2.1. 78 Malone Love Memorial 2.2 Non-Consolidated Cash Funds 2.1.02 Economic Development Fund 2.1.30 Community Development Grant Fund 2.1.50 Revenue Bonds Sinking Fund 2.1.54 C 0 1993 1 & S Fund 2.1.55 Tax & Revenue CO 2000 I & S Fund 2.1.56 Tax & Revenue CO 2002 I & S Fund 2.1.00 All Other Funds 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. 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 peñormance of the City, particularly with regard to the time of purchases and sales. 7.0 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The Finance Director will maintain a list of financial institutions authorized to provide investment services. In addition, a list will also be maintained of approved security broker/dealers who are authorized to provide investment services in the State of Texas. These may include primary dealers or regional dealers that quality under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). 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 em powered by statue to invest in the Types of securities authorized by Chapter 2256 of the Government Code. A copy is attached as exhibit A. 9.0 COLLA TERALIZA TION 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. I 1.0 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.