08-13-12-Resolution-Amending the Investment Policy-08/03/2012RESOLUTION #R084342
A RESOLUTION AMENDING THE CITY OF SANGER, TEXAS, INVESTMENT
POLICY
WHEREAS, Chapter 2256 of the Texas Government Code, commonly known as the
"Public Funds Investment Act," requires the City to adopt an investment policy by rule, order,
ordinance or resolution; and
WHEREAS, the Public Funds Investment Act requires the Treasurer, the Chief Financial
Officer, if not the Treasurer, and the Investment Officer of the City to attend investment training;
I
WHEREAS, the City of Sanger approves of the investment training course sponsored by
the Texas Municipal League; and
WHEREAS, the Treasurer, the Chief Financial Officer of the City have attended an
investment training course sponsored by the Texas Municipal League, as required by the Public
Funds Investment Act; and
WHEREAS, the attached investment policy and incorporated revisions comply with the
Public Funds Investment Act, as amended and authorize the investment of the City funds in safe
anA prudent investments.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Sanger;
Section 1. That the City of Sanger has complied with the requirements of the Public
Funds Investment Act, and the Investment policy of the City of Sanger.
PASSED AND APPROVED this day of August 2012.
ATTEST:
Tami Taber, City Secretary
EXHIBIT "A" TO RESOLUTION
INVESTMENT POLICY
FOR THE CITY OF SANGER, TEXAS
I. POLICY STATEMENT
It is the objective of the City of Sanger, Texas ("City") that the administration of its funds and the
investment of those funds shall be handled in the highest public trust. Investments shall be made in a
manner which will provide the maximum security of principle invested through limitations and
diversification while meeting the daily cash flow needs of the city and conforming to all applicable
federal, state, and local statutes, rules and regulations governing the investment of public funds. The
receipt of a market rate return will be secondary to the requirements for safety and liquidity. The
earning from investments shall be used in a manner that best serves the public trust and interest of the
City. This policy serves to satisfy the statutory requirements of defining and adopting a formal
investment policy and shall be reviewed annually for modifications. It is the intent of the City to be in
compliance with local law and the provisions of Public Funds Investment Act of the Texas Government
Code Chapter 2256,
II. SCOPE
This Investment Policy applies to the investment activities, all financial assets and funds held by the City
of Sanger, Texas. Funds covered and managed by this Investment Policy include:
A General Fund — Used to account for resources traditionally associated with government,
which are not required to be accounted for in another fund.
B. Debt Service Fund — Used to account for resources to be used for the payment of
principle, interest and related costs on debt.
C. Enterprise Fund — Used to account for operations that are financed and operated in a
manner similar to private business enterprises.
D. Capital Improvement Fund — Used to account for resources to enable the acquisition or
construction of major capital facilities which are not financed by enterprise funds, internal
service funds, or trust funds.
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E. Special Revenue Funds — Used to account for proceeds from specific revenue sources
which are restricted to expenditures for specific purposes.
1. 4A Fund
2. 4B Fund
3. Employee Benefits Fund
III. INVESTMENT OBJECTIVES AND STRATEGY
It is the policy of the City that all funds shall be invested in conformance with state and federal
regulations, applicable bond ordinance requirements, and adopted Investment Policy.
In accordance with the Public Funds Investment Act, the following prioritized primary objectives, in
accordance with the Texas Government Code Section 2256.005(d) apply to the City's investment
strategy. Listed in order of their priority, these objectives encompass:
A. Suitability —Understanding the suitability of the investment to the financial requirement
of the City is important. Any investment eligible in the Investment Policy is suitable for
all City funds.
B. Safety —Preservation and safety of principal are the primary objectives of the
Investment Policy. Investments of the City shall be undertaken in a manner that seeks
to insure the preservation of capital in the overall portfolio. To obtain this goal,
diversification is required in the portfolio's composition. The suitability of each
investment decision will be made on the basis of these objectives. The City prefers to
invest in money market accounts, certificates of deposits, and United States
government backed agency discount notes.
C. Liquidity — The City's investment portfolio will remain sufficiently liquid to meet
operating requirements that might be reasonably anticipated. The City's investment
portfolio will remain sufficiently liquid and enable it to meet all operating requirements
which might be reasonably anticipated.
D. Diversification —Investment maturities shall be staggered throughout the budget cycle
to provide cash flow based on the anpated needs of the City. Diversifying the
appropriate maturity structure will reduce market cycle risk. Diversification of the
portfolio will include diversification by maturity and market sector and will include the
use of a number of brokers/dealers for diversification and market coverage.
Competitive bidding will be used on each sale and purchase.
E. Yield — Attaining a competitive market yield, commensurate with the City's investment
risk constraints and cash flow characteristic of the portfolio, is the desired objective.
The City's investment portfolio shall be designed with the objective of attaining a
market rate of return throughout budgetary and economic cycles, taking into account
the City's risk constraints and the cash flow of the portfolio. "Market rate of return"
may be defined as the average yield of the current three-month U.S. Treasury Bill or
such other index that most closely matches the average maturity of the portfolio. The
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City's objective shall be a reasonably safe yield rate in accordance with payment
schedules and other investment goals.
Effective cash management is recognized as essential to good fiscal management. Cash
management is defined as the process of managing monies in order to ensure maximum
cash availability, The City shall maintain a comprehensive cash management program
which includes collection of accounts receivable, prudent investment of its available
cash, disbursement of payments in accordance with invoice terms and the management
of banking services. The City staff will follow the "Prudent Person" statement relating
to the standard of care that must be exercised when investing public funds as expressed
in the Texas Government Code Section 2256.006(a-b). The Investment Officers shall
avoid any transactions that might impair public confidence in the City's ability to govern
effectively. The governing body recognizes that in diversifying the portfolio, occasional
measured unrealized losses due to market volatility are inevitable, and must be
considered within the context of the overall portfolio's investment return, provided that
adequate diversification has been implemented. The prudence of the investment
decision shall be measured in accordance with the tests set forth in the Texas
Government Code Section 2256,006(b),
It shall be the policy of the City not to invest in speculative instruments such as
derivatives.
IV. LEGAL LIMITATIONS, RESPONSIBILITIES AND AUTHORITY
Direct specific investment parameters for the investment of public funds in Texas are found in the Public
Funds Investment Act of the Texas Government Code Section 2256,
The Interlocal Cooperation Contracts, Section 791, of the Texas Government Code authorizes local
governments to participate in public funds investments in conjunction with other local governments and
agencies of the state of Texas. Section 791 along with Section 2256 of the Texas Government Code
provides authorization for participation in investment pools to invest public funds jointly with objectives
of preservation and safety of principal, liquidity, and yield.
V. DELEGATION OF INVESTMENT AUTHORITY
The City Manager and the Finance Director acting on behalf of the City Council are designated as the
Investment Officers of the City and are responsible for investment management decisions and activities.
The Council is responsible for considering the quality and capability of staff, investment advisors, and
consultants involved in investment management and procedures. All participants in the investment
process shall seek to act responsibly as custodians of the public trust.
The Investment Officers shall develop and maintain written administrative procedures for the operation
of the investment program which are consistent with the investment policy. Procedures will include
reference to safekeeping, wire transfers, certificates of deposit, and fund accounts. Additional
procedures will be documented for the performance of wire transfer agreements; banking services
contracts, and other investment related activities.
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The Investment Officers shall be responsible for all transactions undertaken and shall establish a system
of controls to regulate the activities of subordinate officials and staff. The Investment Officers shall
designate a staff person as a liaison/deputy in the event circumstances require timely action and the
Investment Officers are not available.
No officer or designee may engage in an investment transaction except as provided under the terms of
this policy and the procedures established by the Investment Officers and approved by the City Council.
VI. _ PRUDENCE —STANDARD OF CARE
The standard of prudence to be used in the investment function shall be the "prudent person" standard
and shall be applied in the context of managing the overall portfolio. The Texas Government Code `
Section 2256.006(a) states Investments shall be made with judgment and care, under prevailing
circumstances, that a person of prudence, discretion, and intelligence would exercise in the
management of the person's own affairs, not for speculation, but for investment, considering the
probable safety of capital and the probable income to be derived.
Limitation of Personal Liability
The Investment Officers and those delegated investment authority under this policy, when acting in
accordance with the written procedures and this policy and in accordance with the written procedures
and this policy and in accord with the Prudent Person Rule, shall be relieved of personal responsibility
and liability in the management of the portfolio provided that deviations from expectations for a specific
security's credit risk or market price change or portfolio shifts are reported in a timely manner and that
appropriate action is taken to control adverse market effects.
VII. INTERNAL CONTROLS
The Investment Officers shall establish a system of written internal controls which will be reviewed
annually with the independent auditor of the City. The controls shall be designed to prevent losses of
public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated
changes in financial markets, or imprudent actions by employees or Investment Officers of the City.
Cash Flow Forecasting
Cash flow forecasting is designated to protect and sustain cash flow requirements of the City.
Supplemental to the financial and budgetary systems, the Investment Officers will maintain a cash flow
forecasting process designed to monitor and forecast cash positions for investment purposes. Cash flow
will include the historical researching and monitoring of specific cash flow items, payables, and
receivables as well as overall cash position and patters.
VIII. AUTHORIZED INVESTMENTS
Acceptable investments .under this policy shall be limited to the instruments listed below. The
investments shall be selected in a manner which promotes diversity of the market sector and maturity.
The selection of high-grade government investments and high-grade money market instruments is
designed to assure the marketability of those investments should the need for liquidity arise.
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A. Obligations of the United States Government, its agencies and instrumentalities, and
government sponsoring enterprises, not to exceed two years to stated maturity;
B. Fully insured or collateralized certificates of deposit from a bank doing business in the State
of Texas and under the terms of a written depository agreement with that bank, not to
exceed three years to the stated maturity;
C. Money market funds authorized by the Public Funds Investment Act of the Texas
Government Code Chapter 2256.
D. Texas Local Government Investment Pools authorized by the Public Funds Investment Act of
the Texas Government Code Chapter 2256.
Additional types of securities approved for investment of public funds by Texas state statutes are not
eligible for investment by the City until this Investment Policy has been amended and the amended
version approved by the City Council authorizing investment of these additional types of securities.
Competitive Bidding Requirements
All securities, excluding certificates of deposit, will be purchased or sold after three (3) offers/bids are
taken to verify that the City is receiving fair market value/price for the investment.
Delivery versus Payment
All security transactions, including collateral for repurchase agreements, entered into by the City, shall
be conducted on a delivery versus payment (DVP) basis.
IX. SAFEKEEPING AND COLLATERILZATION
The laws of the State and prudent treasury management require that all purchased securities be bought
on a delivery versus payment basis and be held in safekeeping by either the City, an independent third
party financial institution, or the City's designated depository.
All safekeeping arrangements shall be designed by the Investment Officers and an agreement of the
terms executed in writing. The third party custodian shall be required to issue safekeeping receipts to
the City listing each specific security, rate, description, maturity, cusip number, and other pertinent
information. Each safekeeping receipt will be clearly marked that the security is held for the City or
pledged to the City.
All securities pledged to the City for certificates of deposit or demand deposits shall be held by an
independent third party bank domiciled in Texas. The safekeeping bank may be written within the same
holding company as the bank, from which the securities are pledged.
Collateralization
Collateralization shall be required on all public funds of the City over the FDIC insurance coverage limit,
and in order to anticipate market changes and provide a level of additional security for all funds, the
collateralized level required will be 102% of the market value of the principal accrued interest.
XI1. PERFORMANCE EVALUATION AND REPORTING
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The Investment Officers shall submit quarterly and annual reports to the City Council containing a
written report of investment transactions and investment positions as of the date of report.
The report will be prepared jointly by all involved in the investment activity and be signed by the
Investment Officer(s),
XIII. DEPOSITORIES
The City will designate one banking institution through a competitive process as its central banking
service provider. This institution will be used for normal banking services including disbursements,
deposits, and lockbox. As a matter of ensuring liquidity and security should the funds deposited with
the designated bank be temporarily unavailable, the City will maintain an emergency reserve in another
qualified bank.
XIV. INVESTMENT POLICY ADOPTIO(V BY CITY COUNCIL
The City's Investment Policy shall be formally approved and adopted by resolution of the City Council
and reviewed annually in accordance with the provisions of the Public Funds Investment Act of the
Texas Government Code Chapter 2256,
XV. AMENDMENT
In the event Texas state law changes and the City cannot invest in the investments described by this
policy, this policy shall automatically be conforming to existing law.