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01-01-07-Resolution-Amending the Investment Policy-01/22/2007RESOLUTION NO. 01-01-07 A RESOLUTION AMENDING THE CITY OF SANGER 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; and 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, if not the Treasurer, and the Investment 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 and prudent investments. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Sanger; That the City of Sanger has complied with the requirements of the Public Funds Investment Act, and the Investment Policy as amended, attached hereto as "Exhibit A" is hereby adopted as the investment policy of the City of Sanger effective aLnu(..r, 2007. PASSED, ADOPTED AND APPROVED by the City Council of the City of Sanger this 9A day of Qnuo jr' 007. W Rosalie Chavez, City Se etaiy A r 11 1 . EXHIBIT "A" TO RESOLUTION 01-01-07 INVESTMENT POLICY FOR THE CITY OF SANGER, TEXAS I. POLICY STATEMENT It is the policy of the City of Sanger, Texas k"City") that the administration of its funds and the investment of those funds shall be handled at its highest public trust. Investments shall be made in a manner which will provide the maximum security of principal invested through limitations and diversification while meeting the daily cash flow needs of the City and conforming to all applicable State and City statutes governing the investment of public funds. The receipt of a market rate return A ill be secondary to the requirements for safety and liquidity. It is the intent of the City to be in complete compliance with local law and the Texas Public Funds Investment Act. The earnings from investments will be used in a manner that best serves the public trust and interests of the City. II, SCOPE This investment policy applies to all the financial assets and funds held by the City: General Fund Debt Service Fund Enterprise Fund III. OBJECTIVES AND STRATEGY It is the policy ofthe City that all funds shall be managed and invested withthree primary objectives, listed in order of their priority: safety, liquidity, diversification and yield. These objectives encompass. Safe , of Principal Safety of principal is the foremost objective of the City. 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 deposit, and U.S. government backed agency discount notes. Li uidi The City's investment portfolio will be based on a cash flow analysis of needs and will remain sufficiently liquid to enable it to meet all operating requirements which might be reasonably anticipated. Diversification Diversification of the portfolio will include diversification bymaturity and market sector and Page 2 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. Yield 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 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. It shall be the policy of the City to not 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, Chapter 2256, Texas Government Code. (The "Act"). The Interlocal Cooperation Act, Chapter 791, Texas Government Code, authorizes local governments in Texas to participate in an investment pool established thereunder. That statute and reference to authorize investment in investment pools by political subdivisions of the State of Texas. V. DELEGATION OF INVESTMENT AUTHORITY The City Manager and the City Secretary/Assistant City Manager 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. Page 3 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 Officer shall designate a staffperson as a liaison/deputy in the event circumstances require timely action and the Investment Officer is not available. No officer or designee may engage in an investment transaction except as provided under the terms A this policy and the procedures established by the Investment Officer and approved by the City Council. VI. PRUDENCE 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. This standard states: "Investments shall be made with judgement and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercises in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the expected 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 loss of public funds due to fraud, employee error misrepresentation by third parties, unanticipated market changes, or imprudent actions by employees of the City. Cash Flow Forecasting Cash flow forecasting is designed to protect and sustain cash flow requirements of the City. Supplemental to the financial and budgetary systems, the Investment Officer 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 patterns. VIII. AUTHORIZED INVESTMENTS Acceptable investments under this policy shall be limited to the instruments listed below. The investments are to be chosen in a manner which promotes diversity of market sector and maturity. The choice of high-grade government investments and high-grade money market instruments is designed to assure the marketability of those investments should liquidity needs arise. 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 INVESTMENTS ACT. D. Texas Local Government Investment Pools authorized by the PUBLIC FUNDS INVESTMENTS ACT. If additional types of securities are approved for investment by public funds by state statutes, they will not be eligible for investment by the City until this policy has been amended and the amended version approved by the City Council, Competitive Bidding Retluirement Ail 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 COLLATERALIZATION 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 Officer 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. Page 5 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 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 A $100,000, and in order to anticipate market changes and provide a level of additional security for all funds, the collateralization level required will be 102% of the market value of the principal and accrued interest. XII. PERFORMANCE EVALUATION AND REPORTING The Investment Officers shall submit quarterly and annual reports to the City Council containing a written report of investment transactions and investment's position as of date of report. The report will be prepared jointly by all involved in the investment activity and be signed by the Investment Officer. XIII. DEPOSITORIES The City will designate one banking institution through a competitive process as its central banking services provider. This institution will be used for normal banking services including disbursements, deposits, and lockbox. XIV. INVESTMENT POLICY ADOPTION BY CITY COUNCIL The City's investment policy shall be adopted by the City Council passage of an adopting Resolution. The policy shall be reviewed on an annual basis by the City Investment Officer and City Council, XV. AMENDMENT In the event State law changes and the City cannot invest in the investments described in this policy, this policy shall automatically be conforming to existing law. APPROVED BY THE CITY COUNCIL WITH THE PASSAGE OF RESOLUTION #01-01 -07 the � day of �,1�2007.