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HomeMy WebLinkAboutRES 85-366 R E S O L U T I O N BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF BEAUMONT: THAT the City Manager be, and he is hereby authorized, to adopt the revised Investment Policies, a copy of which is attached hereto as Exhibit "A" . PASSED BY THE CITY COUNCIL of the City of Beaumont this the o?a*,W— day of _ , 1935. AJ41L7-,,/ - - Mayor - L4 t , CITY OF BEAUMONT INVESTMENT POLICIES Exhibit "A" CITY OF BEAUMONT INVESTMENT POLICY TABLE OF CONTENTS I. Introduction.. ,.,., .....3 .. .. .. .. . .... .. .. ......... II. Adoption. .......... 3 III. Scope 3 ... ... ... ..... ... .. IV, Investment Objectives. ... . ... ... .... ... .. ...... ...3 A. Safety of Capital. ......... . ... ... ..... ,4 B. Liquidity......... .... ..... ... ... . ... . ...5 C. Yield. ... ....... . .. ... .. ..... .... .. .. .... .....5 V. Delegation of Authority. ... . . „.. .6 .... .. ... ..... .. VI, Eligible Instruments. . . ...... .. .... .. .... .. . ......7 VII. Liquidation. ............ ..... .. ............... .. ..7 VIII. Competition. ... .. ... ... ... ..... . .... .. ............8 IX. City Depository.. .. .. ..... .. ... . ... ... .. .... ......8 X. Reporting. .... ... .... ... . .. ...8 XI, Audit and Review..... ... .. . . ....... ... ... .......8 XII. Application... ..... ... .... .. ....... ... ..... .......8 CITY OF BEAUMONT INVESTMENT POLICY I. INTRODUCTION These investment guidelines have been prepared to ensure that the City's investments are duly authorized, properly managed, adequately protected and fully collateralized. These policies are not intended to limit authorized investment opportunities but rather to: — establish prudent investment procedures; — assure that investment assets are adequately safeguarded; — assure that adequate accounts and records are maintained which reflect investment position and results; — establish reporting standard; and — assure that a system of good internal controls is maintained. II. ADOPTION This policy is adopted by City Council as of June 4, 19b5, but may be amended from time to time by Council action. III. SCOPE These policies provide investment guidelines for all funds invested by the City of Beaumont to ensure compliance with the City Charter, City ordinances and state and federal law. The policies will be reviewed and, if necessary, amended by City Council annually. IV. INVESTMENT OBJECTIVES The objectives of the City's investment policies are: — to provide for the safety of the City's capital. — to provide funds to meet the City's cash needs, essentially serving as a buffer between the timing of revenue sources and disbursements, and — to earn the highest rate of return on invested funds without sacrificing either safety or necessary liquidity. A. SAFETY OF CAPITAL The City shall follow prudent investment practices which seek to preserve capital from interest rate risks, limit losses due to institutional failures and provide for the safety of securities and collateral. 1. The City shall limit the effects of Interest Rate Risk by: — Structuring its portfolio so that securities mature to meet cash requirements; thus, avoiding the need to sell securities on the open market prior to maturity, with the risk of capital loss. 2. The City shall limit Credit Risk by: — Limiting its investments to Direct Obligations of the U.S. Treasury and fully collateralized Certificates of Deposit or repurchase agreements within depositories designated by the City Council. — Diversifying its portfolio to eliminate losses from an overconcentration of assets in one institution, maturity or class of securities. Investments shall not exceed more than 20% of the capitalization of the financial institution. At the time an investment is made, no more than 25% of the City's total investments shall be concentrated in one institution other than the main depository. — Utilizing only the Federal Reserve Bank or primary security dealers registered with the Texas Security Commission for the purchase of direct U.S. Treasury obligations not purchased through City depositories. 3. The City shall provide for the security of its investments in the following manner: — All securities purchased by the City shall be held for safekeeping by an independent financial institution in the name of the City. Securities shall not be held in "Street Name". — All certificates of deposits purchased through depositories shall be fully collateralized and the collateral shall be held for the City in safekeeping by an independent third party. All securities pledged to colla.teralize City investments and deposits shall be formally accepted and released by the City Council. — All deposits and investments of the City shall be secured by collateral in the amount equal to at least one hundred percent (100%) of the aggregate market value of the deposit or investment less an amount insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Corporation. The following securities shall be acceptable as collateral: United States bonds, Certificates of Indebtedness of the United States, Treasury notes of the United States, and other evidences of indebtedness of the United States which are guaranteed as to both principal and interest by the United States Government, bonds of the State of Texas, or of any county, City, town, independent school district, common school district or other school district in the State .of Texas; or bonds issued under the Federal Farm Loan Act, or road district bonds, bonds, pledges or other evidences of indebtedness issued by the Board of Regents of the University of Texas, notes or bonds secured by mortgages insured and debentures issued by the Federal Housing Administrator of the United States Government; in shares or share accounts of any building and loan association organized under the laws of this state, provided the payment of such shares or share accounts is insured by the Federal Savings & Loan Insurance Corporation, and in the shares or share accounts of any Federal Savings & Loan Association domiciled in this state, provided the payment of-such shares or share accounts is insured by the Federal Savings & Loan Insurance Corporation; bank acceptances of banks having a capital stock of not less than Five Hundred Thousand ($500,OOU.OU) Dollars, and bonds issued by municipal corporations in Texas. — The City shall require delivery of all securities purchased through repurchase agreements or shall have these securities held in the City's name by an independent third party. — On a quarterly basis, the Finance Office shall confirm directly that securities are being held in safekeeping for the City and that approved collateral is properly pledged and of sufficient market value to protect the investment. The results of the confirmation shall be included in the Investment Report. B. LIQUIDITY The City shall construct its investment portfolio so that investments mature to meet the City's cash needs. When the City has a need to invest in longer term securities, the City shall limit its investments to securities with an active secondary market and shall limit the maturities to less than three years without specific Council authorization. C. YIELD 1. The City shall seek to earn the highest of return on invested funds through interest income without sacrificing safety and liquidity. The City shall seek to obtain a yield exceeding the average return on three month Treasury Bills. 2. The City shall attempt to obtain stability in the yield by use of a variety of instruments and maturities. 3. Although the City may at times have gains or losses on liquidation of investments, the City should not seek "trading" profits in the management of its portfolio in a speculative manner. V. DELEGATION OF AUTHORITY A. City Council It shall be the City Council's responsibility to establish and approve the City's investment policies. The City Council shall require monthly reporting of the status and results of the City's investment activity. B. Investment Committee An Investment Committee shall be appointed by the City Manager and shall be composed of the City Manager and/or Assistant City Manager, the Finance Officer, and three representatives from the business/financial community, representing corporate financial officers and/or academicians. The City Attorney shall serve as legal advisor to the Investment Committee. The terms of the community representatives shall not exceed two years. Financial officers of City depositories and security dealers shall not be appointed to the committee. The Investment Committee shall meet quarterly to review cash flow analysis and make recommendations to the Finance Officer for investment strategies. The committee shall review investment activity and performance, economic outlook, portfolio diversification, maturity structure, authorized depositories, brokers, dealer and other investment matters. C. City Manager/Assistant City Manager The City Manager and/or Assistant City Manager shall review the monthly investment reports with the Finance Officer and investigate any policy violations notea. D. Finance Officer The Finance Officer shall invest the funds of the City in compliance _with the City's investment policy, and in accordance with advice of the City's Investment Committee. The Finance Officer shall prepare a monthly investment report which details the current investment position, monthly investment activity and investment results. �-l ��j 6 Additionally, the Finance Officer in conjunction_ with the Department of Budget and Research shall prepare a cash—flow analysis of all funds on a regular basis to assist in the development of long and short term investment strategies. The Finance Officer shall provide a copy of the City's investment guidelines to all banks and dealers doing business with the City so that the institutions will be aware of the investment philosophy of the City. The Finance Officer shall establish internal controls, including safekeeping procedures, to protect the assets of the City. The internal control procedures shall be reviewed by the internal and external auditors and the Investment Committee at least annually. Disclaimer ; The Finance Officer, acting in accordance with __written, approved procedures and exercising due diligence, shall be relieved of responsibility for an individual security credit risk or market price changes provided that deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. VI. ELIGIBLE INVESTMENTS The City shall invest its idle funds in time deposits, certificates of deposits, and repurchase agreements in depository banks which are qualified to perform such functions under the depository statues, TEX.REV.CIV.STAT.ANN.Arts. 2559 et seq . In addition to investments made through its depositories, the City may also invest in direct debt obligations of the United States. The purchase of direct debt obligations of the United States must be directed by the City Council except for the purchase of short term U.S. Treasury Bills thirteen weeks or less maturity purchased through the primary depository. The Finance Director or his designee is hereby authorized to purchase U.S. Treasury Bills thirteen weeks or less maturity. The types of eligible investments are subject to revision with changes in state legislation. VII. LIQUIDATION Liquidations shall be made to meet unanticipated cash requirements or to redeploy cash into other instruments expected to outperform present investments or to otherwise adjust the City's portfolio. 7 r VIII-COMPETITION The Finance Officer shall install procedures to ensure that rates received are competitive in the money market. IX. CITY DEPOSITORY The City Council shall request applications for the City Depository once every two years. The City Depository as authorized by the City Council shall meet all requirements of the state law concerning city depositories. (The bank "offering the most favorable terms and conditions for the handling of the City funds" shall be selected as the Depository. ) The City Council may also designate additional City Depositories for investment purposes only in accordance with state law. These depositories and the Primary depository will be allowed to bid competitively on the placement of certificates of deposits. The relationship between the City and its depositories shall be reduced to a written contract and executed by both parties. X. REPORTING The Finance Officer shall prepare a monthly report on the results of the investment activity. This report shall include the status of the current portfolio position, the trading activity, the interest earnings and collateral. Additionally, an annual report will be provided to the City Council containing details of investment transactions and positions in compliance with State law. Additionally, the report shall include an assessment of performance. Any material changes in investment procedures and/or portfolio shall be disclosed. XI. AUDIT AND REVIEW The investment procedures shall be reviewed annually as part of the City's independent audit. The results shall be presented to the City Council. Additionally, the Internal Audit staff shall periodically review the investment report, policies and procedures to ensure the existence of adequate internal controls over the City's investments. XII. APPLICATION These guidelines shall govern all investments made by the City of Beaumont after June 4, 1985.