Loading...
HomeMy WebLinkAboutColleyville Economic Development Corporation (CEDC) Resolutions (R-98-26)-09/14/1998 RESOLUTION R-98-26 AN RESOLUTION REVISING THE COLLEYVILLE ECONOMIC DEVELOPMENT CORPORATION INVESTMENT POLICY WHEREAS, recent changes to the Public Funds Investment Act, which governs the investment of funds by public entities in the State of Texas, necessitates the update of the Colleyville Economic Development Corporation's investment policy; and, WHEREAS, the Corporation wishes to add ethics/conflict of interest requirements and state mandated training requirements to the policy, NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE COLLEYVILLE ECONOMIC DEVELOPMENT CORPORATION: Sec. 1. THAT "Exhibit A" of this resolution be adopted as the Colleyville Economic Development Corporation's Investment Policy and it replaces "Exhibit A" contained in Resolution R-96-4. Sec. 2. THAT this resolution become effective on the date of passage. AND IT IS SO RESOLVED. PASSED AND ADOPTED, this September 14, 1998. COLLEYVILLE E ELOPMENT CORPORATION Nelson Thibodeaux President COLLEYVILLE ECONOMIC DEVELOPMENT CORPORATION INVESTMENT POLICY Scope This investment policy applies to all financial assets of the Colleyville Economic Development Corporation including: General Fund Debt Service Fund Capital Projects Fund and any new fund created by the governing body, unless specifically exempted by the governing body. Objectives Safety of principal is the foremost objective of the Corporation in managing its portfolio. The Corporation will also maintain sufficient liquidity to provide adequate and timely working funds. The Corporation investment portfolio shall be designed with the objective of regularly exceeding the weighted average return on thirteen week Treasury bills. This is considered a benchmark for riskless investment transactions, and therefore, is a minimum standard for the portfolio's rate of return. For bond funds which fall under the arbitrage provisions of the Tax Reform Act of 1986, the Corporation will attempt to earn allowable bond yield with market conditions permitting. Delegation of Authority The Corporation designates the Investment Officers to be the General Manager with overall responsibilities to see that investment objectives are accomplished and the Finance Manager with the specific day-to-day performance of managing the funds of the Corporation. Ethics and Conflict of Interest All investment 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 shall disclose to the Colleyville Economic Development Corporation and Texas Ethics Commission a statement under the following conditions: A. If they have a personal business relationship with a business organization offering to engage in an investment transaction with the entity. Under the Public Funds Investment Act, a person al business relationship is defined as: 1. the investment officer owns 10 percent or more of the voting stock or shares of the business organization or owns $5,000 or more of the fair market value of the business organization: 2. funds received by the investment officer from the business organization exceed 10 percent of the investment officer's gross income for the previous year; or 3. the investment officer has acquired from the business organization during the previous year investments with a book value of $2,500 or more for the personal account of the investment officer. B. If they are related within the second degree by affinity or consanguinity, as determined by Chapter 573 V.A.T.C.S. to an individual seeking to sell an investment to the City of Colleyville. Prudence The standard of prudence to be used by investment officials shall be the "prudent person" which means the officer may not be an expert but is obligated to act responsibly and shall be applied in the context of managing an overall portfolio. Investment officers acting in accordance with written procedures 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. Investment officers shall notify the Board of Directors in writing of any conflicts of interest, as defined by the Public Funds Investment Act, no later than the next regularly scheduled Board of Director's meeting. It is the policy of the Colleyville Economic Development Corporation that the Investment Officers perform their duties in accordance with the policies and procedures set forth in this policy. The Investment Officers of the Corporation (General Manager and Finance Manager, and Assistant to the Finance Director of the City of Colleyville) shall be personally indemnified in the event of investment loss provided the Investment Policy is followed. Internal Controls The Finance Manager shall establish a system of written internal controls which shall be reviewed annually by the independent auditor. The controls shall be designed to prevent the loss of public funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent actions. Permissible Instruments The following is a list of permissible instruments as authorized by the 70th Texas Legislature in the Public Funds Investment Act (TEX. REV. CIV. STAT. ANN. ACT 842A- 2) and amended by the 71th Legislature: 1. obligations of the United States or its agencies or instrumentalities; 2. direct obligations of the State of Texas or its agencies; 3. other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas or the United States or its agencies or instrumentalities; 4. obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated as to investment quality by nationally recognized investment rating firm and having received a rating of not less than "A" or its equ ivalent; 5. certificates of deposit issued by state and national banks and domiciled in the state that are: a. guaranteed or insured by the Federal Deposit Insurance Corporation, FSLlC or its succp,ssors; or b. secured by obligations that are described by subdivisions (1) through (4) of this subsection which are intended to include all direct federal agency or instrumentality issued mortgage backed securities, and 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. invest in a local government investment pool as authorized by the Interlocal Cooperation Act (TEX. REV. CIV. STAT. ANN. ACT. 4413 (32c), as amended, and the Public Funds Investment Act (TEX. REV. CIV. STAT. ACT. 842A-2), as amended. The investment pool must comply with the requirements of the Public Funds Investment Act, as amended, as follows: a. the investment pool maintains a stable asset value as defined in the Public Funds Investment Act; b. the investment pool maintains a AAA rating by one of the nationally recognized ratings agencies; c. the investment pool's maximum average dollar weighted maturity does not exceed 90 days; and d. the investment pool's continued compliance with the remaining provisions of the Public Funds Investment Act. 7. Direct repurchase agreements with primary security dealers having a defined termination date, and secured by U.S. Government or federal agency securities, provided that the ownership of collateral for the repurchase agreem ent is transferred to the Corporation, and deposited with a safekeeping agent for the duration of the contract and a signed master repurchase agreement has been executed with the counterparty. 8. SEC-registered no-load money market mutual funds with a dollar weighted average portfolio of 90 days or less whose assets consist exclusively of United States Government Securities whose investm ent objectives include seeking to maintain a stable net asset value of $1.00 per share. Investment in mutual funds shall be limited to a maximum of ten percent (10%) of the Corporations available funds. Unacceptable Investment Instruments The following securities, although authorized by the Public Funds Investment Act, are not eligible investments for the Colleyville Econom ic Developm ent Corporation: 1. Collateralized mortgage obligations 2. Commercial paper 3. Banker's acceptances 4. Reverse repurchase agreements 5. No-load mutual funds other than no-load money market mutual funds 6. Guaranteed investment contracts 7. Share certificates of qualifying credit unions Investment Strategy The investment strategy by type of fund is as follows: (1) Operating Funds The investment strategy for operating fund(s) is to assure that anticipated cash flows are matched with adequate investment liquidity. A secondary objective is to create a portfolio which will experience minimum volatility during economic cycles. These funds shall not have an investment with a stated maturity greater than eighteen (18) months. (2) Debt Service Funds The investment strategy for debt service fund(s) is the assurance of investment liquidity to cover the debt service obligations on the required payment date. Investments purchased shall not have a stated final maturity date which exceeds the corresponding debt service payment date. (3) Reserve Funds The investment strategy for reserve fund(s) is the assurance of investment liquidity adequate to cover the debt service obligation s not funded by debt service funds on the required payment date. Investment of reserve funds are controlled by their ordinance, resolution or indenture, and Federal and State law. Bond documents must be examined for each issue, for potential differences with this policy concerning investment instruments, maximum maturity or average life restrictions, call dates or sinking fund redemptions, and applicable arbitrage yields and rebate liability. Provisions contained in the bond documents will supersede provisions of this policy. Reserve funds will be invested using a more conservative approach than the current standard investment strategy when arbitrage rebate rules require refunding excess earnings. All excess earnings received will be segregated to allow a proper determination of interest income to be used in the arbitrage calculation. Maturity limitations for single issue reserve funds shall not exceed the sooner of five (5) years, the call provisions of the bond ordinance, or the final maturity of the bond issue. A. Diversification The Corporation will attempt to limit the risk of loss through diversification of its portfolio and to achieve the aforementioned investment strategies by diversification of instruments. Maximum Diversification by Instrument Percent of Portfolio U.S. Treasury Obligations (Bills, Notes and Bonds) 100% U.S. Government Agency Securities and Instrumentalities of Government Sponsored Corporations 75% Certificates of Deposit (CD's) Commercial Bank's 75% Local Government Investment Pool 75% Tri-Party Repurchase Agreement 75% SEC registered, no-load mutual fund 10% Competitive Selection of Investments On all funds available for investment other than those placed with Investment Pools, oral bids shall be requested from at least two broker/dealers or national banks. The Corporation will accept the bid which provides the highest rate of return within the maturity required and within the parameters of this policy. Records will be kept of the bids offered, bids accepted, and a brief explanation of the decision which was made regarding the investment. Qualified Institutions As the Corporations investments are managed by the investment officers for the City of Colleyville, the Corporation shall utilize the broker/dealers selected by the City of Colleyville. The selection process is as follows: each year in December, the City Council shall approve five financial institutions for investment purposes as recommended by the Finance Director. All firms shall answer the Broker/Dealer questionnaire (Appendix A) and submit their most recent audited financial statements for evaluation of credit worthiness. All personnel in the firms who will be trading or quoting securities to the Corporation must maintain a current NASD license and be registered to deal securities in the State of Texas. An investment certification form (Appendix B) on the firm's letterhead signed by a principal of the firm must be on file with the Corporation. Safekeeping All marketable securities purchased by the Corporation shall be held in third party safekeeping by an institution designated as primary agent. All securities will be delivered to the third party institution by seller. Personnel in the third party institution will verify the correct security was delivered by the seller ("delivery vs payment"). The third party institution shall issue a safekeeping receipt to the Corporation listing the specific instrument, rate/yield, maturity, CUSIP, and other pertinent information. Collateral on deposit type securities which exceed the FDIC coverage shall be held in a third party safekeeping institution. In the event a third party safekeeping institution is used, a collateral agreement shall be executed between the Board of Directors, depository which pledged the collateral, and the third party custodian of the collateral. The Board of Directors will retain possession of all original safekeeping receipts and the receipts will state the security is pledged to the Colleyville Economic Development Corporation. Either the General Manager or the Finance Manager must approve release of collateral in writing prior to its removal from the safekeeping account. Collateral Securities for Certificates of Deposit and Demand Accounts The General Manager will accept as collateral for its Certificates of Deposit and demand accounts the following securities: A FDIC coverage B. U.S. Treasury bills, notes and bonds C. United States Agency and instrumentalities bills or notes D. GNMA mortgage backed fully modified pass through securities The collateral for the demand account may combined with the collateral held by the City of Colleyville's demand account for the deman d accounts held at the same institution. Collateral shall be "marked to market" monthly by the Finance Manager. The following percentages constitutes the minimum market value for collateral instruments which are pledged for the Corporation's Certificates of Deposit and demand deposits. Form of Collateral Pledged Collateral Ratio 1. U.S. Treasury bills, notes, and bonds a. maturing within 1 year b. maturing in 1-5 years c. maturing in more than 5 years 102% 105% 110% 2. Actively traded U.S. Government Agency securities a. maturing in less than 1 year b. maturing in 1-5 years c. maturing in more than 5 years 103% 107% 115% 3. GNMA mortgage pass through securities 115% Collateral shall be audited annually be the Corporation's independent auditor and may be audited by the Corporation at anytime during normal business hours of the safekeeping bank. Arbitrage The Tax Reform Act of 1986 places limitations on the Corporation's yield from investing certain tax-exempt bond proceeds, debt service funds and reserve funds. The rebate provisions require that the Corporation compute earnings on investments from certain issues of bonds on a periodic basis to determine if rebate is required. To determine the Corporation's arbitrage position, the corporation is required to calculate the actual yield earned on the investment of the funds and compare it to the yield that would have been earned if the funds had been invested at a rate equal to the yield on the applicable bonds sold by the Corporation. The rebate provisions state that periodically ( not less than once every five years and not later than sixty days after maturity of the bonds), the Corporation is required to pay the United States Treasury a rebate of any excess earnings. These restrictions require extreme precision in the monitoring and recordkeeping of investments, particularly in computing yields to ensure compliance. Failure to comply can dictate that the bonds become taxable, retroactively from the date of issuance. The investment strategy for bond funds which fall under the arbitrage provisions of the Tax Reform Act of 1986, is that the Corporation will attempt to earn maximum allowable bond yield with market conditions permitting. Reporting Requirements Included as a part of the City of Colleyville's quarterly investment report, the Finance Manager shall issue a written report concerning the Corporations's investment transactions for the preceding quarter and describing in detail the investment position of the Corporation as of the end of the quarter indicating the market values of all investments held during the quarter. The report shall list for each investment held during the quarter: the purchase price of the investment, the par value of the investment, the market value of the investment at the beginning of the quarter, market value of the investment at the end of the quarter, the market change from the beginning until the end of the quarter, and fully accrued interest for the period. This report shall be in compliance with provisions of the Public Funds Investment Act, as amended. The report shall be signed by the General Manager and Finance Manager. Training Requirements Both the Finance Manager and Assistant to the Finance Director of the City of Colleyville shall complete ten hours of training every two years as required by the Public Funds Investment Act. This training may be obtained from the following sources: North Central Texas Council of Governments, Government Treasurer's Organization of Texas, Government Finance Officer's of Texas, or Texas Municipal League. The training must include education in investment controls, security risks, strategy risks, market risks, and any other topics as required by the Public Funds Investment Act.