HomeMy WebLinkAboutORD 1997-110 � . ORDINANCE N0. 97->>o
�=� AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS AMENDING ORDINANCE N0. 97-44
RELATIVE TO THE CITY INVESTMENT POLICY PURSUANT
TO CHAPTER 10 FINANCE, ARTICLE II INVESTMENT OF
CITY FUNDS OF THE GRAPEVINE CODE OF
' ORDINANCES; PROVIDING A SEVERABILITY CLAUSE;
DECLARING AN EMERGENCY AND PROVIDING AN
EFFECTIVE DATE
WHEREAS, the Grapevine Code of Ordinances, Chapter 10, Finance, Article II
Investment of City Funds, Section 10-31(e) provides that the City Council may adopt
investment policies and guidelines; and
WHEREAS, the City Council approved Ordinance No. 97-44, on May 6, 1997, which
adopted the current Investment Policy and Investment Strategy; and
WHEREAS, the Texas Legislature approved House Bill 2799 which amended
�.�.,� certain provisions of Chapter 2256 of the Texas Government Code (the Public Funds
Investment Act), effective September 1, 1997; and
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WHEREAS, it is imperative that an Investment Policy and Investment Strategy be
adopted which is fully in compliance with Chapter 2256 of the Texas Local Government
Code.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS:
Section 1. That all matters stated in the preamble to this ordinance are true and
correct and are incorporated herein as if copied in their entirety.
Section 2. That the City Council has performed the annual review of the City
Investment Policy and Investment Strategy required pursuant to Chapter 2256 of the Texas
Government Code and desires to adopt amendments to the Policy as shown on Exhibit "A"
attached hereto and made a part of said Policy.
Section 3. If any section, article, paragraph, sentence, clause, phrase or word in
this ordinance, or application thereto any person or circumstances is held invalid or
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unconstitutional by a Court of competent jurisdiction, such holding shall not affect the
validity of the remaining portions of this ordinance; and the City Council hereby declares
it would have passed such remaining portions of the ordinance despite such invalidity,
which remaining portions shall remain in full force and effect.
"" � Section 4. The fact that the present ordinances and regulations of the City of
Grapevine, Texas are inadequate to properly safeguard the health, safety, morals, peace
and general welfare of the inhabitants of the City of Grapevine, Texas, creates an
`""�' emergency for the immediate preservation of the public business, property, health, safety
and general welfare of the public which requires that this ordinance shall become effective
from and after the date of its passage, and it is accordingly so ordained.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the �th day of October , 1997.
APPROVED:
William D. Tate
Mayor
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ATTEST:
Lind Huff
City Secretary
APPROVED AS TO FORM:
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John F. Boyle, Jr. `
City Attorney
ORD. NO. 97-��� 2
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Exhibit "A" to
Ord. No. 97-110
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. CITY OF GRAPEVINE
INVESTMENT POLICY
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. Adopted: May 6, 1997
Amended: October 7, 1997
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PREFACE
It is the policy of City of Grapevine that, giving due regard to the safety and risk of investment,
all available funds shall be invested in conformance with State and Federal Regulations,
applicable Bond Resolution requirements, adopted Investment Policy and adopted Investment
Strategy.
Effective cash management is recognized as essential to good fiscal management.
Aggressive cash management and effective investment strategy development will be pursued
to take advantage of interest earnings as a viable and material revenue to all City funds. The
City's portfolio shall be designed and managed in a manner responsive to the public trust and
consistent with this Policy.
Investments shall be made with the primary objectives of:
� • Preservation of capital,
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• Safety of City funds,
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• Maintenance of sufficient liquidity,
• Maximization of return within acceptable risk constraints, and
• Diversification of investments.
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INVESTMENT POLICY
TABLE OF CONTENTS
Paqe
IPU RPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. INVESTMENT OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
III. INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
� A. Authorized Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Protection of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
C. Investment Advisors and Investment Providers . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Responsibility and Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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I. PURPOSE
. A. Forrnal Adoption
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This Investment Policy is authorized by the City of Grapevine in accordance with Chapter
2256, Texas Government Code, the Public Funds Investment Act.
B. Scope
This Investment Policy applies to all of the investment activities of the City. This Policy
establishes guidelines for: 1) who can invest City funds, 2) how City funds will be
invested, and 3)when and how a periodic review of investments will be made. In addition
to this Policy, bond funds (as defined by the Internal Revenue Service) shall be managed
in accordance with their issuing documentation and all applicable State and Federal Law.
All investments made with City funds prior to the adoption of this Investment Policy shall
be held or liquidated as determined by the Investment Officer to be in the best interest of
the financial well being of the City.
C. Review and Amendment
�a� . This Policy shall be reviewed annually by the City Council. Amendments must be
approved by the Investment Officer and adopted by the City CounciL
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D. Investment Strategy
In conjunction with the annual Policy review, the City Council shall review the separate
written investment strategy for each of the City funds. The investment strategy must
describe the investment objectives for each particular fund according to the following
priorities:
1) investment suitability,
2) preservation and safety of principal,
3) liquidity,
4) marketability prior to maturity of each investment,
5) diversification, and
6) yield.
Monitorinq of market prices for investments will be accomplished bv utilizinq the most
recent issue of the Wall Street Journal.
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, II. INVESTMENT OBJECTIVES
A. Safety of Principal
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The primary objective of all investment activity is the preservation of capital and the safety
of principal in the overall portfolio. The first priority of each investment transaction shall be
to ensure that capital losses are avoided, whether they be from securities defaults or
erosion of market value.
B. Maintenance of Adequate Liquidity
The City's investment portfolio will remain sufficiently liquid to meet the cash flow
requirements that might be reasonably anticipated. Liquidity shall be achieved by
matching investment maturities with forecasted cash flow requirements; investing in
securities with active secondary markets; and maintaining appropriate portfolio
diversification.
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� III. INVESTMENT POLICIES
A. Authorized Investments
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� Investments described below are authorized by the Public Funds Investment Act as
eligible securities for the City. The City's funds governed by this Policy may be invested
in:
1. Obligations of Govemmental Entities.
Except for the items listed in (g) below, the following are authorized investments for
obligations of governmental agencies:
a. Obligations of the United States or its agencies and instrumentalities;
b. Direct obligations of the State of Texas or its agencies and instrumentalities;
c. Other obligations, the principal and interest on which are unconditionally
guaranteed, insured by, or backed by the full faith and credit of the State of
Texas or the United States or their respective agencies and instrumentalities;
� � d. Obligations of states, agencies, counties, cities, and other political
subdivisions of any State having been rated as to investment quality by a
� nationally recognized investment rating firm and having received a rating of
not less than "A" or its equivalent; and
e. Collateralized mortgage obligations directly issued by a federal agency or
instrumentality of the United States, the underlying security for which is
guaranteed by an agency or instrumentality of the United States.
f. The average life of Governmental Obligations may not exceed two years and
stated maturities may not exceed two years.
g. The following are not authorized investments for this City:
(1) Obligations whose payments represent the coupon payments on the
outstanding principal balance of the underlying mortgage-backed
security collateral and pays no principal (Interest Only CMO);
(2) Obligations whose payments represent the principal stream of cash
flow from the underlying mortgage-backed security collateral and
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bears no interest (Principal Only CMO);
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(3) Collateralized mortgage obligations that have a stated final maturity
date of greater than 3 years; and
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(4) Collateralized mortgage obligations, the interest rate of which is
determined by an index that adjusts opposite to the changes in the
market index(Inverse Floater CMO).
The City of Grapevine expressly prohibits the acceptance of collateralized deposits
interest-only and principal-only mortgage backed securities and collateralized mortgage
obligations with stated final maturities in excess of ten years or with coupon rates that float
inversely to market index movements.
2. Certificates of Deposit.
Certificates of deposit issued by state and national banks and savings and loan
associations domiciled in Texas that are:
a. Guaranteed or insured by the Federal Deposit Insurance Corporation or its
successors; or
,�,�� b. Secured by obligations that are described by 1 above, which are intended to
include all direct Federal agency or instrumentality issued mortgage backed
securities, but excluding those mortgage backed securities of the nature described
� in 1.f. above, that have a market value of not less than the principal amount of the
certificates; or
c. Secured in any other manner and amount provided by law for deposits of the City
of Grapevine; or
d. Governed by a Depository Agreement, as described in B.4. of this section, that
complies with Federal and State regulation to properly secure a pledged security
interest.
e. Certificates of Deposit may have stated maturities of no greater than one year.
3. Repurchase Agreements.
a. Fully collateralized repurchase agreements and reverse repurchase agreements
as defined by the Public Funds Investment Act, with a defined termination date that
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are placed with a primary government securities dealer or financial institution doing
business in the State of Texas, and which are secured by obligations of the United
States or its agencies and instrumentalities and which are pledged in the City's
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, name and deposited with a third party custodian bank selected and approved by
the City. Repurchase agreements should not exceed 180 days to stated maturity
and reverse repurchase agreements should not exceed 90 days to stated maturity,
�,.� provided an executed PSA Master Repurchase Agreement is on file with the City
and the counter party bank or dealer.
� b. Sweep accounts are authorized for the City's excess collected balances, with such
funds invested in a repurchase agreement as defined and authorized by this policy
and collateralized as required by this policy for repurchase agreements.
4. Mutual Funds.
Money market mutual funds regulated by the Securities & Exchange Commission, with a
dollar weighted average portfolio maturity of 90 days or less that fully invest dollar-for-
dollar all City's funds without sales commissions or loads and, whose investment
objectives include seeking to maintain a stable net asset value of$1 per share. The City
may not invest funds under its control in an amount that exceeds 10% of the total assets
of any individual money market mutual fund or exceeds 80% of its monthly average fund
balance, excluding bond proceeds and reserves and other funds held for debt service in
money market mutual funds;
,,���, 5. Investment Pools.
;� Eligible investment pools organized and operating in compliance with the Public Funds
Investment Act that have been authorized by the City Council; and whose investment
� philosophy and strategy are consistent with this Policy and the City's ongoing investment
strategy.
B. Protection of Principal
The City shall seek to control the risk of loss due to the failure of a security issuer or grantor.
Such risk shall be controlled by investing only in the safest types of securities as defined in
the Policy; by collateralization as required by law; and through portfolio diversification by
maturity and type.
The purchase of individual securities shall be executed "delivery versus payment" (DVP)
through the City's Safekeeping Agent. By so doing, City's funds are not released until the City
has received, through the Safekeeping Agent, the securities purchased.
1. Diversification by Investment Type
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Diversification by investment type shall be maintained by ensuring an active and
efficient secondary market in portfolio investments and by controlling the market and
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a opportunity risks associated with specific investment types.
Diversification by investment type shall be established by the following maximum
�,� percentages of investment type as compared to the total investment portfolio at the
time of each investment transaction:
a. U.S. Treasury Bills/Notes/Bonds 100%
b. U. S. Agencies & Instrumentalities 100%
c. States, Counties, Cities, & Other 75%
d. Certificates of Deposit 75%
e. Money Market Mutual Funds 20%
f. Eligible Investment Pools 100%
2. Bond Proceeds
Bond proceeds may be invested in a single security or investment if the City Manager
determines that such an investment is necessary to comply with Federal arbitrage
restrictions or to facilitate arbitrage record keeping and calculation.
3. Diversification by Investment Maturity
In order to minimize risk of loss due to interest rate fluctuations, investment maturities will
not exceed the anticipated cash flow requirements of the funds. Maturity guidelines by
fund are as follows (Investment transactions made prior to the adoption of this Policy are
not subject to these guidelines):
a. Operating Funds
The weighted average days to maturity for the operating fund portFolio shall be less
� than 270 days and the maximum allowable maturity shall be two years.
b. Construction and Capital Improvement Funds
The investment maturity of construction and capital improvement funds shall generally
be limited to the anticipated cash flow requirement or the "temporary period," as
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defined by Federal tax law. During the temporary period bond proceeds may be
invested at an unrestricted yield. After the expiration of the temporary period, bond
proceeds subject to yield restriction shall be invested considering the anticipated cash
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flow requirements of the funds and market conditions to achieve compliance with the
applicable regulations. The maximum maturity for construction or capital improvement
funds investments shall generally be no longer than the construction time required for
��:,� a particular project, with no single security instrument exceeding the life of authorized
investments as described in 1 f. above.
c. Debt Service Funds
Debt Service Funds shall be invested to ensure adequate funding for each
consecutive debt service payment. The Investment Officers shall invest in such a
manner as not to exceed an "unfunded" debt service date with the maturity of any
investment. An unfunded debt service date is defined as a coupon or principal
payment date that does not have cash or investment securities available to satisfy
said payment.
Funds that are considered "bond proceeds" for arbitrage purposes may be invested
using a more conservative approach than the standard investment strategy when
arbitrage rebate rules require rebating excess earnings. All earnings in excess of the
allowable arbitrage eamings ("rebate liability")will be segregated and made available
for any necessary payments to the U.S. Treasury.
„�. 4. Ensuring Liquidity
� Liquidity shall be achieved by anticipating cash flow requirements, by investing in
securities with active secondary markets and by investing in eligible money market
mutual funds and local government investment pools.
A security may be liquidated to meet unanticipated cash requirements, to re-deploy
cash into other investments expected to outperform current holdings, or otherwise to
adjust the portfolio.
5. Depository Agreements
Consistent with the requirements of State law, the City requires all bank and savings
and loan association deposits to be federally insured or collateralized with eligible
securities. Financial institutions serving as the City's Depositories will be required to
sign a Depository Agreement with the City and the City's safekeeping agent. The
safekeeping portion of the Agreement shall define the City's rights to the collateral in
case of default, bankruptcy, or closing and shall establish a perfected security interest
in compliance with Federal and State regulations, including:
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• the Agreement must be in writing;
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• the Agreement has to be executed by the Depository and the City of Grapevine
contemporaneously with the acquisition of the asset;
�.v..;, • the Agreement must be approved by the Board of Directors or the loan committee
of the Depository and a copy of the meeting minutes must be delivered to the City
of Grapevine;
• the Agreement must be part of the Depository's "official record" continuously
since its execution.
a. Allowable Collateral
Eligible securities for collateralization of deposits are defined by the Public Funds
Collateral Act, as amended, and meet the constraints of this Policy.
b. Collateral Levels
The market value of the principal portion of collateral pledged for certificates of
� deposit must at all times be equal to or greater than the par value of the certificate
of deposit plus accrued interest, less the applicable level of FDIC insurance.
,�a� c. Monitoring Collateral Adequacy
�„ The City shall require monthly reports with market values of pledged securities
from all financial institutions with which the City has collateralized deposits. The
Investment Officers will monitor adequacy of collateralization levels to verify
market values and total collateral positions.
d. Additional Collateral
If the collateral pledged for a deposit falls below the par value of the deposit, plus
accrued interest and less FDIC insurance, the institution holding the deposit will
notify the City and must pledge additional securities no later than the end of the
next succeeding business day.
e. Collateral Maturity
Collateral pledged for a deposit may not exceed five years as stated maturity.
f. Security Substitution
,�� ,m Collateralized deposits often require substitution of securities. Any financial
institution requesting substitution must contact the Investment Officers for
approval and settlement. The substituted security's value will be calculated and
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, � s�bstitution approved if the substitution maintains a pledged value equal to or
greater than the required security level. An Investment Officer must provide
written notification of the decision to the bank or the safekeeping agent holding
the security prior to any security release. Substitution is allowable for all
transactions, but should be limited, if possible, to minimize potential administrative
problems and transfer expense. The Investment Officers may limit substitution
and assess appropriate fees if substitution becomes excessive or abusive.
6. Safekeeping
a. Safekeeping Agreement
The City shall contract with a bank or banks for the safekeeping of securities
either owned by the City as a part of its investment portfolio or as part of its
depository agreements.
b. Safekeeping of Deposit Collateral
All collateral securing bank and savings and loan deposits must be held by a
third-party banking institution acceptable to and under contract with the City of
Grapevine, or by the Federal Reserve Bank.
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C. Investment Advisors and Investment Providers
Investment Advisors shall adhere to the spirit, philosophy and specific term of this Policy
and shall invest within the same"Standard of Care." Investment Providers shall adhere to
the spirit and philosophy of this Policy and shall avoid recommending or suggesting
transactions outside that"Standard of Care."
Selection of Investment Advisors and Investment Providers will be performed by the
Investment Officer. The Investment Officer will establish criteria to evaluate Investment
Advisors and Investment Providers, including:
a. Adherence to the City's policies and strategies,
b. Investment performance and transaction pricing within accepted risk constraints,
c. Responsiveness to the City's request for services, information and open
communication,
d. Understanding of the inherent fiduciary responsibility of investing public funds, and
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e. Similarity in philosophy and strategy with the City of Grapevine's objectives.
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Selected Investment Advisors and Investment Providers shall provide timely transaction
confirmations and monthly activity reports.
�.� Business organizations eligible to transact investment business with the City shall be
presented a written copy of this Investment Policy. Additionally, the registered principal of
the business organization seeking to transact investment business shall execute a written
instrument substantially to the effect that the registered principal has:
1) received and thoroughly reviewed this Investment Policy, and
2)
2) (a) Acknowledaed that the business orqanization has implemented reasonable
procedures and controls in an effort to preclude investment transactions
conducted befinreen the Citv and the orqanization that are not authorized bv
the Citv's investment policy, except to the extent that this authorization is
dependent on an analvsis of the makeup of the Citv's entire portfolio or
requires an interpretation of subiective investment standards.
(b) Such instrument must be accepted bv a qualified representative of the
� business. Such qualified reqresentative must meet the followinq criteria:
� "Qualified representative" means a person who holds a position with
a business orqanization, who is authorized to act on behalf of the
business orqanization, and who is one of the followinq:
� for a business orqanization doinp business that is requlated
bv or reqistered with a securities commission, a person who
is reqistered under the rules of the National Association of
Securities Dealers;
ii for a state or federal bank, a savinqs bank, or a state or
federal credit union, a member of the loan committee for the
bank or branch of the bank or a person authorized bv
corporate resolution to act on behalf of and bind the bankinq
institution; or
. iii for an investment pool, the person authorized by the elected
official or board with authoritv to administer the activities of
the investment pool to siqn the written instrument on behalf of
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the investment pool.
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The City shall not enter into an investment transaction with a business organization
�J prior to receiving the written instrument described above.
.,�.�. 3) The list of approved brokers for purchase of allowed securities is:
BancOne
Bank of America
Dain Boxworth
Daiwa Securities
Dean Witter
Donaldson. Lufkin & Jenrette Securities
Dresdner Kleinwort Benson
Everen Securities
First Chicaqo
Fuii Securities
Lehman Bros
Merrill Lvnch
Morqan Stanlev
Prudential Securities
Raymond James
Smith Barnev
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D. Responsibility and Controls
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1. Delegation of Authority to Invest
Per Ordinance 81-44, the City Council has designated the "investment officers" to be
the City Manager with overall responsibilities to see that investment objectives are
accomplished and the Finance /Treasurer Director with the specific day-to-day
, performance of managing the funds of the City.
The Investment Officer shall review the investment portfolio's status and performance,
determine and implement appropriate portfolio adjustments, oversee the City's
Investment Advisor, monitor compliance with the Investment Policy and Investment
Strategy Statement, and perform other duties as necessary to manage the City's funds.
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_ 2. Training
" (a) All Investment Officers of the Citv of Grapevine shall have a minimum of 10
�_._�� classroom hours of Investment Trainina durinq each consecutive 24 month
period followinq the effective date of this Ordinance.
(b) Traininq as required in (2 (a) above is authorized to be provided from one or
more of the followinq sources:
The Texas Municipal Leaque (TML)
The North Central Texas Council of Governments (NCTCOG)
Courses sponsored bv the Government Finance Officers Association
Area Universities and Colleqes
Qualified traininq institutions not affiliated with any financial institution
the Citv does business with
2. Prudent Investment Management
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The designated Investment Officers shall perform their duties in accordance with the adopted
Investment Policy and intemal procedures. In determining whether an Investment Officer has
exercised prudence with respect to an investment decision, the investment of all funds over
which the Investment Officer had responsibility; rather that the prudence of a single
investment shall be considered. Investment Officers acting in good faith and in accordance
with these policies and procedures shall be relieved of personal liability.
3. Standard of Care
The standard of care used by the City shall be the "prudent investor rule" and shall be applied
in the context of managing the overall portfolio within the applicable legal constraints. The
Public Funds Investment Act states:
"Investments shall be made with judgment and care, under circumstances then prevailing, 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."
° 4. Standards of Ethics
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The designated Investment Officers shall act as custodians of the public trust avoiding any
transaction which might involve a conflict of interest, the appearance of a conflict of interest,
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, or any activity which might otherwise discourage public confidence. Investment Officers 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.
�. :e, Additionally, all Investment Officers shall file with the Texas Ethics Commission and the City
a statement disclosing any personal business relationship with an entity seeking to sell
investments to the City
Each Citv investment officer shall disclose if he has a personal business relationship with anv
investment firm doinq business with the City, if the extent of business relationship meets anv
of the followinq conditions:
� (a) the investment officer owns 10% or more of the votinq stock or shares of the
business orqanization or owns $5,000 or more of the fair market value of the
business orqanization;
(b) funds received by the investment officers from the business oraanization exceed 10
percent of the investment officer's aross income for the previous year; or
(c) the investment officer has acquired from the business orqanization durinq the
�revious vear investments with a book value of $2,500 or more for the personal
�.,,� account of the investment officer.
(d) If the investment officer is related within the second deqree bv affinity or
�` consanquinitv as determined under the Government Code, to an individual seekinq
to sell an investment to the Citv.
6. Establishment of Internal Controls
The City of Grapevine's Investment Officer will maintain a system of internal controls over the
investment activities of the City.
7. Reporting
Investment performance will be monitored and evaluated by the Investment Officer. The
Investment Officers will provide a quarterly comprehensive report signed by all Investment
Officer to the City Council. This investment report shall:
1) describe in detail the investment position of the City,
2) state the reporting period beginning book and market value, additions or changes to
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the book and market value during the period and ending book and market value for the
period of each pooled fund group,
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m 3) state the reporting period beginning book and market value and reporting period
ending book and market value for each investment security by asset type and fund
type,
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4) state the maturity date of each investment security,
5) state the fund for which each investment security was purchased, and
6) state the compliance of the investment portfolio with the City's Investment Policy and
strategy and the Public Funds Investment Act.
The City of Grapevine, in conjunction with its Annual Financial Audit, shall perform a
compliance audit of management controls on investments and adherence to the City's
Investment Policy and Investment Strategy Statement. The City's independent auditor is
required to review the Quarterly Investment Reports during the annual audit of the City's
Financial System.
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EXHIBIT "B" TO
ORD. NO. 97-110
CITY OF GRAPEVINE
INVESTMENT STRATEGY STATEMENT
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Adopted:
Mav 6, 1997
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PREFACE
It is the policy of the City of Grapevine that, giving due regard to the safety and risk of
�:.,� investment, all available funds shall be invested in conformance with State and Federal
Regulations, applicable Bond Resolution requirements, adopted Investment Policy and
. adopted Investment Strategy.
In accordance with the Public Funds Investment Act, the City of Grapevine's investment
strategies shall address the following priorities (in order of importance):
• Understanding the suitability of the investment to the financial requirements of the City,
• Preservation and safety of principal,
• Liquidity,
• Marketability of the investment prior to maturity,
• Diversification of the investment portfolio, and
• Yield.
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Effective investment strategy development coordinates the primary objectives of the City of
Grapevine's Investment Policy and cash management procedures to enhance interest
. earnings and reduce investment risk. Aggressive cash management will increase the
available"investment period" and subsequently interest earnings. Maturity selections shall be
based on cash flow and market conditions to take advantage of various interest rate cycles.
The Cit�s investment portfolio shall be designed and managed in a manner responsive to the
public trust and consistent with the Investment Policy.
Each major fund type has varying cash flow requirements and liquidity needs. Therefore
specific strategies shall be implemented considering the fund's unique requirements. The
City's funds shall be analyzed and invested according to the following major fund types:
a. Operating Funds
b. Construction and Capital Improvement Funds
c. Debt Service Funds
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�. ., INVESTMENT STRATEGY
In order to minimize risk of loss due to interest rate fluctuations, investment maturities will not
�V� exceed the anticipated cash flow requirements of the funds. Investment guidelines by fund-
type are as follows:
a. Operating Funds
The City of Grapevine's Operating Funds are as follows:
General Fund Occupancy Tax Fund
Water and Sewer Fund Grant Fund
TIF Operating Fund Trust and Agency Fund
Lake Enterprise Fund Self Insurance Fund
Fleet Management Fund Capital Lease Fund
Suitability - Any investment eligible in the Investment Policy is suitable for the Operating
Funds.
Safety of Principal - All investments shall be of high quality securities with no perceived
default risk. Market price fluctuations will occur. By managing the weighted average days to
� maturity for the Operating Fund portfolio to less than 270 days and restricting the maximum
allowable maturity to finro years, the price volatility of the overall portfolio will be minimized.
Marketability - Securities with active and efficient secondary markets are necessary in the
event of an unanticipated cash requirement. Historical market"spreads" befinreen the bid and
offer prices of a particular security-type of less than a quarter of a percentage point shall
define an efficient secondary market.
Liquidity - The Operating Funds require the greatest short term liquidity of any of the fund
types. Short term investment pools and money market mutual funds shall provide daily
liquidity and may be utilized as a competitive yield altemative to fixed maturity investments.
Diversification - Investment maturities shall be staggered throughout the budget cycle to
. provide cash flow based on the anticipated operating needs of the City. Market cycle risk will
be reduced by diversifying the appropriate maturity structure out through finro years.
Yield - Attaining a competitive market yield for comparable security-types and portfolio
restrictions is the desired objective. The yield of an equally weighted, rolling three month
treasury bill portFolio shall be the minimum yield objective.
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b. Construction and Capital Improvement Funds
The City of Grapevine's Construction and Capital Improvement funds are as follows:
�..,�
Capital Projects - Streets
Capital Projects - General Facilities and Equipment
Capital Projects - Recreation
� Capital P�ojects - Street Maintenance and Capital Replacement
Capital Projects -TIF
Suitability - Any investment listed as eligible in the Investment Policy is suitable for
Construction and Capital Improvement Funds.
Safety of Principal - All investments shall be of high quality securities with no perceived
default risk. Market price fluctuations will, however, occur. By managing the Construction
and Capital Improvement Fund's portfolio to exceed the anticipated expenditure schedule the
market risk of the overall portfolio will be minimized.
Marketability - Securities with active and efficient secondary markets are necessary in the
event of an unanticipated cash requirement. Historical market"spreads" befinreen the bid and
offer prices of a particular security-type of less than a quarter of a percentage point shall
�.- :. define an efficient secondary market.
„�, Liquidity - The City's funds used for construction and capital improvement programs have
reasonably predictable draw down schedules. Therefore, investment maturities shall
generally follow the anticipated cash flow requirements. Investment pools and money market
� mutual funds shall provide readily available funds generally equal to one month's anticipated
cash flow needs, or a competitive yield alternative for short term fixed maturity investments.
A singular repurchase agreement may be utilized if disbursements are allowed in the amount
necessary to satisfy any expenditure request. This investment structure is commonly referred
to as a Flexible Repurchase Agreement.
Diversification - Market conditions and arbitrage regulations influence the attractiveness of
staggering the maturity of fixed rate investments for bond proceeds and other construction
and capital improvement funds. With bond proceeds, if investment rates exceed the
applicable arbitrage yield, the City is best served by locking in most investments. If the
arbitrage yield cannot be exceeded, then concurrent market conditions will determine the
attractiveness of diversifying maturities or investing in shorter and larger amounts. At no time
shall the anticipated expenditure schedule be exceeded in an attempt to bolster yield with any
City funds.
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Yield -Achieving a positive spread to the applicable arbitrage yield is the desired objective
for bond proceeds. Non-bond proceed construction and capital project funds will target a
rolling portfolio of six month treasury bills.
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�,.�, � c. Debt Service Funds
The City's Debt Service Fund includes:
Debt Service Fund - General Obligations
Debt Service Fund -TIF
Suitability-Any investment listed as eligible in the Investment Policy is suitable for the Debt
Service Fund.
Safety of Principal - All investments shall be of high quality securities with no perceived
default risk. Market price fluctuations will however occur. By managing the Debt Service
Fund's portfolio to not exceed the debt service payment schedule the market risk of the
overall portfolio will be minimized.
Marketability - Securities with active and efficient secondary markets are not necessary as
the event of an unanticipated cash requirement is not probable.
Liquidity- Debt service funds have predictable payment schedules. Therefore, investment
maturities shall not exceed the anticipated cash flow requirements. Investment pools and
money market mutual funds may provide a competitive yield alternative for short term fixed
�-� maturity investments. A singular repurchase agreement may be utilized if disbursements are
allowed in the amount necessary to satisfy any debt service payment, this investment
�„ structure is commonly referred to as a Flexible Repurchase Agreement.
Diversification - Market conditions influence the attractiveness of fully extending maturity to
the next"unfunded" payment date. Generally if investment rates are trending down, the City
is best served by locking in most investments. If interest rates are flat or trending up, then
concurrent market conditions will determine the attractiveness of extending maturity or
investing in shorter term alternatives. At no time shall the debt service schedule be exceeded
in an attempt to bolster yield.
Yield - Attaining a competitive market yield for comparable security-types and portfolio
restrictions is the desired objective. The yield of an equally weighted, rolling three month
treasury bill portfolio shall be the minimum yield objective.
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