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Home My WebLink AboutORD 1997-044 � , ORDINANCE NO. 9�-44 �� AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF GRAPEVINE, TEXAS ADOPTING 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, 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, the Public Funds Investment Act; and WHEREAS, the City Council desires to adopt the Investment Policy and Investment �� " Strategy which are attached hereto and made a part hereof as Exhibits "A" and "B", which are fully in compliance with the Public Funds Investment Act. � 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 hereby adopts the Investment Policy, attached hereto and made a part hereof as Exhibit "A", and the Investment Strategy, attached hereto and made a part hereof as Exhibit "B". Section 3. That all ordinances or any parts thereof in conflict with the terms of this ordinance shall be and hereby are deemed repealed and of no force or effect; provided, however, that the ordinance or ordinances under which the cases currently filed and pending in the Municipal Court of the City of Grapevine, Texas, shall be deemed repealed only when all such cases filed and pending under such ordinance or ordinances have been '"�� disposed of by a final conviction or a finding not guilty or nolo contendere, or dismissal. ��, Section 4. If any section, article, paragraph, sentence, clause, phrase or word in this ordinance, or application thereto any person or circumstances is held invalid or 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 5. 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 sth day of Mav , 1997. APPROVED: � ,, William D. Tate !��°�� Mayor :� ATTEST: � , Linda uff City Secretary APPROVED AS TO FORM: I � J , � .' f " !, . 'w� �.✓.'��_. j . :. .,...._ .. .�.- .. : w . . ' "-- ' . � _ ..'� ,f . ; 4 7� ��4 John F. Boyle, Jr. %' City Attorney �� RES. NO. 97-44 2 E�t�i�i�:� T� ' e �"-yy ?;a3c � Of �.�...... �p� EXHIBIT °A" CI'TY OF GRAPEVINE iNVF.S .NT POi,iCY Adopted: May 6 , 1997 � � ��k�l�l�� TO��%' y 7;�y ��p ,�,� of . '� � 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 Investrnent 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, • Safety of City funds, • Maintenance of suff'icient liquidity, �..� • Maximization of return within acceptable risk constraints, and • Diversification of investments. ��,,,,,..w �,� �'.�..�: ��-�� E�iHl�►fi-� T�of s r- , a�e �•� iNVF;STMF.NT Pn .i(:Y TAR .F,nF('ONTF.NTS � �� IPURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. INVESTMENT OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 III. INVE5TMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 A. Authorized Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 B. Protection of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 C. Investment Advisors and Investment Providers . . . . . . . . . . . . . . . . . . . . . . . . 8 D. Responsibility and Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 �._ .. �:� �� XH191T � TO �'�� r�� I. PURPOSE Pa�e ___�__ of � A. Formal Adoption � 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 Ciry 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 �� This Policy shall be reviewed annually by the City Council. Amendments must be approved by the Investment Officer and adopted by the City Council. �� D. Investrnent 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) investrnent suitability, 2) preservation and safety of principal, 3) liquidity, 4) marketability prior to maturity of each investment, 5) diversification, and 6) yield. � � 1 EXHIBIT � jp ��`� c�, �� Page $-- of !�-- II. INVESTMENT OBJECTNES A. Safety of Principal The primary objective of all investment activity is the preservation of capital and the safety of principal in the overall portfolio. The first pr�ority 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. � � �,� �� 2 EXHIBIT � TO ��G �r-�� Page �' of _-�--- � III. INVESTMENT POLICIES A. Authorized Investments � 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 Governmental Entities. Except for the items listed in (g) below, the following are authorized investrnents for obligations of governmental agencies: a. Obligations of the United States or its agencies and instnunentalities; 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 insriwnentalities; d. Obligations of states, agencies, counties, cities, and other political subdivisions �- i 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 instiumentality of the United States. f. The average life of Governmental Obligations may not exceed two years and stated maturities may not exceed two yeazs. 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 bears no interest (Principal Only CMO); �,� �:�. 3 EXHIBIT � To ��-� y�-�� Pa;;e _�, of �� ,� (3) Collateralized mortgage obligations that have a stated final maturity date of greater than 3 years; and : � (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. Guarantced 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 di�ct Federal agency or insriumentality issued mortgage backed securities, but excluding �r � 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. Certif'icates 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 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 instnunentalities and which are pledged in the City's 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 malurity, provided an executed PSA Master Repurchase Agreement is on file with the City and the counter party bank or dealer. �� 4 EXHIBIT � TO ��.�'7�5� Page _.�_ of � 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 �nds. Money market mutual funds regulated by the Securities & Exchange Comrnission, 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 Diversif'ication by investment type shall be maintained by ensuring an active and efficient secondary market in portfolio investments and by controlling the market and opportunity risks associated with specific investment types. Diversif'ication by inveshnent type shall be established by the following maximuui percentages of investment type as compared to the total investment portfolio at the time �f each inve�tment transacti�n: � a. U.S. Treasury Bills/Notes/Bonds 100% � 5 EXHIBIT � TO `�%�"� `� ��¢ �a3e � of i�.s 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 investrnent 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 minimi�e 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�nds The investment maturity of construction and capital improvement funds shall generally be limited to the anticipated cash flow requirement or the "temporary period," as 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 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 � 6 EXM181T � TO ��`�'" �T�� /G' "r�� _ � �__ a,�� "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 earnings ("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: • the Agreement must be in writing; • the Agreement has to be executed by the Depository and the City of Grapevine contemporaneously with the acquisition of the asset; � 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. �,.�, � 7 EXHIBIT� TO ��f eC �%Y5� Pa�e � of �s � a. Allowable Collateral Eligible securities for collateralization of deposits aze 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 cert�cates of deposit must at all tunes be equal to or greater than the par value of the certificate of deposit plus accrued interest, less the applicable level of FDIC insurance. c. Monitoring Collateral Adequacy The City shall require montlily 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 �x � 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 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 substitution 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. � � 8 ��{w11�311'._.�._ T0 ,�'��. 9 7_�c� page f�- of � �� .,� 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 ac,ceptable to and under contract with the City of Grapevine, or by the Federal Reserve Bank. C. Investment Advisors and Investrnent 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." �°g"`� Selection of Investment Advisors and Inves�nent 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 e. Similarity in philosophy and strategy with the City of Grapevine's objectives. Selected Investment Advisors and Investment Providers shall provide timely transaction confumations 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 x' substantially to the effect that the registered principal has: � 9 EXI-11E31T � }'0�'f�C-��7�5� �;.�„ �— of /s �� 1) received and thoroughly reviewed this Investrnent Policy, and 2) acknowledged that the organization has implemented reasonable procedures and controls in an effort to preclude imprudent investment activities with the City. The City shall not enter into an investment transaction with a business organization prior to receiving the written instrument described above. D. Responsibility and Controls 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 Investrnent Officer shall review the investment portfolid s status and performance, detemline and implement appmpriate 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. The Investment Officer shall attend at least one training session, within twelve months of �,�,� assuming these duties, that addresses investment controls, security risks, strategy risks, market risks, and compliance with the Public Funds Investment Act. Any person, required to attend training, performing investment-related duties prior to September 1, 1995 shall have until September 1, 1997 to complete this requirement. 2. Prudent Investment Management The designated Investment Officers shall perform their duties in accordance with the adopted Investment Policy and internal procedures. In determining whether an Investment Officer has exercised pnzdence with respect to an investment decision, the investment of a11 funds over which the Investment Off'icer 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: �m.�� 10 E�CF11E31T � TO ��- � ��—�� Pa�e �,� of � �� "Invesirnents 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 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, or any activity which might otherwise discourage public confidence. Investment Officers shall refrain from personal business activiry that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Additionally, all Investment Officers shall file with the Texas Ethics Commission and the Ciry a statement disclosing any personal business relationship with an entity seeking to sell investments to the City or any relationship within the second degree by affinity or consanguinity to an individual seeking to sell invesrinents to the City. 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 O�cer. 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 the book and market value during the period and ending book and market value far the period of each pooled fund group, 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, 4) state the maturity date of each investment security, 5) state the fund for which each investment security was purchased, and rT�� 6) state the compliance of the investment portfolio with the City's Investment Policy and strategy and the Public Funds Investment Act. �.� 11 /��,/ ��7�� EXN1131T.�_ f� �SV`of � Page — ��.� 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. H:invescpo� �,,:� �k� 12 EXHIBIT �`3 TO lG�t y'7-�� Page _..._.� of �:s. �� EX�IIBIT 'B" CITY OF GRAPEVINE iNVF.STMENT STRATF:CiY STATF.MF.NT �..,� �� Adopted: May 6 , 199 7 �,� EXHIBIT °� Tp ��`-�. `�I`� Page ��-- of . --�.. �,� PREFACE It is the policy of the City of Grapevine that, giving due regard to the safety and risk of invesrinent, ,�, 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 investtnent prior to maturity, • Diversification of the investment portfolio, and � Yield. � - Effective investment strategy development coordinates the primary objectives of the City of Grapevine's Investment Policy and cash management procedures to enhance interest eamings and „�.�w 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 City's investment portfolio shall be designed and managed in a manner responsive to the public trust and consistent with the Investrnent 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 �� .� 1 EXHialT� TO ��' ��!' �� Page -� of �-s ��. iNVF.STMF.NT STRATF,GY In order to r�unimize risk of loss due to interest rate fluctuations, investment maturities will not exceed the anticipated cash flow requirements of the funds. Investment guidelines by fund-type are as follows: a. Operating �nds 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 inveshnents 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 two °°`°'m years, the price volatility of the overall portfolio will be minunized. �ry:.� Marketability - Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Historical market "spreads" between 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 liquidiry and may be utilized as a competitive yield alternative to fixed maturity investments. Diversification-Invest�nent 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 two 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 minunum yield objective. � �� 2 EXHfE31T� �'0 ��L `��.�`� Page � of �� b. Construction and Capital Improvement�nds 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 Projects - Street Maintenance and Capital Replacement Capital Projects - TIF Suitability-Any investrnent 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" between 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 const�uction and capital improvement programs have reasonably predictable draw down schedules. Therefore, investment maturities shall generally follow the anticipated cash flow requirements. Investrnent 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 disbucsements 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. 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. �� 3 EXFIl81T � TO ��d' `�T S`� Page s of s ��, 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 qualiry 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 excced 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. �� 4