HomeMy WebLinkAboutItem 08 - Investment PolicyITEM #08
INVESTMENT POLICY
Adopted:
May 6, 1997
Most Recent Revision/Review:
September 3, 2024
ITEM #08
TABLE OF CONTENTS
INVESTMENT POLICY
PREFACE………………………………………………………………………………………...1
I.PURPOSE………………………………………………………………………………...2
A.Formal Adoption…………………………………………………………………..2
B.Scope………………………………………………………………………………2
C.Review and Amendment…………………………………………………………..2
D.Investment Strategy………………………………………………………………..3
II.INVESTMENT OBJECTIVES……………………………………………………….…3
A.Safety of Principal………………………………………………………………....3
B.Maintenance of Adequate Liquidity…………………………………………….…4
C.Preservation of Public Trust…………………………………………………….....4
D.Diversification……………………………………………………………………..4
E.Yield………………………………………………………………………….……4
III.INVESTMENT POLICIES……………………………………………………………..4
A.Authorized Investments…………………………………………………………...4
B.Unauthorized Investments………………………………………………………...7
C.Protection of Principal…………………………………………………………….7
D.Investment Advisors and Investment Providers………………….………………11
E.Responsibility and Controls……………………………………………………...12
IV.BROKER/DEALER LIST……………………………………………………………..15
V.PFIA LIST OF TRAINING SOURCES………………………………………………15
INVESTMENT STRATEGY STATEMENT
PREFACE……………………………………………………………………………………….17
I.INVESTMENT STRATEGY…………………………………………………………..18
A.Operating Funds………………………………………………………………….18
B.Construction and Capital Improvement Funds…………………………………..19
C.Debt Service Funds………………………………………………………………20
ITEM #08
Page 1
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. Fiscally
conservative and effective cash management and investment strategy development will be pursued
to take advantage of interest earnings as viable and material revenue to all City funds. The
portfolio of the City 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:
1) Preservation and safety of city funds,
2)Maintenance of sufficient liquidity,
3) Preservation of public trust through prudent investment activities,
4) Maximization of return within acceptable risk constraints, and
5)Diversification of investments.
ITEM #08
Page 2
I.PURPOSE
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, and the Public Funds
Collateral Act Chapter 2257, Texas Government Code.
B.Scope
This Investment Policy applies to all of the investment activities of the City. These funds
are accounted for in the City’s Annual Comprehensive Financial Report (ACFR) and
include:
1.General Fund
2.Special Revenue Funds
3.Capital Projects Funds
4.Enterprise Funds
5.Trust and Agency Funds, to the extent not required by law or existing contract to
be kept segregated and managed separately.
6.Debt Service Funds, including reserves and sinking funds, to the extent not required
by law or existing contract to be kept segregated and managed separately.
7.4B Economic Development Corp. Sales Tax Fund
8.Crime Control District Sales Tax Fund
9.Community Quality of Life Fund
10.Any new fund created by the City, unless specifically exempted from this Policy
by the City Council or by law.
This Policy establishes guidelines for: who can invest City funds, how City funds will be
invested, and 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.
This Investment Policy shall apply to all transactions involving the financial assets and
related activity for all the foregoing and future funds. However, this policy does not apply
to the assets administered for the benefit of the City by outside agencies under deferred
compensation programs.
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 and adopted by Resolution annually by the City Council.
ITEM #08
Page 3
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 and adopt by Resolution. 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.
II. INVESTMENT OBJECTIVES
A. Safety of Principal
The City shall manage and invest its cash with five primary objectives, listed in order of
priority: safety, liquidity, public trust, diversification and yield, expressed as optimization
of interest earnings. The safety of the principal invested always remains the primary
objective. All investments shall be designed and managed in a manner responsive to the
public trust and consistent with state and local law.
Safety of principal is the foremost objective of the investment program. Investments shall
be undertaken in a manner that seeks to ensure the preservation of capital in the overall
portfolio. The objective will be to mitigate credit and interest rate risk.
1. Credit Risk – The City will minimize credit risk, the risk of loss due to the failure
of the issuer or backer of the investment, by:
a) Limiting investments to the highest credit quality investments.
b) Pre-qualifying the financial institutions with which the City will do
business.
c) Diversifying the investment portfolio so that potential losses on individual
issuers will be minimized.
2. Interest Rate Risk – The City will minimize the risk that the interest earnings and
the market value of investments in the portfolio will fall due to changes in general
interest rates, by:
a) Structuring the investment portfolio so that investments mature to meet cash
requirements for ongoing operations, thereby avoiding the need to liquidate
investments prior to maturity.
b) Investing operating funds primarily in certificates of deposit, shorter-term
securities, money market mutual funds, or local government investment
pools functioning as money market mutual funds.
c) Diversifying maturities and staggering purchase dates to minimize the
impact of market movements over time.
ITEM #08
Page 4
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.
A portion of the portfolio will be invested in shares of money market mutual funds or local
government investment pools that offer same-day liquidity. In addition, a portion of the
portfolio will consist of securities with active secondary or resale markets.
C. Preservation of Public Trust
All participants in the City’s investment process shall seek to act responsibly as custodians
of the public trust. Investment officers shall avoid any transaction that might impair public
confidence in the City’s ability to govern effectively.
D. Diversification
Diversification of the portfolio will include diversification by maturity and market sector
and the use of a number of institutions and brokers. The City will diversify its investments
to avoid unreasonable and avoidable risks.
E. Yield
The investment portfolio shall be designed with the objective of maintaining a reasonable
market yield throughout budgetary and economic cycles, taking into account the
investment risk constraints and liquidity needs. Return on investment is of secondary
importance compared to the safety and liquidity objectives described above.
III. INVESTMENT POLICIES
A. Authorized Investments
Only investments described below authorized by the Public Funds Investment Act are
eligible securities for the City. The City shall require at least three competitive offers or
bids for all individual security purchases and sales (excluding transactions with money
market mutual funds, local government investment pools and when issued securities, which
are deemed to be made at prevailing market rates). All prudent measures will be taken to
liquidate an investment that is downgraded to less than the required minimum rating. The
City’s funds governed by this Policy may be invested in:
1. Obligations of Governmental Entities
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
ITEM #08
Page 5
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) Guaranteed investment contracts will be authorized for bond proceeds if the
guaranteed investment contract:
1) has a defined termination date;
2) is secured by obligations described by Section 2256.009(a)(1),
excluding those obligations described by Section 2256.009(b), in an
amount at least equal to the amount of bond proceeds invested under
the contract; and
3) is pledged to the City and deposited with the City or with a third
party approved by the City.
g) The stated maturities may not exceed five years.
2. Certificates of Deposit
Certificates of deposit issued by state and national banks that has its main office or
branch office in Texas with stated maturities of no greater than five years that are:
a) Organized under Texas law, the laws of another state, or federal law, that
has its main office or a branch office in Texas, or by a savings bank
organized under Texas law, the laws of another state, or federal law, that
has its main office or a branch office in Texas;
b) The depository institution selected by the City and arranges for the deposit
of the funds in certificates of deposits in one or more federally insured
depository institutions, wherever located for the account of the City as
amended by H.B. 2226;
c) Guaranteed or insured by:
1) The Federal Deposit Insurance Corporation or its successors; or
2) Guaranteed or insured by the Federal Deposit Insurance Corporation
or its successors; or
3) Secured by obligations that are described by A.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
4) Secured in any other manner and amount provided by law for
deposits of the City of Grapevine; or
5) 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.
3. Repurchase Agreements
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 instrumentalities and which are pledged in the City’s
name and deposited with a third-party custodian bank approved by the City. A
ITEM #08
Page 6
Master Repurchase Agreement must be signed by the bank/dealer prior to
investment in a repurchase agreement. All repurchase agreement transactions will
be on a delivery vs. payment basis. Securities received for repurchase agreements
must have a market value greater than or equal to 102 percent at the time funds are
disbursed. Repurchase agreements should not exceed 120 days and reverse
repurchase agreements should not exceed 90 days, provided an executed PSA
Master Repurchase Agreement is on file with the City and the counter party bank
or dealer.
4. Money Market Mutual Funds
Money market mutual funds regulated by the Securities & Exchange Commission,
with a maximum dollar weighted average portfolio maturity of 60 days or less
whose investment objectives include seeking to maintain a stable net asset value of
1 per share. Money Market Mutual funds that are 1) registered and regulated by
the Securities and Exchange Commission, 2) have a dollar weighted average stated
maturity of 60 days or less, 3) rated AAA by at least one nationally recognized
rating service, and 4) seek to maintain a net asset value of $1.00 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 15% of its monthly
average fund balance, excluding bond proceeds and reserves and other funds held
for debt service in money market mutual funds.
5. Interest Bearing Bank Accounts
Interest bearing bank deposits issued by state and national banks or savings bank
or a state or federal credit union (having their main or branch office in Texas) that
are guaranteed or insured by the Federal Deposit Insurance Corporation or the
National Credit Union Share Insurance Fund (or their successor organizations).
Also included are collateralized interest-bearing savings deposits that have secured
the uninsured portion of deposits with obligations of the U.S. Treasury and/or
Federal agencies and instrumentalities.
6. Investment Pools
Eligible investment pools organized and operating in compliance with the Public
Funds Investment Act that have been authorized by Resolution by the City Council;
and local government investment pools, which 1) meet the requirements of Chapter
2256.016 of the Public Funds Investment Act and 2) are rated no lower than AAA
or an equivalent rating by at least one nationally recognized rating service, and 3)
are authorized by resolution or ordinance by the Board, and whose investment
philosophy and strategy are consistent with this Policy and the City’s ongoing
investment strategy. In addition, a local government investment pool created to
function as a money market mutual fund must mark its portfolio to the market daily
and, to the extent reasonably possible, stabilize at $1.00 net asset value.
7. Commercial Paper
Commercial Paper is an authorized investment under the Public Funds Investment
Act under Sec. 2256.013 of the Public Funds Investment Act which provides it
must:
a) have a stated maturity of 270 days or fewer from the date of its issuance;
and
b) is rated not less than A-1 or P-1 or an equivalent rating by at least:
1) two nationally recognized credit rating agencies; or
2) one nationally recognized credit rating agency and is fully secured
ITEM #08
Page 7
by an irrevocable letter of credit issued by a bank organized and
existing under the laws of the United States or any state.
B. Unauthorized Investments
1. The following are NOT authorized investments for the City:
a) 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);
b) Obligations whose payments represent the principal stream of cash flow
from the underlying mortgage-backed security collateral and bears no
interest (Principal Only CMO);
c) Collateralized mortgage obligations that have a stated final maturity date of
greater than 2 1/2 years; and
d) 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).
C. 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
Diversification 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.
Diversification by investment type shall be guided 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%
g) Commercial Paper, excluding Investment Pools 20%
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.
ITEM #08
Page 8
Maturity guidelines by fund are as follows (investment transactions made prior to
the adoption of this Policy are not subject to these guidelines):
a)Limiting investments to avoid overconcentration in investments from a
specific issuer or business sector (excluding obligations of governmental
agencies under III(A) and certificates of deposit that are fully insured and
collateralized in accordance with state and federal law;
b)Limiting investments that have higher credit risks (example: commercial
paper);
c)Diversify through investments with varying maturities; and
d)Continuously investing a portion of the portfolio in readily available funds
such as local government investment pools (LGIPs), money market funds
or overnight repurchase agreements to ensure that appropriate liquidity is
maintained in order to meet ongoing obligations.
Operating Funds
The weighted average days to maturity for the operating fund portfolio shall be
less than 360 days and the maximum allowable maturity shall be 5 years.
Construction and Capital Improvement Funds
The investment maturity 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 above.
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 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
ITEM #08
Page 9
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 or approved letter of credit issued by Federal Home Loan Bank. 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:
a) The Agreement must be in writing;
b) 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;
c) The Agreement must be part of the Depository’s “official record”
continuously since its execution.
d) Allowable Collateral and Policy
Consistent with the requirements of the Public Funds Collateral Act, it is
the policy of the City to require full collateralization of all City funds on
deposit with a depository bank, other than investments. In order to
anticipate market changes and provide a level of security for all funds, the
collateralization level will be 102% of market value of principal and accrued
interest on the deposits. At its discretion, the City may require a higher
level of collateralization for certain investment securities. Securities
pledged as collateral shall be held by an independent third party. The Chief
Financial Officer is responsible for entering into collateralization
agreements with third party custodians in compliance with this Policy. The
agreements are to specify the acceptable investment securities for collateral,
including provisions relating to possession of the collateral, the substitution
or release of investment securities, ownership of securities, and the method
of valuation of securities. A clearly marked evidence of ownership
safekeeping receipt) must by supplied to the City and retained. Collateral
shall be reviewed at least monthly to assure that the market value of the
pledged securities is adequate.
e) Collateral Define
The City shall accept only the following types of collateral:
1) Obligations of the United States or its agencies and
instrumentalities,
2) Direct obligations of the state of Texas or its agencies and
instrumentalities,
3) 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,
4) Obligations of states, agencies, counties, cities, and other political
subdivisions of any state rated as to investment quality by a
nationally recognized rating firm not less than A or its equivalent
ITEM #08
Page 10
with a remaining maturity of five (5) years or less,
5) A surety bond issued by an insurance company rated as to
investment quality by a nationally recognized rating firm not less
than A,
6) A letter of credit issued to the City by the Federal Home Loan Bank.
f) Collateral Levels
The market value of the principal and interest portion of collateral pledged
for certificates of deposit and bank balances on deposit must at all times be
equal to or greater than the par value of the certificate of deposit plus
accrued interest.
g) 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.
h) 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.
i) 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.
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 part of its investment portfolio or held as
custody to secure demand or time deposits. Securities owned by the City
shall be evidenced by safekeeping receipts of the institution holding the
securities.
b) Safekeeping of Deposit Collateral
All collateral securing 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.
c) Subject to Audit
All collateral shall be subject to inspection and audit by the Chief Financial
Officer or the City’s independent auditors.
ITEM #08
Page 11
D. 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 Committee. The Investment Committee will establish criteria to evaluate
Investment Advisors and Investment Providers, including:
1. Adherence to the City’s policies and strategies;
2. Investment performance and transaction pricing within accepted risk constraints,
3. Responsiveness to the City’s request for services, information and open
communication;
4. Understanding of the inherent fiduciary responsibility of investing public funds; and
5. Similarity in philosophy and strategy with the City of Grapevine’s objectives.
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 qualified
representative 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. Acknowledged that the business organization has implemented reasonable procedures
and controls in an effort to preclude investment transactions conducted between the
City and the organization that are not authorized by the City’s investment policy, except
to the extent that this authorization is dependent on an analysis of the makeup of the
City’s entire portfolio or requires an interpretation of subjective investment standards.
3. Such instrument must be accepted by a qualified representative of the business.
Qualified representative(s) must meet the following criteria:
a) “Qualified representative” means a person who holds a position with a
business organization, who is authorized to act on behalf of the business
organization, and who is one of the following:
1) for a business organization doing business that is regulated by or
registered with a securities commission, a person who is registered
under the rules of the National Association of Securities Dealers;
2) for a state or federal bank, a savings 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 by corporate resolution to act on behalf
of and bind the banking institution; or
3) for an investment pool, the person authorized by the elected official
or board with authority to administer the activities of the investment
pool to sign the written instrument on behalf of the investment pool.
The City shall not enter into an investment transaction with a business organization prior
to receiving the written instrument described above.
ITEM #08
Page 12
The list of approved brokers to be utilized for the purchase of allowed securities is to be
selected by the investment committee with such list of selected brokers to be provided to
the City Council on an annual basis or at any time the list is modified. All such brokers so
selected will meet the criteria set forth in the other provisions of this Investment Policy.
E. Responsibility and Controls
1. Delegation of Authority to Invest
The City Council hereby designates the “Investment Officers” by Ordinance to be
the City Manager, with overall responsibilities to see that investment objectives
are accomplished and that the Chief Financial Officer, Treasurer, or their
designees who are designated as Public Fund Investment Officers are vested and
authorized with specific day-to-day performance of managing and investment of
the funds of the City of Grapevine.
Per Ordinance 2024-xyz the City Council has established an Investment Committee
consisting of the City Manager, Chief Financial Officer and Treasurer of the City
of Grapevine. The committee shall perform the following duties:
a) Establish and modify from time to time a list of approved brokers and
dealers for the purchase of allowed securities. The list of approved
brokers to be utilized for the purchase of allowed securities is to be
selected by the Investment Officers, with such list of selected brokers to
be provided to the City Council on an annual basis or at any time the list
is modified.
b) Review the City’s investment portfolio on a regular basis and determine
appropriate portfolio adjustments, oversee the City’s investment
advisor, monitor compliance with the City’s Investment Policy and
Strategy statements and perform other duties as necessary to maintain
the City’s investment program.
2. Training
a) All Certified Public Funds Investment Officers of the City of Grapevine
shall have a minimum of 10 classroom hours of Investment Training
during the first consecutive 24 month period and eight hours for each
consecutive 24 month period thereafter following the effective date of
this Ordinance.
b) Training as required in 2.(a) above is authorized to be provided from
one or more of the sources listed under PFIA List of Training Sources
page 18).
3. 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 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.
4. 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
ITEM #08
Page 13
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.”
5.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 activity 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 City a
statement disclosing any personal business relationship with an entity seeking to
sell investments to the City.
Each City Investment Officer shall disclose if he has a personal business
relationship with any investment firm doing business with the City, if the extent of
business relationship meets any of the following conditions:
a)The Investment Officer owns 10% 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;
b)Funds received by the Investment Officers from the business organization
exceed 10% of the Investment Officer’s gross income for the previous year;
or
c) 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.
d)If the Investment Officer is related within the second degree by affinity or
consanguinity, as determined under the Government Code, to an
individual seeking to sell an investment 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
Officer. The Investment Officers will provide a quarterly comprehensive report
signed by all Investment Officers to the City Council. This investment report shall:
a)Describe in detail the investment position of the City;
b)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 for the period of each pooled fund group;
c)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;
d)State the maturity date of each investment security;
e) Accrued interest and total earnings for reporting period;
ITEM #08
Page 14
f)State the percentage of total portfolio that each type of investment
represents; and
g)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.
8.Performance Standards
The City’s investment portfolio will be managed in accordance with the parameters
specified within this policy. The portfolio shall be designed with the objective of
obtaining a rate of return through budgetary and economic cycles, commensurate
with the investment risk constraints and the cash flow requirements of the City.
ITEM #08
Page 15
CITY OF GRAPEVINE, TEXAS
BROKER/DEALER LIST
The following is a list of approved and authorized broker/dealers used for the City of Grapevine,
Texas. Each of the firms used from this list will provide compliance materials and a complete
file of those materials will be maintained by the City.
In accordance with Section 2256.025 of the Public Funds Investment Act, the list below is
approved by the Investment Committee and shall be maintained by the Chief Financial Officer
and corresponding staff.
Broker/Dealers:
Ameriprise Financial Services, LLC
Cantor Fitzgerald, LP
FHN Financial Securities Corp.
Hilltop Securities
J.P. Morgan Securities
Mischler Financial Group
Multi-Bank Securities
SouthState Duncan Williams Securities
Corp. Wells Fargo
Securities Government Pools Authorized by City
Council: Local Government Investment Cooperative (
LOGIC) Texas Local Government Investment Pool (
TexPool) CITY OF GRAPEVINE,
TEXAS PFIA LIST OF TRAINING
SOURCES The following is a list of approved and authorized training sources for the City of
Grapevine, Texas. Certified training should be obtained every two fiscal years from an independent
source for all investment officers and
delegees. In accordance with § 2256.08 of the Public Funds Investment Act, the list below is approved
by the Investment Committee and shall be maintained by the Chief Financial Officer
and corresponding
staff. Training
Sources: Government Finance Officers Association of Texas (
GFOAT) Government Treasurers’ Organization of Texas (
GTOT) North Central Texas Council of Governments (
NCTCOG) Texas Municipal League (
TML) University of North Texas (UNT) – Center for Public
ITEM #08
INVESTMENT STRATEGY STATEMENT
Adopted:
May 6, 1997
Most Recent Revision/Review:
September 3, 2024
Pag e 16
ITEM #08
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, the city’s 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):
1.Understanding the suitability of the investment to the financial requirements of the
City,
2.Preservation and safety of principal,
3. Liquidity,
4.Marketability of the investment prior to maturity,
5. Diversification of the investment portfolio, and
6.Yield.
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 City’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:
1.Operating Funds
2. Construction and Capital Improvement Funds
3. Debt Service Funds
Pag e 17
ITEM #08
I.INVESTMENT STRATEGY
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. Investment guidelines by fund-type
are as follows:
A.Operating Funds
The City of Grapevine’s Operating Funds are as follows:
General Fund Heritage Foundation Fund
Water and Sewer Fund Occupancy Tax Fund
TIF 1 & 2 Operating Fund Grant Fund
Lake Enterprise Fund Trust and Agency Fund
4B Economic Development Corp. Sales Tax Fund Special Revenue Fund
Crime Control District Sales Tax Fund Capital Project Fund
Community Quality of Life Fund
All Non-Major Governmental Funds
1.Suitability
Any investment eligible in the Investment Policy is suitable for the Operating Funds.
2.Safety of Principal
All investments shall be of highest credit 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 360 days and restricting the
maximum allowable maturity to 5 years, the price volatility of the overall portfolio will
be minimized.
3.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.
4.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 alternative to fixed maturity
investments.
5.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.
6.Yield
Attaining a competitive market yield for comparable security-types and portfolio
restrictions is the desired objective. The yield of rolling one-year Treasury bill
portfolio shall be the minimum yield objective.
Pag e 18
ITEM #08
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 Projects - Street Maintenance and Capital Replacement
Capital Projects - Tax Increment Financing Districts #1 and #2
Capital Projects - Community Quality of Life Fund
1.Suitability
Any investment listed as eligible in the Investment Policy is suitable for Construction and
Capital Improvement Funds
2.Safety of Principal
All investments shall be of highest credit quality securities with no perceived default risk.
Market price fluctuations will, however, occur. By managing the Construction and
Capital Improvement Fund’s portfolio to the anticipated expenditure schedule market
risk shall be reduced.
3.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.
4.Liquidity
5.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. A flexible repurchase agreement may be utilized
if disbursements are allowed in the amount necessary to satisfy any expenditure
request.
6.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.
7.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.
Pag e 19
ITEM #08
C.Debt Service Funds
The City’s Debt Service Fund includes:
Debt Service Fund - General Obligations
Debt Service Fund - Tax Increment Financing Districts #1 and #2
1.Suitability
Any investment listed as eligible in the Investment Policy is suitable for the Debt
Service Fund.
2.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.
3.Marketability
Securities with active and efficient secondary markets are less necessary, as the event
of an unanticipated cash requirement is not probable.
4.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 flexible repurchase agreement may be utilized if
disbursements are allowed in the amount necessary to satisfy any debt service payment.
5.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.
6.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.
Pag e 20
ITEM #08
RESOLUTION NO. 2024-014
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS, APPROVING THE CITY’S
INVESTMENT POLICY; AND PROVIDING AN EFFECTIVE
DATE
WHEREAS, the City’s Investment Policy requires adoption annually by resolution;
and
WHEREAS, all constitutional and statutory prerequisites for the approval of this
resolution have been met, including but not limited to the Open Meetings Act; and
WHEREAS, the City Council hereby declares that the approval of this resolution is
in the best interests of the health, safety, and welfare of the public.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF GRAPEVINE, TEXAS:
Section 1. That all matters stated hereinabove are found to be true and correct
and are incorporated herein by reference as if copied in their entirety.
Section 2. The Investment Policy attached is hereby adopted.
Section 3. That this resolution shall take effect from and after the date of its
passage.
PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF
GRAPEVINE, TEXAS on this the 3rd day of September, 2024.
APPROVED:
William D. Tate
Mayor
ITEM #08
Resolution No. 2024-014 2
ATTEST:
Tara Brooks
City Secretary
APPROVED AS TO FORM:
Matthew C.G. Boyle
City Attorney
ITEM #08