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Resolution 2017-18 RESOLUTION NO. 2017-18(R) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WYLIE, TEXAS, APPROVING THE CURRENT INVESTMENT POLICY, PROVIDING FOR SCOPE OF THIS POLICY, PROVIDING FOR INVESTMENT OBJECTIVES, PROVIDING FOR AN INVESTMENT COMMITTEE, PROVIDING FOR DELEGATION OF AUTHORITY, PROVIDING INVESTMENT STRATEGIES BY POOLED FUND GROUPS, PROVIDING FOR STANDARD OF CARE, PROVIDING FOR OTHER INVESTMENT GUIDELINES, PROVIDING FOR INVESTMENTS AUTHORIZED BY PUBLIC FUNDS INVESTMENT ACT AND INVESTMENTS UNAUTHORIZED BY THE CITY, PROVIDING FOR PORTFOLIO DIVERSIFICATION AND MATURITY LIMITS, PROVIDING FOR SELECTION OF BROKERS/DEALERS, PROVIDING FOR SELECTION OF DEPOSITORIES, PROVIDING FOR SAFEKEEPING AND CUSTODY, PROVIDING FOR RECORD KEEPING AND REPORTING, PROVIDING FOR ETHICS AND CONFLICTS OF INTEREST, PROVIDING FOR POLICY REVISIONS; AND MAKING VARIOUS FINDINGS AND PROVISIONS RELATED TO THE SUBJECT. WHEREAS, the Public Funds Investment Act, as amended, requires the City of Wylie to adopt the investment policy by rule, order, ordinance or resolution; and WHEREAS,the Investment Policy was originally approved December 12, 2006; and WHEREAS, the Investment Policy complies with the Texas Government Code, Chapter 2256, Public Funds Investment Act, Subchapter A — Authorized Investments for Governmental Entities and Subchapter B—Miscellaneous Provisions as amended, and authorizes the investment of City funds in safe and prudent investments. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WYLIE, TEXAS, THAT the City of Wylie has complied with the requirements of the Public Funds Investment Act and the Investment Policy, attached hereto, is adopted as the investment policy of the City effective September 26, 2017. DULY PASSED AND APPROVED by the City Council of the City of Wylie, Texas on this the 26th day of September, 2017. i f Eric Hogue, lay,% ATTESTER BY: 0 / / t Caro e Ehrlich, C. Secretary 41 -- _4 ,s ut411,e I .‘ 3-1...." ,—.erGa.At‘.0 .101177,:-, . Resolution No.2017-18(R) s °I° ° 41T Amendment of Investment Policy TE OF TF.,;,— City of Wylie, Texas INVESTMENT POLICY_ Adopted May 1995 Revised December 2006 CITY OF WYLIE, TEXAS 111 INVESTMENT POLICY Table of Contents I. INTRODUCTION 1 II. SCOPE 1 III. OBJECTIVES 1 Safety 1 Liquidity 1 Diversification 1 Yield 1 IV. INVESTMENT COMMITTEE 2 V. DELEGATION OF AUTHORITY 2 VI. INVESTMENT STRATEGY 3 Operating Funds 3 Debt Service Funds 3 Debt Service Reserve Funds 3 Special Projects and Special Purpose Funds 3 VII. STANDARD OF CARE 3 VIII. INVESTMENTS AUTHORIZED BY THE CITY 4 IX. OTHER INVESTMENT GUIDELINES 5 X. DIVERSIFICATION AND MATURITY LIMITS 5 XI. SELECTION OF BROKER/DEALERS 6 XII. SAFEKEEPING AND CUSTODY 6 XI11. RECORD KEEPING AND REPORTING 7 X1V. ETHICS AND CONFLICTS OF INTEREST 8 XV. POLICY REVISIONS 9 APPENDIX A-BROKER/DEALER QUESTIONNAIRE APPENDIX B -CERTIFICATION BY DEALER CITY OF WYLIE, TEXAS INVESTMENT POLICY I. INTRODUCTION The City's principal investment objectives,in order of priority, are listed below. Chapter 2256 of Title 10 of the Local Government Code (herein after referred to as the "Public Funds Safety. The primary objective of the City's Investment Act") prescribes that each city is to adopt investment activity is the preservation of principal written rules governing its investment practices and (capital) in the overall portfolio. Each investment to define the authority of the investment officer. The transaction shall seek first to ensure that capital following Investment Policy addresses the methods, losses are avoided, whether the loss occurs from the procedures, and practices which must be exercised to default of a security or from erosion of market value. ensure effective and judicious fiscal management of the City's funds. This Policy shall not apply to the Liquidity. The City's investment portfolio will selection, retention or other issues concerning the remain sufficiently liquid to enable the City to meet depositories of the City's funds in demand deposits as operating requirements that might be reasonably provided under Chapter 105 of the Local Government anticipated. Liquidity shall be achieved by matching Code. investment maturities with forecasted cash flow requirements, by investing in securities with active II. SCOPE secondary markets, and by using state or local investment pools. This Policy shall apply to the investment and management of all funds of the City under its control, Diversification. The governing body recognizes that other than those expressly excluded herein or by in a diversified portfolio, occasional measured losses applicable law or valid agreement. This Policy shall due to market volatility are inevitable, and must be not supersede the restrictions on investment and use considered within the context of the overall applicable to any specific fund and, in the event of portfolio's return, provided that adequate any conflict between this Policy and the requirements diversification has been implemented. Therefore, of any fund subject hereto, the specific requirement assets held in the common investment portfolio shall applicable to such fund shall be followed as well as be diversified to eliminate the risk of loss resulting all other provisions of this Policy other than those in from one concentration of assets in a specific conflict. The Employees Deferred Compensation maturity, a specific issuer or a specific class of Agency Fund is excluded from coverage under this securities. Policy. Yield. The investment portfolio goal (benchmark) In order to make effective use of the City's resources, against which the yield is compared will be all monies shall be pooled into one bank account, established from time to time by the Finance except for those monies required to be accounted for Director. Recommendations by the Investment in other bank accounts as stipulated by applicable Committee will be considered when the performance laws, bond covenants or contracts. The bank account measure is being established. Efforts to seek higher will be maintained by pooled fund group for purposes than the above goal must be consistent with risk of implementing pooled fund strategies and reporting. limitations identified in this policy and prudent The income derived from this pooled investment investment principles. The City's investment account shall be distributed by fund in accordance portfolio shall be designed with the objective of with the City's internal procedures. attaining a rate of return which is consistent with the risk limitations and cash flow characteristics of the III. OBJECTIVES City's investments. IV. INVESTMENT COMMITTEE CITY OF WYLIE, TEXAS INVESTMENT POLICY misrepresentation by third parties, or imprudent An investment committee consisting of the City actions by employees and officers of the City. Attorney, City Manager and Director of Finance will meet on a quarterly basis. The Investment Committee With written approval from the City Manager, the shall be authorized to invite advisors to the meetings Director may delegate any phase of the investment as needed. management program to members of the City staff. Such approval shall state specifically the functions The investment officer will present a brief report of such person is authorized to perform or that the investment activities to the Investment Committee. person is authorized to perform all activities of the The primary objectives of the committee will be to Director under this Policy. The Director shall obtain and maintain, at the City's expense, fidelity bonds for (1) make recommendations regarding investment himself and each of his designees in amounts strategies determined adequate by the Director(which shall not (2) approve a list of authorized brokers, dealers, be less than five percent of the amounts subject to banks, savings and loans, credit unions, and this Policy) for each fiscal year as shown by the pools approved budget. No person may engage in an (3) recommend a list of authorized training investment transaction except as provided under the sources for the state mandated investment terms of this Policy and the internal procedures training and established by the Director. A current list of persons (4) monitor program results. authorized to transact investment business and wire funds on behalf of the City shall be maintained by the The committee shall include in its deliberations such Director. topics as performance reports, economic outlook, portfolio diversification, maturity structure, potential At the discretion of either the City Manager or the risk to the city's funds, and the target rate of return Director and in any event upon the termination or on the investment portfolio. The Investment reassignment of any member of the Director's staff Committee shall provide for minutes of its meetings. authorized to conduct transactions for the City pursuant to this Policy, the authority of such person V.DELEGATION OF AUTHORITY shall be revoked and such revocation of authority shall be immediately communicated by the Director Management responsibility for the investment orally and in writing to each and every depository, program is delegated by the City Council to the City broker/dealer, investment advisor, custodian and Manager who will designate the Finance Director as other agency or entity with whom the City has any Investment Officer (hereinafter referred to as the existing or continuing relationship in the "Director"). The Director's authority will at all times management of its investments. be limited by conformance with all Federal regulations, State of Texas statutes and other legal VI. INVESTMENT STRATEGY requirements including the City Charter and City Ordinances, including this Policy. The City of Wylie maintains a pooled investment portfolio. The pooled portfolio utilizes specific The Director shall develop and maintain written investment strategies designed to address the unique administrative procedures for the operation of the characteristics of the pooled investment portfolio. investment program consistent with this Policy. The The pooled investment portfolio includes Operating controls shall be designed to prevent, identify and Funds, Debt Service Funds, Debt Service Reserve control losses of public funds arising from deviation Funds, Capital Projects and Special Purpose Funds. from this Policy, fraud, employee error, and CITY OF WYLIE, TE" : • S INVESTMENT POLICY Investment strategies for these. different groups are (1) the investment of all funds, or funds under detailed below. the City's control, over which the officer had responsibility rather than a consideration as (1) Investment strategies for operating, debt to the prudence of a single investment; and service, capital project, and special purpose funds have as their primary objective to assure that (2) whether the investment decision was anticipated cash outflows are matched with adequate consistent with the written investment policy investment liquidity. The secondary objective is to of the City. create a portfolio structure which will experience minimal volatility during economic cycles. The Director and his staff shall recognize that the investment activities of the City are a matter of public (2) The investment strategy for the debt service record. Therefore, all participants in the investment reserve funds shall have as the primary objective the process shall seek to act responsibly as custodians of ability to generate a dependable revenue stream from the public trust. Investment officials shall avoid any securities with a low degree of volatility. Securities transactions that might impair public confidence in should be of high quality, with short to intermediate the City's ability to govern effectively. term maturities. Except as may be required by a bond ordinance, securities should be of high quality with VIII.INVESTMENTS AUTHORIZED BY THE short to intermediate-term maturities. CITY OF WYLIE VII. STANDARD OF CARE Authorized investments for municipal governments in the State of Texas are set forth in the Public Funds Investments shall be made with judgment and care, Investment Act, as amended (Section 2256.009- under prevailing circumstances, that a person of 2256.019, Government Code). However, suitable prudence, discretion, and intelligence would exercise investments for the City of Wylie are limited to the in the management of the person's own affairs, not following. for speculation, but for investment, considering the probable safety of capital and the probable income to (1) Direct obligations of the United States or its be derived. Investment of funds shall be governed by agents and instrumentalities with a stated maturity of the following investment objectives, in order of 5 years or less. priority: (2) Certificates of deposit issued in the State of (1) preservation and safety of principal; Texas with a maximum maturity of 2 years or less and insured by the Federal Deposit Insurance (2) liquidity; and Corporation. (3) diversification; and (3) Fully collateralized direct repurchase agreements with a defined termination date of 2 years (4) yield. or less which are secured by obligations of the United States or its agencies and instrumentalities and In determining whether an investment officer has pledged with a third party in the City's name. The exercised prudence with respect to an investment agreement must be placed through a primary decision, the determination shall be made taking into government securities dealer, as defined by the consideration: Federal Reserve, or by a financial institution doing business in the State of Texas. Each issuer of CITY OF WYLIE9 TEXAS INVESTMENT POLICY repurchase agreements shall be required to sign a Reserve Bank as the securities are simultaneously master repurchase agreement. released to the purchaser). In this manner the City will always have possession of either its securities or (4) Approved investment pools as described in its monies. Section 2256.016 which are continuously rated no lower than AAA, AAA-m or an equivalent rating by X. DIVERSIFICATION AND MATURITY at least one nationally recognized rating agency and LIMITS have a weighted average maturity no greater than 90 days. It is the policy of the City to avoid concentration of assets in a specific maturity, a specific issue, or a IX. OTHER INVESTMENT GUIDELINES specific class of securities,with the exception of U.S. Treasury issues. The asset allocation in the portfolio The City seeks active management of its portfolio should, however, be flexible depending upon the assets. In order to meet the objectives of this Policy, outlook for the economy and the securities markets. the City may from time to time sell securities that it owns in order to better position its portfolio assets. The City will not exceed the following maximum Sales of securities prior to maturity shall be limits as a percentage of the total portfolio for each of documented and approved by the Director before the categories listed below: such a transaction is consummated. Sales of securities yielding net proceeds less than 92% of the Max. book value of the securities must be approved in of Max. advance and in writing by the City Manager. Three Investment Category Portfolio Maturity examples of situations involving the sale of securities Obligations of the United 100% 5 years prior to maturity are States or its agencies and instrumentalities. (1) swap - to sell an investment to realize a capital gain, Certificates of Deposit 25% 18 mon. (2) To better position selected investments due to a change in market conditions, Repurchase Agreements 100% 2 years NOT Reverse Repurchase (3) To react to emergency liquidity demands. Agreements Each investment transaction must be based upon The Director shall evaluate how each security competitive quotations received from at least three purchased fits into the City's overall investment broker/dealers who have been approved by the City strategy. in accordance with Texas law. At all times the City shall maintain 10 percent of its The purchase and sale of all securities shall be on a total investment portfolio in instruments maturing in delivery versus payment or payment versus delivery 90 days or less. The weighted average maturity of all basis (i.e., for securities purchases, monies will not securities and certificates of deposit in the City's total be released by the City's safekeeping bank until investment portfolio at any given time (not including securities are received at the Federal Reserve Bank cash or demand deposits)shall not exceed 2 years. for further credit to the City's safekeeping bank. In the case of securities sales, monies will be received XI. SELECTION OF BROKERS/DEALERS by the City's safekeeping bank via the Federal CITY I F WYLIE, TEXAS INVESTMENT POLICY The City shall maintain a list of broker/dealers and imprudent investment activities being conducted financial institutions which have been approved for between the entity and the securities firm (See investment purposes by the investment committee. Appendix B). (For the purpose of this investment policy, Broker/dealer will be used to refer to any brokerage All approved broker/dealer firms must have a firm, bank, investment pool, or financial institution completed City of Wylie broker/dealer questionnaire, with which the City does investment business). investment policy, written acknowledgment per Securities may only be purchased from those above guidelines, executed master repurchase authorized institutions and firms. The authorized agreement, if applicable, and current financial broker/dealers will be reviewed at least annually. To information on file. Certification language should be be eligible, a broker/dealer must meet at least one of mutually acceptable to both parties. An investment the following criteria: 1) be recognized as a Primary officer of the City may not buy any securities from a Dealer as defined by the New York Federal Reserve person who has not delivered to the City an Market Reports Division; or 2) complies with instrument substantially in the form provided by this Securities and Exchange Commission Rule 15C3-1, policy. the Uniform Net Capital Requirement Rule. If the City's depository bank also provides custodial and The Director shall review the quality of service and safekeeping services for the City, the bank may not financial stability of each broker/dealer and financial be included as an authorized broker/dealer for the institution approved under this Section at least City, however (Non- negotiable Certificate of annually. Any approved broker/dealer or financial Deposits are exempt from this policy. institution may be removed from the list of approved broker/dealers with the approval of the Director, if in Broker/dealers will be selected and recommended to the opinion of the Director, the firm has not the investment committee by the Director on the performed adequately or its financial position is basis of their financial stability, expertise in cash considered inadequate. management and their ability to service the City's account. Each broker/dealer that has been authorized by the City shall be required to submit and annually XII. SAFEKEEPING AND CUSTODY update a Broker/Dealer Information Request form which includes the firm's most recent financial Investment securities purchased for the City will be statements. The Director shall maintain a file which delivered by either book entry or physical delivery includes the most recent Broker/Dealer Information and shall be held in third-party safekeeping by a Request forms submitted by each firm approved for Federal Reserve Member financial institution investment purposes. A copy of the submitted designated as the City's safekeeping and custodian Broker/Dealer Information Request forms as well as bank. The City may designate more than one a list of those broker/dealers approved by the City custodian bank. The City shall execute a shall be maintained by the Director (See Appendix Safekeeping Agreement with each bank prior to A). utilizing the custodian's safekeeping services. Only a state or national bank located within the State of The City of Wylie will provide all approved Texas may be utilized as a custodian of securities securities dealers with a copy of the City's pledged to secure certificates of deposit. The Investment Policy. A principal in the firm must safekeeping agreement must provide that the execute a written statement acknowledging receipt safekeeping bank will immediately record and and review of the policy and a statement promptly issue and deliver a signed safekeeping acknowledging that reasonable procedures and receipt showing the receipt and the identification of controls have been implemented to preclude the security, as well as the City's interest. CITY OF WYLIE9 TEXAS INVESTMENT POLICY XIII.RECORD KEEPING AND REPORTING The Director shall maintain a list of designated custodian banks and a copy of the Safekeeping A record shall be maintained of all bids and offerings Agreement executed with each custodian bank. for securities transactions in order to ensure that the City receives competitive pricing. All transactions The City must approve release of securities in writing shall be documented by the person authorizing the prior to their removal from the custodial account. A transaction in a form that shows that person's name, telephone facsimile of a written authorization shall be the party instructed to execute the transaction, the sufficient if the custodian orally confirms receipt of date, a description of the transaction and a brief the transmission and an exact copy of the document statement of the reason(s)for the transaction. is retained in the City's files. In no event shall the custodial bank be an authorized depository bank, At least annually, the Director shall verify that all issuer of repurchase agreements in which the City securities purchased by or pledged to the City are on invests or broker/dealer of securities on behalf of the hand in appropriate form. The City, in conjunction City. with its annual financial audit, shall perform a compliance audit of management controls on All securities shall be confirmed in the name of the investments and adherence to the City's established City and delivered to an approved custodial bank or investment policies. carried at a Federal Reserve Bank in the name of the City. The Custodian shall not otherwise deposit Each depository of the City's funds shall maintain purchased or pledged securities. All book entry separate, accurate and complete records relating to all securities owned by the City shall be evidenced by a deposits of the City's funds, the securities pledged to safekeeping receipt issued to the City and signed by secure such deposits and all transactions relating to the appropriate officer at the custodian bank stating the pledged securities. Each approved custodian that the securities are held in the Federal Reserve shall maintain separate, accurate and complete System in a CUSTOMER ACCOUNT naming the records relating to all securities received on behalf of City as the "customer." In addition, the custodian the City, whether pledged, purchased or subject to bank will, when requested, furnish a copy of the repurchase agreement, as well as all transactions delivery advice received by the custodian bank from related to such securities. In addition, each the Federal Reserve Bank. depository shall file all reports required by the Texas State Depository Board. Each depository and All certificated securities (those transferred by custodian shall agree to make all the records physical delivery) shall: 1) be held by an approved described in this paragraph available to the Director custodian bank or any correspondent bank in New or designee and the City's auditors at any reasonable York City approved by the Director; and 2) the time. correspondent bank or the City's safekeeping bank shall issue a safekeeping receipt to the City All broker/dealers, custodians, depositories and evidencing that the securities are held by the investment advisors shall maintain complete records correspondent bank for the City. of all transactions that they conducted on behalf of the City and shall make those records available for The original safekeeping receipt for each transaction inspection by the Director or other representatives including purchased securities under a repurchase designated by the City Council or City Manager. agreement and collateral securing deposits will be forwarded to the Director or his designee and held in All sales of securities for less than the book value of a secured file by the City. the security shall be approved by the Director. Sales of securities for less than 92 percent of the book CITY OF WYLIE9 TEXAS S INVESTMENT POLICY value of the securities must be approved by both the City Manager and the Director. XIV. ETHICS AND CONFLICTS OF INTEREST An investment report shall be prepared by the Officers and employees of the City involved in the Director and signed by each officer and employee of investment process shall refrain from personal the City authorized to conduct any of the City's business activity that involves any of the City's investment activity, on a annual basis listing all of the approved custodians, depositories, broker/dealers or investments held by the City, beginning and ending investment advisors.Employees and officers shall not market value for period, the current market valuation utilize investment advice concerning specific of the investments and transaction summaries, securities or classes of securities obtained in -the including a detailed list of the gains and losses transaction of the City's business for personal recognized. The market value will be determined by: investment decisions, shall in all respects subordinate (1)written reports such as the Wall Street Journal; (2) their personal investment transactions to those of the on-line services such as Bloomberg; or (3) through a City, particularly with regard to the timing of primary dealer or national bank that is independent of purchases and sales and shall keep all investment the specific security being valued. The report must advice obtained on behalf of the City and all state the pooled fund group for each asset/security. transactions contemplated and completed by the City The report shall explain the total investment return confidential, except when disclosure is required by during the previous quarter and compare the law. portfolio's performance to other benchmarks of performance. If invested in securities, the City's An investment officer of the City who has a personal audit firm must review the quarterly reports annually business relationship with an organization seeking to and the result of the review shall be reported to the sell an investment to the City shall file a statement City Council by that auditor. disclosing that personal business interest. An investment officer who is related within the second Within 90 days after the end of the City's fiscal year, degree by affinity or consanguinity to an individual the Director shall prepare, sign and deliver to the City seeking to sell an investment to the City shall file a Manager and the City Council an annual report on the statement disclosing that relationship. A statement City's investment program and investment activity required under this subsection must be filed with the which has also been signed by each officer and Texas Ethics Commission and the governing body of employee of the City authorized to conduct any of the the City. City's investment activity. The annual report shall include full year investment returns. Such annual XV.POLICY REVISIONS report shall include an analysis of the compliance with this Policy as well as changes in the applicable This Investment Policy will be reviewed at least laws and regulations during the previous year and annually by the City Attorney, City Manager and may include any other items of significance related to Director of Finance and revised when necessary. All the investment program. The annual investment revisions shall be approved by the City Council. report will be reviewed as a part of the annual audit.