Resolution 2021-26RESOLUTION NO. 2021-26(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 STANDA' 1 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 RECO' 1 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, 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 14, 2021.
DULY PASSED AND ADOPTED by the City Council of the City of Wylie, Texas this 14th day
of September 2021.
attire Porter, Mayor
ATTESTED BY:
Stephanie Storm, City Secretary
Resolution No. 2021-26(R) Investment Policy
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INVESTMENT POLICY
INVESTMENT POLICY
Submitted for Review September 14, 2021
Table of Contents
INTRODUCTION
11. SCOPE
III. OBJECTIVES 1
Safety 1
Liquidity
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
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
XIII. RECORD KEEPING AND REPORTING 7
XIV. ETHICS AND CONFLICTS OF INTEREST 8
XV. POLICY REVISIONS 9
APPENDIX A - BROKER/DEALER QUESTIONNAIRE
APPENDIX B - CERTIFICATION BY DEALER
INVESTMENT POLICY
1. INTRODUCTION
Chapter 2256 of Title 10 of the Local Government
Code (hereinafter referred to as the "Public Funds
Investment Act") prescribes that each city imtnadopt
written rules governing its investment pmodooa and
to dcfioc the authority of the investment ot5oec The
following Investment Policy addresses the methods,
procedures, and pruoduos which must bcexercised to
ensure effective and judicious fiscal management of
thcCity'u funds. This Policy shall not apply tothe
selection, retention or other issues concerning the
depositories o[the City'sfunds indemand deposits us
provided under Chapter 105 of the Local Government
Code.
11. SCOPE
This Policy ehu| apply to the iovcsUnnut and
management of all funds of the City under its control,
other than those expressly excluded herein or by
xpp\iouh|o law orvalid agreement. This Policy shall
not supersede the restrictions on investment and use
applicable to any specific fund and, inthe event of
any conflict between this Policy and the requirements
of any fund subject hereto, the specific requirement
upp|ioub|o to such fund obu[| he followed as well as
all other provisions of this Policy other than those in
onoDiot. The Employees Deferred Compensation
Agency Fund is excluded from coverage under this
Policy.
In order to make effective use ofthe City'o resources,
all monies shall be pooled into one bank account,
except for those monies required tobnaccounted for
in other bunk accounts as stipulated by applicable
\m*o, bond covenants orcontracts. The bank account
will be maintained bvpooled fund group for purposes
ofimplementing pooled fund strategies and reporting.
The income derived from this pooled investment
account ohu\| be distributed by fund in uocondunom
with the City'ointernal procedures.
111. OBJECTIVES
TheCdy's principalinvestment objectives, ioorder u[
priority, are listed below.
Safety. The primary objective of the Chv's
investment activity is the preservation of principal
(capital) in the ovcnu|| portfolio. Each investment
transaction ohu|| seek fic»tVoensure that capital |onaea
are avoided, whether the \omo occurs from the default
oyosecurity or from erosion ofmarket value.
The Cbv's invcsUnor¢ portfolio will
remain sufficiently liquid to uouh|e the City to meet
operating requirements that might be reasonably
anticipated. Liquidity shall be uobicvod by matching
investment maturities with forecasted cash flow
requirements, by investing in xeouddco with uodvc
secondary nnurkcco, and by using utu1c or local
investment pools.
The governing body recognizes that
in udivooiOod portfolio, occasional measured losses
due to market volatility are inevitable, and must he
considered v/dbin the context of the overall
portf6|io'a return, provided that adequate
diversification has been implemented. Therefore,
assets held in the common investment portfolio obu||
be diversified to eliminate the risk of loss resulting
from one 0000crtugion of assets in u specific
maturity, u specific issuer or u specific class of
Yield. The investment portfolio goal
against which the yield is compared will be
established from time to time by the Finance
Director. Reoonnncududono by the lnvemU000t
Committee will hcconsidered when the performance
measure is being established. Efforts toseek higher
than the above goal must be consistent with risk
limitations identified in this policy and prudent
investment principles. The City`a investment
portfolio shall be designed with the obicohvo of
INVESTMENT POLICY
attaining a rate of return which is consistent with the
risk limitations and cash flow characteristics of the
City's investments.
IV. INVESTMENT COMMITTEE
An investment committee consisting of the City
Manager, the Director of Finance and the Assistant
Director of Finance will meet annually before the
beginning of a new fiscal year. The Investment
Committee shall be authorized to invite advisors to
the meetings as needed.
The investment officer will present a brief report of
investment activities to the Investment Committee.
The primary objectives of the committee will be to
(1) make recommendations regarding investment
strategies
(2) approve a list of authorized brokers, dealers,
banks, savings and loans, credit unions, and
pools
recommend a list of authorized training
sources for the state mandated investment
training and
(4) monitor program results.
(3)
The committee shall include in its deliberations such
topics as performance reports, economic outlook,
portfolio diversification, maturity structure, potential
risk to the city's funds, and the target rate of return on
the investment portfolio.
V. DELEGATION OF AUTHORITY
Management responsibility for the investment
program is delegated by the City Council to the City
Manager who will designate the Finance Director as
Investment Officer (hereinafter referred to as the
"Director"). The Director's authority will at all times
be limited by conformance with all Federal
regulations, State of Texas statutes and other legal
requirements including the City Charter and City
Ordinances, including this Policy.
The Director shall develop and maintain written
administrative procedures for the operation of the
investment program consistent with this Policy. The
controls shall be designed to prevent, identify and
control losses of public funds arising from deviation
from this Policy, fraud, employee error, and
misrepresentation by third parties, or imprudent
actions by employees and officers of the City.
With written approval from the City Manager, the
Director may delegate any phase of the investment
management program to members of the City staff.
Such approval shall state specifically the functions
such person is authorized to perform or that the
person is authorized to perform all activities of the
Director under this Policy. The Director shall obtain
and maintain, at the City's expense, fidelity bonds for
himself and each of his designees in amounts
determined adequate by the Director (which shall not
be less than five percent of the amounts subject to
this Policy) for each fiscal year as shown by the
approved budget. No person may engage in an
investment transaction except as provided under the
terms of this Policy and the internal procedures
established by the Director. A current list of persons
authorized to transact investment business and wire
funds on behalf of the City shall be maintained by the
Director.
At the discretion of either the City Manager or the
Director and in any event upon the termination or
reassignment of any member of the Director's staff
authorized to conduct transactions for the City
pursuant to this Policy, the authority of such person
shall be revoked and such revocation of authority
shall be immediately communicated by the Director
orally and in writing to each and every depository,
broker/dealer, investment advisor, custodian and
other agency or entity with whom the City has any
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INVESTMENT POLICY
existing orcontinuing relationship inthe management
of its investments.
VI. INVESTMENT ST
The City of Wylie maintains u pooled investment
portfolio. The pooled portfolio utilizes specific
investment strategies designed to address the unique
oburuote,stkm of the pooled iuvootnnrt portfolio.
The pooled investment portfolio includes Operating
Funds, Debt Service Funds, Debt Service Reserve
Fundy, Cuphx| Projects and Special Purpose Funds.
Investment strategies for these different groups are
detailed below.
(D lnvem8nout obatoocw for operating, debt
service, capital project, and special puqxmn funds
have as their pdnnucy objective to uooum: that
anticipated cash ou1Dovvx are matched with adequate
investment liquidity. The secondary objective is to
create u portfolio structure which will experience
minimal volatility during economic cycles.
(2) The investment strategy for the debt service
reserve funds shall have as the primary uNeodvc the
ability to generate udopendah|c revenue stream from
securities with u low degree of volatility. Seou6hcm
should be of high quality, with short to intermediate
tcon maturities. Except as may brrequired by abond
ordinance, ueuucidco should hoofhigh quality with
short to iotcnnodiu1e'tonn maturities.
VII.8TANDA
I I
1nvaoUnonM sbu| humade with judgment and care,
under prevailing circumstances, that person of
prudence, discretion,
and intelligence would exercise
in the management ofthe [ersom`sown affairs, not
for speculation, but for investment, considering the
probable safety ufcapital and the probable income to
hederived. Investment offunds shall hcgoverned hy
the following investment objectives, in order of
preservation and safety ofprincipal;
liquidity; and
diversification; and
yie|cL
In determining whether an investment officer has
exercised prudence with respect to an investment
decision, the determination shall be made taking into
(\)
the iovooUnnnt of all funds, or funds under
the Ci1y`a control, over which the officer had
responsibility rather than u consideration as
to the prudence ofusingle investment; and
CD whether the investment decision was
consistent with the written investment policy
of the City.
The Director and his staff shall recognize that the
investment activities ofthe City are umatter ofpublic
record. Therefore, all participants in the investment
process shall seek to act responsibly as custodians of
the public trust. Investment officials shall avoid any
transactions that might impair public confidence in
the City'sability togovern effectively.
VIII. INVESTMENTS AUTHORIZED BY THE
CITY OFWYLKE
Authorized investments for municipal governments
iuthe State ofTexas are set forth inthe Public Funds
Investment &u" as amended (Section
2256.089'2256.019, Government Code). However,
suitable investments for the City ofWylie are limited
to the following.
(l)
Direct obligations o[the United States or its
INVESTMENT POLICY
maturity of 5 years or less.
(2) Certificates of deposit issued in the State of
Texas with a maximum maturity of 2 years or
less and insured by the Federal Deposit
Insurance Corporation.
(3)
Fully collateralized direct repurchase
agreements with a defined termination date
of 2 years or less which are secured by
obligations of the United States or its
agencies and instrumentalities and pledged
with a third party in the City's name. The
agreement must be placed through a primary
government securities dealer, as defined by
the Federal Reserve, or by a financial
institution doing business in the State of
Texas. Each issuer of repurchase agreements
shall be required to sign a master repurchase
agreement.
(4) Approved investment pools as described in
Section 2256.016 which are continuously
rated no lower than AAA, AAAm or an
equivalent rating by at least one nationally
recognized rating agency and have a
weighted average maturity no greater than 90
days.
IX. OTHER INVESTMENT GUIDELINES
The City seeks active management of its portfolio
assets. In order to meet the objectives of this Policy,
the City may from time to time sell securities that it
owns in order to better position its portfolio assets.
Sales of securities prior to maturity shall be
documented and approved by the Director before
such a transaction is consummated. Sales of
securities yielding net proceeds less than 92% of the
book value of the securities must be approved in
advance and in writing by the City Manager. Three
examples of situations involving the sale of securities
prior to maturity are
(1) swap - to sell an investment to realize a
capital gain,
(2) To better position selected investments
due to a change in market conditions,
(3) To react to emergency liquidity demands.
Each investment transaction must be based upon
competitive quotations received from at least three
broker/dealers who have been approved by the City
in accordance with Texas law.
The purchase and sale of all securities shall be on a
delivery versus payment or payment versus delivery
basis (i.e., for securities purchases, monies will not be
released by the City's safekeeping bank until
securities are received at the Federal Reserve Bank
for further credit to the City's safekeeping bank. In
the case of securities sales, monies will be received
by the City's safekeeping bank via the Federal
Reserve Bank as the securities are simultaneously
released to the purchaser). In this manner the City
will always have possession of either its securities or
its monies.
X. DIVERSIFICATION AND MATURITY
LIMITS
It is the policy of the City to avoid concentration of
assets in a specific maturity, a specific issue, or a
specific class of securities, with the exception of U.S.
Treasury issues. The asset allocation in the portfolio
should, however, be flexible depending upon the
outlook for the economy and the securities markets.
The City will not exceed the following maximum
limits as a percentage of the total portfolio for each of
the categories listed below:
Investment Category
Obligations of the United
States or its agencies and
instrumentalities.
Certificates of Deposit
Repurchase Agreements
NOT Reverse Repurchase
Agreements
Max. %
of
Portfolio
100%
25%
100%
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INVESTMENT POLICY
Max.
Maturity
5 years
18 mon,
2 years
The Director shall evaluate how each security
purchased fits into the City's overall investment
strategy.
At all times the City shall maintain 10 percent of its
total investment portfolio in instruments maturing in
90 days or less. The weighted average maturity of all
securities and certificates of deposit in the City's total
investment portfolio at any given time (not including
cash or demand deposits) shall not exceed 2 years.
XL SELECTION OF BROKERS/DEALERS
The City shall maintain a list of broker/dealers and
financial institutions which have been approved for
investment purposes by the investment committee.
(For the purpose of this investment policy,
Broker/dealer will be used to refer to any brokerage
firm, bank, investment pool, or financial institution
with which the City does investment business).
Securities may only be purchased from those
authorized institutions and firms. The authorized
broker/dealers will be reviewed at least annually. To
be eligible, a broker/dealer must meet at least one of
the following criteria: 1) be recognized as a Primary
Dealer as defined by the New York Federal Reserve
Market Reports Division; or 2) complies with
Securities and Exchange Commission Rule 15C3-1,
the Uniform Net Capital Requirement Rule. If the
City's depository bank also provides custodial and
safekeeping services for the City, the bank may not
be included as an authorized broker/dealer for the
City. However, non-negotiable Certificate of Deposits
are exempt from this policy.
Broker/dealers will be selected and recommended to
the investment committee by the Director on the basis
of their financial stability, expertise in cash
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
update a Broker/Dealer Information Request form
which includes the firm's most recent financial
statements. The Director shall maintain a file which
includes the most recent Broker/Dealer Information
Request forms submitted by each firm approved for
investment purposes. A copy of the submitted
Broker/Dealer Information Request forms as well as
a list of those broker/dealers approved by the City
shall be maintained by the Director (See Appendix
A).
The City of Wylie will provide all approved securities
dealers with a copy of the City's Investment Policy.
A principal in the firm must execute a written
statement acknowledging receipt and review of the
policy and a statement acknowledging that reasonable
procedures and controls have been implemented to
preclude imprudent investment activities being
conducted between the entity and the securities firm
(See Appendix B).
All approved broker/dealer firms must have a
completed City of Wylie broker/dealer questionnaire,
investment policy, written acknowledgment per
above guidelines, executed master repurchase
agreement, if applicable, and current financial
information on file. Certification language should be
mutually acceptable to both parties. An investment
officer of the City may not buy any securities from a
person who has not delivered to the City an
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INVESTMENT POLICY
instrument substantially in the form provided by this
policy.
The Director shall review the quality of service and
financial stability of each broker/dealer and financial
institution approved under this Section at least
annually. Any approved broker/dealer or financial
institution may be removed from the list of approved
broker/dealers with the approval of the Director, if in
the opinion of the Director, the firm has not
performed adequately or its financial position is
considered inadequate.
XII. SAFEKEEPING AND CUSTODY
Investment securities purchased for the City will be
delivered by either book entry or physical delivery
and shall be held in third -party safekeeping by a
Federal Reserve Member financial institution
designated as the City's safekeeping and custodian
bank. The City may designate more than one
custodian bank. The City shall execute a
Safekeeping Agreement with each bank prior to
utilizing the custodian's safekeeping services. Only a
state or national bank located within the State of
Texas may be utilized as a custodian of securities
pledged to secure certificates of deposit. The
safekeeping agreement must provide that the
safekeeping bank will immediately record and
promptly issue and deliver a signed safekeeping
receipt showing the receipt and the identification of
the security, as well as the City's interest.
The Director shall maintain a list of designated
custodian banks and a copy of the Safekeeping
Agreement executed with each custodian bank.
The City must approve release of securities in writing
prior to their removal from the custodial account. A
telephone facsimile of a written authorization shall be
sufficient if the custodian orally confirms receipt of
the transmission and an exact copy of the document
is retained in the City's files. In no event shall the
custodial bank be an authorized depository bank,
issuer of repurchase agreements in which the City
invests or broker/dealer of securities on behalf of the
City.
All securities shall be confirmed in the name of the
City and delivered to an approved custodial bank or
carried at a Federal Reserve Bank in the name of the
City. The Custodian shall not otherwise deposit
purchased or pledged securities. All book entry
securities owned by the City shall be evidenced by a
safekeeping receipt issued to the City and signed by
the appropriate officer at the custodian bank stating
that the securities are held in the Federal Reserve
System in a CUSTOMER ACCOUNT naming the
City as the "customer." In addition, the custodian
bank will, when requested, furnish a copy of the
delivery advice received by the custodian bank from
the Federal Reserve Bank.
All certificated securities (those transferred by
physical delivery) shall: 1) be held by an approved
custodian bank or any correspondent bank in New
York City approved by the Director; and 2) the
correspondent bank or the City's safekeeping bank
shall issue a safekeeping receipt to the City
evidencing that the securities are held by the
correspondent bank for the City.
The original safekeeping receipt for each transaction
including purchased securities under a repurchase
agreement and collateral securing deposits will be
forwarded to the Director or his designee and held in
a secured file by the City.
XIII. RECORD KEEPING AND REPORTING
A record shall be maintained of all bids and offerings
for securities transactions in order to ensure that the
City receives competitive pricing. All transactions
shall be documented by the person authorizing the
transaction in a form that shows that person's name,
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INVESTMENT POLICY
the party instructed to execute the transaction, the
date, o description of the transaction and u brief
statement of the reason(s) for the transaction.
At least annually, the Director shall verify that all
securities purchased hvorpledged tothe City are oo
hand inappropriate form. The City, inconjunction
with its nunuu| financial audit, ohuU perform u
compliance audit of management controls on
investments and adherence to the City`s established
investment policies.
Each depository of the Chv's funds shall maintain
separate, accurate and complete records relating to all
deposits ofthe City'ofuody, the securities pledged to
ocuuo: such deposits and all transactions relating to
the pledged securities. Each approved custodian shall
maintain separate, accurate and complete records
relating to all securities received on hebu|f of the
City, whether pledged, purchased or subject to
repurchase agreement, as well as all transactions
related to such securities. In addition, each
depository shall file all reports required by the Texas
State Depository Bound. Each depository and
custodian shall agree to make all the records
described in this paragraph available to the Din:uk»r
or designee and the City'oauditors utany reasonable
All broker/dealers, custodians, depositories and
investment advisors shall maintain complete records
of all transactions that they conducted on behalf of
the City and shall make those records available for
inspection by the Director or other representatives
designated bythe City Council orCity Manager.
All sales of securities for less than the book value of
the security shall be approved by the CXrcutx. 8o|no
of a:ouridoo for |eau than 42 percent of the book
value of the 000mitica must he approved by both the
City Manager and the Director.
A monthly investment report shall ieprepared by
staff and signed by the Director, listing all of the
investments held hvthe City, beginning and ending
market value for period, the current market valuation
of the investments and transaction summaries,
including u detailed list of the gains and losses
recognized. The market value will bcdetermined by:
(|) written reports such asthe Wall Street Journal; (2)
on-line oon/icos such as Bloomberg; or(3)through u
primary dealer ornational bank that iuindependent of
the apcoiOu security being valued. The report must
state the pooled fund group for cauhuyacKuoourity.
The report shall list the total investment return for the
month. If invested in securities, the City`saudit firm
must review the monthly reports annually and the
result of the review shall be reported to the City
Council by that auditor.
Within g0days after the end ofthe Cbv's fiscal year,
the Director shall prepare, sign and deliver tothe City
Manager and the City Council auannual report onthe
City'o investment program and investment activity
vvbiub has also been signed by each officer and
employee nfthe City authorized toconduct any nfthe
City'y investment activity. The annual report shall
include fb|| year investment returns. Such annual
report ohu|| include an unu|yyia of the compliance
with this Policy as well as changes in the opp|ioub|c
laws and regulations during the previous your and
may include any other items ufsignificance related to
the investment program. The annual investment
report will horeviewed unupart ofthe annual audit.
XIV, ETHICS AND CONFLICTS OFINTEREST
Officers and mnp\oycmo of the City involved in the
investment process shall refrain from personal
huniocso activity that involves any of the City's
approved custodians, depositories, broker/dealers or
investment advisors. Employees and officers shall not
utilize investment advice concerning specific
ycourihcu or u|uamco of securities obtained in the
transaction of the City's business for personal
,
INVESTMENT POLICY
bmooUoent decisions, ubu| inall respects subordinate
their personal investment transactions tothose of the
City, particularly with regard to the timing of
purchases and ou|ey and oba|| keep all investment
advice obtained on behalf of the City and all
transactions contemplated and completed by the City
confidential, except when disclosure is required by
An investment officer of the City who has u personal
business relationship with an organization seeking to
sell an investment tothe City shall file astatement
disclosing that personal business interest. An
investment officer who is related within the second
degree by affinity or consanguinity to an individual
seeking to sell an investment to the City xhu| file a
statement disclosing that relationship. /\ statement
required under this subsection must hofi|odwith the
Texas Ethics Commission and the governing body of
the City.
XV. POLICY REVISIONS
This lnvuuUnont Policy will be reviewed at least
annually by the City Manager,the Director of
Finance and the Assistant Director of Finance and
revised when necessary. All revisions sbuJ\ he
approved bythe City Council.