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Res 140-95 8/15/1995RESOLUTION NO. EXHIBIT A RESOLUTION AUTHORIZING THE DIRECTOR OF FINANCE AND CITY TREASURER TO ENGAGE IN CERTAIN FINANCIAL TRANSACTIONS ON BEHALF OF THE CITY OF WICHITA FALLS, TEXAS BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF WICHITA FALLS, TEXAS 1. That the Director of Finance of the City is hereby authorized and empowered, for and on behalf of the City to establish and maintain one or more accounts with securities dealers for the purpose of purchasing, investing in, acquiring, selling, possessing, disposing of, transferring, exchanging, pledging, financing, engaging in repurchase and reverse repurchase agreement, and generally dealing in and with the securities authorized for investment by the City's Investment Policy, attached hereto. 2. That said officer shall have the fullest authority at all times with respect to the aforesaid transactions, including without limitation authority to give written and oral instructions to security dealers with respect to said transactions; to bind and obligate the City for the carrying out of any contracts, arrangement or transactions with security dealers, which shall be entered into by such officer on behalf of the City; to pay in cash, by check, or by wire, upon funds of the City such sums as may be due in connections with any said account; to deliver securities to security dealers, to order the delivery or transfer of securities to any name selected by said officer; to endorse and contract in order to pass title thereon; to direct the sale or exercise of any rights with respect to such securities; to sign for the City all releases, powers of attorney or other documents in connection with said account; to direct such security dealers to surrender any securities to the proper agent or party for the purpose of effecting any exchange or conversion, or otherwise; to accept delivery of any securities; to appoint any other person or persons to do any and all things which said officer and hereby empowered to do; and generally to do and take all actions considered necessary or desirable by such officers in connection with such account. 3. That such security dealers may deal with either of the officer empowered by this resolution, directly or indirectly, as though they were dealing directly with the City. 4. That the City Clerk of the City is hereby authorized, empowered and directed to certify the following documents to secur-J-.-.- dealers and to affix the City seal thereon: (a) certified copies of this resolution; and, (b) specimen signatures of the persons empowered by th-s resolution. 5. That the City is home rule municipal corporation, du--V organized and existing under the laws of the State of Texas, that iT-*s charter empowers it to transact the business defined in th-'s resolution, and that no limitation has been imposed upon such powers by its charter, state law or otherwise which prevents the transacticn of such business. 6. That security dealers may rely upon the authority given under this resolution, as continuing in effect until they receive written notice of a change in or recision of such authority. 7. That in the event of any change in the of f ice or powers --f the persons hereby empowered, the City Manager of the City shall send written notice of such change to the security dealers with whom the City does business, which notification, when received, shall amend or terminate the powers of the persons theretofore authorized. 8. That this resolution shall apply not only to transactions and agreements with security dealers which may take place after the adoption hereof, but shall also apply to those transactions which May have been made by the officers named herein prior to the adoption hereof, all of which, together with the actions of such officers, are hereby ratified, confirmed and approved. PASSED AND APPROVED this the day of 1995. MAYOR� ATTEST: ty Clerk INVESTMENT POLICY FOR THE CITY OF WICHITA FALLS AS OF AUGUST 15, 1995 I. POLICY STATEMENT 1--- is the policy of the City of Wichita Falls, Texas ("City") that the administration of its funds and the investment of those funds shall be handled at its highest public trust. Investments shall be made in a manner which will provide the maximum security of principal invested through limitations and diversification while meeting the daily cash flow needs of the City and conforming to all applicable state and City statutes governing the investment of public funds. The receipt of a market rate of return will be secondary to the requirements for safety and liquidity. It is the intent of the City to be in complete compliance with local law and the Texas Public Funds Investment Act. The earnings from investment will be used in a manner that best serves the public trust and interests of the City. Ii. SCOPE This investment policy applies to all the financial assets and funds held by the City. The City commingles its funds into one pooled investment fund for investment purposes for efficiency and maximum investment opportunity. These funds are defined in the City's Comprehensive Annual Financial Report (CAFR) and include: General Fund Special Revenue Funds Debt Service Fund Capital Projects Funds Enterprise Funds Internal Service Fund Trust and Agency Funds And any new funds created by the City unless specifically exempted by the City Council and this policy. III. OBJECTIVES AND STRATEGY It is the policy of the City that all funds shall be managed and invested with three primary objectives, listed in order of their priority: safety, liquidity, diversification and yield. These objective encompass: Safety of Principal Safety of principal is the foremost objective of the City. Investments of the City shall be undertaken in a manner that seeks to insure the preservation of capital in the overall portfolio. To obtain this goal, diversification is required in the portfolio's composition. The suitability of each investment decision will be made on the basis of these objectives. Diversification Diversification of the portfolio will include diversification by maturity and market sector and will include the use of a number of broker/dealers for diversification and market coverage. Competitive bidding will be used on each sale and purchase. Yield The City's investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the City's risk constraints and the cash flow of the portfolio. "Market rate of return" may be defined as the average yield of the current three month U.S. Treasury Bill or such other index that most closely matches the average maturity of the portfolio. Effective cash management is recognized as essential to good fiscal management. Cash management is defined as the process of managing monies in order to ensure maximum cash availability. The City shall maintain a comprehensive cash management program which includes collection of accounts receivable, prudent investment of its available cash, disbursement of payments in accordance with invoice terms and the management of banking services. IV. LEGAL LIMITATIONS, RESPONSIBILITIES AND AUTHORITY Direct specific investment parameters for the investment of public funds in Texas are found in the Public Funds Investment Act, Chapter 2256, Texas Government Code, (the "Act"). The Interlocal Cooperation Act, Chapter 791, Texas Government Code, authorizes local governments in Texas to participate in an investment pool established thereunder. That statute and reference to authorized investment in investment pools in the Act, is primary authority for use of investment pools by political subdivisions of the State of Texas. V. DELEGATION OF INVESTMENT AUTHORITY The Chief Financial Officer, acting on behalf of the City Council, is designated as the Investment Officer of the City and is responsible for investment management decisions and activities. The Council is also responsible for considering the quality and capability of staff, investment advisors, and consultants involved in investment management and procedures. All participants in the investment process shall seek to act responsibly as custodians of the public trust. The Investment Officer shall develop and maintain written administrative procedures for the operation of the investment program which are consistent with this investment policy. Procedures will include reference to safekeeping, require and include PSA Master Repurchase Agreements, wire transfer agreements, banking services contracts, and other investment related activities. The Investment Officer shall be responsible for all transaction undertaken and shall establish a system of controls to regulate the activities of subordinate officials and staff. The Investment Officer shall designate a staff person as a liaison/deputy in the event circumstances require timely action and the Investment Officer is not available. No officer or designee may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Investment Officer and approved by the City Manager. Authorization Resolution A Trading Resolution is established with this investment policy, and attached hereto, authorizing the Investment Officer or Agent to engage in investment transactions on behalf of the City. The Trading Resolution shall be used to establish brokerage and banking accounts in the performance of this policy. The persons authorized by the Trading Resolution to transact business for the City are also authorized to approve wire transfers used in the process of investing. See Exhibit A. Vi. PRUDENCE The standard of prudence to be used in the investment function shall be the "prudent person" standard and shall be applied in the context of managing the overall portfolio. This standard states: "Investments shall be made with judgement and care, under circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the expected income to be derived." Limitation of Personal Liability The Investment Officer and those delegated investment authority under this policy, when acting in accordance with the written procedures and this policy and in accord with the Prudent Person Rule, shall be relieved of personal responsibility and liability in the management of the portfolio provided that deviations from expectations for a specific security's credit risk or market price change or portfolio shifts are reported in a timely manner and that appropriate action is taken to control adverse market effects. VII. INTERNAL CONTROLS The Investment Officer shall establish a system of written internal controls which will be reviewed annually with the independent auditor of the City. The controls shall be designed to prevent loss of public funds due to fraud, employee error, misrepresentation by third parties, unanticipated market changes, or imprudent actions by employees of the City. Cash Flow Forecasting Cash flow forecasting is designed to protect and sustain cash flow requirements of the City. Supplemental to the financial and budgetary systems, the Investment Officer will maintain a cash flow forecasting process designed to monitor and forecast cash positions for investment purposes. Cash flow will include the historical researching and monitoring of specific cash flow items, payables and receivables as well as overall cash position and patterns. VII. AUTHORIZED INVESTMENTS Acceptable investments under this policy shall be limited to the instruments listed below. The investment are to be chosen in a manner which promotes diversity or market sector and maturity. The choice of high-grade government investments and high-grade, money market instruments is designed to assure the marketability of those investments should liquidity needs arise. A. Obligations of the United States Government, its agencies and instrumentalities, and government sponsoring enterprises, not to exceed two years to stated maturity; B. Fully insured or collateralized certificates of deposit from a bank domiciled in the State of Texas and under the terms of a written depository agreement with that bank, not to exceed one year to the stated maturity; C. Bankers acceptances as defined by the Public Funds Investment Act not to exceed 180 days to stated maturity; D. Commercial paper rated A -1 /P -1 or the equivalent by at least two nationally recognized rating agencies not to exceed 180 days to stated maturity; E. Repurchase agreement and reverse repurchase agreements as defined by the Public Funds Investment Act, not to exceed 180 days to stated maturity, provided an executed PSA Master Repurchase Agreement is on file with the City and the counterparty bank or primary dealer; F. No-load, SEC registered money market funds, each approved specifically before use by the City Council. No more than 8001 of the entity's monthly average balance may be invested in money market funds; G. Texas Local Government Investment Pools as defined by the Public Funds Investment Act; and, H. No-load, mutual fund registered with the SEC, rated AAA by at least one nationally recognized rating agency, investing exclusively in this policy's authorized investments, and having a weighted average maturity of not more than two (2) years. This fund must confirm to all requirements of investment pools, including prospectus information, confirmations and monthly reporting. No more than 150 of the entity's monthly average balance may be invested in money market funds If additional types of securities are approved for investment by public funds by state statues, they will not be eligible for investment by the City until this policy has been amended and the amended version approved by the City Council. Competitive Bidding Requirement All securities, including certificates of deposit, will be purchased or sold after three (3) offers/bids are taken to verify that the City is receiving fair market value/price for the investment. Delivery versus Payment All security transactions, including collateral for repurchase agreements, entered into by the City, shall be conducted on a delivery versus payment (DVP) basis. IX. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS All investments made by the City will be made through either the City's banking services bank (trading desk) , a primary dealer, or the City's Financial Advisor. The City shall maintain a list of financial institutions which are authorized to provide investment services. Banks shall continuously provide their most recent "Consolidated Report of Condition" (call report). At a minimum the City shall conduct an annual evaluation of each bank's creditworthiness to determine whether it should be on the "Qualified Institution" listing. Securities broker /dealers not affiliated with a bank, shall be required to be classified as reporting dealers affiliated with the New York Federal Reserve as primary dealers, and meet certain other criteria as determined by the Investment Officer. A list of no more than ten (10) authorized primary dealers will be established and maintained. The following criteria must be met by those firms on the list: - provision of an audited financial statement for the most recent period, - proof of certification by the National Association of Securities Dealers (NASD), - proof of current registration with the State Securities Commission, and - completion of a City questionnaire. Every dealer with whom the City transacts business will be provided a copy of this Investment Policy to assure that they are familiar with the goals and objectives of the investment program. The broker /dealer will be required to return a signed copy of the Certification Form certifying that the policy has been received and reviewed. (Exhibit B) As investment are made, the Investment Officer shall rotate from the authorized bidder's list for bids /offers. An attempt will be made to alternate to all names on the list. X. DIVERSIFICATION AND MATURITY LIMITATIONS It is policy of the City to diversify its investment portfolio. Invested funds shall be diversified to minimize risk or loss resulting from over - concentration of assets in a specific maturity, specific issuer, or specific class of securities. Diversification strategies shall be established and periodically reviewed. At a minimum, diversification standards by security type and issuer shall be: U.S. Treasuries and securities with US Government's guarantee 1000, U.S. Government agencies and instrumentalities Fully insured or collateralized CDs Banker's acceptances Commercial paper Maximum per CP issuer Repurchase agreements Money Market funds Operating Funds Bond Funds Local Government Investment Pools Liquidity Pools Net Asset Value (longer duration) Pools Maximum percent ownership of pool Mutual Funds not to exceed 500 not to exceed 300 not to exceed 150 not to exceed 254 not to exceed 100 10011-0 not to exceed 804 804 100% not to exceed 304 not to exceed 2001 not to exceed 15*1 The Investment Officer shall be required to diversify maturities. The investment Officer, to the extent possible, will attempt to match investment with anticipated cash flow requirements. Matching maturities with cash flow dates will reduce the need to sell securities prior to maturity, thus reducing market risk. Unless matched to a specific requirements, the Investment Officer may not invest more than 200 of the portfolio for a period greater than one (1) year. Unless matched to a specific requirements, the Investment Officer may not invest any portion of the portfolio for a period greater then two (2) years. Xi. SAFEKEEPING AND COLLATERALIZATION The laws of the State and prudent treasury management require that all purchased securities be bought on a delivery versus payment basis and be held in safekeeping by either the City, an independent third party financial institution, or the City's designated depository. All safekeeping arrangements shall be designated by the Investment Officer and an agreement of the terms executed in writing. The third party custodian shall be required to issue safekeeping receipts to the City listing each specific security, rate, description, maturity, cusip number, and other pertinent information. Each safekeeping receipt will be clearly marked that the security is held for the City or pledged to the City. All securities pledged to the City for certificates of deposit or demand deposits shall be held by an independent third party bank domiciled in Texas. The safekeeping bank may be within the same holding company as the bank from with the securities are pledged. Collateralization Collateralization shall be required on two types of investments: a: certificates of deposits over the FDIC insurance coverage of $100,000, and b: repurchase agreements. In order to anticipate market changes and provide a level of additional security for all funds, the collateralization level required will be 10215 of the market value of the principal and accrued interest. XII. PERFORMANCE EVALUATION AND REPORTING The Investment Officer shall submit monthly to the City Manager and quarterly and annual reports to the City Council containing sufficient information to permit an informed outside reader to evaluate the performance of the investment program. At a minimum, this report shall contain: Beginning and ending market value of the portfolio by market sector and total portfolio, Beginning and ending carrying (Book) value of the portfolio by market sector and total portfolio, Transactions which change market and book value, detail reporting on each asset (book, market, and maturity dates at a minimum), Overall current yield of the portfolio, Overall weighted average maturity of the portfolio, and Maximum maturities in the portfolio. The report will be prepared jointly by all involved in the investment activity and be signed by the staff involved. XIII. DEPOSITORIES The City will designate one banking institution through a competitive process as its central banking services provider at least every three years. This institution will be used for normal banking services including disbursements, deposits, lockbox, controlled disbursement and safekeeping of securities. Other banking institutions from which the City may purchase certificates of deposit will also be designated after they provide their latest audited financial statements to the City. XIV. INVESTMENT POLICY ADOPTION BY CITY COUNCIL The City's investment policy shall be adopted by the City Council. The policy shall be reviewed on an annual basis by the City Manager and City Council. XV . AMENDMENT In the event State law changes and the City cannot invest in the investments described in this policy, this policy shall automatically be conformed to existing law. APPROVED BY CITY COUNCIL City Clerk Date EXHIBIT B BROKER/DEALER CERTIFICATION FORM as required by Texas Government Code 2256.005(k) CITY OF WICHITA FALLS, TEXAS (the "City") The City acknowledges that the only means the firm has to preclude "imprudent investment activities arising out of transactions between the firm and the City" is to confirm that all provisions of the City's investment policy are followed in investment transactions conducted between the firm and the City, and, the second paragraph below should be read accordingly. I, as a registered principal for the firm do hereby certify that I, and the broker covering this account, , have received and both have thoroughly reviewed the investment policy of the City. We acknowledge that this firm has implemented reasonable internal procedures and controls in an effort to preclude imprudent investments between this firm and the City arising from transactions between the City and the firm. Signature Name: Title: Date: