HomeMy WebLinkAboutFY 2019 Annual Investment ReportAnnual Investment Report
Fiscal Year 2018-19
City of Euless
201 N. Ector Drive, Euless, TX 76039 www.eulesstx.gov
*Compliance Summary - Legislative Requirements
Introduction
Investment Strategy Compliance
*Annual Review, Fiscal Year 2019
I. Portfolio Summary
II. Performance Summary
III. Interest Income Summary
IV. Collateral Review
V. Broker Selection Process
VI. Summary
*Certification
*Minutes from 9/3/2019
*Appendices
Appendix A - Investment Portfolio by Fund
Appendix B - Investment Purchases
Appendix C - Investment Maturities
Appendix D - Investment Types and Institutions
*Investment Policy
*Broker / Dealers
*Economic News
Investment Committee Meeting
1/28/2020
1
INTRODUCTION
The information contained in this report will quantitatively and graphically demonstrate the achievement
of these City objectives for Fiscal Year 2018-19.
This report is written and submitted in accordance with Chapter 2256 of the Texas Government Code
entitled the "Public Funds Investment Act,"which states that "at least once each year, the investment
officer of a state agency or political subdivision shall prepare a written report concerning the agency's or
subdivision's local funds investment transactions for the preceding year and describing in detail the
investment position of the agency or subdivision as of the date of the report."
The City's investment policy designates the Investment Officers as the responsible managers of the
City's investment program. The daily investment procedures are monitored by the City's Finance
department and reviewed by the Investment Officers.This report has been signed by each Investment
Officer as required by the Public Funds Investment Act and the City's investment policy.
In compliance with the City's investment policy, the Finance department fulfills four main objectives:
compliance, safety,liquidity,and yield,in that order. Compliance is maintained through regular reporting
to City management on a monthly, quarterly and annual basis. Safety is insured by 1) investing only in
securities allowed by Chapter 2256 of the Texas Government Code entitled the "Public Funds Investment
Act;"2) using delivery vs.payment for all purchases; 3) protecting all non-government securities (cash
and bank certificates of deposit)with collateral including Federal Deposit Insurance Corporation (FDIC)
Insurance, Federal Savings and Loan Insurance Corporation (FSLIC)Insurance and/or eligible securities
as defined in Government Code Chapter 2257 Collateral for Public Funds Section 2257.002; and 4)
diversifying investment purchases into different security markets to minimize individual market risk.
Liquidity is met by matching investment terms to future operating cash needs such as payroll, accounts
payable, debt service,and capital improvement disbursements. The City also utilizes money market
funds and local government investment pools to provide daily liquidity needs. Per the Investment Policy,
the yield or rate of return which the City receives is measured against the 90-day treasury bill yield.
2
101 General Fund 270 Midtown PID Fund
201 Hotel-Motel Tax Fund 275 Midtown TIRZ #4 Fund
202 Juvenile Case Fund 501 Water & Wastewater Fund
210 1/2 Cent Sales Tax Operations Fund 504 Service Center Fund
220 Crime Control & Prevention District Fund 510 Drainage Utility Fund
221 Police Seized Asset Fund 520 Recreation Classes Fund
230 Police Drug DEA Awards Fund 521 Arbor Daze Fund
231 Police Drug State Awards Fund 530 Softball World Operations Fund
240 Car Rental Tax Fund 540 Golf Course Operations Fund
245 Glade Parks PID Fund 550 Parks at Texas Star Operations Fund
250 Glade Parks TIRZ Fund 601 Equipment Replacement Fund
260 Cable PEG Fund 610 Health Insurance Fund
265 Glade Parks PID #2 Fund 615 Risk Management/Worker's Comp Fund
301 Developer's Escrow Fund 330 Car Rental CIP Fund
305 Streets CIP Fund 502 Water & Wastewater CIP Fund
310 1/2 Cent Sales Tax CIP Fund 505 Water Impact Fees Fund
320 General Capital Projects Fund 508 Wastewater Impact Fees Fund
321 Redevelopment Fund 511 Drainage CIP Fund
322 Midtown Development CIP 543 TSGC CIP Fund
552 TSSC CIP Fund
401 Debt Service/General Obligation Fund 410 1/2 Cent Sales Tax Debt Service Fund
402 Star Center Debt Service Fund 506 Water & Wastewater Debt Service Fund
403 Glade Parks Debt Service Fund 541 TSGC Debt Service Fund
404 Midtown Development Debt Service Fund
102 General Fund Emergency Fund 507 Water & Wastewater Emergency Fund
103 General Fund Contingency Fund 509 Water & Wastewater Rate Stabilization Reserve Fund
211 1/2 Cent Sales Tax Debt Reserve Fund 532 TSSC Reserve Fund
240 Car Rental Tax Fund ($2,000,000 Reserve)542 TSGC Reserve Fund
323 Midtown Development Reserve Fund 705 Star Center Escrow Fund
503 Water & Wastewater Debt Reserve Fund
Janina Jewell
Director of Finance
Jackie Theriot
Assistant Director of Finance
Based on the above strategies,the investment portfolio reported herein is in compliance with the City's adopted
investment policy.
The strategy for all pooled funds is to assure that cash flows are matched with projected needs and provide
adequate liquidity and safety.This may be accomplished by purchasing high quality securities in a laddered
structure or utilizing an investment pool. Furthermore, the following purposes are also considered when investing.
Investment Strategy Compliance
-Operating Funds will be structured in such a way as to minimize volatility during economic cycles.This may be
accomplished by purchasing high quality short-term securities.The weighted average maturity on these funds will
remain within the 6 to 9 month range. These funds include:
-Funds for Capital Improvement Projects (CIP)and Special Purposes may purchase securities which allow for
flexibility and unanticipated project outlays by having a portion of their investments in highly liquid securities.The
stated final maturity dates of securities held should not exceed the estimated project completion dates. These funds
include:
-Debt Service Funds should assure adequate liquidity to cover the debt service obligations on the required payment
dates. These funds include:
-Emergency, Contingency, Operating and Debt Service Reserve funds will have the ability to generate a dependable
revenue stream to the appropriate fund from securities with a low degree of volatility.Such securities will tend to
hold their value during economic cycles.The stated final maturity dates of securities held should not exceed five
years. These funds include:
3
Instrument $ Cost
% of
Portfolio
Weighted
Average
Yield
Weighted
Avg. Yield
Prior Qtr.
Agencies & CD 47,137,619$ 40%0.95%1.04%
Gov't Pools & Escrows 71,912,513$ 60%1.27%1.38%
119,050,132$ 100.00%
I. PORTFOLIO SUMMARY
The City's investment portfolio at the end of the fiscal year, September 30, 2019,is
summarized by instrument as shown below.
Distribution by Instrument
The Distribution by Instrument table shows approximately 60% of the City funds are
invested in overnight investment pools and escrows, while the remaining 40%is invested in
government agencies and a CD.As of the date of this report, the weighted average yield on
the portfolio was 2.22%. When compared to prior quarter levels,the yield on the portfolio
has declined.The portfolio composition below demonstrates the diversity within the
portfolio.
FFCB
12%
FHLB
16%
FHLMC
8%
FNMA
2%
FAMCA
2%
Escrows
9%
TexPool
26%
TexStar
25%
Other
60%
Portfolio Composition
as of September 30, 2019
4
# of months $ Cost % of Portfolio
Overnight 71,912,512$ 60.4%
< 1 mo 6,951,394$ 5.8%
up to 6 mos 15,460,013$ 13.0%
6 to 9 mos 4,235,447$ 3.6%
9 to 12 mos 3,991,016$ 3.4%
12 to 18 mos 7,999,750$ 6.7%
18 to 24 mos 8,500,000$ 7.1%
119,050,132$ 100.0%
I. PORTFOLIO SUMMARY (CONTINUED)
The City's investment portfolio at the end of the fiscal year, September 30, 2019,is
summarized by maturity as shown below.
Distribution by Maturity
The Distribution by Maturity table reflects the degree of liquidity in the City's portfolio.
Currently,access to 60% of the portfolio is available within 24 hours,with an
additional 19% available within 6 months.This liquidity strategy was followed to
meet cash flow requirements for construction projects, payroll, debt service,and
other operating expenses.An additional 7% of the portfolio matures within one year.
The City has 7% of the portfolio invested from 12 -18 months,with remaining 7%
invested in the 18-24 month range. The weighted average maturity on the portfolio is
currently 108.98 days.
$71.9 $7.0
$15.5
$4.2
$4.0
$8.0
$8.5
$0.0 $9.0 $18.0 $27.0 $36.0 $45.0 $54.0 $63.0 $72.0
Overnight
< 1 mo
up to 6 mos
6 to 9 mos
9 to 12 mos
12 to 18 mos
18 to 24 mos
Investment Maturity Distribution
as of September 30, 2019
Shown in millions
5
Institution $ Cost % of Portfolio
Duncan Williams 7,205,518$ 6.0%
FTN Financial 10,488,471$ 8.8%
Hilltop Securities 5,998,700$ 5.0%
Mutual Securities 1,000,150$ 0.9%
Great Pacific Securities 5,000,000$ 4.2%
Samco Capital 7,500,250$ 6.3%
Vining Sparks 9,944,530$ 8.4%
TexPool 31,018,143$ 26.1%
TexStar 30,247,920$ 25.4%
Escrows 10,646,450$ 8.9%
119,050,132$ 100.0%
-No more than 33% in money market mutual funds, and
-No more than 33% by individual brokerage firms.
The chart below demonstrates the City's compliance with the above guidelines.
I. PORTFOLIO SUMMARY (CONTINUED)
The City's investment portfolio at the end of the fiscal year, September 30, 2019,is
summarized by institution as shown below.
Distribution by Institution
The City strives to not only diversify the portfolio by the type of instruments that are
purchased, but also by the institution from which they are purchased. The City uses the
following guidelines:
-No more than 10% in repurchase agreements,
-No more than 33% in investment pools with any single institution,
$0.0 $8.0 $16.0 $24.0 $32.0
Duncan
FTN
Hilltop
Mutual
Great Pacific
Samco
Vining
TexPool
TexStar
Escrows
$7.2
$10.5
$6.0
$1.0
$5.0
$7.5
$9.9
$31.0
$30.2
$10.6
Investments by Institution
as of September 30, 2019
Shown in millions
6
City of Euless
Pooled Portfolio Summary
for Fiscal Year Ending
September 30, 2019
Cost Book Market
Principal Only Value Value
Investments at June 30, 2019 123,061,220$ 122,883,845$ 123,222,827$
Investment Purchases/Dividends 33,886,588$
Investment Maturities (37,897,676)$
Investments at September 30, 2019 119,050,132$ 118,913,298$ 119,205,098$
Janina Jewell
Director of Finance
Jackie Theriot
Assistant Director of Finance
7
Summary of Investments by Fund
Cash & Investment Cash & Investment Increase/
at Market Value at Market Value (Decrease)
6/30/2019 9/30/2019 In Fund
101 General Fund 17,230,094 15,397,836 (1,832,258) Operating expenses
102 General Fund Emergency 499,600 500,210 610
103 General Fund Contingency 1,000,575 1,000,400 (175)
201 Hotel-Motel Tax Fund 475,277 587,100 111,823 Operating revenues
202 Juvenile Case Fund 285,448 287,972 2,523
210 1/2 Cent Operations Fund 2,065,602 2,636,711 571,109 Operating revenues
211 1/2 Cent Debt Reserve 170,658 160,642 (10,015)
220 CCPD 814,765 953,500 138,735 Operating revenues
221 Police Seized Asset Fund 284,737 279,542 (5,195)
230 Police Drug DEA Awards 333,245 335,056 1,812
231 Police Drug State Awards 176,207 191,906 15,698
235 Public Safety Grant Fund (5,078) (53,937) (48,859)
236 Police Grant Fund - - -
237 Texas Transportation Grant (12,692) (11,683) 1,009
240 Car Rental Tax Fund 5,349,818 8,917,091 3,567,272 Motor vehicle tax collection
240-R Car Rental Reserve Fund 2,003,013 2,002,503 (510)
245 Glade Parks PID 750,000 750,000 -
250 Glade Parks TIRZ #3 1,319,077 1,145,696 (173,382) Operating expenses
260 Cable PEG Fund 748,918 759,969 11,051
265 Glade Parks PID #2 - - -
270 Midtown PID 91,788 87,437 (4,352)
275 Midtown TIRZ #4 14 39,865 39,851
301 Developer's Escrow Fund 2,247,950 2,240,431 (7,519)
305 Streets CIP 19,309,990 18,914,981 (395,009) Capital outlay
310 1/2 Cent Sales Tax CIP 2,629,299 1,568,309 (1,060,989) Capital outlay
320 General CIP Fund 1,627,797 1,856,002 228,205
321 Redevelopment CIP Fund 1,127,459 971,143 (156,316) Capital outlay
322 Midtown Development CIP 73,936 73,926 (10)
323 Midtown Development Reserves 1,002,296 1,002,072 (224)
330 Car Rental CIP Fund 5,206,781 4,312,624 (894,157) Capital outlay
401 Debt Service/General 3,449,110 1,760,066 (1,689,044) Debt service payments
402 Star Center Debt Service 644,356 134,797 (509,559) Debt service payments
403 Glade Parks Debt Service 359,185 4,737 (354,448) Debt service payments
404 Midtown Development Debt Service 1,253,857 508,126 (745,731) Debt service payments
410 EDC Debt Service 105,455 2,310 (103,146) Debt service payments
501 Water & Wastewater Fund 7,847,865 9,403,006 1,555,141 Operating Revenues
502 Water & Wastewater-CIP 15,271,407 12,965,353 (2,306,054) Capital outlay
503 Water & Wastewater Bond Reserve 827,464 827,464 -
504 Service Center Fund 668,878 563,565 (105,314) Operating expenses
505 Water Impact Fees 2,292,917 2,273,894 (19,023)
506 Water & Wastewater-Debt Service 1,248,725 599,366 (649,360) Debt service payments
507 Water & Wastewater-Emergency 500,000 500,000 -
508 Wastewater Impact Fees 854,888 774,048 (80,840)
509 W/WW Rate Stabilization 4,397,321 4,344,419 (52,902)
510 Drainage Utility 235,689 266,920 31,231
511 Drainage CIP 1,294,957 1,206,498 (88,460)
520 Recreation Classes Fund 575,007 482,390 (92,616)
521 Arbor Daze Fund 53,851 54,240 389
530 Softball World Operations (362,089) (341,173) 20,916
532 TSSC Debt Reserve 602,840 610,934 8,094
540 TSGC Operations 21,140 128,241 107,101 Operating revenues
541 TSGC Debt (37,543) 56,497 94,039 Transfer for debt service payments
542 TSGC Debt Reserve 1,001,733 866,221 (135,512) Transfer to operations
543 TSGC CIP Fund 124,900 49,952 (74,947) Capital outlay
550 Parks @ Texas Star 656,409 739,345 82,936
552 TSSC CIP 201,016 201,883 867
601 Equipment Replacement 4,191,056 4,668,963 477,908 Transfers in
610 Health Insurance Fund 5,191,798 5,019,402 (172,396) Operating expenses
615 Risk Management Fund 1,632,412 2,181,465 549,052 Transfer from other funds
701 Payroll Clearing Fund 559,069 559,180 111
705 Star Center Escrow 1,429,088 1,428,593 (495)
TOTAL 123,899,337 119,748,005
The following is a summary of cash and investments held by each fund at June 30, 2019 and September 30, 2019.The changes include all
investment purchases, maturities, revenues, expenses, and transfers that occurred during the fourth quarter of FY2019.
8
II. PERFORMANCE SUMMARY
Consolidated Invested Percentage
FY2018 Cash Balance Invested
October 974,775$ 76,027,761$ 99%
November 134,970$ 76,953,272$ 100%
December 284,007$ 80,173,117$ 100%
January 976,677$ 88,983,418$ 99%
February 163,361$ 91,625,315$ 100%
March 396,261$ 80,600,314$ 100%
April 1,025,759$ 92,891,806$ 99%
May 453,758$ 96,275,093$ 100%
June 171,974$ 97,808,649$ 100%
July 1,753,285$ 97,338,229$ 98%
August 126,294$ 95,705,977$ 100%
September 493,796$ 95,611,071$ 99%
Average 579,576$ 89,166,169$ 99%
Consolidated Invested Percentage
FY2019 Cash Balance Invested
October 1,078,427$ 94,114,094$ 99%
November 49,258$ 93,564,690$ 100%
December (2,188,438)$ 102,553,900$ 102%
January (1,538,753)$ 108,627,560$ 101%
February 310,593$ 123,588,957$ 100%
March 208,365$ 113,379,186$ 100%
April 943,108$ 121,003,933$ 99%
May (856,748)$ 123,014,644$ 101%
June 676,510$ 123,061,220$ 99%
July 1,073,212$ 123,073,931$ 99%
August 111,563$ 120,064,292$ 100%
September 592,585$ 119,050,132$ 100%
Average 38,307$ 113,758,045$ 100%
This graph shows how the City's funds continue to be invested, always in pursuit of 100%.
Cash and Investment Balances -Full utilization of funds and minimization of idle cash is
necessary to pursue additional interest income for the City.The average percent of invested
funds is 100% for FY2019. The monthly data below shows the continued utilization of City
funds through investments.
85.00%
90.00%
95.00%
100.00%
105.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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Fiscal Year
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Average City's Number Estimated
90-day Invested Days in Interest
Month T-bill Yield Balance Month Earnings
October 2.29%94,114,094$ 31 $183,045
November 2.32%93,564,690$ 30 $178,414
December 2.40%102,553,900$ 31 $209,041
January 2.36%108,627,560$ 31 $217,731
February 2.40%123,588,957$ 28 $227,539
March 2.35%113,379,186$ 31 $226,292
April 2.38%121,003,933$ 30 $236,704
May 2.30%123,014,644$ 31 $240,300
June 2.08%123,061,220$ 30 $210,384
July 2.04%123,073,931$ 31 $213,238
August 1.95%120,064,292$ 31 $198,846
September 1.84%119,050,132$ 30 $180,043
Estimated earnings at benchmark yields $2,521,577
Actual FY2019 interest income (un-audited)$2,629,198
Earnings over benchmark $107,621
Annual Average 2.23%113,758,045$ $2,536,804
Benchmark City's Basis
90-day Wtd Avg Point
Month T-bill yield Portfolio Yld Difference
October 2.29%2.14%-15
November 2.32%2.21%-11
December 2.40%2.29%-11
January 2.36%2.36%0
February 2.40%2.40%0
March 2.35%2.44%9
April 2.38%2.45%7
May 2.30%2.45%15
June 2.08%2.42%34
July 2.04%2.40%36
August 1.95%2.25%30
September 1.84%2.22%38
Average 2.23%2.34%11
Cash management performance -effectiveness of the cash management program has
been measured utilizing actual figures for FY2019 as shown below:
During FY2019, the Fed had one rate hike of 0.25%in December 2018, making the rate
2.25%-2.50%. The rate remained unchanged through June 2019. However,in July and
September the Fed decided to cut the rates by 25 basis points each time.The rate at the
end of the fiscal year was 1.75%-2.00%.Since September, the Fed cut the rate another
25 basis points dropping the rate to 1.50%-1.75%. The Fed continues to analyze whether
to hold the rate as is or continue with the rate cuts.Some feel it will remain as is for some
time while others think there may be another rate cut by year end. The average yield on the
City's portfolio has remained flat or surpassed the 90-day T-bill rate since January.
However, as our investments continue to be called or mature, the City's portfolio average
will continue to decrease as we reinvest at current market rates. The portfolio's annual
weighted average yield was 11 basis points above the average annual 90-day T-Bill rate.
Key rate comparisons -an objective of the investment policy is for the City's average rate of
return to consistently exceed that of the three-month U.S.Treasury Bill,as stated before.
Therefore, returns for both have been presented for comparative purposes below.
10
III. INTEREST INCOME SUMMARY
FY15 Audit $167,649
FY16 Audit $376,405
FY17 Audit $610,219
FY18 Audit $1,349,182
FY19 Unaudited $2,629,198
FY19 Budgeted $992,318
Interest income exceeded the budgeted level for fiscal year 2019. When compared to prior year,
interest earnings have nearly doubled.This increase can be attributed to the Fed rate hike in
December 2018 and the availability of new debt proceeds to invest. However,since July 2019,
the Fed cut rates by a quarter of a percent three times.As such,reinvestment of proceeds from
maturing securities will now be invested at lower yields.
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY15 Audit FY16 Audit FY17 Audit FY18 Audit FY19
Unaudited
FY19 Budgeted
In
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Interest Income Summary
11
Interest Income By Fund
For Fiscal Year Ending September 2019
#Fund FY 18 FY 18 Actual FY 19 FY 19 Actual Diff FY19
Budget Audited Budget (Unaudited)Bud.-Act.
101 General $140,000 $256,724 $170,000 $442,141 $272,141
201 Hotel/Motel 1,500 8,254 5,000 12,130 $7,130
202 Juvenile Case Fund 800 3,644 3,000 5,827 $2,827
210 1/2 Cent Sales Tax-Operations 3,500 17,281 8,500 40,419 $31,919
211 1/2 Cent Sales Tax-Reserve 50 672 5,650 916 ($4,734)
220 Crime Control & Prevention District 3,200 13,639 11,885 20,093 $8,208
221 Police Seized Asset Funds 1,250 4,358 3,500 6,252 $2,752
230 Police Drug DEA Awards 1,000 5,259 5,300 7,628 $2,328
231 Police Drug State Awards 400 2,237 2,000 3,819 $1,819
240 Car Rental Tax 35,000 137,758 75,000 231,387 $156,387
245 Glade Parks PID 0 0 0 0 $0
250 Glade Parks TIRZ 0 6,936 2,000 21,792 $19,792
260 Cable PEG Fund 2,400 9,327 9,300 16,221 $6,921
270 Midtown PID 0 0 0 676 $676
301 Developer's Escrow 5,000 36,792 0 47,529 $47,529
305 Streets CIP 2,500 94,316 208,948 379,171 $170,223
310 1/2 Cent Sales Tax - CIP 5,000 37,460 14,790 82,892 $68,102
320 General Capital Projects 5,000 20,251 0 36,593 $36,593
321 Redevelopment CIP Fund 16,223 26,218 32,107 30,023 ($2,084)
322 Midtown Development CIP 0 0 0 0 $0
323 Midtown Development Reserves 0 0 0 0 $0
325 Police Facility CIP 0 0 0 0 $0
330 Car Rental CIP 6,000 33,363 0 123,809 $123,809
401 GO Debt Service 6,000 36,975 25,000 63,980 $38,980
402 Star Center Debt 400 4,519 3,000 6,699 $3,699
403 Glade Parks Debt Service 0 0 0 2,969 $2,969
404 Midtown Development Debt Service 35,000 65,638 55,000 40,936 ($14,064)
410 1/2 Cent Sales Tax Debt Service 0 21 0 30 $30
501 Water and Wastewater 30,000 146,144 75,000 249,328 $174,328
502 Water and Wastewater CIP 16,057 88,166 134,638 238,808 $104,170
503 Water and Wastewater Reserve 0 0 0 0 $0
504 Service Center Fund 0 0 0 0 $0
505 Water Impact Fees 7,800 31,643 0 52,482 $52,482
508 Wastewater Impact Fees 1,500 10,793 0 18,108 $18,108
509 W/WW Rate Stabilization 3,500 44,530 20,000 87,064 $67,064
510 Drainage 850 2,836 2,500 4,099 $1,599
511 Drainage CIP 7,000 19,457 0 29,742 $29,742
520 Recreation Classes 400 5,303 4,000 10,042 $6,042
521 Arbor Daze 0 259 0 1,132 $1,132
530 Softball World 0 0 0 2 $2
531 Softball World Debt 0 0 0 0 $0
532 TSSC Reserve 600 7,665 6,300 12,894 $6,594
540 Golf Course 0 2,009 0 567 $567
541 TSGC Debt Service 20 392 400 1,018 $618
542 Golf Course Reserve 3,500 14,886 12,500 22,105 $9,605
543 TSGC CIP Fund 1,500 3,443 0 3,689 $3,689
550 Parks At Texas Star 1,500 6,989 1,500 13,370 $11,870
552 TSSC CIP 2,000 997 0 2,416 $2,416
601 Equipment Replacement 11,000 52,486 35,000 95,259 $60,259
610 Health Insurance 8,000 56,996 37,500 115,879 $78,379
615 Risk Mgmt/Worker's Comp 8,000 32,546 23,000 47,262 $24,262
Total $373,450 $1,349,182 $992,318 $2,629,198 $1,636,880
Note that interest earnings are being earned on all investable City funds and great efforts are pursued to meet budgeted
levels. This report points out that the unaudited interest earnings for the end of the fiscal year have exceeded the
budgeted expectations due to higher reinvestment rates early in the fiscal year and in increase in funds available for
investment.
Several funds were budgeted conservatively or not at all due to the volatility of revenues and expenditures. However,
these funds are used for investment purposes when available. These funds include Capital Improvement Projects,DEA
Funds, Grant Funds, and Debt Service Funds.
12
City of Euless
Collateral Analysis for
Cash
as of 09/30/19
Pledging Safekeeping Pledged Sec.Security Market Value Inv. Value Difference
Institution Location Description Market Value (w/FDIC Ins.)@ Mat'y (P & I)Over/(Under)
Frost Bank $1,356,365 $1,606,365 $465,333 $1,141,032
Bank of New Payroll $7,123
York Mellon various bonds $1,356,365 Operating $320,032
Insurance $138,178
Produced By:
Director of Finance
Reviewed by:
Assistant Director of Finance
This review is practiced on a regular basis assuring coverage. Another regular practice is reviewing each individual
instrument pledged. This assures compliance with the investment policy and consideration of the underlying security.This
separate but thorough practice has protected the City's portfolio against derivative products.
The first and most important objective of investing public funds is safety.One way to ensure the safety of the City's assets
is to have them fully secured with "collateral." Acceptable collateral is defined in the City's investment policy as Federal
Deposit Insurance Corporation (FDIC)Insurance, Federal Savings and Loan Insurance Corporation (FSLIC)Insurance
and/or eligible securities as defined in Government Code Chapter 2257 Collateral for Public Funds Section 2257.002.
Bank balances are monitored daily to assure full coverage. The amount of collateral required by the depository bank
varies with the expected level of deposits (typically correlates with large receipts such as property taxes,franchise taxes
and investment maturities).
IV. COLLATERAL REVIEW
13
The primary objectives of compliance, safety,liquidity and yield have been achieved for
the reporting period as evidenced by this report. These objectives will continue to be
pursued for the City of Euless as provided by the investment policy. This year proved to
be another successful year for the investment program. The City of Euless,like all other
local governments,is faced with the challenge of meeting benchmark levels triggered by
the Fed's actions. The City's investment program will continue to seek new techniques,
instruments,etc.to enhance the return on the City's funds, as well as the return of all
City funds.
The investment committee will meet on January 28, 2020 to discuss the Annual
Investment Report.Once the annual report is approved by the committee,it will be
forwarded to the City Council.
VI. SUMMARY
Director of Finance
Jackie Theriot
Assistant Director of Finance
Janina Jewell
5. All brokers are notified after the selection is complete.
V. BROKER SELECTION PROCESS
2.A questionnaire is sent to the broker which requests the necessary information for
management to review including references, capital adequacy ratios, etc.
3. The Finance Department reviews all received questionnaires, summarizes the
information and recommends the desired list of brokers with explanatory notes in
conjunction with the first quarter investment report.
4. The list is presented to the investment committee annually for their approval.
This section of the report is to provide a brief explanation of the process undertaken to
select brokers with which the City invests.The broker/dealer list is reviewed annually,
and additions/deletions are made as necessary. The City currently maintains a list of
seven broker/dealers. The process is outlined below:
1. Brokers express an interest in doing business with the City.
14
CERTIFICATION
This report has been examined and approved by the Investment Officers of the City of Euless.
Information presented in this report to the Investment Committee and City Council represents
an accurate description of the City's investment activity for the fiscal year ending September
30, 2019.This report meets all requirements specified by the Public Funds Investment Act
and the Policy of the City of Euless.
Investment Officers
______________________________________
Janina Jewell
Director of Finance
______________________________________
Jackie Theriot
Assistant Director of Finance
______________________________________
Diana L Ayala
Budget and Treasury Manager
______________________________________
Ross Fairclo
Accountant II
15
Minutes – 09/03/2019 6:16 pm Investment Committee Meeting
Members: Linda Martin, Mayor
Loretta Getchell, City Manager
Bob Freeman, Deputy City Manager
Janina Jewell, Director of Finance
Committee members present included Mayor Martin, Loretta Getchell, Robert Freeman, and Janina Jewell.
Non-committee present included Diana Ayala, Budget / Treasury Manager.
Jewell presented the Third Quarter Investment Report for Fiscal Year 2019. She stated it was in compliance
with Chapter 2256 of the Public Funds Investment Act. Jewell referred the committee to page 2 that showed
the City’s investment strategy for the various funds of the City as of June 30, 2019. She noted that operating
funds were invested with a weighted average maturity (WAM) ranging from 6 to 9 months, capital
improvement projects (CIP) and special purpose funds were invested in accordance with drawdown
schedules of the projects and would not exceed the estimated project completion dates, debt service funds
were invested to assure adequate liquidity to cover the debt service obligations on the required payment
date, and finally that emergency, contingency, operating and debt service reserve funds could not exceed
five year investment timelines. She noted that there were no changes made that quarter to the strategy.
Jewell stated that the presented investment portfolio was in compliance with those strategies for the third
quarter of Fiscal Year 2019.
Jewell referred the committee to page 3 where she noted significant increases and decreases in fund
investments since March 31, 2019. She specifically noted the Water and Wastewater Capital Improvement
Projects fund where the City had received bond proceeds and the Water and Wastewater Rate Stabilization
fund where the City had received the 2018 settle up from Trinity River Authority during the quarter. Overall
there was an increase of $10.2 million mostly due to the issuance of revenue bond proceeds. The total market
value of cash and investments was stated to be $123,899,337.
On page 4 Jewell pointed out that the portfolio was very liquid with 59% being invested in pools and escrows
and 41% in agencies and certificates of deposit. The portfolio shows its diversity in investment types on this
page. She noted that the weighted average yield on the portfolio was 2.42% and was down 2 basis points
from the last quarter. On page 5 she noted the diversity of the portfolio by maturity and specifically cited
that 86% of the portfolio maturity had a maturity of less than one year. The liquidity strategy was followed
to meet cash flow requirements for construction projects, payroll, debt service, and other operating expenses
as well as working with an expectedly decreasing market rate. The Weighted Average Maturity (WAM) on
the portfolio was 120.83 days which is well within the 365 day guideline in the investment policy. Page 6
noted the portfolio diversity by institution and that no one institution had more than a third of the City’s
portfolio invested with them. Page 7 was noted to show the market value of the portfolio as of June 30,
2019, of $123,222,827 which, if investments had been liquidated, the City would have to show a gain of
$161,607.
On page 8 Jewell noted the comparison of average 90 day T-Bills for the quarter compared to the portfolio
average maturity. The portfolio averaged 19 basis points over the 90 Day T-Bill benchmark. This page also
16
showed that cash was 100% invested for the quarter. Jewell noted on page 9 that the City was fully
collateralized as of June 30, 2019.
Jewell then noted that the report was certified by City Investment Officers. Mayor Martin made a motion to
approve the quarterly investment report. The Mr. Freeman seconded the motion and the vote was
unanimous.
Minutes for the May 14, 2019, Investment Committee Meeting were presented. Mr. Freeman motioned to
approve. The Ms. Getchell seconded the motion and the committee approved unanimously.
Ms. Jewell commented briefly on the economic outlook and the meeting was adjourned at 6:26pm.
17
APPENDICES
18
City of Euless
Change in Portfolio Values by Asset and Investment Fund
For the Quarter Ending September 30, 2019
Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in
Type Number Call Date Value 09/30/2019 06/30/2019 Market Value 09/30/2019 06/30/2019 Book Value
OPERATING FUNDS:
FHLB 3130AEDY3 12/13/2019 1,000,000 1,000,900 1,001,700 (800) 997,116 997,116 -
FFCB 3133EJSU4 12/26/2019 1,000,000 1,001,400 1,002,200 (800) 1,000,150 1,000,150 -
FFCB 3133EJTS8 10/03/2019 1,000,000 1,000,050 1,000,800 (750) 1,000,000 1,000,000 -
FHLB 3130A54A4 10/28/2019 1,000,000 999,500 997,690 1,810 974,660 971,736 2,924
FHLB 3130ACLX0 10/30/2019 1,000,000 999,750 998,500 1,250 976,753 974,071 2,682
FHLB 3136G4KQ5 01/17/2020 1,000,000 999,620 997,700 1,920 969,594 966,988 2,606
FHLB 3130ADMS8 02/14/2020 1,000,000 1,000,300 999,900 400 983,498 982,196 1,303
FFCB 3133EJW88 05/26/2020 1,000,000 1,005,500 1,006,800 (1,300) 1,000,000 1,000,000 -
FHLB 3130AFJZ1 12/11/2019 1,000,000 1,001,310 1,002,400 (1,090) 997,900 997,900 -
FFCB 3133EFKY2 10/28/2019 1,000,000 999,600 997,400 2,200 981,360 978,253 3,107
FFCB 3133EJ6B0 04/24/2020 1,000,000 1,004,000 1,004,700 (700) 1,000,000 1,000,000 -
FHLB 3130AFU88 02/04/2020 1,000,000 1,001,870 1,002,600 (730) 998,200 998,200 -
FFCB 3133EKAF3 02/12/2020 1,000,000 1,002,100 1,002,050 50 1,000,000 1,000,000 -
FHLB 3130AFWJ2 02/19/2020 1,000,000 1,002,100 1,002,800 (700) 1,000,000 1,000,000 -
FHLB 3130AFX77 02/25/2020 1,000,000 1,002,100 1,002,800 (700) 1,000,000 1,000,000 -
FFCB 3133EKPZ3 07/10/2020 1,000,000 1,001,980 1,001,700 280 1,000,000 1,000,000 -
FFCB 3133EF2L0 04/13/2020 500,000 498,650 497,350 1,300 490,165 489,030 1,135
FHLB 3130AG7L3 01/08/2021 1,000,000 1,000,120 1,001,020 (900) 1,000,000 1,000,000 -
FHLMC 3134GTKN2 05/14/2021 1,000,000 1,001,540 1,001,200 340 1,000,000 1,000,000 -
FHLMC 3134GTNP4 05/27/2021 1,000,000 1,001,910 1,001,500 410 1,000,000 1,000,000 -
FAMCA 3132X02A8 12/27/2019 1,000,000 1,001,490 1,002,890 (1,400) 1,000,500 1,000,500 -
FFCB 3133ECJ54 03/18/2020 1,000,000 998,100 996,600 1,500 986,021 984,198 1,823
FHLB 3130AG5X9 10/09/2020 1,000,000 1,000,220 1,001,360 (1,140) 1,000,000 1,000,000 -
FHLB 3130A8QD8 07/14/2020 1,000,000 994,800 992,600 2,200 974,665 971,770 2,895
FHLB 3130AGEC5 02/24/2021 1,000,000 1,003,500 1,002,400 1,100 1,000,000 1,000,000 -
Purchases
FAMCA 31422BGX2 07/02/2021 1,000,000 1,001,900 - 1,001,900 1,000,000 - 1,000,000
FHLMC 3134GTM75 07/29/2021 1,000,000 1,000,400 - 1,000,400 1,000,000 - 1,000,000
FHLB 3130AGUK9 02/05/2021 1,000,000 1,000,970 - 1,000,970 1,000,000 - 1,000,000
FHLMC 3134GTZ48 05/21/2021 1,000,000 1,000,000 - 1,000,000 1,000,000 - 1,000,000
FHLB 3130AGVM4 11/12/2020 1,000,000 1,000,000 - 1,000,000 1,000,000 - 1,000,000
FHLB 3130AGX91 08/21/2020 1,000,000 1,000,000 - 1,000,000 1,000,000 - 1,000,000
FHLB 3130AGZX6 12/11/2020 1,000,000 999,600 - 999,600 999,250 - 999,250
Maturities
FHLB 3130AFUV7 07/05/2019 1,000,000 - 1,000,030 (1,000,030) - 1,000,000 (1,000,000)
FHLMC 3134GTCS0 07/05/2019 1,000,000 - 1,000,130 (1,000,130) - 1,000,000 (1,000,000)
FFCB 3133EJKH1 07/11/2019 1,000,000 - 1,000,040 (1,000,040) - 1,000,000 (1,000,000)
FHLB 3130AGAP0 07/12/2019 1,000,000 - 1,000,190 (1,000,190) - 1,000,000 (1,000,000)
FHLB 3130AGAW5 07/18/2019 1,000,000 - 1,000,193 (1,000,193) - 1,000,000 (1,000,000)
FHLB 3130AENV8 07/23/2019 1,000,000 - 1,000,290 (1,000,290) - 1,000,000 (1,000,000)
FHLB 3130AEPT1 07/30/2019 1,000,000 - 1,000,360 (1,000,360) - 1,000,000 (1,000,000)
FHLMC 3134G3A91 08/22/2019 1,000,000 - 999,160 (999,160) - 985,335 (985,335)
FAMCA 31422BCH1 08/19/2019 1,000,000 - 1,000,600 (1,000,600) - 1,000,000 (1,000,000)
FHLB 3130AGFB6 08/14/2019 1,000,000 - 1,000,500 (1,000,500) - 1,000,000 (1,000,000)
Total Operating:
Par total does not
include maturities 31,500,000$ 31,525,280$ 34,520,153$ (2,994,873)$ 31,329,833$ 34,297,442$ (2,967,610)$
19
City of Euless
Change in Portfolio Values by Asset and Investment Fund
For the Quarter Ending September 30, 2019
Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in
Type Number Call Date Value 09/30/2019 06/30/2019 Market Value 09/30/2019 06/30/2019 Book Value
CIP FUNDS
FFCB 3133EJPU7 10/21/2019 1,000,000 1,000,300 1,001,000 (700) 1,000,000 1,000,000 -
FNMA 313586RC5 10/09/2019 1,000,000 999,550 994,200 5,350 947,430 940,859 6,571
FFCB 3133EJF79 10/10/2019 1,000,000 1,000,220 1,001,400 (1,180) 999,006 999,006 -
FFCB 3133EJJ91 10/22/2019 1,000,000 1,000,450 1,001,700 (1,250) 1,000,000 1,000,000 -
FHLMC 3137EAEM7 04/23/2020 1,000,000 1,003,570 1,004,130 (560) 989,033 988,684 349
FFCB 3133EJW62 11/26/2019 1,000,000 1,001,200 1,002,500 (1,300) 1,000,000 1,000,000 -
FFCB 3133EKBU9 02/27/2020 1,000,000 1,002,390 1,003,000 (610) 1,000,000 1,000,000 -
FFCB 3133EKBZ8 08/28/2020 1,000,000 1,005,760 1,006,600 (840) 1,000,426 1,000,426 -
FHLMC 3134GBET5 04/13/2020 750,000 749,475 748,275 1,200 735,058 733,657 1,401
Purchases
FHLMC 3134GTN66 07/29/2021 1,000,000 1,000,130 - 1,000,130 1,000,000 - 1,000,000
FHLB 3130AH4G5 03/19/2021 1,000,000 1,000,100 - 1,000,100 1,000,000 - 1,000,000
Maturities
FHLMC 3134GTBS1 07/15/2019 1,000,000 - 1,000,150 (1,000,150) - 1,000,000 (1,000,000)
FHLMC 3134GS2J3 08/26/2019 1,000,000 - 1,000,700 (1,000,700) - 1,000,000 (1,000,000)
FHLMC 3134GTRS4 09/10/2019 1,000,000 - 1,000,345 (1,000,345) - 1,000,100 (1,000,100)
FHLB 3130AFZ67 09/26/2019 1,000,000 - 1,001,100 (1,001,100) - 1,000,000 (1,000,000)
Total CIP:
Par total does not
include maturities 10,750,000$ 10,763,145$ 12,765,100$ (2,001,955)$ 10,670,953$ 12,662,732$ (1,991,779)$
RESERVE FUNDS:
FHLB 3130ADUB6 12/19/2019 500,000 500,400 500,575 (175) 500,000 500,000 -
FHLB 3130AFSS7 01/28/2020 1,000,000 1,001,820 1,002,400 (580) 1,000,000 1,000,000 -
Purchases
FHLMC 3134GTZX4 01/15/2021 1,000,000 1,000,200 - 1,000,200 1,000,000 - 1,000,000
FHLMC 3134GUCP3 09/20/2021 500,000 500,210 - 500,210 500,000 - 500,000
FHLB 3130AH5N9 06/23/2021 1,000,000 1,001,500 - 1,001,500 1,000,000 - 1,000,000
FHLMC 3134GUBE9 09/13/2021 1,000,000 1,000,030 - 1,000,030 1,000,000 - 1,000,000
Maturities
B of T - C949763-RU-2 07/29/2019 41,000 - 41,004 (41,004) - 41,000 (41,000)
FHLB 3130ABZZ2 08/28/2019 500,000 - 499,600 (499,600) - 500,000 (500,000)
FHLB 313383VN8 09/13/2019 1,000,000 - 999,700 (999,700) - 988,676 (988,676)
FHLMC 3134GTTL7 09/17/2019 1,000,000 - 1,000,300 (1,000,300) - 1,000,000 (1,000,000)
Total Reserve:
Par total does not
include maturities 5,000,000$ 5,004,160$ 4,043,579$ 960,581$ 5,000,000$ 4,029,676$ 970,324$
OVERNIGHT INVESTMENTS:
Beginning Bal Ending Bal
Texpool Balance 29,163,345 31,018,143 31,018,143 29,163,345 1,854,798 31,018,143 29,163,345 1,854,798
Purchases 11,499,203
Maturities 9,644,405
Texstar Balance 30,575,331 30,247,920 30,247,920 30,575,331 (327,411) 30,247,920 30,575,331 (327,411)
Purchases 9,780,132
Maturities 10,107,544
Escrows Balance 12,155,318 10,646,449 10,646,449 12,155,318 (1,508,869) 10,646,449 12,155,318 (1,508,869)
Purchases 65,342
Maturities 1,574,212
B of T Balance - - - - - - - -
Purchases -
Maturities -
Total Overnight:71,912,511$ 71,912,512$ 71,893,994$ 18,518$ 71,912,512$ 71,893,994$ 18,518$
Total Portfolio
Par total does not
include maturities 119,162,511$ 119,205,098$ 123,222,827$ (4,017,730)$ 118,913,298$ 122,883,845$ (3,970,547)$
20
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23
CITY OF EULESS
FINANCE POLICY
DAT E: June 26, 1990 PREPARED BY:Finance Department
REV: January 23, 2018 REVIEWED BY:City Manager
RE: Investment Policy APPROVED BY:City Council
I.SCOPE
This investment policy applies to the investment activities of the Government of the City of
Euless, Texas. This policy serves to satisfy the statutory requirements of defining and adopting
a formal investment policy. The policy and strategy shall be reviewed annually by the Investment
Committee and any modifications must be approved by the Investment Committee and
forwarded to City Council for final approval. The City Council must adopt a written instrument
by rule, order, ordinance, or resolution stating that it has reviewed the investment policy and
investment strategies. Any changes made to either the policy or strategies will be recorded in
this written instrument. This Investment Policy, as approved, is in compliance with Chapter 2256
of the Texas Government Code, also known as “The Public Funds Investment Act.”
A.FUNDS INCLUDED All financial assets of all funds, including the General Fund and any
other accounts of the City not specifically excluded in these policy guidelines are included.
These funds, as well as funds that may be created from time-to-time, shall be administered
in accordance with the provisions of these policies. All funds will be pooled for investment
purposes. The strategy developed for this pooled fund group will address the varying needs,
goals, and objectives of each fund.
B.FUNDS EXCLUDED None.
II.OBJECTIVES AND STRATEGY
A.COMPLIANCE The City must adopt rules, designate staff to manage local funds, and submit
related reports as outlined by Chapter 2256 of the Texas Government Code, also known as
the Public Funds Investment Act (“PFIA”). All investments made on behalf of the City must
comply with the Public Funds Investment Act and all federal, state, and local statutes, rules,
or regulations. In conjunction with the comprehensive annual financial audit and report, the
City will perform, or have performed, a compliance audit of management controls on
investments and adherence to the City’s approved investment policy.
B. SAFETY OF PRINCIPAL The primary objective of the City’s investment activity is the
preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and
interest rate risk.
1.Credit Risk – The City of Euless will minimize credit risk, which is the risk of loss due
to the failure of the security issuer or backer, by:
a.Limiting investments to the types of securities listed in Section V of this investment
policy.
24
b. Pre-qualifying the financial institutions, broker/dealers and advisors with whom the
City of Euless will do business.
c. Diversifying the investment portfolio so that the impact of potential losses from any
type of security or from any one issuer will be minimized.
2. Interest Rate Risk – The City of Euless will minimize interest rate risk, which is the risk
that the market value of securities in the portfolio will fall due to changes in market
interest rates by:
a. Structuring the portfolio so that securities mature to meet cash requirements for
ongoing operations, avoiding the need to sell securities prior to maturity.
b. Investing operating funds primarily in shorter-term securities, money market
mutual funds, or similar investment pools.
C. LIQUIDITY The City’s investment portfolio will remain sufficiently liquid to enable the City to
meet operating requirements that might be reasonably anticipated. Liquidity shall be
achieved by matching investment maturities with forecasted cash flow requirements and by
investing in securities with active secondary markets. In addition, all or a portion of the
portfolio may be invested in money market mutual funds or local government investment
pools which offer same day liquidity for short-term funds.
D. YIELD The City’s cash management portfolio shall be designed with the objective of regularly
exceeding the average rate of return on three-month U.S. Treasury Bills, or the average
Federal Reserve Discount whichever is higher. The investment program shall seek to
augment returns above this threshold consistent with risk limitations identified herein and
prudent investment principles.
Funds held for future capital projects shall be invested in securities that reasonably can be
expected to produce enough income to offset inflationary construction cost increases.
E. RISK OF LOSS All participants in the investment process shall seek to act responsibly as
custodians of the public trust. Investment officials shall avoid any transaction that might
impair public confidence in the City’s ability to govern effectively.
F. STRATEGY The strategy for all pooled funds is to assure that cash flows are matched with
projected needs and assume adequate liquidity and safety. This may be accomplished by
purchasing high quality securities in a laddered structure or utilizing an investment pool.
Furthermore the following purposes are also considered when investing:
1. Funds for Capital Improvement Projects or special purposes should allow for flexibility
and unanticipated project outlays by having a portion of their investments in highly
liquid securities. The stated final maturity dates of securities held should not exceed
the estimated project completion date. A weighted average maturity of 365 days or
less will be maintained and calculated by using the stated final maturity of each
security.
25
2. Funds for Debt Service should assure liquidity adequate to cover the debt service
obligation on the required payment date. Surplus funds outside the debt service dates
will remain within the investment and fiscal policies.
3. Debt Service Reserves, Operating Reserves, Emergency and Contingency funds will
have the ability to generate a dependable revenue stream to the appropriate fund from
securities with a low degree of volatility. Such securities will tend to hold their value
during economic cycles. The stated final maturity dates of securities held should not
exceed five years.
4. Operating funds will be structured in such a way as to minimize volatility during
economic cycles. This may be accomplished by purchasing high quality short-term
securities which will complement each other in a laddered maturity schedule. The
weighted average maturity on these funds will remain within the 6 to 9 month range
and calculated by using the stated final maturity date of each security.
III. INVESTMENT COMMITTEE
A. MEMBERS There is hereby created an Investment Committee, consisting of the City
Manager and/or his designee, the Deputy City Manager, the Director of Finance, and the
Mayor or Mayor’s designee. The Investment Committee shall meet at least quarterly to
determine general strategies and to monitor results and shall call a special meeting of the
Investment Committee within 24 hours of notification of any significant events related to the
City’s portfolio including a downgrade in the investment rating. All prudent measures will be
taken to liquidate an investment whose rating has been downgraded to less than the required
minimum rating. The Investment Committee shall be authorized to invite advisors to the
meetings as needed including, but not limited to, the City Attorney, the City Council, or
outside advisors.
B. SCOPE The Investment Committee shall include in its deliberations such topics as:
performance reports, economic outlook, portfolio diversification, maturity structure, potential
risk to the City’s funds, authorized brokers and dealers, and the target rate of return on the
investment portfolio.
C. PROCEDURES The Investment Committee shall provide for minutes of its meetings. Any
two members of the Investment Committee may request a special meeting, and three
members shall constitute a quorum. The Investment Committee shall establish its own rules
of procedures.
IV. RESPONSIBILITY AND CONTROL
A. DELEGATION Management responsibility for the Investment Program is hereby delegated
to the Director of Finance, who shall establish written procedures and internal controls for the
operation of the investment program, consistent with this Investment Policy. Such
procedures shall include, but not be limited to, account management procedures, cash flow
procedures, investment transaction procedures, authorized dealer selection process,
investment portfolio reporting requirements, and explicit delegation of authority to persons
responsible for investment transactions. No person shall engage in an investment transaction
except as provided under the terms of this policy and the procedures established by the
26
Director of Finance. The Director of Finance shall be responsible for all transactions
undertaken and shall establish a system of controls to regulate the activities of the Authorized
Investment Officers and subordinate officials.
B. SUBORDINATES The Director of Finance will serve as the City’s chief investment officer.
The Assistant Director of Finance, Treasurer, and the accountant responsible for cash and
debt analysis are hereby designated as Authorized Investment Officers, responsible for the
investment of the City’s funds, pursuant to the Public Funds Investment Act Section 2256.005
Subsection F. Authority granted to a person to invest the funds on behalf of the City shall
remain in effect until rescinded by the City or until the person resigns from or is terminated
by the City. All authorized investment officers shall receive not less than 8 hours of
investment training relating to their investment responsibilities, as described by Section
2256.008 of the Public Funds Investment Act not less than once in a two-year period that
begins on the first day of the City’s fiscal year and consists of the two consecutive fiscal years
after that date. This training must be provided by an independent source which has been
approved by the investment committee. At least one training session of not less than 10
hours of investment training related to their investment responsibilities as described by
Section 2256.008 of the PFIA must be completed by the investment officer within twelve
months of assuming their duties. The training must include, but is not limited to, education
in investment controls, security risks, strategy risks, market risks, diversification, and
compliance with the Public Funds Investment Act.
C. QUARTERLY REPORTS The Director of Finance shall prepare and submit investment
reports that are compliant with Government Code Chapter 2256 Public Funds Investment
Section 2256.023.
D. ANNUAL REPORTS Within 120 days of the end of the fiscal year, the Director of Finance
shall present a comprehensive annual report on the investment program and investment
activity. The annual report shall include twelve-month and quarterly comparison returns, and
shall suggest improvements that might be made in the investment program.
E. MONITORING OF MARKET PRICE OF INVESTMENTS The investment officer shall
determine the market value of each investment at least quarterly and at a time as close as
practicable to the closing of the reporting period for investments. Such values shall be
included on the investment reports. The following methods shall be used:
1. Certificates of deposits shall be valued at their face value plus any accrued but unpaid
interest.
2. Shares in money market mutual funds and investment pools shall be valued at par plus
any accrued but unpaid interest.
3. Other investment securities may be valued in any of the following ways:
a. the lower of two bids obtained from securities broker/dealers for such security;
b. the average of the bid and asked prices for such investment security as published in
the Wall Street Journal; or
27
c. the bid price published by any nationally recognized security pricing service.
F. PRUDENCE The standard of prudence to be used by the investment officers shall be
“prudent person” standard and shall be applied in the context of managing an overall portfolio.
The “prudent person” standard states that, “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 probable income
to be derived.” Investment officers acting in accordance with written procedures and the
investment policy and exercising due diligence shall be relieved of personal responsibility for
an individual security’s credit risk or market price changes, provided deviations from
expectations are reported in a timely fashion and appropriate action is taken to control
adverse developments.
G. ETHICS AND CONFLICTS OF INTEREST Officers and employees involved in the
investment process shall refrain from personal business activity that could conflict with proper
execution and management of the investment program, or that could impair their ability to
make impartial investment decisions. Employees and investment officers shall disclose any
material interests in financial institutions with which they conduct business. They shall further
disclose any personal financial/investment positions that could be related to the performance
of the investment portfolio. Employees and officers shall refrain from undertaking personal
investment transactions with the same individual with whom business is conducted on behalf
of the City of Euless.
An investment officer who has a personal business relationship with a business organization
offering to engage in an investment transaction with the City shall file a statement disclosing
that personal business interest. Investment officers who are related within the second degree
by affinity or consanguinity to an individual seeking to sell an investment to the City shall also
disclose such relationship. A statement required under this section must be filed with the
Texas Ethics Commission and the City Council. For the purpose of this section, an
investment officer has personal business relationship with a business organization if:
1. The investment officer owns 10 percent 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;
2. Funds received by the investment officer from the business organization exceed 10
percent of the investment officer’s gross income for the previous year; or
3. 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.
V. AUTHORIZED AND SUITABLE INVESTMENT SECURITIES
A. ACTIVE PORTFOLIO MANAGEMENT The City intends to pursue an active versus a passive
portfolio management philosophy. That is, securities may be sold before they mature if
market conditions present an opportunity for the City to benefit from the trade.
28
B. ELIGIBLE INVESTMENTS The following investments will be permitted by this policy as
defined by state and local law where applicable:
1. Obligation, including letters of credit, of the United States or its agencies and
instrumentalities, including the Federal Home Loan Banks (except for mortgage pass-
through securities);
2. Fully insured or collateralized* certificates of deposits issued by a broker or depository
institution that has its main office or branch in the State of Texas and is:
a. guaranteed or insured by the Federal Deposit Insurance Corporation or its successor
or the National Credit Union Share Insurance Fund or its successor;
b. secured by obligations that are described in the Tex. Gov’t. Code Sec. 2256.009(a)
that has a market value of not less that the principal amount of the certificates but
excluding those mortgage backed securities as described by Tex. Gov’t Code Sec.
2256.009(b); or
c. secured in accordance with Chapter 2257 or in any other manner and amount
provided by law for deposits of the City of Euless
3. Fully collateralized* repurchase agreements having a defined termination date.
(“Repurchase agreement” means a simultaneous agreement to buy, hold for a specified
time, and sell back at a future date obligations described by Section V. A. of this Policy,
at a market value at the time the funds are disbursed of not less than the principal amount
of the funds disbursed. The term refers to direct security repurchase agreement and a
reverse security repurchase agreement.) These investments must be in accordance with
a master repurchase agreement approved by the Investment Committee;*(see definition
of collateral, Section VII).
4. Investment Pools as authorized by Texas Government Code 2256. The pool must enter
into a contract approved (by resolution) by the City Council to provide services to the
City. The pool must be continuously rated no lower than AAA or AAA-m or at an
equivalent rating by at least one nationally recognized rating service. A public funds
investment pool that uses amortized cost or fair value accounting must mark its portfolio
to market daily and, to the extent reasonably possible, stabilize at a $1 net asset value,
when rounded and expressed to two decimal places. In addition, a public funds
investment pool that uses amortized cost shall report yield to its investors in accordance
with regulations of the Federal Securities and Exchange Commission. The pool must
provide to the investment officer or authorized representative of the entity an offering
circular or other similar disclosure instrument that contains, at a minimum, the following
information:
a. the types of investments in which money is allowed to be invested;
b. the maximum average dollar-weighted maturity allowed, based on the stated
maturity date, of the pool;
c. the maximum stated maturity date any investment security within the portfolio
has;
d. the objectives of the pool;
29
e. the size of the pool;
f. the names of the members of the advisory board of the pool and the dates their
terms expire;
g. the custodian bank that will safekeep the pool’s assets;
h. whether the intent of the pool is to maintain a net asset value of one dollar and
the risk of market price fluctuation;
i. whether the only source of payment is the assets of the pool at market value or
whether there is a secondary source of payment, such as insurance or
guarantees, and a description of the secondary source of payment;
j. the name and address of the independent auditor of the pool;
k. the requirements to be satisfied for an entity to deposit funds in and withdraw
funds from the pool and any deadlines or other operating policies required for
the entity to invest funds in and withdraw funds from the pool;
l. the performance history of the pool, including yield, average dollar weighted
maturities, and expense ratios; and
m. the pool’s policy regarding holding deposits in cash.
To maintain eligibility to receive funds from and invest funds on behalf of an entity
under this chapter, an investment pool must furnish to the investment officer or other
authorized representative of the entity:
a. investment transaction confirmations; and
b. a monthly report that contains, at a minimum, the following information:
1. the types and percentage breakdown of securities in which the pool is
invested;
2. the current average dollar-weighted maturity, based on the stated
maturity date, of the pool;
3. the current percentage of the pool’s portfolio in investments that have
stated maturities of more than one year;
4. the book value versus the market value of the pool’s portfolio, using
amortized cost valuation;
5. the size of the pool;
6. the number of participants in the pool;
7. the custodian bank that is safekeeping the assets of the pool;
8. a listing of daily transaction activity of the entity participating in the pool
9. the yield and expense ratio of the pool, including a statement regarding
how yield is calculated;
10. the portfolio managers of the pool; and
11. any changes or addenda to the offering circular.
5. No load money market mutual fund, registered with and regulated by the Securities
Exchange Commission, which complies with Federal Securities and Exchange
Commission Rule 2a-7 as defined in Texas Government Code Sec. 2256.014. Each fund
must provide the City with a prospectus and other information required by the Securitas
Exchange Act of 1934 or the Investment Advisor Act of 1940.
6. Other such securities or obligations as approved by City Council upon recommendation
of the Investment Committee. No securities will be purchased which have a potential for
30
price volatility that is inappropriate for the City and incompatible with its investment
strategies. This includes, but is not limited to, certain collateralized* mortgage obligations,
such as principal and interest only securities, inverse floaters, capped and mismatched
floaters, and structures notes and range notes.
C. LENGTH OF INVESTMENTS Except for monies of Reserve funds, Emergency funds,
Contingency funds and construction funds, the City of Euless shall invest in instruments
whose maturities do not exceed two (2) years at the time of purchase.
1. For the General Fund, Water & Wastewater Utility Fund, and any other operating funds,
the weighted average maturity of each fund’s portfolio will remain within the 6 to 9 month
range. Assets held from bond proceeds may be invested in maturities with a final stated
maturity greater than (2) years based on estimated project completion dates.
2. Assets held in the General Obligation Interest & Sinking Fund may be invested in
maturities which provide liquidity adequate to cover the debt service payment dates.
3. Assets held in the General Emergency, General Contingency, Water & Wastewater
Emergency, and the Car Rental Tax Reserve Funds may be invested in maturities not
exceeding five (5) years.
4. An average remaining maturity of 365 days or less shall be maintained on bond proceeds
subject to arbitrage rebate restrictions, and the total portfolio average remaining shall not
exceed one year.
D. DIVERSIFICATION It is the policy of the City of Euless to diversify its investment portfolios.
Assets held in the common investment portfolio shall be diversified to eliminate the risk of
loss resulting from one concentration of assets in a specific maturity, a specific issuer or a
specific class of securities. Diversification strategies shall be determined and revised
periodically by the Investment Committee. In establishing specific diversification strategies,
the following general policies and constraints shall apply:
1. Portfolio maturities shall be staggered in a way that protects interest income from the
volatility of interest rates that avoids undue concentration of assets in a specific maturity
sector.
2. Securities shall be selected which provide for stability of income and reasonable liquidity.
In addition, the City will invest a portion of the City’s portfolio in readily available funds
such as local government investment pools and money market funds to ensure that
appropriate liquidity is maintained in order to meet ongoing obligations.
3. The Investment Committee shall establish strategies and guidelines for the percentage
of the total portfolio that may be invested in securities other than repurchase agreements,
treasury bills, or insured and collateralized* certificates of deposit.
4. The Investment Committee shall conduct a quarterly review of these guidelines, and shall
evaluate the probability of market and default risk in various investment sectors as part
of its considerations. *(see definition of collateral, Section VII)
31
5. The investment officer will obtain at least three competitive bids from approved brokers
on our broker/dealer list before making an investment transaction. In the event of a tie,
the choice will be made by a cumulative and objective manner.
E. ARBITRAGE Although steps have been taken to distribute bond issuance annually in
amounts not to exceed $5 million dollar increments, if this process does not occur, the City
of Euless will fall under arbitrage regulations.
The Tax Reform Act of 1986 provided limitations restricting the City’s investing of tax-exempt
General Obligation Bond proceeds and debt service income. New arbitrage rebate
provisions require that the City compute earnings on investment from each issue of bonds
on an annual basis to determine if a rebate is required. To determine the City’s arbitrage
position, the City is required to perform specific calculations relative to the actual yield earned
on the investment of the funds and the yield that could have been earned if the funds had
been invested at a rate equal to the yield on the bonds sold by the City. The rebate provision
states that periodically (not less than once every five years, and not later than sixty days after
maturity of the bonds), the City is required to pay the U.S. Treasury a rebate of excess
earnings based on the City being in a positive arbitrage position. The Tax Reform restrictions
require extreme precision in the monitoring and recording facets of investments as a whole,
and particularly as relates to yields and computations so as to insure compliance. Failure to
comply can dictate that the bonds become taxable, retroactively from the date of issuance.
The City’s investment position relative to the new arbitrage restrictions is the continued
pursuit of maximizing yield on applicable investments while insuring the safety of capital and
liquidity. It is a fiscally sound position to continue maximization of yield and rebate excess
earnings, if necessary.
VI. SELECTION OF BANKS AND DEALERS
A. BIDDING PROCESS Periodically, a Depository shall be selected through the City’s banking
services procurement process, which shall include a formal request for proposal (RFP)
issued in compliance with applicable State law. The contract can be extended as per the
RFP specifications. In selecting depositories, the credit worthiness of institutions shall be
considered, and the Director of Finance shall conduct a comprehensive review of prospective
depositories credit characteristics and financial history.
B. INSURABILITY Banks and Savings & Loan Associations seeking to establish eligibility for
the City’s competitive investment program, shall submit financial statements, evidence of
federal insurance and other information as required by the Director of Finance.
C. AUTHORIZED BROKER/DEALERS A list will be maintained of “primary” dealers and
regional dealers that qualify under the Securities and Exchange Commission (SEC) Rule
15C3-1 (uniform net capital rule). All financial institutions and broker/dealers who desire to
become qualified for investment transactions must supply the audited financial statements,
proof of state registration, and a completed broker/dealer questionnaire: All brokers and
dealers must be authorized by the Investment Committee, as analyzed by this Broker
Questionnaire. Investment Officers shall not conduct business with any firm with whom
public entities have sustained losses on investments or whose name has been removed from
an approved list by the Investment Committee. At least annually, the investment committee
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will review, revise and adopt a list of qualified brokers that are authorized to engage in
investment transactions with the City.
D. COMPLIANCE A written copy of the investment policy will be presented to any investment
pool or business organization offering to engage in an investment transaction with the City.
A qualified representative (as described by section 2256.002, subdivision 10 of the Texas
Government Code) of such business organization shall execute a written instrument, in a
form acceptable to both the City and the organization, certifying that they have received and
reviewed a written copy of the City’s investment policy. The firm must acknowledge that it
has implemented reasonable internal 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 or relates to investment transactions of the
entity that are not made through accounts or other contractual arrangements over which the
business organization has accepted discretionary investment authority. The investment
officer of the City may not acquire or otherwise obtain any authorized investment described
in the City’s investment policy from a business organization that has not delivered such
instrument. This instrument does not, at any time, relieve the City of the responsibility of
monitoring all investment transactions to determine if they are in compliance with this policy.
VII. COLLATERALIZATION, SAFEKEEPING AND CUSTODY
A. COLLATERALIZATION OF DEPOSITS The City requires that all uninsured collected
balances plus accrued interest, if any, in depository accounts be secured in accordance with
the requirements of this Policy and Chapter 2257, Government Code (“Public Funds
Collateral Act”) and the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (FIRREA). Financial institutions serving as City depositories will be required to sign a
depository agreement with the City which details securities that can serve as eligible
collateral, collateralization ratios, standards for collateral custody and control, collateral
valuation, rights of substitution and conditions for agreement termination.
Pledged securities serving as collateral will always be held in the City’s name or on behalf of
the City by an independent third party with which the City has a current custodial agreement.
Depository and custodial records shall assure the notation of the City’s ownership of or
explicit claim on the securities. Collateral levels will be reviewed no less than monthly to
ensure the market value of the pledged securities is at least 105% of the deposit and
investment balances less any amount insured by FDIC or FSLIC. Eligible collateral is as
follows:
B. ELIGIBLE COLLATERAL
1. FDIC and FSLIC insurance coverage.
2. Eligible securities that are compliant with Government Code Chapter 2257 Collateral for
Public Funds Section 2257.002.
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The City’s Investment Officers reserve the right to accept or reject any form of collateral or
enhancement at their sole discretion.
C. SUBJECT TO AUDIT All collateral shall be subject to inspection and audit by the Director of
Finance, or designee, as well as the City’s independent auditors.
D. SAFEKEEPING AND CUSTODY Safekeeping and custody of the City’s investments shall
be in accordance with applicable law and accounting standards. Investment securities will
be held by a Custodian designated by the City and will be required to issue safekeeping
receipts clearly detailing that the securities are owned by the City. Monthly safekeeping
reports detailing the City’s securities held by the Custodian will be provided no less than
monthly.
E. DELIVERY VS. PAYMENT Treasury Bills, Notes and Bonds and Government Agencies’
Securities, and all other investment transactions, except investment pools and mutual funds,
shall be purchased using the delivery versus payment method (DVP). That is, funds shall
not be wired or paid until verification has been made that the security was received by the
Custodian. The original copy of all safekeeping receipts shall be delivered to the City.
VIII. MANAGEMENT AND INTERNAL CONTROLS
The Director of Finance, or designee, shall establish a system of internal controls which shall be
reviewed by an independent auditor. The controls shall be designed to prevent losses of public
funds arising from fraud, employee error, misrepresentation by third parties, unanticipated
changes in financial markets, or imprudent actions by employees or Investment Officers of the
City.
Controls and managerial emphasis deemed most important that shall be employed where
practical are:
A. Control of collusion;
B. Separation of duties;
C. Separation of transaction authority from Accounting and Record-keeping;
D. Custodian safekeeping receipts records management;
E. Avoidance of physical delivery securities;
F. Clear delegation of authority;
G. Documentation of investment bidding events;
H. Written confirmation of transactions for investments and wire transfers;
I. Reconcilements and comparisons of security receipts with the investment subsidiary records;
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J. Compliance with investment policies;
K. Accurate and timely reports;
L. Validation of investment maturity decisions with supporting cash flow data;
M. Adequate training and development of Investment Officials;
N. Verification of all interest income and security purchase and sell computations;
O. Review of financial conditions of all brokers, dealers, and depository institutions; and
P. Staying informed about market conditions, changes and trends that require adjustments in
investment strategies.
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Hilltop Securities - Linda Callaway
Vining Sparks - Mike Smith
Duncan Williams - Patrick Boyer/Doug Boyer
Samco Capital Markets - Robert Phillips
FTN Financial NKA FHN Financial - Zach Brewer
Financial Northeastern Securities, Inc. - Samuel E. Vaughan
The City's list of seven brokers currently includes FTN Financial,Hilltop Securities,Vining
Sparks,Duncan Williams,Samco Capital,Great Pacific Securities, and Financial
Northeastern Securities.
The public funds investment act and the City's investment policy require staff to review the
broker/dealer list annually.At this time, it is recommended that the committee consider
dropping Great Pacific Securities as our broker has left the firm and we have enough brokers
with the remaining six companies to fill our portfolio needs. The recommended broker/dealer
list for 2020 includes:
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Economic News
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