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Home My WebLink AboutFY 2020 Annual Investment ReportAnnual Investment Report Fiscal Year 2019-20 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 2020 I. Portfolio Summary II. Performance Summary III. Interest Income Summary IV. Collateral Review V. Broker Selection Process VI. Summary *Certification *Minutes from 9/22/2020 *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 1/12/2021 1 INTRODUCTION The information contained in this report will quantitatively and graphically demonstrate the achievement of these City objectives for Fiscal Year 2019-20. 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 242 Cares Act Fund 550 Parks at Texas Star Operations Fund 245 Glade Parks PID Fund 601 Equipment Replacement Fund 250 Glade Parks TIRZ Fund 610 Health Insurance Fund 260 Cable PEG Fund 615 Risk Management/Worker's Comp Fund 265 Glade Parks PID #2 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 41,598,013$ 34%0.19%0.34% Gov't Pools & Escrows 80,760,230$ 66%0.09%0.14% 122,358,243$ 100.00% I. PORTFOLIO SUMMARY The City's investment portfolio at the end of the fiscal year, September 30, 2020,is summarized by instrument as shown below. Distribution by Instrument The Distribution by Instrument table shows approximately 66% of the City funds are invested in overnight investment pools and escrows,while the remaining 34%is invested in government agencies.As of the date of this report,the weighted average yield on the portfolio was .28%. When compared to prior quarter levels,the yield on the portfolio has declined. The portfolio composition below demonstrates the diversity within the portfolio. FFCB 15% FHLB 4% FHLMC 13% FAMCA 2%Escrows 4% TexPool 31% TexStar 31% Other 66% Portfolio Composition as of September 30, 2020 4 # of months $ Cost % of Portfolio Overnight 80,760,229$ 66% < 1 mo 1,000,000$ 1% up to 6 mos 2,999,650$ 2% 6 to 9 mos 5,000,313$ 4% 9 to 12 mos 3,999,954$ 3% 12 to 18 mos 10,998,597$ 9% 18 to 24 mos 17,599,500$ 15% 122,358,243$ 100.0% I. PORTFOLIO SUMMARY (CONTINUED) The City's investment portfolio at the end of the fiscal year, September 30, 2020,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 66% of the portfolio is available within 24 hours,with an additional 3% 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 9% of the portfolio invested from 12 -18 months,with remaining 15% invested in the 18-24 month range. The weighted average maturity on the portfolio is currently 154.65 days. $80.8 $1.0 $3.0 $5.0 $4.0 $11.0 $17.6 $0.0 $9.0 $18.0 $27.0 $36.0 $45.0 $54.0 $63.0 $72.0 $81.0 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, 2020 Shown in millions 5 Institution $ Cost % of Portfolio Duncan Williams 6,999,246$ 6% FHN Financial 9,499,917$ 8% Hilltop Securities 7,100,000$ 6% Samco Capital 9,999,100$ 8% Vining Sparks 7,999,750$ 7% TexPool 38,223,654$ 31% TexStar 38,280,409$ 31% Escrows 4,256,167$ 3% 122,358,243$ 100% -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, 2020,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 $40.0 Duncan FHN Hilltop Samco Vining TexPool TexStar Escrows $7.0 $9.5 $7.1 $10.0 $8.0 $38.2 $38.3 $4.3 Investments by Institution as of September 30, 2020 Shown in millions 6 City of Euless Pooled Portfolio Summary for Fiscal Year Ending September 30, 2020 Cost Book Market Principal Only Value Value Investments at June 30, 2020 129,925,601$ 129,922,095$ 130,042,849$ Investment Purchases/Dividends 30,201,766$ Investment Maturities (37,769,124)$ Investments at September 30, 2020 122,358,243$ 122,353,569$ 122,430,587$ 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) 6/30/2020 9/30/2020 In Fund 101 General Fund 20,863,564 17,058,024 (3,805,539) Operating expenses 102 General Fund Emergency 500,000 500,340 340 103 General Fund Contingency 1,005,900 1,002,760 (3,140) 201 Hotel-Motel Tax Fund 507,655 575,964 68,309 202 Juvenile Case Fund 267,740 281,776 14,036 210 1/2 Cent Operations Fund 2,505,173 2,826,996 321,824 Operating revenues 211 1/2 Cent Debt Reserve 391,500 391,500 - 220 CCPD 812,114 695,933 (116,181) Operating expenses 221 Police Seized Asset Fund 262,005 255,388 (6,617) 230 Police Drug DEA Awards 337,340 337,487 147 231 Police Drug State Awards 188,627 194,848 6,221 235 Public Safety Grant Fund (25,391) (461) 24,930 236 Police Grant Fund - - - 237 Texas Transportation Grant (8,850) (15,753) (6,904) 240 Car Rental Tax Fund 4,330,913 4,563,321 232,407 Motor vehicle tax collection 240-R Car Rental Reserve Fund 2,003,163 2,000,883 (2,280) 245 Glade Parks PID 750,000 750,000 - 250 Glade Parks TIRZ #3 1,975,926 1,745,688 (230,238) Operating expenses 260 Cable PEG Fund 808,449 584,557 (223,892) Operating expenses 265 Glade Parks PID #2 - - - 270 Midtown PID 309,102 128,760 (180,342) Operating expenses 275 Midtown TIRZ #4 39,679 91,067 51,388 301 Developer's Escrow Fund 2,217,056 2,222,581 5,525 305 Streets CIP 13,337,303 12,581,735 (755,568) Capital outlay 310 1/2 Cent Sales Tax CIP 5,215,039 4,215,664 (999,375) Capital outlay 320 General CIP Fund 9,539,326 9,348,963 (190,363) Capital outlay 321 Redevelopment CIP Fund 1,493,551 1,434,757 (58,795) 322 Midtown Development CIP 73,857 73,855 (2) 323 Midtown Development Reserves 1,000,502 1,000,450 (52) 330 Car Rental CIP Fund 3,313,241 2,796,919 (516,322) Capital outlay 401 Debt Service/General 3,175,656 1,921,592 (1,254,065) Debt service payments 402 Star Center Debt Service 607,755 134,797 (472,958) Debt service payments 403 Glade Parks Debt Service 368,772 7,603 (361,169) Debt service payments 404 Midtown Development Debt Service 1,075,811 603,864 (471,947) Debt service payments 410 EDC Debt Service 244,936 10,834 (234,102) Debt service payments 501 Water & Wastewater Fund 8,780,662 9,954,815 1,174,154 Operating Revenues 502 Water & Wastewater-CIP 9,323,375 8,629,701 (693,674) Capital outlay 503 Water & Wastewater Bond Reserve 827,464 827,464 - 504 Service Center Fund 576,138 552,088 (24,050) 505 Water Impact Fees 2,218,813 2,232,181 13,368 506 Water & Wastewater-Debt Service 1,548,662 598,237 (950,425) Debt service payments 507 Water & Wastewater-Emergency 500,000 500,000 - 508 Wastewater Impact Fees 844,834 778,506 (66,328) 509 W/WW Rate Stabilization 3,512,020 3,420,617 (91,403) 510 Drainage Utility 270,706 292,337 21,631 511 Drainage CIP 1,242,519 1,238,669 (3,850) 520 Recreation Classes Fund 185,694 157,826 (27,867) 521 Arbor Daze Fund 54,273 54,293 19 530 Softball World Operations (468,635) (476,224) (7,589) 532 TSSC Debt Reserve 253,419 260,580 7,161 540 TSGC Operations (204,916) 174,214 379,129 Transfers in 541 TSGC Debt (44,240) 57,270 101,511 Transfer for debt service payments 542 TSGC Debt Reserve 638,850 633,586 (5,265) 543 TSGC CIP Fund 230,447 230,147 (300) 550 Parks @ Texas Star 778,891 846,271 67,380 552 TSSC CIP 203,176 144,242 (58,933) 601 Equipment Replacement 9,644,503 11,038,972 1,394,468 Transfers in 610 Health Insurance Fund 5,985,962 6,332,611 346,649 Insurance Savings 615 Risk Management Fund 2,302,727 2,444,932 142,205 Transfer from other funds 701 Payroll Clearing Fund 609,252 862,000 252,748 Payroll timing 705 Star Center Escrow 1,339,132 1,318,007 (21,125) TOTAL 130,641,140 123,426,030 The following is a summary of cash and investments held by each fund at June 30, 2020 and September 30, 2020.The changes include all investment purchases, maturities, revenues, expenses, and transfers that occurred during the fourth quarter of FY2020. 8 II. PERFORMANCE SUMMARY 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% Consolidated Invested Percentage FY2020 Cash Balance Invested October 379,335$ 118,031,381$ 100% November 455,441$ 119,176,817$ 100% December 383,233$ 131,211,812$ 100% January 870,369$ 135,983,931$ 99% February 29,432$ 145,694,572$ 100% March 288,256$ 131,856,268$ 100% April 316,568$ 129,420,163$ 100% May 138,575$ 127,727,560$ 100% June 654,479$ 129,925,601$ 99% July 544,736$ 126,849,343$ 100% August 585,485$ 123,700,459$ 100% September 1,135,590$ 122,358,243$ 99% Average 481,792$ 128,494,679$ 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 FY2020. The monthly data below shows the continued utilization of City funds through investments. 85.00% 90.00% 95.00% 100.00% 105.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Pe r c e n t I n v e s t e d Fiscal Year 9 Average City's Number Estimated 90-day Invested Days in Interest Month T-bill Yield Balance Month Earnings October 1.51%118,031,381$ 31 $151,371 November 1.56%119,176,817$ 30 $152,808 December 1.52%131,211,812$ 31 $169,389 January 1.52%135,983,931$ 31 $175,550 February 1.25%145,694,572$ 29 $144,697 March 0.11%131,856,268$ 31 $12,319 April 0.09%129,420,163$ 30 $9,574 May 0.14%127,727,560$ 31 $15,187 June 0.16%129,925,601$ 30 $17,086 July 0.09%126,849,343$ 31 $9,696 August 0.11%123,700,459$ 31 $11,557 September 0.10%122,358,243$ 30 $10,057 Estimated earnings at benchmark yields $879,291 Actual FY2020 interest income (un-audited)$1,423,661 Earnings over benchmark $544,370 Annual Average 0.68%128,494,679$ $873,764 Benchmark City's Basis 90-day Wtd Avg Point Month T-bill yield Portfolio Yld Difference October 1.51%2.01%50 November 1.56%1.85%29 December 1.52%1.75%23 January 1.52%1.69%17 February 1.25%1.64%39 March 0.11%1.18%107 April 0.09%0.77%68 May 0.14%0.54%40 June 0.16%0.48%32 July 0.09%0.41%32 August 0.11%0.33%22 September 0.10%0.28%18 Average 0.68%1.08%40 Cash management performance -effectiveness of the cash management program has been measured utilizing actual figures for FY2020 as shown below: We ended September 2019,with Fed rates at 1.75%-2.00%.Fed cut rates in October by 25 basis points bringing the rate to 1.50%-1.75%.While most thought there might be a hike or two in 2020, no one expected what would happen in early March with the start of a pandemic. The Fed called an emergency meeting and cut rates by 50 basis points to 1.00% -1.25%. Then two weeks later in their March meeting cut rates again, another 100 basis points to 0%-0.25%. Rates have remained unchanged since then and many believe that they will remain there at least until 2023. The City's average rate is still above the 90- day T-bill rate. 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 40 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 FY16 Audit $376,405 FY17 Audit $610,219 FY18 Audit $1,349,182 FY19 Audit $2,629,198 FY20 Unaudited $1,423,661 FY20 Budgeted $1,588,249 Interest income fell short of the budgeted level for fiscal year 2020. When compared to prior year, interest earnings have declined substantially.This decrease can be attributed to the Fed rate cuts in October 2019, and March 2020,mostly caused by the COVID 19 pandemic.The rates continue to remain unchanged since then and some forsee them to remain 0.00%-0.25% through 2023.While the City's average yield is above the 90 day T-Bill yield, it will continue to decline as investments continue to mature and are reinvested at much lower current market rates. $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 FY16 Audit FY17 Audit FY18 Audit FY19 Audit FY20 Unaudited FY20 Budgeted In t e r e s t E a r n i n g s Interest Income Summary 11 Interest Income By Fund For Fiscal Year Ending September 2020 #Fund FY 19 FY 19 Actual FY 20 FY 20 Actual Diff FY20 Budget Audited Budget (Unaudited)Bud.-Act. 101 General $170,000 $442,141 $255,000 $263,648 $8,648 201 Hotel/Motel 5,000 12,130 15,000 5,830 ($9,170) 202 Juvenile Case Fund 3,000 5,827 5,000 2,194 ($2,806) 210 1/2 Cent Sales Tax-Operations 8,500 40,419 20,000 24,054 $4,054 211 1/2 Cent Sales Tax-Reserve 5,650 916 700 0 ($700) 220 Crime Control & Prevention District 11,885 20,093 20,000 7,720 ($12,280) 221 Police Seized Asset Funds 3,500 6,252 4,000 2,223 ($1,777) 230 Police Drug DEA Awards 5,300 7,628 6,000 2,845 ($3,155) 231 Police Drug State Awards 2,000 3,819 2,500 1,470 ($1,030) 240 Car Rental Tax 75,000 231,387 165,000 116,378 ($48,622) 245 Glade Parks PID 0 0 0 0 $0 250 Glade Parks TIRZ 2,000 21,792 10,000 10,058 $58 260 Cable PEG Fund 9,300 16,221 12,000 6,523 ($5,477) 270 Midtown PID 0 676 0 987 $987 301 Developer's Escrow 0 47,529 0 24,575 $24,575 305 Streets CIP 208,948 379,171 311,129 192,450 ($118,679) 310 1/2 Cent Sales Tax - CIP 14,790 82,892 11,604 40,726 $29,122 320 General Capital Projects 0 36,593 13,308 48,622 $35,314 321 Redevelopment CIP Fund 32,107 30,023 22,858 13,939 ($8,919) 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 0 123,809 0 60,953 $60,953 401 GO Debt Service 25,000 63,980 37,000 25,969 ($11,031) 402 Star Center Debt 3,000 6,699 4,500 2,382 ($2,118) 403 Glade Parks Debt Service 0 2,969 1,200 986 ($214) 404 Midtown Development Debt Service 55,000 40,936 35,000 15,069 ($19,931) 410 1/2 Cent Sales Tax Debt Service 0 30 0 226 $226 501 Water and Wastewater 75,000 249,328 250,000 147,393 ($102,607) 502 Water and Wastewater CIP 134,638 238,808 169,650 119,866 ($49,784) 503 Water and Wastewater Reserve 0 0 0 0 $0 504 Service Center Fund 0 0 0 0 $0 505 Water Impact Fees 0 52,482 0 19,518 $19,518 508 Wastewater Impact Fees 0 18,108 0 6,601 $6,601 509 W/WW Rate Stabilization 20,000 87,064 50,000 43,219 ($6,781) 510 Drainage 2,500 4,099 5,000 1,649 ($3,351) 511 Drainage CIP 0 29,742 0 10,616 $10,616 520 Recreation Classes 4,000 10,042 6,000 1,592 ($4,408) 521 Arbor Daze 0 1,132 0 376 $376 530 Softball World 0 2 3,000 1 ($2,999) 531 Softball World Debt 0 0 0 0 $0 532 TSSC Reserve 6,300 12,894 12,000 1,871 ($10,129) 540 Golf Course 0 567 800 823 $23 541 TSGC Debt Service 400 1,018 0 773 $773 542 Golf Course Reserve 12,500 22,105 20,000 4,993 ($15,007) 543 TSGC CIP Fund 0 3,689 0 2,090 $2,090 550 Parks At Texas Star 1,500 13,370 0 6,259 $6,259 552 TSSC CIP 0 2,416 0 1,360 $1,360 601 Equipment Replacement 35,000 95,259 45,000 103,129 $58,129 610 Health Insurance 37,500 115,879 45,000 64,964 $19,964 615 Risk Mgmt/Worker's Comp 23,000 47,262 30,000 16,741 ($13,259) Total $992,318 $2,629,198 $1,588,249 $1,423,661 ($164,588) 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 not met budgeted expectations due Fed rate cuts and reinvestments at much lower rates in the fiscal year. 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 09/30/20 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 $1,409,599 $1,659,599 $1,396,385 $263,214 Bank of New Payroll $10,862 York Mellon various bonds $1,409,599 Operating $1,309,911 Insurance $75,612 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 12, 2021 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 six 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, 2020.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 Accounting Manager 15 Minutes – 09/22/2020 4:00 pm Investment Committee Meeting Members: Linda Martin, Mayor Loretta Getchell, City Manager Chris Barker, Deputy City Manager Janina Jewell, Director of Finance Committee members present included Mayor Martin, Loretta Getchell, and Janina Jewell. Non-committee present included Diana Ayala, Budget / Treasury Manager. Jewell thanked the committee for their attendance, noted the delay in meetings due to the COVID-19 pandemic, and stated that the City’s independent auditors had been notified that monthly reports were made to the governing body and that quarterly reports were created but that the committee did not meet until now due to the world wide pandemic. She noted that she had sent all committee members the quarterly reports and that she would review each at a thirty thousand foot level and for the committee to feel free in asking any questions regarding the reports as she reviewed them. Jewell noted that the first quarter, which ended on December 31, 2019, had a total portfolio of $131 million, 122 days of weighted average maturity, 1.75% weighted average yield, and that the 90 days T-bill was at 1.52%. She also noted that the portfolio was fully collateralized, the report had been signed by all investment officers, investment strategies described in the policy were followed, and that the report satisfied Chapter 2256 of the Government Code. Jewell then reviewed the second quarter, which ended on March 31, 2020. That quarter ended with a total portfolio of $132 million, 139 days of weighted average maturity, 1.18% weighted average yield, and that the 90 days T-bill was at 0.11%. She also noted that the portfolio was fully collateralized, the report had been signed by all investment officers, investment strategies described in the policy were followed, and that the report satisfied Chapter 2256 of the Government Code. Jewell reviewed the third quarter, which ended on June 30, 2020. The third quarter ended with a total portfolio of $130 million, 147 days of weighted average maturity, 0.48% weighted average yield, and that the 90 days T-bill was at 0.16%. Jewell then detailed the Third Quarter Investment Report for Fiscal Year 2020. 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, 2020. 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. Jewell stated that the presented investment portfolio was in compliance with those strategies for the third quarter of Fiscal Year 2020. She also pointed out the addition of a new operating fund this quarter; the CARES Act Grant Fund. 16 Jewell referred the committee to page 3 where she noted significant increases and decreases in fund investments since March 31, 2020. She specifically noted the overall decrease of $1.7 million mostly due to the capital expenses in completing the numerous projects across the City. The total market value of cash and investments was stated to be $130,641,140. On page 4 Jewell pointed out that the portfolio was very liquid with 67% being invested in pools and escrows and 33% 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 0.48% and was down 70 basis points from the last quarter. On page 5 she noted the diversity of the portfolio by maturity and specifically cited that 78% 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 low market rates. The Weighted Average Maturity (WAM) on the portfolio was 147 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, 2020, of $130,042,849 which, if investments had been liquidated, the City would have to show a gain of $120,754. 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 47 basis points over the 90 Day T-Bill benchmark. This page also showed that cash was 100% invested for the quarter. Jewell noted on page 9 that the City was fully collateralized as of June 30, 2020. Jewell then noted that the report was certified by City Investment Officers. Ms. Getchell made a motion to approve all of the quarterly investment reports. The Mayor Martin seconded the motion and the vote was unanimous. The Board asked about CD’s and CEDAR status in the market and encouraged staff to look at another pool option since it may not be our best move to go into long term low interest rate securities. Minutes for the January 28, 2020, Investment Committee Meeting were presented. Ms. Getchell motioned to approve. The Mayor Martin seconded the motion and the committee approved unanimously. The meeting was adjourned at 4:23pm. 17 APPENDICES 18 City of Euless Change in Portfolio Values by Asset and Investment Fund For the Quarter Ending September 30, 2020 Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in Type Number Call Date Value 09/30/2020 06/30/2020 Market Value 09/30/2020 06/30/2020 Book Value OPERATING FUNDS: FFCB 3133EK7A8 05/13/2021 1,000,000 1,010,420 1,012,500 (2,080) 1,000,350 1,000,350 - FFCB 3133ELAQ7 12/22/2020 1,000,000 1,004,820 1,006,700 (1,880) 999,250 999,250 - FFCB 3133ELGL2 04/09/2021 1,000,000 1,010,420 1,010,900 (480) 1,000,000 1,000,000 - FHLB 3130AHZM8 02/03/2021 1,000,000 1,004,870 1,007,800 (2,930) 999,700 999,700 - FHLB 3130AJ4A4 02/10/2021 1,000,000 1,005,090 1,008,000 (2,910) 1,000,000 1,000,000 - FFCB 3133ELWK6 10/20/2021 1,000,000 1,000,210 1,000,900 (690) 1,000,000 1,000,000 - FHLMC 3134GVLD8 04/14/2022 1,000,000 1,000,150 1,000,900 (750) 1,000,000 1,000,000 - FFCB 3133ELZH0 05/14/2021 1,000,000 1,001,230 999,920 1,310 1,000,000 1,000,000 - FFCB 3133ELYG3 11/04/2021 1,000,000 1,000,230 1,000,500 (270) 1,000,000 1,000,000 - FFCB 3133ELA95 11/26/2021 1,000,000 1,000,010 999,200 810 1,000,000 1,000,000 - FHLMC 3134GVST6 05/11/2022 1,000,000 1,000,150 999,800 350 1,000,000 1,000,000 - FFCB 3133ELN67 06/23/2021 1,000,000 1,000,010 999,880 130 1,000,000 1,000,000 - FFCB 3133ELG57 09/08/2021 1,000,000 1,000,100 1,000,100 - 1,000,000 1,000,000 - FFCB 3133ELG65 12/08/2021 1,000,000 1,000,100 999,970 130 1,000,000 1,000,000 - FFCB 3133ELN75 12/23/2021 1,000,000 1,000,190 999,800 390 1,000,000 1,000,000 - FAMCA 31422BB66 05/20/2022 1,000,000 1,000,170 1,000,000 170 1,000,000 1,000,000 - FHLMC 3134GVC89 06/03/2022 1,000,000 1,000,350 1,000,100 250 1,000,000 1,000,000 - FHLMC 3134GVG36 06/08/2022 1,000,000 1,000,310 1,000,350 (40) 1,000,000 1,000,000 - FHLMC 3134GVH43 06/08/2022 1,000,000 1,000,660 1,000,000 660 1,000,000 1,000,000 - FHLMC 3134GVQ76 06/17/2022 1,000,000 1,000,670 1,000,000 670 1,000,000 1,000,000 - Purchases FFCB 3133EL3S1 08/12/2021 1,000,000 1,000,350 - 1,000,350 1,000,000 - 1,000,000 FHLMC 3134GWQM1 08/19/2022 1,000,000 999,650 - 999,650 1,000,000 - 1,000,000 FHLMC 3134GWPQ3 08/19/2022 1,000,000 999,650 - 999,650 1,000,000 - 1,000,000 FFCB 3133EL4M3 02/24/2022 1,000,000 999,550 - 999,550 1,000,000 - 1,000,000 FHLMC 3134GWSP2 08/24/2022 1,000,000 999,930 - 999,930 1,000,000 - 1,000,000 FHLMC 3134GWSB3 08/26/2022 1,000,000 999,650 - 999,650 1,000,000 - 1,000,000 FHLB 3130AK4L7 06/08/2021 1,000,000 1,000,080 - 1,000,080 999,889 - 999,889 FHLB 3130AJY29 08/13/2021 1,000,000 999,960 - 999,960 999,861 - 999,861 FFCB 3133EL6P4 12/09/2021 1,000,000 999,650 - 999,650 1,000,000 - 1,000,000 FHLMC 3134GWL87 09/14/2022 1,000,000 1,000,090 - 1,000,090 1,000,000 - 1,000,000 FFCB 3133EMAT9 09/22/2022 1,000,000 999,560 - 999,560 998,500 - 998,500 FHLMC 3134GWS64 09/30/2022 1,100,000 1,099,857 - 1,099,857 1,100,000 - 1,100,000 Maturities FAMCA 31422BGX2 07/02/2021 1,000,000 - 1,000,000 (1,000,000) - 1,000,000 (1,000,000) FFCB 3133EKPZ3 07/10/2020 1,000,000 - 1,001,280 (1,001,280) - 1,000,000 (1,000,000) FFCB 3133ELJD7 04/22/2021 1,000,000 - 1,000,800 (1,000,800) - 1,000,000 (1,000,000) FAMCA 31422BUL2 08/13/2021 1,000,000 - 1,001,610 (1,001,610) - 1,000,000 (1,000,000) FAMCA 31422BUW8 02/24/2022 1,000,000 - 1,002,050 (1,002,050) - 1,000,000 (1,000,000) FFCB 3133ELSW5 03/11/2022 1,000,000 - 1,001,300 (1,001,300) - 1,000,000 (1,000,000) FAMCA 31422BE97 12/22/2021 1,000,000 - 1,001,250 (1,001,250) - 1,000,000 (1,000,000) FHLMC 3137EAEJ4 09/29/2020 1,000,000 - 1,003,500 (1,003,500) - 1,000,000 (1,000,000) Total Operating: Par total does not include maturities 32,100,000$ 32,138,137$ 28,059,110$ 4,079,027$ 32,097,550$ 27,999,300$ 4,098,250$ 19 City of Euless Change in Portfolio Values by Asset and Investment Fund For the Quarter Ending September 30, 2020 Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in Type Number Call Date Value 09/30/2020 06/30/2020 Market Value 09/30/2020 06/30/2020 Book Value CIP FUNDS FHLB 3130AHB85 10/07/2020 1,000,000 1,000,530 1,003,920 (3,390) 1,000,000 1,000,000 - FFCB 3133ELCY8-2 12/10/2021 1,000,000 1,002,760 1,005,900 (3,140) 997,740 997,740 - FFCB 3133ELUX0 03/30/2022 1,000,000 1,005,900 1,005,900 - 1,000,000 1,000,000 - FHLMC 3134GVKX5 04/20/2022 1,000,000 1,000,240 1,001,000 (760) 1,000,000 1,000,000 - FHLMC 3134GVTG3 05/13/2022 1,000,000 1,000,500 1,000,000 500 1,000,000 1,000,000 - Purchases None this qtr - - - - - - Maturities FFCB 3133ELGK4 04/09/2021 1,000,000 - 1,001,330 (1,001,330) - 1,000,000 (1,000,000) FFCB 3133ELZD9 08/12/2021 1,000,000 - 999,800 (999,800) - 1,000,000 (1,000,000) US TREA9128282Q2 08/15/2020 1,000,000 - 1,001,870 (1,001,870) - 1,000,000 (1,000,000) CD 588493LQ7 08/24/2020 200,000 - 200,440 (200,440) - 200,000 (200,000) CD 69506YQU6 08/25/2020 200,000 - 200,460 (200,460) - 200,000 (200,000) CD 75524KMZ4 08/26/2020 200,000 - 200,460 (200,460) - 200,000 (200,000) CD 07370Y3E0 08/26/2020 200,000 - 200,460 (200,460) - 200,000 (200,000) CD 71270QUU8 08/28/2020 200,000 - 200,480 (200,480) - 200,000 (200,000) FFCB 3133EKBZ8 04/15/2020 1,000,000 - 1,003,860 (1,003,860) - 1,000,426 (1,000,426) Total CIP: Par total does not include maturities 5,000,000$ 5,009,930$ 10,025,880$ (5,015,950)$ 4,997,740$ 9,998,166$ (5,000,426)$ RESERVE FUNDS: FFCB 3133ELCY8 12/10/2021 1,000,000 1,002,760 1,005,900 (3,140) 1,000,000 1,000,000 - FFCB 3133ELFR0 12/27/2021 1,000,000 1,018,440 1,020,900 (2,460) 998,050 998,050 - FHLMC 3134GV2M9 06/30/2022 500,000 500,340 500,000 340 500,000 500,000 - Purchases FHLMC 3134GV5E4 07/08/2022 1,000,000 1,000,400 - 1,000,400 1,000,000 - 1,000,000 FAMCA 31422BV98 09/08/2021 1,000,000 1,000,350 - 1,000,350 1,000,000 - 1,000,000 Maturities FHLMC 3134GU3V0 01/21/2022 1,000,000 - 1,001,780 (1,001,780) - 1,000,000 (1,000,000) FHLMC 3134GU3Y4 01/24/2022 1,000,000 - 1,000,900 (1,000,900) - 1,000,000 (1,000,000) FHLB 3130AJFH7 03/30/2022 1,000,000 - 1,001,800 (1,001,800) - 1,000,000 (1,000,000) Total Reserve: Par total does not include maturities 4,500,000$ 4,522,290$ 5,531,280$ (1,008,990)$ 4,498,050$ 5,498,050$ (1,000,000)$ OVERNIGHT INVESTMENTS: Beginning Bal Ending Bal Texpool Balance 40,928,177 38,223,655 38,223,655 40,928,176 (2,704,521) 38,223,655 40,928,176 (2,704,521) Purchases 8,983,862 Maturities 11,688,384 Texstar Balance 40,400,406 38,280,409 38,280,409 40,400,405 (2,119,996) 38,280,409 40,400,405 (2,119,996) Purchases 7,117,546 Maturities 9,237,543 B of T Balance 598,468 597,863 597,863 598,468 (605) 597,863 598,468 (605) Purchases 57 Maturities 662 US Bank Balance 4,499,530 3,658,303 3,658,303 4,499,530 (841,227) 3,658,303 4,499,530 (841,227) Purchases 882 Maturities 842,109 Total Overnight:80,760,230$ 80,760,230$ 86,426,579$ (5,666,350)$ 80,760,230$ 86,426,579$ (5,666,350)$ Total Portfolio Par total does not include maturities 122,360,230$ 122,430,587$ 130,042,849$ (7,612,263)$ 122,353,569$ 129,922,095$ (7,568,526)$ 20 Ci t y o f E u l e s s Sc h e d u l e o f P u r c h a s e s FY 2 0 2 0 4 t h Q u a r t e r Co s t Ac c r u e d In v . CU S I P Pu r c h a s e Ma t u r i t y Ca l l Te r m Pr i c e Pa r Bo o k V a l u e Co u p o n In t e r e s t Se l l e r To t a l C o s t Ty p e Nu m b e r Da t e Da t e Da t e (i n d a y s ) Pe r $ 1 0 0 Va l u e (P r i n . O n l y ) YT M Ra t e Pu r c h a s e d In s t . Di s c o u n t Pr e m i u m Fu n d of I n v e s t m e n t Te x p o o l Ju l 3, 2 4 1 , 2 5 0 3, 2 4 1 , 2 5 0 - - Va r i o u s 3, 2 4 1 , 2 5 0 Te x p o o l Au g 4, 3 5 1 , 5 6 2 4, 3 5 1 , 5 6 2 - - Va r i o u s 4, 3 5 1 , 5 6 2 Te x p o o l Se p 1, 3 7 2 , 8 1 3 1, 3 7 2 , 8 1 3 - - Va r i o u s 1, 3 7 2 , 8 1 3 Te x s t a r Ju l 3, 1 0 0 , 1 6 9 3, 1 0 0 , 1 6 9 - - Va r i o u s 3, 1 0 0 , 1 6 9 Te x s t a r Au g 3, 0 0 0 , 1 7 8 3, 0 0 0 , 1 7 8 - - Va r i o u s 3, 0 0 0 , 1 7 8 Te x s t a r Se p 1, 0 0 0 , 1 4 6 1, 0 0 0 , 1 4 6 - - Va r i o u s 1, 0 0 0 , 1 4 6 Es c r o w s S/ T C a s h F u n d 0 0 Es c r o w s - - 50 2 0 FH L M C 31 3 4 G V 5 E 4 07 / 0 8 / 2 0 07 / 0 8 / 2 2 07 / 0 8 / 2 1 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 7 % 0. 2 7 0 % 0 Hi l l t o p - - 24 0 - R 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E L 3 S 1 08 / 1 7 / 2 0 08 / 1 2 / 2 1 N/ C 35 5 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 1 3 % 0. 1 2 5 % 17 FT N / F H N - - 61 0 1, 0 0 0 , 0 1 7 FH L M C 31 3 4 G W Q M1 08 / 1 9 / 2 0 08 / 1 9 / 2 2 08 / 1 9 / 2 1 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 1 % 0. 2 1 0 % 0 Hi l l t o p - - 10 1 1, 0 0 0 , 00 0 FH L M C 31 3 4 G W P Q 3 08 / 1 9 / 2 0 08 / 1 9 / 2 2 08 / 1 9 / 2 1 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 0 % 0. 2 0 0 % 0 FT N / F H N - - 50 1 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E L 4 M 3 08 / 2 4 / 2 0 02 / 2 4 / 2 2 02 / 2 4 / 2 1 54 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 1 7 % 0. 1 7 0 % 0 Vi n i n g - - 21 0 1, 0 0 0 , 0 0 0 FH L M C 31 3 4 G W S P 2 08 / 2 4 / 2 0 08 / 2 4 / 2 2 08 / 2 4 / 2 1 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 2 % 0. 2 2 0 % 0 Du n c a n - - 61 0 1, 0 0 0 , 0 0 0 FH L M C 31 3 4 G W S B 3 08 / 2 6 / 2 0 08 / 2 6 / 2 2 08 / 2 6 / 2 1 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 2 % 0. 2 2 0 % 0 Vi n i n g - - 50 1 1, 0 0 0 , 0 0 0 FH L B 31 3 0 A K 4 L 7 09 / 1 0 / 2 0 06 / 0 8 / 2 1 N/ C 26 8 99 . 9 9 6 3 1, 0 0 0 , 0 0 0 99 9 , 9 6 3 0. 1 3 % 1. 2 5 0 % 20 FT N / F H N (3 7 . 1 5 ) - 61 0 99 9 , 9 8 3 FH L B 31 3 0 A J Y 2 9 09 / 1 0 / 2 0 08 / 1 3 / 2 1 N/ C 33 3 99 . 9 9 5 4 1, 0 0 0 , 0 0 0 99 9 , 9 5 4 0. 1 3 % 0. 1 3 0 % 94 FT N / F H N (4 6 . 2 3 ) - 60 1 1, 0 0 0 , 0 4 8 FA M C A 31 4 2 2 B V 9 8 09 / 2 8 / 2 0 09 / 2 8 / 2 1 12 / 2 8 / 2 0 36 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 16 % 0. 16 0 % 0 Hi l l t o p - - 50 9 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E L 6 P 4 09 / 0 9 / 2 0 12 / 0 9 / 2 1 03 / 0 9 / 2 1 45 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 1 4 % 0. 1 4 0 % 0 FT N / F H N - - 50 1 1, 0 0 0 , 0 0 0 FH L M C 31 3 4 G W L 8 7 09 / 1 4 / 2 0 09 / 1 4 / 2 2 09 / 1 4 / 2 1 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 0 % 0. 2 0 0 % 0 Sa m c o - - 50 1 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E M A T 9 09 / 2 4 / 2 0 09 / 2 2 / 2 2 09 / 2 2 / 2 1 71 8 99 . 9 5 0 0 1, 0 0 0 , 0 0 0 99 9 , 5 0 0 0. 2 0 % 0. 1 7 0 % 9 Sa m c o (5 0 0 . 0 0 ) - 10 1 99 9 , 5 0 9 FH L M C 31 3 4 G W S 6 4 09 / 3 0 / 2 0 09 / 3 0 / 2 2 09 / 3 0 / 2 1 72 0 10 0 . 0 0 0 0 1, 1 0 0 , 0 0 0 1, 1 0 0 , 0 0 0 0. 1 8 % 0. 1 8 0 % 0 Hi l l t o p - - 50 1 1, 1 0 0 , 0 0 0 To t a l s 30 , 1 6 6 , 1 1 8 $ 30 , 1 6 5 , 5 3 5 $ 14 1 $ (5 8 3 ) $ - $ 30 , 1 6 5 , 6 7 5 $ B o f T D i v i d e n d s R e i n v e s t e d Ju l 24 24 - B o f T - - 50 2 24 Au g 21 21 - B o f T - - 50 2 21 Se p 13 13 - B o f T - - 50 2 13 US B a n k D ivi d e n d s R e i n v e s t e d Ju l 33 8 33 8 - US B a n k - - 50 2 33 8 Au g 31 7 31 7 - US B a n k - - 50 2 31 7 Se p 22 8 22 8 - US B a n k - - 50 2 22 8 Te x p o o l D i v i d e n d s R e i n v e s t e d Ju l 7, 2 9 6 7, 2 9 6 - Te x p o o l - - Va r i o u s 7, 2 9 6 Au g 6, 2 0 0 6, 2 0 0 - Te x p o o l - - Var i o u s 6, 2 0 0 Se p 4, 7 4 1 4, 7 4 1 - Te x p o o l - - Va r i o u s 4, 7 4 1 Te x s t a r D i v i d e n d s R e i n v e s t e d Ju l 7, 0 2 5 7, 0 2 5 - Te x s t a r - - Va r i o u s 7, 0 2 5 Au g 5, 7 1 6 5, 7 1 6 - Te x s t a r - - Va r i o u s 5, 7 1 6 Se p 4, 3 1 2 4, 3 1 2 - Te x s t a r - - Va r i o u s 4, 3 1 2 To t a l s i n c l u d i n g D i v i d e n d s 30 , 2 0 2 , 3 4 9 $ 30 , 2 0 1 , 7 6 6 $ 14 1 $ (5 8 3 ) $ - $ 30 , 2 0 1 , 9 0 6 $ 21 Ci t y o f E u l e s s Sc h e d u l e o f M a t u r i t i e s FY 2 0 2 0 4 t h Q u a r t e r Te r m t o Co s t Ac c r u e d In v . CU S I P Pu r c h a s e Ma t u r i t y Ca l l Ma t ' y Pr i c e Pa r Bo o k V a l u e Yi e l d T o Co u p o n In t e r e s t Se l l e r To t a l C o s t Ty p e Nu m b e r Da t e Da t e Da t e (i n d a y s ) Pe r $ 1 0 0 Va l u e (P r i n . O n l y ) Ma t u r i t y Ra t e Pu r c h a s e d In s t . Di s c o u n t Pr e m i u m Fu n d of I n v e s t m e n t Te x p o o l Ju l 2, 3 7 9 , 3 0 9 2, 3 7 9 , 3 0 9 - - - Va r i o u s 2, 3 7 9 , 3 0 9 Te x p o o l Au g 5, 2 5 2 , 8 2 5 5, 2 5 2 , 8 2 5 - - - Va r i o u s 5, 2 5 2 , 8 2 5 Te x p o o l Se p 4, 0 5 6 , 2 5 0 4, 0 5 6 , 2 5 0 - - - Va r i o u s 4, 0 5 6 , 2 5 0 Te x s t a r Ju l 1, 5 6 7 , 7 6 9 1, 5 6 7 , 7 6 9 - - - Va r i o u s 1, 5 6 7 , 7 6 9 Te x s t a r Au g 5, 2 5 9 , 6 2 8 5, 2 5 9 , 6 2 8 - - - Va r i o u s 5, 2 5 9 , 6 2 8 Te x s t a r Se p 2, 4 1 0 , 1 4 6 2, 4 1 0 , 1 4 6 - - - Va r i o u s 2, 4 1 0 , 1 4 6 B o f T Ju l 66 2 66 2 - - - 50 2 66 2 B o f T Au g 0 0 - - - 50 2 - B o f T Se p 0 0 - - - 50 2 - US B a n k Ju l 48 4 , 6 1 9 48 4 , 6 1 9 - - - 50 2 48 4 , 6 1 9 US B a n k Au g 0 0 - - - 50 2 - US B a n k Se p 35 7 , 4 9 0 35 7 , 4 9 0 - - - 50 2 35 7 , 4 9 0 FA M C A 31 4 2 2 B G X 2 07 / 0 2 / 1 9 07 / 0 2 / 2 1 07 / 0 2 / 2 0 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 2. 1 6 % 2. 1 6 0 % - GP S - - 61 0 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E L G K 4 01 / 0 9 / 2 0 04 / 0 9 / 2 1 07 / 0 9 / 2 0 45 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 6 4 % 1. 6 4 0 % FT N / F H N - - 33 0 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E K P Z 3 06 / 1 0 / 1 9 07 / 1 0 / 2 0 N/ C 39 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 2. 1 3 % 2. 1 2 5 % - GP S - - 50 1 1, 0 0 0 , 0 0 0 FH L M C 31 3 4 G U 3 V 0 01 / 1 7 / 2 0 01 / 2 1 / 2 2 07 / 2 1 / 2 0 72 4 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 6 5 % 1. 6 5 0 % - Sa m c o - - 24 0 - R 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E L J D 7 01 / 2 2 / 2 0 04 / 2 2 / 2 1 07 / 2 2 / 2 0 45 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 6 2 % 1. 6 2 0 % Hi l l t o p - - 21 0 1, 0 0 0 , 0 0 0 FH L M C 31 3 4 G U 3 Y 4 01 / 2 4 / 2 0 01 / 2 4 / 2 2 07 / 2 4 / 2 0 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 6 5 % 1. 6 5 0 % - Hi l l t o p - - 24 0 - R 1, 0 0 0 , 0 0 0 FF C B 31 3 3 E L Z D 9 05 / 1 2 / 2 0 08 / 1 2 / 2 1 08 / 1 2 / 2 0 45 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 3 % 0. 2 3 0 % FT N / F H N - - 30 5 - 1 9 1, 0 0 0 , 0 0 0 FA M C A 31 4 2 2 B U L 2 02 / 1 3 / 2 0 08 / 1 3 / 2 1 08 / 1 3 / 2 0 54 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 5 5 % 1. 5 5 0 % Hi l l t op - - 61 0 1, 0 0 0 , 0 0 0 US T R E A S 91 2 8 2 8 2 Q 2 02 / 2 0 / 2 0 08 / 1 5 / 2 0 N/ C 17 5 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 5 0 % 1. 5 0 0 % 20 6 . 0 4 Vi n i n g - - 32 0 - 2 0 1, 0 0 0 , 2 0 6 CD 58 8 4 9 3 L Q 7 02 / 2 4 / 2 0 08 / 2 4 / 2 0 N/ C 18 0 10 0 . 0 0 0 0 20 0 , 0 0 0 20 0 , 0 0 0 1. 6 0 % 1. 6 0 0 % FN S - - 32 0 - 2 0 20 0 , 0 0 0 FA M C A 31 4 2 2 B U W 8 02 / 2 4 / 2 0 02 / 2 4 / 2 2 08 / 2 4 / 2 0 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 5 7 % 1. 5 7 0 % - Vi n i n g - - 10 1 1, 0 0 0 , 0 0 0 CD 69 5 0 6 Y Q U 6 02 / 2 5 / 2 0 08 / 2 5 / 2 0 N/ C 18 0 10 0 . 0 0 0 0 20 0 , 0 0 0 20 0 , 0 0 0 1. 6 0 % 1. 6 0 0 % FN S - - 32 0 - 2 0 20 0 , 0 0 0 CD 75 5 2 4 K M Z 4 02 / 2 6 / 2 0 08 / 2 6 / 2 0 N/ C 18 0 10 0 . 0 0 0 0 20 0 , 0 0 0 20 0 , 0 0 0 1. 6 0 % 1. 6 0 0 % FN S - - 32 0 - 2 0 20 0 , 0 0 0 CD 07 3 7 0 Y 3 E 0 02 / 2 6 / 2 0 08 / 2 6 / 2 0 N/ C 18 0 10 0 . 0 0 0 0 20 0 , 0 0 0 20 0 , 0 0 0 1. 6 0 % 1. 6 0 0 % FN S - - 32 0 - 2 0 20 0 , 0 0 0 CD 71 2 7 0 Q U U 8 02 / 2 8 / 2 0 08 / 2 8 / 2 0 N/ C 18 0 10 0 . 0 0 0 0 20 0 , 0 0 0 20 0 , 0 0 0 1. 6 0 % 1. 6 0 0 % FN S - - 32 0 - 2 0 20 0 , 0 0 0 FF C B 31 3 3 E K B Z 8 02 / 2 8 / 1 9 08 / 2 8 / 2 0 N/ C 53 8 10 0 . 0 4 2 6 1, 0 0 0 , 0 0 0 1, 0 0 0 , 4 2 6 2. 5 0 % 2. 5 2 0 % - FT N / F H N - 42 5 . 83 30 5 - 1 9 1, 0 0 0 , 8 5 2 FF C B 31 3 3 E L S W 5 03 / 1 1 / 2 0 03 / 1 1 / 2 2 09 / 1 1 / 2 0 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 9 5 % 0. 9 5 0 % - Hi l l t o p - - 60 1 1, 0 0 0 , 0 0 0 FA M C A 31 4 2 2 B E 9 7 06 / 2 2 / 2 0 12 / 2 2 / 2 1 09 / 2 2 / 2 0 54 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 0. 2 5 % 0. 2 5 0 % Hi l l t o p - - 50 1 1, 0 0 0 , 0 0 0 FH L M C 31 3 7 E A E J 4 10 / 0 4 / 1 9 09 / 2 9 / 2 0 N/ C 35 5 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 6 3 % 1. 6 2 5 % 22 5 . 6 9 Hi l l t o p - - 50 1 1, 0 0 0 , 2 2 6 FH L B 31 3 0 A J F H 7 03 / 3 0 / 2 0 03 / 3 0 / 2 2 09 / 3 0 / 20 72 0 10 0 . 0 0 0 0 1, 0 0 0 , 0 0 0 1, 0 0 0 , 0 0 0 1. 0 0 % 1. 0 0 0 % - Du n c a n - - 50 9 1, 0 0 0 , 0 0 0 TO T A L 37 , 7 6 8 , 6 9 8 $ 37 , 7 6 9 , 1 2 4 $ 1. 5 0 % 43 2 $ - $ 42 6 $ 37 , 7 6 9 , 9 8 2 $ 22 Ci t y o f E u l e s s In v e s t m e n t P o r t f o l i o G e n e r a l I n f o r m a t i o n In v e s t m e n t T y p e s a n d I n s t i t u t i o n s In v e s t m e n t T y p e s Te x s t a r Lo c a l G o v ' t P o o l FN M A Fe d . N a t ' l M o r t . A s s o c . FH L M C Fe d . H o m e L o a n M o r t . C o r p Te x p o o l Lo c a l G o v ' t P o o l FF C B Fe d . F a r m C r e d i t B a n k FA M C A Fa r m e r M a c B o f T Ba n k o f T e x a s FH L B Fe d . H o m e L o a n B a n k CD Ce r t i f i c a t e s o f D e p o s i t US B a n k US B a n k TB I L L Tr e a s u r y B i l l In s t i t u t i o n Te x s t a r Te x S T A R Vi n i n g Vi n i n g S p a r k s GP S Gr e a t P a c i f i c S e c u r i t i e s Te x p o o l Te x P o o l FT N n k a Fi r s t T e n n e s s e e n k a Hi l l t o p Hi l l t o p S e c u r i t i e s B o f T Ba n k o f T e x a s F H N F i r s t H o r i z o n N a t i o n a l Du n c a n Du n c a n W i l l i a m s US B a n k US B a n k Sa m c o Sa m c o C a p i t a l FN S Fi n a n c i a l N o r t h e a s t e r n S e c u r i t i e s 23 CITY OF EULESS FINANCE POLICY DATE: 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 32 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. 33 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; 34 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. 35 FHN Financial - Zach Brewer Hilltop Securities - Gilbert Ramon Vining Sparks - Mike Smith Duncan Williams - Patrick Boyer/Doug Boyer Samco Capital Markets - Robert Phillips Financial Northeastern Securities, Inc. - Steven Azzato The City's list of six brokers currently includes FHN Financial, Hilltop Securities, Vining Sparks, Duncan Williams, Samco Capital, 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, we recommend approval of the six brokers we currently have as they continue to fill our portfolio needs. The recommended broker/dealer list for 2021 includes: 36 Economic News 37