HomeMy WebLinkAboutFY 2021 Annual Investment ReportCity of Euless
Annual Investment Report
Fiscal Year 2020-21
201 N. Ector Drive, Euless, TX 76039 www.eulesstx.gov
*Compliance Summary - Legislative Requirements
Introduction
Investment Strategy Compliance
*Annual Review, Fiscal Year 2021
I. Portfolio Summary
II. Performance Summary
III. Interest Income Summary
IV. Collateral Review
V. Broker Selection Process
VI. Summary
*Certification
*Minutes from 8/10/2021
*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
1/11/2022
1
INTRODUCTION
The information contained in this report will quantitatively and graphically demonstrate the achievement
of these City objectives for Fiscal Year 2020-21.
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 265 Glade Parks PID #2 Fund
201 Hotel-Motel Tax Fund 270 Midtown PID Fund
202 Juvenile Case Fund 275 Midtown TIRZ #4 Fund
210 ½¢ Sales Tax Operations Fund 501 Water & Wastewater Fund
220 Crime Control & Prevention District Fund 504 Service Center Fund
221 Police Seized Asset Fund 510 Drainage Utility Fund
225 PD Narcotics Task Force Fund 520 Recreation Classes Fund
230 Police Drug DEA Awards Fund 521 Arbor Daze Fund
231 Police Drug State Awards Fund 530 Parks @ Texas Star Operations Fund
240 Car Rental Tax Fund 540 TSGC Operations Fund
243 American Rescue Plan Fund 601 Equipment Replacement Fund
245 Glade Parks PID Fund 610 Health Insurance Fund
250 Glade Parks TIRZ #3 Fund 615 Risk Management/Worker's Comp Fund
260 Cable PEG Fund
301 Developer's Escrow Fund 330 Car Rental CIP Fund
305 Streets CIP Fund 502 Water & Wastewater CIP Fund
310 ½¢ Sales Tax CIP Fund 505 Water Impact Fees Fund
320 General CIP Fund 508 Wastewater Impact Fees Fund
321 Redevelopment CIP Fund 511 Drainage CIP Fund
322 Midtown Development CIP Fund 543 TSGC CIP Fund
552 TSSC CIP Fund
401 Debt Service/General Obligation Fund 410 ½¢ 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 & WW Rate Stabilization Reserve Fund
211 ½¢ Sales Tax Debt Reserve Fund 532 PATS 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's 48,390,023$ 37%0.07%0.06%
Gov't Pools & Escrows 83,945,193$ 63%0.01%0.01%
132,335,216$ 100.00%
I. PORTFOLIO SUMMARY
The City's investment portfolio at the end of the fiscal year, September 30, 2021,is
summarized by instrument as shown below.
Distribution by Instrument
The Distribution by Instrument table shows approximately 63% of the City funds are
invested in overnight investment pools and escrows,while the remaining 37%is invested in
government agencies and CD's.As of the date of this report,the weighted average yield on
the portfolio was .08%. When compared to prior quarter levels,the yield on the portfolio
remains flat. The portfolio composition below demonstrates the diversity within the portfolio.
FFCB
27%
FHLB
4%
FHLMC
2%
FAMCA
1%
US TREAS
1%
CD
2%
Escrows
0%
TexPool
25%
TexasClass
17%
TexStar
21%
Other
63%
Portfolio Composition
as of September 30, 2021
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# of months $ Cost % of Portfolio
Overnight 83,945,193$ 63%
< 1 mo 1,000,000$ 1%
up to 6 mos 2,497,350$ 2%
6 to 9 mos 6,999,700$ 5%
9 to 12 mos 8,656,590$ 7%
12 to 18 mos 14,497,051$ 11%
18 to 24 mos 14,739,332$ 11%
132,335,216$ 100.0%
I. PORTFOLIO SUMMARY (CONTINUED)
The City's investment portfolio at the end of the fiscal year, September 30, 2021,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 63% 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 12% of the portfolio matures within one year. The
City has 11% of the portfolio invested from 12 -18 months,with remaining 11%
invested in the 18-24 month range. The weighted average maturity on the portfolio is
currently 153.80 days.
$83.9
$1.0
$2.5
$7.0
$8.7
$14.5
$14.7
$0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0
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, 2021
Shown in millions
5
Institution $ Cost % of Portfolio
Duncan Williams 3,000,000$ 2%
FHN Financial 6,998,527$ 5%
Hilltop Securities 9,497,356$ 7%
Financial Northeastern 9,737,790$ 7%
Samco Capital 10,157,770$ 8%
Vining Sparks 8,998,580$ 7%
TexPool 33,072,895$ 25%
TexasCLASS 22,698,063$ 17%
TexStar 27,403,840$ 21%
Escrows 770,395$ 1%
132,335,216$ 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, 2021,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
FNS
Samco
Vining
TexPool
TexasCLASS
TexStar
Escrows
$3.0
$7.0
$9.5
$9.7
$10.2
$9.0
$33.1
$22.7
$27.4
$0.8
Investments by Institution
as of September 30, 2021
Shown in millions
6
City of Euless
Pooled Portfolio Summary
for Fiscal Year Ending
September 30, 2021
Cost Book Market
Principal Only Value Value
Investments at June 30, 2021 *139,611,210$ 139,601,282$ 139,603,626$
Investment Purchases/Dividends 25,613,422$
Investment Maturities (32,889,417)$
Investments at September 30, 2021 *132,335,215$ 132,318,750$ 132,329,442$
Janina Jewell
Director of Finance
Jackie Theriot
Assistant Director of Finance
* Hard coded data on this summary creates rounding differences.
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Summary of Investments by Fund
Cash & Investment Cash & Investment Increase/
at Market Value at Market Value (Decrease)
6/30/2021 9/30/2021 In Fund
101 General Fund 20,964,653 17,834,522 (3,130,131) Operating expenses
102 General Fund Emergency 499,925 501,000 1,075
103 General Fund Contingency 1,000,200 1,000,880 680
201 Hotel-Motel Tax Fund 762,938 1,016,781 253,842
202 Juvenile Case Fund 208,937 197,976 (10,962)
210 ½¢ Sales Tax Operations Fund 4,038,745 4,567,983 529,238 Operating revenues
211 ½¢ Sales Tax Debt Reserve Fund 401,125 401,125 -
220 Crime Control & Prevention District F 1,284,439 1,514,977 230,538 Operating revenues
221 Police Seized Asset Fund 237,117 233,630 (3,487)
225 PD Narcotics Task Force Fund 17,712
230 Police Drug DEA Awards Fund 337,627 337,645 18
231 Police Drug State Awards Fund 245,141 250,073 4,932
235 Public Safety Grant Fund (75,017) 498 75,515
236 Police Grant Fund - - -
237 Texas Transportation Grant Fund (7,033) (6,324) 709
240 Car Rental Tax Fund 4,220,980 8,520,391 4,299,411 Motor vehicle tax collection
240-R Car Rental Reserve Fund 1,999,683 1,999,183 (500)
243 American Rescue Plan Fund 5,197,234 5,197,063 (170)
245 Glade Parks PID Fund 750,000 750,000 -
250 Glade Parks TIRZ #3 Fund 2,718,463 2,537,477 (180,986) Operating expenses
260 Cable PEG Fund 593,140 568,786 (24,354)
265 Glade Parks PID #2 Fund - - -
270 Midtown PID Fund 369,903 124,155 (245,748) Operating expenses
275 Midtown TIRZ #4 Fund 288,730 379,053 90,323
301 Developer's Escrow Fund 2,218,194 2,219,503 1,308
305 Streets CIP Fund 16,697,399 14,748,374 (1,949,025) Capital outlay
310 ½¢ Sales Tax CIP Fund 1,000,791 934,949 (65,842)
320 General CIP Fund 8,680,751 7,455,447 (1,225,303) Capital outlay
321 Redevelopment CIP Fund 1,380,162 61,232 (1,318,930) Capital outlay
322 Midtown Development CIP 73,850 73,850 0
323 Midtown Development Reserves Fun 1,000,348 1,000,348 0
330 Car Rental CIP Fund 2,004,378 1,916,428 (87,949)
401 Debt Service/General Obligation Fun 3,574,307 2,322,529 (1,251,777) Debt service payments
402 Star Center Debt Service Fund 632,906 134,800 (498,106) Debt service payments
403 Glade Parks Debt Service Fund 374,584 9,806 (364,778) Debt service payments
404 Midtown Development Debt Service 1,179,138 678,860 (500,279) Debt service payments
410 EDC Debt Service Fund 211,421 10,717 (200,704) Debt service payments
501 Water & Wastewater Fund 10,289,805 10,600,706 310,902 Operating Revenues
502 Water & Wastewater-CIP Fund 5,420,850 4,899,285 (521,565) Capital outlay
503 Water & Wastewater Debt Reserve F 827,464 827,464 -
504 Service Center Fund 543,450 474,770 (68,680)
505 Water Impact Fees Fund 2,357,491 2,457,277 99,787
506 Water & Wastewater-Debt Service F 1,375,707 598,639 (777,068) Debt service payments
507 Water & Wastewater-Emergency Fu 500,000 500,000 -
508 Wastewater Impact Fees Fund 845,983 790,620 (55,364)
509 W/WW Rate Stabilization Fund 4,370,685 4,282,730 (87,955)
510 Drainage Utility Fund 267,639 201,883 (65,756)
511 Drainage CIP Fund 1,190,072 1,190,119 47
520 Recreation Classes Fund 199,033 202,018 2,985
521 Arbor Daze Fund 54,311 54,314 3
530 Parks @ Texas Star Operations Fun 535,218 606,563 71,346
532 PATS Debt Reserve Fund 284,319 296,587 12,268
540 TSGC Operations Fund 411,260 486,753 75,493
541 TSGC Debt Service Fund (53,443) 56,864 110,307 Transfer for debt service payments
542 TSGC Debt Reserve Fund 670,906 698,060 27,154
543 TSGC CIP Fund 172,571 153,697 (18,874)
552 PATS CIP Fund 144,297 144,304 7
601 Equipment Replacement Fund 13,225,716 12,429,743 (795,973) equipment expense
610 Health Insurance Fund 6,878,762 6,462,393 (416,369) Insurance claims
615 Risk Management/Worker's Comp F 2,362,828 2,348,075 (14,753)
701 Payroll Clearing Fund 629,986 620,660 (9,327)
705 Star Center Escrow Fund 1,410,277 1,420,629 10,352
TOTAL 139,998,057 132,297,868 (7,682,477)
The following is a summary of cash and investments held by each fund at June 30, 2021 and September 30, 2021. The changes include all
investment purchases, maturities, revenues, expenses, and transfers that occurred during the fourth quarter of FY2021.
8
II. PERFORMANCE SUMMARY
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%
Consolidated Invested Percentage
FY2021 Cash Balance Invested
October 1,308,836$ 120,303,528$ 99%
November 1,584,817$ 119,121,268$ 99%
December 701,678$ 121,562,293$ 99%
January 591,781$ 131,434,564$ 100%
February (351,388)$ 136,018,500$ 100%
March 303,149$ 126,172,120$ 100%
April 386,464$ 130,974,475$ 100%
May 509,700$ 139,006,619$ 100%
June 473,123$ 139,611,211$ 100%
July (71,098)$ 139,206,165$ 100%
August 472,077$ 134,612,610$ 100%
September 84,273$ 132,335,216$ 100%
Average 499,451$ 130,863,214$ 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 FY2021. The monthly data below shows the continued utilization of City
funds through investments.
85.00%
90.00%
95.00%
100.00%
105.00%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
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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 0.09%120,303,528$ 31 $9,196
November 0.08%119,121,268$ 30 $7,833
December 0.09%121,562,293$ 31 $9,292
January 0.06%131,434,564$ 31 $6,698
February 0.04%136,018,500$ 28 $4,174
March 0.03%126,172,120$ 31 $3,215
April 0.01%130,974,475$ 30 $1,077
May 0.01%139,006,619$ 31 $1,181
June 0.05%139,611,211$ 30 $5,737
July 0.06%139,206,165$ 31 $7,094
August 0.04%134,612,610$ 31 $4,573
September 0.04%132,335,216$ 30 $4,351
Estimated earnings at benchmark yields $64,421
Actual FY2021 interest income (un-audited)$165,998
Earnings over benchmark $101,577
Annual Average 0.05%130,863,214$ $65,432
Benchmark City's Basis
90-day Wtd Avg Point
Month T-bill yield Portfolio Yld Difference
October 0.09%0.25%16
November 0.08%0.24%16
December 0.09%0.18%9
January 0.06%0.16%10
February 0.04%0.12%8
March 0.03%0.11%8
April 0.01%0.09%8
May 0.01%0.07%6
June 0.05%0.07%2
July 0.06%0.07%1
August 0.04%0.07%3
September 0.04%0.08%4
Average 0.05%0.13%8
Cash management performance -effectiveness of the cash management program has
been measured utilizing actual figures for FY2021 as shown below:
Fed Funds Rate has remained unchanged since March 15, 2020,still at 0%-0.25%.The
Federal Open Market Committee seeks to achieve maximum employment and inflation at
the rate of 2% over the longer run.In support of these goals,the Committee decided to
keep the target range for the federal funds rate unchanged.With inflation having exceed
2% for some time,the Committee expects it will be appropriate to maintain this target range
until labor market conditions have reached levels consistent with the Committee's
assessments of maximum employment.While some believe we may see a rate hike later in
2022, others believe it will not be until early 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 8 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
FY17 Audit $610,219
FY18 Audit $1,349,182
FY19 Audit $2,629,198
FY20 Audit $1,423,661
FY21 Unaudited $165,998
FY21 Budgeted $381,985
Interest income fell short of the budgeted level for fiscal year 2021. 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 late 2022 or early 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
FY17 Audit FY18 Audit FY19 Audit FY20 Audit FY21
Unaudited
FY21 Budgeted
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Interest Income Summary
11
Interest Income By Fund
For Fiscal Year Ending September 2021
#Fund FY 20 FY 20 Actual FY 21 FY 21 Actual Diff FY20
Budget Audited Budget (Unaudited)Bud.-Act.
101 General $255,000 $263,648 $112,500 $62,639 ($49,861)
201 Hotel/Motel 15,000 5,830 4,000 288 ($3,712)
202 Juvenile Case Fund 5,000 2,194 1,800 104 ($1,696)
210 1/2 Cent Sales Tax-Operations 20,000 24,054 10,000 2,920 ($7,080)
211 1/2 Cent Sales Tax-Reserve 700 0 0 0 $0
220 Crime Control & Prevention District 20,000 7,720 5,000 399 ($4,601)
221 Police Seized Asset Funds 4,000 2,223 1,000 96 ($904)
230 Police Drug DEA Awards 6,000 2,845 1,200 159 ($1,041)
231 Police Drug State Awards 2,500 1,470 850 80 ($770)
240 Car Rental Tax 165,000 116,378 33,500 6,447 ($27,053)
245 Glade Parks PID 0 0 0 0 $0
250 Glade Parks TIRZ 10,000 10,058 2,500 746 ($1,754)
260 Cable PEG Fund 12,000 6,523 5,000 237 ($4,763)
270 Midtown PID 0 987 0 100 $100
301 Developer's Escrow 0 24,575 0 6,155 $6,155
305 Streets CIP 311,129 192,450 22,761 7,646 ($15,115)
310 1/2 Cent Sales Tax - CIP 11,604 40,726 2,621 1,290 ($1,331)
320 General Capital Projects 13,308 48,622 22,671 4,716 ($17,955)
321 Redevelopment CIP Fund 22,858 13,939 1,542 704 ($838)
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 60,953 0 6,311 $6,311
401 GO Debt Service 37,000 25,969 15,000 1,267 ($13,733)
402 Star Center Debt 4,500 2,382 3,000 122 ($2,878)
403 Glade Parks Debt Service 1,200 986 0 52 $52
404 Midtown Development Debt Service 35,000 15,069 1,000 689 ($311)
410 1/2 Cent Sales Tax Debt Service 0 226 0 3 $3
501 Water and Wastewater 250,000 147,393 40,000 14,991 ($25,009)
502 Water and Wastewater CIP 169,650 119,866 2,040 5,832 $3,792
503 Water and Wastewater Reserve 0 0 0 0 $0
504 Service Center Fund 0 0 0 0 $0
505 Water Impact Fees 0 19,518 0 1,015 $1,015
508 Wastewater Impact Fees 0 6,601 0 352 $352
509 W/WW Rate Stabilization 50,000 43,219 20,000 18,591 ($1,409)
510 Drainage 5,000 1,649 1,200 85 ($1,115)
511 Drainage CIP 0 10,616 0 547 $547
520 Recreation Classes 6,000 1,592 6,000 58 ($5,942)
521 Arbor Daze 0 376 0 21 $21
530 Parks At Texas Star 3,000 1 2,500 224 ($2,276)
531 PATS Debt Service 0 0 0 0 $0
532 PATS Reserve 12,000 1,871 1,000 115 ($885)
540 Texas Star Golf Course 800 823 800 66 ($734)
541 TSGC Debt Service 0 773 0 34 $34
542 TSGC Reserve 20,000 4,993 2,500 276 ($2,224)
543 TSGC CIP Fund 0 2,090 0 84 $84
550 Parks At Texas Star 0 6,259 0 0 $0
552 TSSC CIP 0 1,360 0 62 $62
601 Equipment Replacement 45,000 103,129 20,000 12,514 ($7,486)
610 Health Insurance 45,000 64,964 30,000 7,032 ($22,968)
615 Risk Mgmt/Worker's Comp 30,000 16,741 10,000 929 ($9,071)
Total $1,588,249 $1,423,661 $381,985 $165,998 ($215,987)
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 09/30/21
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 $2,388,858 $2,638,858 $1,803,899 $834,959
Bank of New Payroll $19,730
York Mellon various bonds $2,388,858 Operating $1,575,179
Insurance $208,991
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 11, 2022 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, 2021.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 – 08/10/2021 4 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, Chris Barker, and Janina Jewell. Non-
committee present included Diana Ayala, Budget / Treasury Manager.
Jewell presented the Third Quarter Investment Report for Fiscal Year 2021. 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, 2021. 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 followed those strategies for the third quarter of Fiscal
Year 2021.
Jewell referred the committee to page 3 where she noted significant increases and decreases in fund
investments since March 31, 2021. She specifically noted most of the changes (increases) occurred due to
the receipt of bond sale funds, a Trinity River Authority rebate, and American Rescue Plan Act funds. Overall
there was an increase of $13.5 million. The total market value of cash and investments was stated to be
$139,998,057.
On page 4 Jewell pointed out that the portfolio was very liquid with 64% being invested in pools and escrows
and 36% in agencies. The portfolio shows its diversity in investment types on this page. She noted that the
weighted average yield on the portfolio was 0.07% and was down 4 basis points from the last quarter. On
page 5 she noted the diversity of the portfolio by maturity and specifically cited that 73% 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. The weighted
average maturity on the portfolio was 154.38 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, 2021, of $139,603,626 which, if investments had been liquidated, the City would have
to show a gain of $2,344.
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 5.3 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, 2021.
16
Jewell then noted that the report was certified by City Investment Officers. The Mayor made a motion to
approve the quarterly investment report. The Mr. Barker seconded the motion and the vote was unanimous.
Minutes for the May 11, 2021, Investment Committee Meeting were presented. Ms. Getchell motioned to
approve. The Mayor seconded the motion and the committee approved unanimously.
Jewell noted Ms. Ayala was seeing some better rates with Certificates of Deposit and would be looking into
those investments.
Ms. Jewell commented briefly on the economic outlook, inflation rates, and ongoing pandemic impact of the
markets. The meeting was adjourned at 4:12pm.
17
APPENDICES
18
APPENDIX A
City of Euless
Change in Portfolio Values by Asset and Investment Fund
For the Quarter Ending September 30, 2021
Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in
Type Number Call Date Value 09/30/2021 06/30/2021 Market Value 09/30/2021 06/30/2021 Book Value
OPERATING FUNDS:
FFCB 3133EMCJ9 04/08/2022 1,000,000 1,000,150 1,000,150 - 1,000,000 1,000,000 -
FFCB 3133EMEB4 04/22/2022 1,000,000 1,005,640 1,000,000 5,640 999,550 999,550 -
FHLB 3130AKK62 12/14/2021 1,000,000 1,000,100 1,000,100 - 1,000,000 1,000,000 -
FFCB 3133EMLF7 09/22/2022 1,000,000 999,900 999,700 200 1,000,000 1,000,000 -
FFCB 3133EMLF7-2 09/22/2022 1,000,000 999,900 999,700 200 1,000,000 1,000,000 -
FFCB 3133EMMU3 04/13/2022 1,000,000 1,000,060 1,000,110 (50) 1,000,000 1,000,000 -
FFCB 3133EMNU2 04/27/2022 1,000,000 1,000,110 999,900 210 1,000,000 1,000,000 -
FFCB 3133EMMV1 01/13/2023 1,000,000 999,500 999,340 160 999,190 999,190 -
FFCB 3133EMQA3 05/09/2022 1,000,000 999,900 999,840 60 999,550 999,550 -
FFCB 3133EMPR7 08/02/2022 1,000,000 999,920 999,750 170 1,000,000 1,000,000 -
FFCB 3133EMML3 01/12/2023 1,000,000 999,290 998,900 390 998,650 998,650 -
FFCB 3133EMTN2 09/16/2022 1,000,000 1,000,250 999,800 450 1,000,000 1,000,000 -
FFCB 3133EMDA7 10/13/2022 1,000,000 1,000,440 1,000,100 340 1,000,700 1,000,700 -
FFCB 3133EMGX4 11/23/2022 1,000,000 999,930 999,400 530 1,000,000 1,000,000 -
FFCB 3133EMPR7-2 08/02/2022 1,158,000 1,157,907 1,157,711 197 1,158,000 1,158,000 -
FHLB 3130AJY52 08/12/2022 1,000,000 1,000,040 1,000,070 (30) 1,000,590 1,000,590 -
FFCB 3133EMUU4 11/29/2022 1,000,000 999,500 999,288 212 1,000,000 1,000,000 -
FFCB 3133EMWK4 01/19/2023 1,000,000 999,520 999,218 302 1,000,000 1,000,000 -
FFCB 3133EMVP4 04/13/2023 1,000,000 998,610 998,300 310 998,084 998,084 -
FFCB 3133EMXM9 04/27/2023 1,000,000 998,500 998,260 240 998,410 998,410 -
FHLB 3130AMGM8 05/10/2022 1,000,000 999,700 999,400 300 1,000,000 1,000,000 -
FFCB 3133EMZP0 05/18/2023 1,000,000 998,500 997,840 660 998,050 998,050 -
FFCB 3133EMD58 01/02/2023 1,000,000 998,900 998,600 300 999,400 999,400 -
FHLB 3130AMNF5 06/09/2023 1,000,000 999,530 999,660 (130) 1,000,000 1,000,000 -
FFCB 3133EMH96 06/14/2023 1,000,000 998,100 997,750 350 1,000,000 1,000,000 -
Purchases
CD 856283T71 01/28/2022 249,000 249,043 - 249,043 249,000 - 249,000
CD 06251A3A6 07/29/2022 249,000 248,942 - 248,942 249,000 - 249,000
CD 90348JQ94 01/30/2023 249,000 248,771 - 248,771 249,000 - 249,000
CD 05580AB94 07/31/2023 249,000 248,766 - 248,766 249,000 - 249,000
CD 06428FTH0 02/18/2022 249,000 249,049 - 249,049 249,000 - 249,000
CD 38149MXY4 08/11/2022 249,000 249,038 - 249,038 249,000 - 249,000
CD 538036RU0 02/13/2023 249,000 248,564 - 248,564 249,000 - 249,000
FFCB 3133EM2W1 05/17/2023 1,000,000 998,700 - 998,700 998,680 - 998,680
FFCB 3133EM2E1 08/10/2023 1,000,000 998,100 - 998,100 997,070 - 997,070
CD 795451AM5 08/11/2023 249,000 249,299 - 249,299 249,000 - 249,000
FFCB 3133EM4P4 04/14/2023 1,000,000 998,960 - 998,960 999,384 - 999,384
FFCB 3133EM4P4-2 04/14/2023 1,000,000 998,960 - 998,960 1,000,000 - 1,000,000
FAMCA 31422XMA7 09/01/2023 1,000,000 999,810 - 999,810 1,000,000
CD 87165HD23 09/18/2023 249,000 249,274 - 249,274 249,000
CD 70962LAQ5 09/29/2023 249,000 248,639 - 248,639 249,000
CD 923450CQ1 09/29/2023 249,000 248,304 - 248,304 249,000
US TREA91282CDA6 09/30/2023 1,000,000 999,453 - 999,453 998,320
Maturities
FFCB 3133EL3S1 08/12/2021 1,000,000 - 1,000,330 (1,000,330) - 1,000,000 (1,000,000)
FHLB 3130AJY29 08/13/2021 1,000,000 - 1,000,100 (1,000,100) - 999,861 (999,861)
FHLMC 3134GWQM1 08/19/2022 1,000,000 - 1,000,200 (1,000,200) - 1,000,000 (1,000,000)
FHLMC 3134GWPQ3 08/19/2022 1,000,000 - 1,000,220 (1,000,220) - 1,000,000 (1,000,000)
FHLMC 3134GWSP2 08/24/2022 1,000,000 - 1,000,330 (1,000,330) - 1,000,000 (1,000,000)
FHLMC 3134GWSB3 08/26/2022 1,000,000 - 1,000,200 (1,000,200) - 1,000,000 (1,000,000)
FFCB 3133EMMH2 01/06/2022 1,000,000 - 1,000,000 (1,000,000) - 1,000,000 (1,000,000)
FHLMC 3134GWL87 09/14/2022 1,000,000 - 1,000,750 (1,000,750) - 1,000,000 (1,000,000)
FFCB 3133EMAT9 09/22/2022 1,000,000 - 1,000,100 (1,000,100) - 998,500 (998,500)
FHLMC 3134GWS64 09/30/2022 1,100,000 - 1,100,220 (1,100,220) - 1,100,000 (1,100,000)
Total Operating:
Par total does not
include maturities 33,897,000$ 33,885,570$ 35,245,337$ (1,359,767)$ 33,882,627$ 35,248,535$ (4,111,228)$
19
APPENDIX A
City of Euless
Change in Portfolio Values by Asset and Investment Fund
For the Quarter Ending September 30, 2021
Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in
Type Number Call Date Value 09/30/2021 06/30/2021 Market Value 09/30/2021 06/30/2021 Book Value
CIP FUNDS
FHLB 3130AKCB0 10/31/2021 1,000,000 1,000,020 1,000,200 (180) 1,000,000 1,000,000 -
FHLMC 3134GXAV6 11/18/2022 1,000,000 1,000,200 1,000,200 - 1,000,000 1,000,000 -
FFCB 3133EMSE3 03/01/2023 1,000,000 999,270 998,560 710 1,000,000 1,000,000 -
FFCB 3133EMST0 03/10/2023 1,000,000 999,330 999,010 320 1,000,000 1,000,000 -
FFCB 3133EMXN7 04/27/2022 1,000,000 999,970 999,700 270 1,000,000 1,000,000 -
FFCB 3133EMYM8 08/04/2022 1,000,000 999,600 999,400 200 1,000,000 1,000,000 -
FFCB 3133EMYK2 08/04/2022 1,000,000 1,000,070 999,400 670 1,000,000 1,000,000 -
Purchases
FHLB 3130ANYM6 08/28/2023 1,000,000 997,250 - 997,250 995,067 - 995,067
Maturities
FHLMC 3134GXJF2 12/30/2022 1,000,000 - 1,000,000 (1,000,000) - 1,000,000 (1,000,000)
Total CIP:
Par total does not
include maturities 8,000,000$ 7,995,710$ 7,996,470$ (760)$ 7,995,067$ 8,000,000$ (4,933)$
RESERVE FUNDS:
FFCB 3133ELFR0 12/27/2021 1,000,000 1,004,230 1,008,110 (3,880) 998,050 998,050 -
FHLMC 3134GXGQ1 12/15/2022 1,000,000 1,000,880 1,000,200 680 1,000,000 1,000,000 -
FFCB 3133EMSS2 03/09/2023 1,000,000 998,860 998,600 260 998,563 998,563 -
FFCB 3133EMZZ8 11/18/2022 1,000,000 999,300 998,900 400 999,250 999,250 -
FFCB 3133EMM25 03/23/2023 1,000,000 999,400 999,070 330 1,000,000 1,000,000 -
FFCB 3133EMM66 06/28/2023 500,000 501,000 499,925 1,075 500,000 500,000 -
Purchases
FFCB 3133EM3S9 06/26/2023 1,000,000 999,300 - 999,300 1,000,000 - 1,000,000
Maturities
FHLMC 3134GV5E4 07/08/2022 1,000,000 - 1,000,130 (1,000,130) - 1,000,000 (1,000,000)
Total Reserve:
Par total does not
include maturities 6,500,000$ 6,502,970$ 6,504,935$ (1,965)$ 6,495,863$ 6,495,863$ -$
OVERNIGHT INVESTMENTS:
Beginning Bal Ending Bal
Texpool Balance 40,133,618 33,072,895 33,072,895 40,133,618 (7,060,723) 33,072,895 40,133,618 (7,060,723)
Purchases 136,172
Maturities 7,196,895
TexasCLASS Balance 9,697,300 22,698,063 22,698,063 9,697,300 13,000,763 22,698,063 9,697,300 13,000,763
Purchases 13,801,180
Maturities 800,417
Texstar Balance 38,918,980 27,403,840 27,403,840 38,918,980 (11,515,140) 27,403,840 38,918,980 (11,515,140)
Purchases 940,886
Maturities 12,456,026
B of T Balance 14,354 14,355 14,355 14,354 1 14,355 14,354 1
Purchases (0)
Maturities -
US Bank Balance 1,092,633 756,041 756,041 1,092,633 (336,592) 756,041 1,092,633 (336,592)
Purchases 32
Maturities 336,625
Total Overnight:83,945,193$ 83,945,193$ 89,856,885$ (5,911,692)$ 83,945,193$ 89,856,885$ (5,911,692)$
Total Portfolio Par total does not
include maturities 132,342,193$ 132,329,442$ 139,603,626$ (7,274,184)$ 132,318,750$ 139,601,282$ (10,027,852)$
20
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23
CITY OF EULESS
FINANCE POLICY
DATE: June 26, 1990 PREPARED BY:Finance Department
REV: January 25, 2022 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 annual comprehensive 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 as authorized and described in
Texas Government Code Section 2256.010.
3. Fully collateralized repurchase agreements having a defined termination date, are in
accordance with a master repurchase agreement approved by the Investment
Committee, and as authorized by Texas Government Code Section 2256.011.
4. Investment Pools as authorized by Texas Government Code Section 2256.016. 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.
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 Securities
Exchange Act of 1934 or the Investment Advisor Act of 1940.
6. Interest bearing checking accounts that are fully collateralized at 105% of ledger balance.
7. 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
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.
29
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.
5. The investment officer will obtain at least three competitive bids from approved brokers
on our broker/dealer list before making an investment transaction except for a)
transactions with money market funds and local government investment pools (which are
deemed to be made at prevailing market rates), b) treasury and agency securities
purchased at issuance through an approved broker/dealer or financial institution, and c)
fully insured certificates of deposit placed in accordance with the conditions prescribed in
Section 2256.010(b) of the Public Funds Investment Act. 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
30
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
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
31
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.
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
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not be wired or paid until verification has been made that the security was received by the
Custodian.
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;
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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CITY OF EULESS
FINANCE POLICY
DATE: June 26, 1990 PREPARED BY:Finance Department
REV: January 253, 202218 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 annual 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.
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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.
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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
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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
37
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.
38
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 as authorized and described
inissued 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 Texas. Gov’ternment Code Section.
2256.0109(b).; or
c.2. 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, are.
(“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, and as
authorized by Texas Government Code Section 2256.011;*(see definition of collateral,
Section VII).
4. Investment Pools as authorized by Texas Government Code Section 2256.016. 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;
Formatted: Numbered + Level: 1 + Numbering Style: 1, 2,
3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" +
Tab after: 0.5" + Indent at: 0.5"
Formatted: Numbered + Level: 1 + Numbering Style: 1, 2,
3, … + Start at: 1 + Alignment: Left + Aligned at: 0.25" +
Tab after: 0.5" + Indent at: 0.5", Tab stops: 0.83", Left
Formatted: Indent: Left: 0.3", Numbered + Level: 1 +
Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left +
Aligned at: 0.25" + Tab after: 0.5" + Indent at: 0.5"
39
d. the objectives of the pool;
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
11.4. 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 Securitieas
Exchange Act of 1934 or the Investment Advisor Act of 1940.
5.6. Interest bearing checking accounts that are fully collateralized at 105% of ledger
balance.
Formatted: Indent: Left: 0.3", Numbered + Level: 1 +
Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment: Left +
Aligned at: 0.25" + Tab after: 0.5" + Indent at: 0.5", Tab
stops: 1.25", Left + 1.67", Left
Formatted: Indent: Left: 0.5", No bullets or numbering
40
6.7. 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 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.
41
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)
5. The investment officer will obtain at least three competitive bids from approved brokers
on our broker/dealer list before making an investment transaction except for a)
transactions with money market funds and local government investment pools (which are
deemed to be made at prevailing market rates), b) treasury and agency securities
purchased at issuance through an approved broker/dealer or financial institution, and c)
fully insured certificates of deposit placed in accordance with the conditions prescribed in
Section 2256.010(b) of the Public Funds Investment Act. . 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.
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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
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:
43
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.
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;
Formatted: Indent: Left: 0"
Formatted: Indent: Left: 0"
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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;
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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FHN Financial - Buddy Saragusa
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 2022 includes:
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Economic News
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