HomeMy WebLinkAboutFY 2017 Annual Investment ReportCity of
Euless
Annual Investment Report
Fiscal Year 2016-17
201 North Ector Drive Euless, Texas 76039
www.eulesstx.gov
*Compliance Summary - Legislative Requirements
Introduction
Investment Strategy Compliance
*Annual Review, Fiscal Year 2017
I. Portfolio Summary
II. Performance Summary
III. Interest Income Summary
IV. Collateral Review
V. Broker Selection Process
VI. Summary
*Certification
*Minutes from 8/29/2017
*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
1/9/2018
1
INTRODUCTION
The information contained in this report will quantitatively and graphically demonstrate the achievement
of these City objectives for Fiscal Year 2016-17.
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 for 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 in the form of government securities which are pledged to
the City of Euless and safekept by the Federal Reserve Bank; 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. The yield or rate of return
which the City receives is measured against the 90-day treasury bill yield as set by the investment policy.
2
101 General Fund 270 Midtown PID Fund
201 Hotel-Motel Tax Fund 275 Midtown TIRZ #4 Fund
202 Juvenile Case Fund 501 Water & Wastewater Fund
210 1/2 Cent Sales Tax Operations Fund 504 Service Center Fund
220 Crime Control & Prevention District Fund 510 Drainage Utility Fund
221 Police Seized Asset Fund 520 Recreation Classes Fund
230 Police Drug DEA Awards Fund 521 Arbor Daze Fund
231 Police Drug State Awards Fund 530 Softball World Operations Fund
240 Car Rental Tax Fund 540 Golf Course Operations Fund
245 Glade Parks PID Fund 550 Parks at Texas Star Operations Fund
250 Glade Parks TIRZ Fund 601 Equipment Replacement Fund
260 Cable PEG Fund 610 Health Insurance Fund
265 Glade Parks PID #2 Fund 615 Risk Management/Worker's Comp Fund
301 Developer's Escrow Fund 330 Car Rental CIP Fund
305 Streets CIP Fund 502 Water & Wastewater CIP Fund
310 1/2 Cent Sales Tax CIP Fund 505 Water Impact Fees Fund
320 General Capital Projects Fund 508 Wastewater Impact Fees Fund
321 Redevelopment Fund 511 Drainage CIP Fund
322 Midtown Development CIP 543 TSGC CIP Fund
552 TSSC CIP Fund
401 Debt Service/General Obligation Fund 410 1/2 Cent Sales Tax Debt Service Fund
402 Star Center Debt Service Fund 506 Water & Wastewater Debt Service Fund
403 Glade Parks Debt Service Fund 541 TSGC Debt Service Fund
404 Midtown Development Debt Service Fund
102 General Fund Emergency Fund 507 Water & Wastewater Emergency Fund
103 General Fund Contingency Fund 509 Water & Wastewater Rate Stabilization Reserve Fund
211 1/2 Cent Sales Tax Debt Reserve Fund 532 TSSC Reserve Fund
240 Car Rental Tax Fund ($2,000,000 Reserve)542 TSGC Reserve Fund
323 Midtown Development Reserve Fund 705 Star Center Escrow Fund
503 Water & Wastewater Debt Reserve Fund
Janina Jewell
Director of Finance
Jackie Theriot
Assistant Director of Finance
Based on the above strategies,the investment portfolio reported herein is in compliance with the City's adopted
investment policy.
The strategy for all pooled funds is to assure that cash flows are matched with projected needs and provide
adequate liquidity and safety.This may be accomplished by purchasing high quality securities in a laddered
structure or utilizing an investment pool. Furthermore, the following purposes are also considered when investing.
Investment Strategy Compliance
-Operating Funds will be structured in such a way as to minimize volatility during economic cycles.This may be
accomplished by purchasing high quality short-term securities.The weighted average maturity on these funds will
remain within the 6 to 9 month range. These funds include:
-Funds for Capital Improvement Projects (CIP)and Special Purposes may purchase securities which allow for
flexibility and unanticipated project outlays by having a portion of their investments in highly liquid securities.The
stated final maturity dates of securities held should not exceed the estimated project completion date. These funds
include:
-Debt Service Funds should assure adequate liquidity to cover the debt service obligation on the required payment
date. 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
g
Average
Yield
g
Avg. Yield
Prior Qtr.
Agencies & CD 38,906,911$ 51.85%0.52%0.48%
Investment Pools 36,129,233$ 48.15%0.49%0.42%
75,036,144$ 100.00%
I. PORTFOLIO SUMMARY
The City's investment portfolio at the end of the fiscal year, September 30, 2017,is
summarized by instrument as shown below.
Distribution by Instrument
The Distribution by Instrument table shows approximately 48% of the City funds are
invested in overnight investment pools,while the remaining 52%is invested in government
agencies and a CD.As of the date of this report,the weighted average yield on the portfolio
was 1.01%. When compared to prior quarter levels,the yield on the portfolio has continued
to increase slowly.The portfolio composition below demonstrates the diversity within the
portfolio.
FFCB
11%
FHLB
17%
FHLMC
14%
FNMA
7%
FAMCA
3%
B of TX
2%
TexPool
23%
TexStar
23%
Other
48%
Portfolio Composition
as of September 30, 2017
4
# of months $ Cost % of Portfolio
Overnight 36,129,233$ 48.1%
< 1 mo 3,734,816$ 5.0%
up to 6 mos 18,770,391$ 25.0%
6 to 9 mos 9,908,726$ 13.2%
9 to 12 mos 4,494,665$ 6.0%
12 to 18 mos 1,498,313$ 2.0%
18 to 24 mos 500,000$ 0.7%
75,036,144$ 100.0%
I. PORTFOLIO SUMMARY (CONTINUED)
The City's investment portfolio at the end of the fiscal year, September 30, 2017,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 48% of the portfolio is available within 24 hours,with
an additional 30% 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 19% of the portfolio matures within one
year. Currently,the City has 2% of the portfolio invested between 12 -18 months
and less than 1% invested in the 18-24 months. The weighted average maturity on
the portfolio is currently 92.73 days.
$36.1
$3.7
$18.8
$9.9
$4.5
$1.5
$0.5
$0.0 $9.0 $18.0 $27.0 $36.0 $45.0 $54.0
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, 2017
Shown in millions
5
Institution $ Cost % of Portfolio
Coastal Securities 5,998,647$ 8%
Duncan Williams 6,591,233$ 9%
FTN Financial 1,999,643$ 3%
Hilltop Securities 7,542,269$ 10%
Mutual Securities 5,533,152$ 7%
Samco Capital 4,745,863$ 6%
Vining Sparks 6,455,105$ 9%
TexPool 17,508,779$ 23%
TexStar 17,454,012$ 23%
B of TX 1,207,442$ 2%
75,036,144$ 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, 2017,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 in 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 $7.0 $14.0 $21.0 $28.0
Coastal
Duncan
FTN
Hilltop
Mutual
Samco
Vining
TexPool
TexStar
B of TX
$6.0
$6.6
$2.0
$7.5
$5.5
$4.7
$6.5
$17.5
$17.5
$1.2
Investments by Institution
as of September 30, 2017
Shown in millions
6
City of Euless
Pooled Portfolio Summary
for Quarter Ending
September 30, 2017
Cost Book Market
Principal Only Value Value
Investments at June 30, 2017 79,904,706$ 79,857,100$ 79,905,550$
Investment Purchases/Dividends 17,999,297$
Investment Maturities (22,867,857)$
Investments at September 30, 2017 *75,036,146$ 74,996,365$ 75,016,764$
Janina Jewell
Director of Finance
Jackie Theriot
Assistant Director of Finance
* Hard coded data on this summary creates rounding differences.
7
Summary of Investments by Fund
Cash & Investment Cash & Investment Increase/
at Market Value at Market Value Decrease
6/30/2017 9/30/2017 In Fund
101 General Fund 14,034,653 12,454,821 (1,579,832) Operating expenses
102 General Fund Emergency 500,000 499,875 (125)
103 General Fund Contingency 500,000 499,245 (755)
201 Hotel-Motel Tax Fund 518,211 624,931 106,721 Operating revenues
202 Juvenile Case Fund 243,938 250,073 6,135
210 1/2 Cent Operations Fund 1,420,008 1,763,286 343,278 Operating revenues
211 1/2 Cent Debt Reserve 146,717 135,000 (11,716)
220 CCPD 842,528 943,060 100,531 Operating revenues
221 Police Seized Asset Fund 327,192 298,695 (28,497)
230 Police Drug DEA Awards 326,500 332,798 6,297
231 Police Drug State Awards 175,778 176,160 382
235 Public Safety Grant Fund (24,757) 24,187 48,943
236 Police Grant Fund - - -
237 Texas Transportation Grant (10,297) (5,008) 5,288
240 Car Rental Tax Fund 3,922,898 7,063,139 3,140,241 Motor vehicle tax collection
240-R Car Rental Reserve Fund 2,000,640 1,998,210 (2,430)
245 Glade Parks PID 750,000 750,000 -
250 Glade Parks TIRZ #3 210,303 251,695 41,392
260 Cable PEG Fund 558,850 587,721 28,871
265 Glade Parks PID #2 - - -
270 Midtown PID 66,999 66,333 (666)
275 Midtown TIRZ #4 - - -
301 Developer's Escrow Fund 2,053,580 2,087,652 34,072
305 Streets CIP 501,005 357,418 (143,587) Capital outlay
310 1/2 Cent Sales Tax CIP 2,025,136 2,025,628 493
320 General CIP Fund 1,266,708 1,279,733 13,025
321 Redevelopment CIP Fund 257,082 115,551 (141,531) Capital outlay
322 Midtown Development CIP 7,058,303 5,586,361 (1,471,942) Capital outlay
323 Midtown Development Reserves 1,000,088 999,927 (160)
330 Car Rental CIP Fund 2,593,407 2,434,592 (158,815) Capital outlay
401 Debt Service/General 2,422,617 1,017,306 (1,405,311) Debt service payments
402 Star Center Debt Service 603,620 134,577 (469,042) Debt service payments
403 Glade Parks Debt Service 418,584 - (418,584) Debt service payments
404 Midtown Development Debt Service 457,190 236,144 (221,046) Debt service payments
410 EDC Debt Service 36,608 2,260 (34,348) Debt service payments
501 Water & Wastewater Fund 5,931,765 6,785,876 854,111 Operating Revenues
502 Water & Wastewater-CIP 3,827,030 3,597,552 (229,478) Capital outlay
503 Water & Wastewater Bond Reserve 641,351 641,351 -
504 Service Center Fund 401,248 426,107 24,859
505 Water Impact Fees 1,676,078 1,845,425 169,347 Impact fees-development/Heritage
506 Water & Wastewater-Debt Service 711,160 91,913 (619,247) Debt service payments
507 Water & Wastewater-Emergency 500,000 500,000 -
508 Wastewater Impact Fees 644,811 621,670 (23,142)
509 W/WW Rate Stabilization 2,177,361 2,097,314 (80,047)
510 Drainage Utility 289,855 296,011 6,156
511 Drainage CIP 1,232,224 1,215,585 (16,639)
520 Recreation Classes Fund 343,833 312,464 (31,369)
521 Arbor Daze Fund 16,438 16,441 2
530 Softball World Operations (444,591) (429,227) 15,364
532 TSSC Debt Reserve 483,395 504,811 21,416
540 TSGC Operations 221,259 166,963 (54,296)
541 TSGC Debt (27,350) 55,106 82,456 Transfer for debt service payment
542 TSGC Debt Reserve 986,899 1,029,487 42,589
543 TSGC CIP Fund 211,062 67,036 (144,025) Capital outlay
550 Parks @ Texas Star 468,860 493,809 24,949
552 TSSC CIP 471,835 184,266 (287,569) Capital outlay
601 Equipment Replacement 3,861,339 3,100,572 (760,767) Equipment purchase
610 Health Insurance Fund 3,559,560 2,816,595 (742,965) Claims
615 Risk Management Fund 2,278,505 2,425,370 146,865 Transfer from other funds
701 Payroll Clearing Fund 562,558 561,700 (858)
705 Star Center Escrow 1,423,338 1,424,113 776
TOTAL 79,653,912 75,839,684
The following is a summary of cash and investments held by each fund at June 30, 2017 and September 30, 2017.The changes include all
investment purchases, maturities, revenues, expenses, and transfers that occurred during the fourth quarter of FY2017.
8
II. PERFORMANCE SUMMARY
Consolidated Invested Percentage
FY2016 Cash Balance Invested
October 566,130$ 70,586,706$ 99%
November 280,577$ 71,586,488$ 100%
December 474,640$ 75,829,340$ 99%
January 2,060,724$ 95,706,047$ 98%
February (453,332)$ 99,622,556$ 100%
March (569,624)$ 88,738,696$ 101%
April 1,299,527$ 88,608,435$ 99%
May 460,730$ 84,051,837$ 99%
June 809,675$ 83,166,174$ 99%
July 198,809$ 83,974,406$ 100%
August 165,238$ 83,502,191$ 100%
September (188,025)$ 83,131,556$ 100%
Average 425,422$ 84,042,036$ 100%
Consolidated Invested Percentage
FY2017 Cash Balance Invested
October 2,027,780$ 81,485,060$ 98%
November (520,242)$ 82,837,659$ 101%
December (334,996)$ 83,827,193$ 100%
January 999,690$ 89,650,953$ 99%
February 251,912$ 91,880,291$ 100%
March (875,287)$ 80,966,247$ 101%
April (351,116)$ 79,235,914$ 100%
May 1,072,456$ 79,981,669$ 99%
June (251,619)$ 79,904,706$ 100%
July 658,528$ 78,474,378$ 99%
August 77,966$ 76,921,247$ 100%
September 1,107,261$ 75,036,144$ 99%
Average 321,861$ 81,683,455$ 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 revenues for the City.The average percent
of invested funds is 100% for FY2017. The monthly data below shows the continued
utilization of City funds through investments.
85.00%
90.00%
95.00%
100.00%
105.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Percent InvestedFiscal Year
9
Average City's Number Estimated
90-day Invested Days in Interest
Month T-bill Yield Balance Month Earnings
October 0.34%81,485,060$ 31 $23,530
November 0.48%82,837,659$ 30 $32,681
December 0.50%83,827,193$ 31 $35,598
January 0.52%89,650,953$ 31 $39,594
February 0.53%91,880,291$ 28 $37,356
March 0.75%80,966,247$ 31 $51,574
April 0.79%79,235,914$ 30 $51,449
May 0.96%79,981,669$ 31 $65,212
June 1.01%79,904,706$ 30 $66,332
July 1.05%78,474,378$ 31 $69,982
August 0.99%76,921,247$ 31 $64,677
September 1.04%75,036,144$ 30 $64,140
Estimated earnings at benchmark yields $602,125
Actual FY2017 interest income (un-audited)$610,217
Earnings over benchmark $8,092
Annual Average 0.75%81,683,455$ $612,626
Benchmark City's
90-day Wtd Avg Point
Month T-bill yield Portfolio Yld Difference
October 0.34%0.49%15
November 0.48%0.51%3
December 0.50%0.57%7
January 0.52%0.65%13
February 0.53%0.66%13
March 0.75%0.73%-2
April 0.79%0.80%1
May 0.96%0.84%-12
June 1.01%0.90%-11
July 1.05%0.96%-9
August 0.99%1.00%1
September 1.04%1.01%-3
Average 0.75%0.76%1
Cash management performance -effectiveness of the cash management program has
been measured utilizing actual figures for FY2017 as shown below:
During FY2017,the Federal Reserve had three rate hikes of 0.25%in December 2016,
March 2017 and June 2017. The Federal Open Market Committee has kept the target fed
funds rate at 1.25%since June and currently anticipates economic conditions are likely to
warrant another rate hike in December 2017. The average yield on the City's portfolio has
increased slightly from month-to-month. However,while the City's portfolio surpassed the
benchmark 90 day T-bill rate the first five months of the year,the average was only 1 basis
point for the year.
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
FY13 Audit $146,562
FY14 Audit $104,437
FY15 Audit $167,649
FY16 Audit $376,405
FY17 Unaudited $610,217
FY17 Budgeted $119,922
Interest income exceeded the budgeted level for fiscal year 2017. When compared to prior year,
interest earnings have increased.This increase can be attributed to the Fed rate hikes
throughtout the year and the reinvestment of proceeds from maturing securities into slightly
higher yield investments.
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
FY13 Audit FY14 Audit FY15 Audit FY16 Audit FY17
Unaudited
FY17 BudgetedInterest Earnings Interest Income Summary
11
Interest Income By Fund
For Fiscal Year Ending September 2017
#Fund FY 16 FY 16 Actual FY 17 FY 17 Actual Diff FY17
Budget Audited Budget (Unaudited)Bud.-Act.
101 General $35,000 $97,775 $35,000 $140,239 $105,239
201 Hotel/Motel 70 830 70 3,970 $3,900
202 Juvenile Case Fund 30 536 200 1,569 $1,369
210 1/2 Cent Sales Tax-Operations 1,400 5,715 3,000 9,128 $6,128
211 1/2 Cent Sales Tax-Reserve 0 5,387 50 354 $304
220 Crime Control & Prevention District 100 2,207 1,000 6,232 $5,232
221 Police Seized Asset Funds 0 1,673 1,000 2,446 $1,446
230 Police Drug DEA Awards 500 905 500 2,319 $1,819
231 Police Drug State Awards 500 425 200 1,039 $839
240 Car Rental Tax 15,000 49,096 15,000 57,030 $42,030
245 Glade Parks PID 0 0 0 0 $0
250 Glade Parks TIRZ 0 1 0 607 $607
260 Cable PEG Fund 0 1,219 0 3,776 $3,776
301 Developer's Escrow 0 8,038 0 19,385 $19,385
305 Streets CIP 0 2,312 3,654 5,903 $2,249
310 1/2 Cent Sales Tax - CIP 0 2,843 0 15,283 $15,283
320 General Capital Projects 0 3,133 0 8,995 $8,995
321 Redevelopment CIP Fund 0 641 2,188 1,303 ($885)
322 Midtown Development CIP 0 0 0 0 $0
323 Midtown Development Reserves 0 0 0 0 $0
325 Police Facility CIP 8 0 8 0 ($8)
330 Car Rental CIP 0 15,290 0 22,495 $22,495
401 GO Debt Service 500 3,069 750 13,714 $12,964
402 Star Center Debt 300 808 300 1,935 $1,635
403 Glade Parks Debt Service 0 0 0 0 $0
404 Midtown Development Debt Service 0 36,047 8,500 67,951 $59,451
410 1/2 Cent Sales Tax Debt Service 0 0 0 97 $97
501 Water and Wastewater 12,000 40,078 12,000 63,125 $51,125
502 Water and Wastewater CIP 0 30,559 16,862 28,654 $11,792
503 Water and Wastewater Reserve 0 0 0 0 $0
504 Service Center Fund 0 0 40 0 ($40)
505 Water Impact Fees 0 6,150 0 11,747 $11,747
508 Wastewater Impact Fees 0 1,529 0 4,129 $4,129
509 W/WW Rate Stabilization 5,000 4,546 2,000 13,896 $11,896
510 Drainage 80 829 80 1,777 $1,697
511 Drainage CIP 0 2,785 0 9,076 $9,076
520 Recreation Classes 200 761 200 1,993 $1,793
521 Arbor Daze 0 6 0 40 $40
530 Softball World 0 0 0 0 $0
531 Softball World Debt 0 0 0 0 $0
532 TSSC Reserve 400 4,784 400 3,398 $2,998
540 Golf Course 0 320 0 1,153 $1,153
541 TSGC Debt Service 20 89 20 211 $191
542 Golf Course Reserve 950 3,986 1,500 6,961 $5,461
543 TSGC CIP Fund 0 660 0 1,611 $1,611
550 Parks At Texas Star 200 1,113 200 3,322 $3,122
552 TSSC CIP 0 6,423 2,000 7,710 $5,710
601 Equipment Replacement 3,000 10,854 3,000 25,596 $22,596
610 Health Insurance 8,000 15,334 8,000 24,779 $16,779
615 Risk Mgmt/Worker's Comp 2,200 7,649 2,200 15,269 $13,069
Total $85,458 $376,405 $119,922 $610,217 $490,295
Note that interest earnings are being earned on all investable City funds and great efforts are pursued to meet budgeted
levels. This report points out that the unaudited interest earnings for the end of the fiscal year have exceeded the
budgeted expectations due to higher reinvestment rates.
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 & C.D. Investments
as of 09/30/17
Pledging Safekeeping Pledged Sec.Security Market Value Inv. Value Difference
Institution Location Description Par Value (w/FDIC Ins.)@ Mat'y (P & I)Over/(Under)
Frost Bank Federal Reserve $2,629,417 $2,889,750 $1,200,584 $1,689,166
Bank US Treas Note Payroll $31,040
8/31/2019 $498,000 Operating $1,087,171
Federal Reserve Insurance $82,373
Bank US Treas Note
8/31/2019 $2,000,000
Federal Reserve
Bank FHLMC
4/1/2018 $87,193
Federal Reserve
Bank FHLMC
4/1/2018 $15,970
Federal Reserve
Bank FHLMC
4/1/2018 $28,254
Bank of Texas FDIC FDIC $0 $250,000 $41,000 $209,000
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, but generally
consists of types of securities in which the City would invest.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 9, 2018 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's investment portfolio.
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, 2017.This report meets all requirements specified by the Public Funds Investment Act
and the Policy of the City of Euless.
Investment Officers
______________________________________
Janina Jewell
Director of Finance
______________________________________
Jackie Theriot
Assistant Director of Finance
______________________________________
Diana L Ayala
Budget and Treasury Manager
______________________________________
Ross Fairclo
Accountant II
15
Minutes – 08/29/2017 4:00 pm Investment Committee Meeting
Members: Linda Martin, Mayor
Loretta Getchell, City Manager
Bob Freeman, Deputy City Manager
Janina Jewell, Director of Finance
Committee members present included Mayor Martin, Loretta Getchell, Bob Freeman, and Janina Jewell.
Non-committee present included Diana Ayala, Budget / Treasury Manager.
Jewell presented the Third Quarter Investment Report for Fiscal Year 2017. 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, 2017. She
noted that operating funds were invested with a weighted average maturity (WAM) ranging from 6 to 9
months, capital improvement projects (CIP) and special purpose funds were invested in accordance with
drawdown schedules of the projects and would not exceed the estimated project completion dates, debt
service funds were invested to assure adequate liquidity to cover the debt service obligations on the
required payment date, and finally that emergency, contingency, operating and debt service reserve funds
could not exceed five year investment timelines. Jewell stated that the presented investment portfolio
was in compliance with those strategies for the third quarter of Fiscal Year 2017. Jewell also pointed out
that there were no changes in strategy or funds during this quarter.
Jewell then referred the committee to page 3 where she noted significant increases and decreases in fund
investments since March 31, 2016. She specifically noted that the decrease in the General Fund was due
to normal operations with no significant revenues coming in, increase in Car Rental Tax and Water &
Wastewater Funds was due to normal collections and no major outflows, and Glade Parks TIRZ increase
was from participant collections realized that quarter. Numerous Construction Improvement Project (CIP)
Funds including street, Midtown Development, Water & Wastewater, and Texas Star Sports Complex all
had significant decreases due to construction progress. Finally the Water & Wastewater Rate Stabilization
Fund had an increase of over $800K due to both water and wastewater annual settle ups from Trinity
River Authority (TRA). Overall there was a $407K decrease since the last quarter. The total market value
of cash and investments was stated to be $79,653,912.
On page 4 Jewell pointed out that the portfolio was very liquid with 49% being invested in pools and 51%
in agencies and CD’s. The portfolio shows its diversity in investment types on this page. She noted that
the weighted average yield on the portfolio was 0.90% and was up 17 basis points from the last quarter
which was 0.73%. On page 5 she noted the diversity of the portfolio by maturity and specifically cited
that 95% of the portfolio had a maturity of less than one year. The liquidity strategy was followed per
committee guidance during current market conditions and to meet cash flow requirements for
construction projects, payroll, debt service, and other operating expenses. The WAM on the portfolio was
114.47 days which is well within the 365 day guideline in the investment policy. The prior quarter was
122.95 days. 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
16
investment portfolio as of June 30, 2017, of $79,905,550, which, if investments had been liquidated, the
City would have to show a gain of $48,450.
On page 8 Jewell noted the comparison of average 90 day T-Bills for the quarter compared to the portfolio
average maturity. The City’s portfolio weighted average yield continued to be below the benchmark rate
for June 2017. She pointed out the ability of the daily market to adjust to increasing rates quicker than a
longer investment term portfolio such as ours. 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, 2017.
Jewell then noted that the report was certified by City Investment Officers. The Mayor made a motion to
approve the quarterly investment report. Ms. Getchell seconded the motion and the vote was
unanimous.
Minutes for the June 13, 2017, Investment Committee Meeting were presented. Ms. Getchell motioned
to approve. The Mayor seconded the motion and the committee approved unanimously.
Jewell offered a handout of nation-wide building permit trends published by Vining Sparks that showed
building permits year over year up 4.1% but housing starts down year over year by 5.6%. The committee
discussed conditions in the local market.
The meeting was adjourned at 4:14pm.
17
APPENDICES
18
APPENDIX A
City of Euless
Change in Portfolio Values by Asset and Investment Fund
For the Quarter Ending September 30, 2017
Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in
Type Number Call Date Value 09/30/2017 06/30/2017 Market Value 09/30/2017 06/30/2017 Book Value
OPERATING FUNDS:
FHLMC 3134G7U25 10/27/2017 1,000,000 999,890 1,000,000 (110) 1,000,000 1,000,000 -
FFCB 3133EFNE3 11/06/2017 1,000,000 999,721 998,400 1,321 995,958 995,710 248
FFCB 3133EGGP4 12/20/2017 500,000 499,572 499,990 (418) 499,970 499,970 -
FNMA 3135G0RT2 12/20/2017 1,025,000 1,024,509 1,023,774 735 1,022,140 1,021,527 613
FFCB 3133EFKM8 10/20/2017 500,000 499,898 500,000 (102) 500,000 500,000 -
FHLB 3130A8W82 10/27/2017 735,000 734,868 734,816 51 734,449 734,449 -
FHLB 3130A6UK1 12/29/2017 1,000,000 1,000,060 1,000,000 60 1,000,000 1,000,000 -
FFCB 3133EGKR5 10/06/2017 1,000,000 999,954 1,000,000 (46) 1,000,000 1,000,000 -
FHLMC 3134G9VV6 01/12/2018 1,000,000 999,190 1,000,000 (810) 1,000,000 1,000,000 -
FHLB 3130AB2A3 03/27/2018 1,000,000 999,100 1,000,000 (900) 1,000,000 1,000,000 -
FNMA 3135G0J61-2 03/28/2018 1,000,000 998,490 998,570 (80) 996,425 995,996 429
FHLB 3130A5M63 04/25/2018 1,000,000 999,544 1,004,200 (4,656) 1,001,400 1,002,100 (700)
FFCB 3133EGG33 05/14/2018 1,000,000 996,799 998,360 (1,561) 996,082 995,809 273
FFCB 3133EGK79 04/23/2018 1,000,000 998,523 999,170 (647) 997,510 997,510 -
FHLB 313383FW6 06/18/2018 500,000 500,300 500,000 300 500,000 500,000 -
FHLMC 3134G8L98 02/26/2018 1,000,000 999,460 1,000,000 (540) 1,000,000 1,000,000 -
FNMA 3135G0TG8 02/08/2018 1,000,000 999,120 999,500 (380) 998,500 998,500 -
FHLB 3130A7CX1 03/19/2018 1,000,000 998,656 999,477 (821) 998,430 998,430 -
FHLB 3130AAQ84 04/27/2018 1,000,000 998,835 1,000,000 (1,165) 1,000,000 1,000,000 -
FFCB 3133EHGD9 05/21/2018 1,000,000 998,600 1,000,000 (1,400) 1,000,000 1,000,000 -
FHLB 3133807A9 05/30/2018 700,000 699,114 700,560 (1,446) 700,560 700,560 -
FNMA 3135G0L43 07/13/2018 500,000 498,130 498,360 (230) 495,187 494,760 428
FHLMC 3134G9X51 07/27/2018 1,000,000 997,320 998,490 (1,170) 996,225 995,889 336
FHLMC 3134GABQ6 08/15/2018 1,000,000 999,201 998,100 1,101 995,250 994,828 422
FHLB 3130AAUT3 02/23/2018 1,000,000 999,170 1,000,000 (830) 1,000,000 1,000,000 -
FHLMC 3137EADP1 03/07/2018 1,000,000 998,790 999,600 (810) 998,800 998,800 -
FHLB 3130A4Y71 06/15/2018 600,000 598,816 600,000 (1,184) 600,000 600,000 -
FFCB 3133EFSG3 03/14/2018 1,000,000 1,000,170 1,000,000 170 1,000,000 1,000,000 -
FNMA 3135G0WJ8 05/21/2018 1,000,000 999,034 998,480 554 996,200 995,874 326
FHLMC 3134G9AC1 10/26/2018 500,000 497,929 498,315 (386) 495,361 495,045 316
Purchases
FHLB 3130ABVJ2 07/24/2018 1,000,000 1,002,010 - 1,002,010 1,000,000 - 1,000,000
FHLB 3130A6UK1-2 12/29/2017 1,000,000 1,000,060 - 1,000,060 998,928 - 998,928
Maturities
FFCB 3133EFEU7 08/28/2017 1,000,000 - 1,003,190 (1,003,190) - 1,000,277 (1,000,277)
Total Operating:
Par total does not
include maturities 28,560,000$ 28,534,833$ 27,551,352$ 983,480$ 28,517,376$ 27,516,035$ 1,001,341$
19
APPENDIX A
City of Euless
Change in Portfolio Values by Asset and Investment Fund
For the Quarter Ending September 30, 2017
Inv.CUSIP Maturity/Par Market Value Market Value Change in Book Value Book Value Change in
Type Number Call Date Value 09/30/2017 06/30/2017 Market Value 09/30/2017 06/30/2017 Book Value
CIP FUNDS
FHLMC 3134G82C2 10/27/2017 1,250,000 1,249,813 1,249,688 125 1,249,063 1,249,063 -
FFCB 3133EFKM8 10/20/2017 500,000 499,898 500,000 (102) 500,000 500,000 -
FFCB 3133EGS48 03/06/2018 1,000,000 999,290 1,000,000 (710) 1,000,000 1,000,000 -
FHLMC 3134G3T26 05/14/2018 250,000 249,613 249,725 (112) 249,175 249,175 -
FHLB 3130AAXT0 03/09/2018 1,000,000 999,276 1,000,000 (724) 1,000,000 1,000,000 -
FAMCA 31315P6M6 04/09/2018 1,020,000 1,018,493 1,018,494 (1) 1,016,236 1,015,860 376
FHLMC 3134G74Q1 11/24/2017 1,000,000 999,760 999,160 600 996,940 996,940 -
FHLMC 3134G76G1 05/17/2018 800,000 798,736 798,736 - 796,668 796,323 345
Purchases
NONE
Maturities
FFCB 3133ECUU6 07/07/2017 1,000,000 - 1,002,890 (1,002,890) - 1,000,000 (1,000,000)
FNMA 3135G0MZ3 08/28/2017 1,000,000 - 1,000,000 (1,000,000) - 1,000,000 (1,000,000)
Total CIP:
Par total does not
include maturities 6,820,000$ 6,814,879$ 8,818,693$ (2,003,814)$ 6,808,081$ 8,807,360$ (1,999,279)$
RESERVE FUNDS:
FHLMC 3134G35A4 01/30/2018 500,000 500,422 503,150 (2,728) 500,675 501,350 (675)
FNMA 3135G0J61 03/28/2018 500,000 499,245 500,000 (755) 500,000 500,000 -
FAMCA 3132X0SU6 08/15/2018 1,000,000 999,030 1,000,000 (970) 1,000,000 1,000,000 -
Purchases
FHLB 3130AC5H3 02/28/2019 1,000,000 998,210 - 998,210 1,000,000 - 1,000,000
FHLB 3130ABZZ2 08/28/2019 500,000 499,875 - 499,875 500,000 - 500,000
B of T - C 58321J-AU-2 06/29/2018 41,000 41,038 - 41,038 41,000 - 41,000
Maturities
FFCB 3133EE5T3 08/03/2017 500,000 - 500,000 (500,000) - 500,000 (500,000)
FHLMC 3134G6G49 05/08/2017 1,000,000 - 1,000,640 (1,000,640) - 1,000,640 (1,000,640)
FFCB 3133EGE50 09/08/2017 1,000,000 - 1,000,000 (1,000,000) - 1,000,000 (1,000,000)
B of T - C 978208-AB-2 09/29/2017 47,000 - 47,000 (47,000) - 47,000 (47,000)
Total Reserve:
Par total does not
include maturities 3,541,000$ 3,537,820$ 4,550,790$ (1,012,970)$ 3,541,675$ 4,548,990$ (1,007,315)$
OVERNIGHT INVESTMENTS:
Beginning Bal Ending Bal
Texpool Balance 20,487,892 17,508,780 17,508,780 20,487,890 (2,979,110) 17,508,780 20,487,890 (2,979,110)
Purchases 5,771,385
Maturities 8,750,497
Texstar Balance 17,290,516 17,454,012 17,454,012 17,290,516 163,496 17,454,012 17,290,516 163,496
Purchases 8,685,138
Maturities 8,521,642
B of T EscrowBalance 1,206,309 1,166,441 1,166,441 1,206,309 (39,868) 1,166,441 1,206,309 (39,868)
Purchases 2,131
Maturities 41,999
B of T Balance - - - - - - - -
Purchases -
Maturities -
Total Overnight:36,129,233$ 36,129,233$ 38,984,715$ (2,855,482)$ 36,129,233$ 38,984,715$ (2,855,482)$
Total Portfolio
Par total does not
include maturities 75,050,233$ 75,016,764$ 79,905,550$ (4,888,786)$ 74,996,365$ 79,857,100$ (4,860,735)$
20
APPENDIX B
City of Euless
Schedule of Purchases
FY2017 4th Quarter
Cost Accrued
Inv.CUSIP Purchase Maturity Call Term Price Par Book Value Coupon Interest Seller Total Cost
Type Number Date Date Date (in days)Per $100 Value (Prin. Only)YTM Rate Purchased Inst.Discount Premium Fund of Investment
Texpool July 2,341,250$ 2,341,250$ Various 2,341,250$
Texpool Aug 1,941,250 1,941,250 Various 1,941,250
Texpool Sept 1,441,250 1,441,250 Various 1,441,250
Texstar July 2,804,031 2,804,031 Various 2,804,031
Texstar Aug 4,179,297 4,179,297 Various 4,179,297
Texstar Sept 1,655,314 1,655,314 Various 1,655,314
B of T Escrow S/T Cash Fund - - B of T - - 502 -
FHLB 3130ABVJ2 07/24/17 07/24/18 N/C 360 100.0000 1,000,000 1,000,000 1.25%1.250%0 Vining - - 610 1,000,000
FHLB 3130A6UK1-2 08/22/17 12/29/17 N/C 127 99.9643 1,000,000 999,643 1.11%1.010%1,487 FTN (357.20) - 240 1,001,130
FHLB 3130AC5H3 08/28/17 02/28/19 11/28/17 540 100.0000 1,000,000 1,000,000 1.38%1.375%0 Hilltop - - 240-R 1,000,000
FHLB 3130ABZZ2 08/28/17 08/28/19 02/28/18 720 100.0000 500,000 500,000 1.50%1.500%0 Samco - - 102 500,000
B of T - CD 58321J-AU-2 09/29/17 06/29/18 N/C 270 100.0000 41,000 41,000 1.40%1.400%0 B of T - CD - - 211 41,000
Totals 17,903,392$ 17,903,034$ 1,487$ (357)$ -$ 17,904,521$
B of T Escrow Dividends Reinvested
July 649 649 - B of T - - 502 649
Aug 724 724 - B of T - - 502 724
Sept 757 757 - B of T - - 502 757
Texpool Dividends Reinvested
July 16,892 16,892 - Texpool - - Various 16,892
Aug 15,532 15,532 - Texpool - - Various 15,532
Sept 15,211 15,211 - Texpool - - Various 15,211
Texstar Dividends Reinvested
July 14,562 14,562 - Texstar - - Various 14,562
Aug 16,255 16,255 - Texstar - - Various 16,255
Sept 15,679 15,679 - Texstar - - Various 15,679
Totals including Dividends 17,999,654$ 17,999,297$ 1,487$ (357)$ -$ 18,000,784$ 21
APPENDIX C
City of Euless
Schedule of Maturities
FY2017 4th Quarter
Term to Cost Accrued
Inv.CUSIP Purchase Maturity Call Mat'y Price Par Book Value Yield To Coupon Interest Seller Total Cost
Type Number Date Date Date (in days)Per $100 Value (Prin. Only)Maturity Rate Purchased Inst.Discount Premium Fund of Investment
Texpool July 4,077,791$ 4,077,791$ -$ -$ -$ Various 4,077,791$
Texpool Aug 3,322,706 3,322,706 - - - Various 3,322,706$
Texpool Sept 1,350,000 1,350,000 - - - Various 1,350,000$
Texstar July 2,527,031 2,527,031 - - - Various 2,527,031$
Texstar Aug 3,379,297 3,379,297 - - - Various 3,379,297$
Texstar Sept 2,615,314 2,615,314 - - - Various 2,615,314$
B of T Escrow July 0 0 502 -$
B of T Escrow Aug 0 0 - - - 502 -$
B of T Escrow Sept 41,999 41,999 502 41,999$
FFCB 3133ECUU6 02/06/17 07/07/17 N/C 151 100.2890 1,000,000 1,002,890 0.65%1.300%686.11$ Vining 2,890.00 322 1,006,466
FFCB 3133EE5T3 08/03/15 08/03/17 N/C 720 100.0000 500,000 500,000 0.75%0.750%-$ Samco - - 102 500,000
FHLMC 3134G6G49 05/08/15 08/08/17 N/C 810 100.0640 1,000,000 1,000,640 0.77%0.800%666.67$ Samco - 640.00 240-R 1,001,947
FFCB 3133EFEU7 10/07/15 08/28/17 N/C 681 100.3190 1,000,000 1,003,190 0.61%0.780%195.00$ Duncan - 3,190.00 610 1,006,575
FNMA 3135G0MZ3 04/28/17 08/28/17 N/C 120 100.0000 1,000,000 1,000,000 0.87%0.875%1,458.33$ Samco - - 322 1,001,458
FFCB 3133EGE50 11/08/16 09/08/17 N/C 300 100.0000 1,000,000 1,000,000 0.65%0.650%-$ Mutual - - 240-R 1,000,000
B of T - CD 978208-AB-2 09/30/16 09/29/17 N/C 359 100.0000 47,000 47,000 0.75%0.750%-$ B of T - CD - - 211 47,000
TOTAL 22,861,137$ 22,867,857$ 0.72%3,006.11 - 6,720.00 22,877,583$ 22
APPENDIX D
City of Euless
Investment Portfolio General Information
Investment Types and Institutions
Investment Types
Texstar Local Gov't Pool FNMA Fed. Nat'l Mort. Assoc.FHLMC Fed. Home Loan Mort. Corp
Texpool Local Gov't Pool FFCB Fed. Farm Credit Bank FAMCA Farmer Mac
B of T Bank of Texas FHLB Fed. Home Loan Bank CD Certificates of Deposit
TBILL Treasury Bill
Institution
Texstar TexSTAR Vining Vining Sparks Mutual Mutual Securities
Texpool TexPool Coastal Coastal Securities Hilltop Hilltop Securities
B of T Bank of Texas FTN First Tennessee Duncan Duncan Williams
Samco Samco Capital23
1
CITY OF EULESS
FINANCE POLICY
DATE: June 26, 1990 PREPARED BY:Finance Department
REV: January 234, 20187 REVIEWED BY:City Manager
RE: Investment Policy APPROVED BY:City Council
I. SCOPE
This investment policy applies to the investment activities of the Government of the City of
Euless, Texas. This policy serves to satisfy the statutory requirements of defining and
adopting a formal investment policy. The policy and strategy shall be reviewed annually by the
Investment Committee and any modifications must be approved by the Investment Committee
and forwarded to City Council for final approval. The City Council must adopt a written
instrument by rule, order, ordinance, or resolution stating that it has reviewed the investment
policy and investment strategies. Any changes made to either the policy or strategies will be
recorded in this written instrument. This Investment Policy, as approved, is in compliance with
Chapter 2256 of the Texas Government Code, also known as “The Public Funds Investment
Act.”
A. FUNDS INCLUDED All financial assets of all funds, including the General Fund and any
other accounts of the City not specifically excluded in these policy guidelines are included.
These funds, as well as funds that may be created from time-to-time, shall be administered
in accordance with the provisions of these policies. All funds will be pooled for investment
purposes. The strategy developed for this pooled fund group will address the varying
needs, goals, and objectives of each fund.
B. FUNDS EXCLUDED None.
II. OBJECTIVES AND STRATEGY
A. COMPLIANCE The City must adopt rules, designate staff to manage local funds, and
submit related reports as outlined by Chapter 2256 of the Texas Government Code, also
known as the Public Funds Investment Act (“PFIA”). All investments made on behalf of the
City must comply with the Public Funds Investment Act and all federal, state, and local
statutes, rules, or regulations. In conjunction with the comprehensive annual financial audit
and report, the City will perform, or have performed, a compliance audit of management
controls on investments and adherence to the City’s approved investment policy.
B. SAFETY OF PRINCIPAL The primary objective of the City’s investment activity is the
preservation of capital in the overall portfolio. The objective will be to mitigate credit risk
and interest rate risk.
1. Credit Risk – The City of Euless will minimize credit risk, which is the risk of loss due
to the failure of the security issuer or backer, by:
a. Limiting investments to the types of securities listed in Section V of this
investment policy.
24
2
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
3
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 compliment 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
26
4
established by the 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
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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.
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B. ELIGIBLE INVESTMENTS The following investments will be permitted by this policy as
defined by state and local law where applicable:
1. Obligation, including letters of credit, of the United States or its agencies and
instrumentalities, including the Federal Home Loan Banks (except for mortgage pass-
through securities);
2. Fully insured or collateralized* certificates of deposits issued by a broker or depository
institution that has its main office or branch in the State of Texas and is:
a. guaranteed or insured by the Federal Deposit Insurance Corporation or its
successor or the National Credit Union Share Insurance Fund or its successor;
b. secured by obligations that are described in the Tex. Gov’t. Code Sec. 2256.009(a)
that has a market vaue of not less that the principal amount of the certificates but
excluding those mortgage backed securities as described by Tex. Gov’t Code Sec.
2256.009(b); or
c. secured in accordinance with Chapter 2257 or in any other manner and amount
provided by law for deposits of the City of Euless
3. Fully collateralized* repurchase agreements having a defined termination date.
(“Repurchase agreement” means a simultaneous agreement to buy, hold for a specified
time, and sell back at a future date obligations described by Section V. A. of this Policy,
at a market value at the time the funds are disbursed of not less than the principal
amount of the funds disbursed. The term refers to direct security repurchase
agreement and a reverse security repurchase agreement.) These investments must be
in accordance with a master repurchase agreement approved by the Investment
Committee;*(see definition of collateral, Section VII).
4. Investment Pools as authorized by Texas Government Code 2256with a weighted
average maturity of 90 days or less. 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 accountingcreated to function as a money market mutual
fund 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 created to function
as a money market mutual fund 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 and percentage
breakdown of securities in which the pool is invested;
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b. the maximum average dollar-weighted maturity allowed, based on the stated
maturity date, of the pool;
c. the maximum stated maturity date any investment security within the portfolio
has;
d. the objectives of the pool;
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 secodary 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; and
l. the performance history of the pool, including yield, average dollar weighted
maturities, and expense ratios; and
l.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 maturites of more than one year;
4. the book value versus the market value of the pool’s portfolio, using
amortized cost valuation;
5. the size of the pool;
6. the number of participants in the pool;
7. the custodian bank that is safekeeping the assets of the pool;
8. a listing of daily transaction activity of the entity participating in the pool
9. the yield and expense ratio of the pool, including a statement regarding
how yield is calculated;
10. the portfolio managers of the pool; and
11. any changes or addenda to the offering circular.
5. No load money market mutual fund, registered with and regulated by the Securities
Exchange Commission, which complies with federal Secruities and Exchange
Commission Rule 2a-7 has a dollar weighted average portfolio maturity of 90 days or
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less whose assets consist exclusively of the assets described in Sections V. A-C of this
Policy and whose investment objectives includes the maintenance of a stable net asset
value of $1 for each share as defined in Texas Government Code Sec. 2256.014. Each
fund must provide the City with a prospectus and other information required by the
Securites Exchange Act of 1934 or the Investment Advisor Act of 1940.
6. Other such securities or obligations as approved by City Council upon recommendation
of the Investment Committee. No securities will be purchased which have a potential
for 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 Contigency, 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.
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3. The Investment Committee shall establish strategies and guidelines for the percentage
of the total portfolio that may be invested in securities other than repurchase
agreements, treasury bills, or insured and collateralized* certificates of deposit.
4. The Investment Committee shall conduct a quarterly review of these guidelines, and
shall evaluate the probability of market and default risk in various investment sectors as
part of its considerations. *(see definition of collateral, Section VII)
5. The investment officer will obtain at least three competitive bids from approved brokers
on our broker/dealer list before making an investment transaction. In the event of a tie,
the choice will be made by a cumulative and objective manner.
E. ARBITRAGE Although steps have been taken to distribute bond issuance annually in
amounts not to exceed $5 million dollar increments, if this process does not occur, the City
of Euless will fall under arbitrage regulations.
The Tax Reform Act of 1986 provided limitations restricting the City’s investing of tax-
exempt General Obligation Bond proceeds and debt service income. New arbitrage rebate
provisions require that the City compute earnings on investment from each issue of bonds
on an annual basis to determine if a rebate is required. To determine the City’s arbitrage
position, the City is required to perform specific calculations relative to the actual yield
earned on the investment of the funds and the yield that could have been earned if the
funds had been invested at a rate equal to the yield on the bonds sold by the City. The
rebate provision states that periodically (not less than once every five years, and not later
than sixty days after maturity of the bonds), the City is required to pay the U.S. Treasury a
rebate of excess earnings based on the City being in a positive arbitrage position. The Tax
Reform restrictions require extreme precision in the monitoring and recording facets of
investments as a whole, and particularly as relates to yields and computations so as to
insure compliance. Failure to comply can dictate that the bonds become taxable,
retroactively from the date of issuance.
The City’s investment position relative to the new arbitrage restrictions is the continued
pursuit of maximizing yield on applicable investments while insuring the safety of capital
and liquidity. It is a fiscally sound position to continue maximization of yield and rebate
excess earnings, if necessary.
VI. SELECTION OF BANKS AND DEALERS
A. BIDDING PROCESS Periodically, a Depository shall be selected through the City’s
banking services procurement process, which shall include a formal request for proposal
(RFP) issued in compliance with applicable State law. The contract can be extended as
per the RFP specifications. In selecting depositories, the credit worthiness of institutions
shall be considered, and the Director of Finance shall conduct a comprehensive review of
prospective depositories credit characteristics and financial history.
B. INSURABILITY Banks and Savings & Loan Associations seeking to establish eligibility for
the City’s competitive investment program, shall submit financial statements, evidence of
federal insurance and other information as required by the Director of Finance.
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C. AUTHORIZED BROKER/DEALERS A list will be maintained of “primary” dealears 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 orgaization thatperson
who 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 indepenent 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:
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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;
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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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CITY OF EULESS
FINANCE POLICY
DATE: June 26, 1990 PREPARED BY:Finance Department
REV: January 23, 2018 REVIEWED BY:City Manager
RE: Investment Policy APPROVED BY:City Council
I. SCOPE
This investment policy applies to the investment activities of the Government of the City of
Euless, Texas. This policy serves to satisfy the statutory requirements of defining and
adopting a formal investment policy. The policy and strategy shall be reviewed annually by the
Investment Committee and any modifications must be approved by the Investment Committee
and forwarded to City Council for final approval. The City Council must adopt a written
instrument by rule, order, ordinance, or resolution stating that it has reviewed the investment
policy and investment strategies. Any changes made to either the policy or strategies will be
recorded in this written instrument. This Investment Policy, as approved, is in compliance with
Chapter 2256 of the Texas Government Code, also known as “The Public Funds Investment
Act.”
A. FUNDS INCLUDED All financial assets of all funds, including the General Fund and any
other accounts of the City not specifically excluded in these policy guidelines are included.
These funds, as well as funds that may be created from time-to-time, shall be administered
in accordance with the provisions of these policies. All funds will be pooled for investment
purposes. The strategy developed for this pooled fund group will address the varying
needs, goals, and objectives of each fund.
B. FUNDS EXCLUDED None.
II. OBJECTIVES AND STRATEGY
A. COMPLIANCE The City must adopt rules, designate staff to manage local funds, and
submit related reports as outlined by Chapter 2256 of the Texas Government Code, also
known as the Public Funds Investment Act (“PFIA”). All investments made on behalf of the
City must comply with the Public Funds Investment Act and all federal, state, and local
statutes, rules, or regulations. In conjunction with the comprehensive annual financial audit
and report, the City will perform, or have performed, a compliance audit of management
controls on investments and adherence to the City’s approved investment policy.
B. SAFETY OF PRINCIPAL The primary objective of the City’s investment activity is the
preservation of capital in the overall portfolio. The objective will be to mitigate credit risk
and interest rate risk.
1. Credit Risk – The City of Euless will minimize credit risk, which is the risk of loss due
to the failure of the security issuer or backer, by:
a. Limiting investments to the types of securities listed in Section V of this
investment policy.
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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 compliment 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
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established by the 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
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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.
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B. ELIGIBLE INVESTMENTS The following investments will be permitted by this policy as
defined by state and local law where applicable:
1. Obligation, including letters of credit, of the United States or its agencies and
instrumentalities, including the Federal Home Loan Banks (except for mortgage pass-
through securities);
2. Fully insured or collateralized* certificates of deposits issued by a broker or depository
institution that has its main office or branch in the State of Texas and is:
a. guaranteed or insured by the Federal Deposit Insurance Corporation or its
successor or the National Credit Union Share Insurance Fund or its successor;
b. secured by obligations that are described in the Tex. Gov’t. Code Sec. 2256.009(a)
that has a market vaue of not less that the principal amount of the certificates but
excluding those mortgage backed securities as described by Tex. Gov’t Code Sec.
2256.009(b); or
c. secured in accordinance with Chapter 2257 or in any other manner and amount
provided by law for deposits of the City of Euless
3. Fully collateralized* repurchase agreements having a defined termination date.
(“Repurchase agreement” means a simultaneous agreement to buy, hold for a specified
time, and sell back at a future date obligations described by Section V. A. of this Policy,
at a market value at the time the funds are disbursed of not less than the principal
amount of the funds disbursed. The term refers to direct security repurchase
agreement and a reverse security repurchase agreement.) These investments must be
in accordance with a master repurchase agreement approved by the Investment
Committee;*(see definition of collateral, Section VII).
4. Investment Pools as authorized by Texas Government Code 2256. The pool must
enter into a contract approved (by resolution) by the City Council to provide services to
the City. The pool must be continuously rated no lower than AAA or AAA-m or at an
equivalent rating by at least one nationally recognized rating service. A public funds
investment pool that uses amortized cost or fair value accounting must mark its
portfolio to market daily and, to the extent reasonably possible, stabilize at a $1 net
asset value, when rounded and expressed to two decimal places. In addition, a public
funds investment pool that uses amortized cost shall report yield to its investors in
accordance with regulations of the Federal Securities and Exchange Commission. The
pool must provide to the investment officer or authorized representative of the entity an
offering circular or other similar disclosure instrument that contains, at a minimum, the
following information:
a. the types of investments in which money is allowed to be invested;
b. the maximum average dollar-weighted maturity allowed, based on the stated
maturity date, of the pool;
c. the maximum stated maturity date any investment security within the portfolio
has;
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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 secodary 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 maturites of more than one year;
4. the book value versus the market value of the pool’s portfolio, using
amortized cost valuation;
5. the size of the pool;
6. the number of participants in the pool;
7. the custodian bank that is safekeeping the assets of the pool;
8. a listing of daily transaction activity of the entity participating in the pool
9. the yield and expense ratio of the pool, including a statement regarding
how yield is calculated;
10. the portfolio managers of the pool; and
11. any changes or addenda to the offering circular.
5. No load money market mutual fund, registered with and regulated by the Securities
Exchange Commission, which complies with federal Secruities 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
Securites Exchange Act of 1934 or the Investment Advisor Act of 1940.
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6. Other such securities or obligations as approved by City Council upon recommendation
of the Investment Committee. No securities will be purchased which have a potential
for 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 Contigency, 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.
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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. In the event of a tie,
the choice will be made by a cumulative and objective manner.
E. ARBITRAGE Although steps have been taken to distribute bond issuance annually in
amounts not to exceed $5 million dollar increments, if this process does not occur, the City
of Euless will fall under arbitrage regulations.
The Tax Reform Act of 1986 provided limitations restricting the City’s investing of tax-
exempt General Obligation Bond proceeds and debt service income. New arbitrage rebate
provisions require that the City compute earnings on investment from each issue of bonds
on an annual basis to determine if a rebate is required. To determine the City’s arbitrage
position, the City is required to perform specific calculations relative to the actual yield
earned on the investment of the funds and the yield that could have been earned if the
funds had been invested at a rate equal to the yield on the bonds sold by the City. The
rebate provision states that periodically (not less than once every five years, and not later
than sixty days after maturity of the bonds), the City is required to pay the U.S. Treasury a
rebate of excess earnings based on the City being in a positive arbitrage position. The Tax
Reform restrictions require extreme precision in the monitoring and recording facets of
investments as a whole, and particularly as relates to yields and computations so as to
insure compliance. Failure to comply can dictate that the bonds become taxable,
retroactively from the date of issuance.
The City’s investment position relative to the new arbitrage restrictions is the continued
pursuit of maximizing yield on applicable investments while insuring the safety of capital
and liquidity. It is a fiscally sound position to continue maximization of yield and rebate
excess earnings, if necessary.
VI. SELECTION OF BANKS AND DEALERS
A. BIDDING PROCESS Periodically, a Depository shall be selected through the City’s
banking services procurement process, which shall include a formal request for proposal
(RFP) issued in compliance with applicable State law. The contract can be extended as
per the RFP specifications. In selecting depositories, the credit worthiness of institutions
shall be considered, and the Director of Finance shall conduct a comprehensive review of
prospective depositories credit characteristics and financial history.
B. INSURABILITY Banks and Savings & Loan Associations seeking to establish eligibility for
the City’s competitive investment program, shall submit financial statements, evidence of
federal insurance and other information as required by the Director of Finance.
C. AUTHORIZED BROKER/DEALERS A list will be maintained of “primary” dealears 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
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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 orgaization 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 indepenent 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.
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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;
E. Avoidance of physical delivery securities;
F. Clear delegation of authority;
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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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Hilltop Securities - Linda Callaway
Vining Sparks - Mike Smith
Duncan Williams - Patrick Boyer/Doug Boyer
Samco Capital Markets - Robert Phillips
First Tennessee - Zach Brewer
Mutual Securities Inc. - Michael Swan
Financial Northeaster Securities, Inc. - Samuel E. Vaughan
Broker/Dealer Review and Approval
The City list of six brokers currently it includes First Tennessee, Hilltop Securities, Vining
Sparks, Duncan Williams, Samco Capital, and Mutual Securities.
The public funds investment act and the City's investment policy require staff to review the
broker/dealer list annually. At this time, it is recommend that the committee approve the
following list of broker dealers. The recommended broker/dealer list for 2018 includes: