(A) Acceptable investment instruments:
(1) Obligations of the United States or its agencies and instrumentalities;
(2) Direct obligations of the state or its agencies;
(3) Other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of the state or the United States or their respective agencies and instrumentalities;
(4) Certificates of deposit issued by state and national banks domiciled in the state and collateralized or fully insured by FDIC or U.S. government securities;
(5) Direct repurchase agreements with primary security dealer having a defined termination date, and secured by U.S. government or federal agency securities, provided that the ownership of collateral for the repurchase agreement is transferred to the town, and deposited with the town’s safekeeping agent for the duration of the contract and a signed master repurchase agreement has been executed with the counterparty; and
(6) SEC-registered, no-load money market mutual funds with a dollar-weighted average portfolio maturity of 90 days or less whose assets consist exclusively of U.S. government securities and whose investment objectives include seeking to maintain a stable net asset value of $1 per share. Investment in mutual funds shall be limited to a maximum often percent of the town’s operating funds.
(B) The Public Funds Investment Act (Tex. Gov’t Code, Chapter 2256) authorizes municipalities and other political subdivisions of the state to invest their public funds jointly through investment pools that complies with the requirements of the Public Funds Investment Act (Tex. Gov’t Code, Chapter 2256).
(1) A decision to participate in an investment pool requires a Participation or Interlocal Agreement to be executed with the State or Interlocal Authority for the investment pool.
(2) Participation in these investment pools is approved subject to the following conditions:
(a) Execution of a participation or interlocal agreement;
(b) The investment pool maintains a stable asset value as defined in the Public Funds Investment Act (Tex. Gov’t Code, Chapter 2256);
(c) The investment pool maintains an AAA rating by one of the rating agencies;
(d) The investment pool’s maximum average dollar weighted maturity does not exceed 90 days; and
(e) The investment pool’s continued compliance with the remaining provisions of the Public Funds Investment Act (Tex. Gov’t Code, Chapter 2256).
(C) The Investment Officers will, in general, maintain a passive investment portfolio in which securities will be purchased with the intent to own the securities until maturity. Safety of principal with due consideration of liquidity is the foremost objective of this investment policy. Each investment transaction shall seek to avoid capital losses from security defaults or erosion of market value.
(D) The town will practice competitive bidding orally, by telephone, electronically or in any combination of these methods when purchasing an investment to help strengthen the investment process. All investments, other than the placement of funds in investment pools, will be competitively bid placed with vendors guaranteeing the highest rate of return. The town reserves the right to reject the most financially favorable bid if it is potentially disruptive to its investment strategy.
(E) When appropriate, actual risk of default shall be minimized by adequate collateralization. Market risk shall be minimized by diversification. Diversification shall be directed towards investment instruments, varying maturities, multiple investment pools and securities dealers.
(Res. 2009-01, passed 3-7-2009)