(A) Securities dealers, investment consultants and banks.
(1) Competitive bidding of all investments among securities dealers will assure that the town receives the highest yield on its investments. The town shall seek to conduct its investment transactions with several competing, reputable investment securities dealers and brokers to protect principal while achieving full advantage of the market.
(2) It is the policy of the town to purchase securities only from those institutions on the town’s approved list of broker/dealers, investment consultants, and banks. All securities dealers must be registered with and certified by the Texas State Securities Commission, National Association of Security Dealers (NASD) and Securities and Exchange Commission (SEC) and must execute the Securities Broker/Dealer Certification.
(3) The Director of Finance shall evaluate the soundness of financial institutions, broker/dealers and consultants to the extent he/she considers necessary. Investigation may include review of rating agency reports, review of call reports and analysis of management, profitability, capitalization and asset quality. Financial institutions, broker/dealers and consultants with whom the town wishes to conduct business shall provide the financial data requested by the town.
(4) The Director of Finance shall review the information and decide on the soundness of a financial institution, broker/dealer or consultant before adding the institution to the list of those with whom the town does business.
(5) An institution must be approved by the Director of Finance, and confirmed by the Town Council, and added to the approved list before any business may be transacted with the town. The Director of Finance shall also be able to limit the number of authorized securities dealers/banks/consultants doing business with the town as required.
(6) All banks will be federal reserve members approved by the Director of Finance and the Town Council. No investment will be placed with savings and loan institutions.
(7) Repurchase agreements will be done only with primary dealers.
(8) The master repurchase agreement of the Public Securities Association (PSA) shall be executed between the town and any primary dealer with which the town transacts repurchase agreements.
(9) Regardless of reporting status, all securities purchased shall require same day delivery, on settlement date, to the town’s safekeeping agent on a delivery versus payment (DVP) basis. By doing so, town funds are not released until the town has received, through the Federal Reserve wire, the securities purchased.
(B) Investment type. Market risk shall be minimized by diversification of investment types. To allow efficient and effective placement of proceeds from bond sales, the limit on repurchase agreements may be exceeded for a maximum of five days following the receipt of bond proceeds.
(C) Investment strategies. The town maintains the following portfolios which will utilize the specific investment strategy considerations designed to address the unique characteristics of the pooled fund groups or separate investment assets represented in the portfolios.
(1) Debt service funds.
(a) The town will maintain one debt service fund for the municipal building bi-annual payments. Additional debt service funds will be established as required by ordinance or law. These funds will be operated as separately invested assets.
(b) Investment strategies for debt service funds shall have as the primary objective the assurance of investment liquidity adequate to cover the debt service obligation on the required payment date.
(2) Reserve funds. The town will maintain one reserve fund per their contractual agreement with the Community Resource Group, Inc. Additional reserve funds will be established as required by ordinance or law. Investment of reserve funds are controlled by their ordinance, resolution or indenture, and federal and state law. Reserve funds will be invested using a more conservative approach than the current standard investment strategy when arbitrage rebate rules require refunding excess earnings. All excess earnings received will be segregated to allow a proper determination of interest income to be used in the arbitrage calculation.
(Res. 2009-01, passed 3-7-2009)