HomeMy WebLinkAboutO-1992-1802
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ORDINANCE NO. 1802
AN ORDINANCE ADOPTING THE CITY OF LA PORTE INVESTMENT POLICY DATED
JANUARY 13, .1992~ PROVIDING A SEVERABILITY CLAUSE~ CONTAINING A
REPEALING CLAUSE~ FINDING COMPLIANCE WITH THE OPEN MEETINGS LAW~ AND
PROVIDING AN EFFECTIVE DATE HEREOF.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LA PORTE:
Section 1. The City Council of the City of La Porte hereby
adopts the "City of La Porte Investment Policy" dated January 13,
1992, a true and correct copy of which is attached to this Ordinance
as Exhibit "A", incorporated by reference herein, and made a part
hereof for all purposes.
Section 2. The "City of La Porte Investment policy" is
intended to comply in all respects with the Public Funds Investment
Act of 1987, codified as Article 842a-2, Public Funds Investment
Act, of the Texas Revised Civil Statutes. The "City of La Porte
Investment policy" shall hereafter be deemed to be amended to
embrace any subsequent amendments to the said Public Funds
Investment Act of 1987, so as to conform to the terms and provisions
of said Act.
Section 3. If any section, sentence, phrase, clause, or any
part of any section, sentence, phrase, or clause, of this ordinance
or the City of La Porte Investment Policy Manual hereby adopted,
shall for any reason, be held invalid, such invalidity shall not
affect the remaining portions of this Ordinance, or said Investment
policy Manual, and it is hereby declared to be the intention of this
City Council to have passed each section, sentence, phrase or
clause, or part thereof, irrespective of the fact that any other
section, sentence, phrase or clause, or part thereof, may be
declared invalid.
Section 4.
The City Council officially finds, determines,
recites and declares that a sufficient written notice of the date,
hour, place and subject of this meeting of the City Council was
posted at a p.1ace convenient to the public at the City Hall of the
City for the time required by law preceding this meeting, as
required by the Open Meetings Law, Article 6252-17, Texas Revised
Civil Statutes Annotated: and that this meeting has been open to the
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public as required by law at all times during which this ordinance
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ORDINANCE NO. 1802
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and the subject matter thereof has been discussed, considered and
formally acted upon. The City Council further ratifies, approves
and confirms such written notice and the contents and posting
thereof.
Section 5. This Ordinance shall be effective from and after
its passage and approval, and it is so ordered.
PASSED AND APPROVED, this 13th day of January, 1992.
A;1~~
Cherie Black
City Secretary
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nox W. Askins
City Attorney
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City of La Porte, Texas
Investment Policy
Adopted by the City Council
of the City of La Porte
on January 13, 1992, by
Ordinance No. 1802
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City of La Porte, Texas
Robert T. Herrera
City Manager
Jeff Litchfield, CPA
Director of Finance
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I. SCOPE
This investment policy applies to the investment activities of the government of
the City of La Porte, Texas.
FUNDS INCLUDED All financial assets of all funds managed by the City,
including but not limited to receipts of Tax Revenues, Charges for Services,
Bond Proceeds, Interest Incomes, Loans and Funds received by the City
where the City performs a custodial function.
II. OBJECTIVES
SAFETY The primary objective of the City's investment activity is the
preservation of capital in the overall portfolio. Each investment transaction
shall seek first to ensure that capital losses are avoided, whether they be from
securities defaults or erosion of market value.
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.
YIELD The City's cash management portfolio shall be designed with the
objective of regularly exceeding the average rate of return on the three month
U.S. Treasury Bill. The investment program shall seek to augment returns
above this threshold consistent with risk limitations identified herein and
prudent investment principles.
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. The governing body recognizes that in a diversified
portfolio, occasional measured losses due to market volatility are inevitable,
and must be considered within the context of the overall portfolio's investment
return, provided that adequate diversification has been implemented.
III. OVERSIGHT RESPONSIBILITY
Oversight Responsibility for the investment activity of the City of La Porte shall
rest with the Audit Committee and the City Manager.
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IV. RESPONSIBILITY AND CONTROL
DELEGATION Management responsibility for the investment program is
hereby delegated to the Director of Finance, who shall establish written
procedures for the operation of the investment program, consistent with this
investment policy. Such procedures shall include explicit delegation of
authority to persons responsible for investment transactions.
SUBORDINATES All persons involved in investment activities will be referred
to as "Investment Officials". No person shall engage in an investment
transaction except as provided under the terms of this policy and the
procedures 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 Subordinate Investment Officials.
QUARTERLY REPORTS The Director of Finance shall submit quarterly an
investment report that summarizes recent market conditions, economic
developments and anticipated investment conditions. The report shall
summarize the investment strategies employed in the most recent quarter,
describe the portfolio in terms of investment securities, maturities, risk
characteristics and other features. The report shall explain the quarter's total
investment return and compare the return to budgetary expectations. The
report shall include an appendix that discloses all transactions during the
quarter.
ANNUAL REPORTS Within 90 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 of returns, and shall suggest improvements that
might be made in the investment program.
PRUDENCE Investments shall be made with the exercise of due care, 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 own capital as well as the probable income to be
derived.
CONFLICTS OF INTEREST Officers and employees involved in the investment
process shall refrain from personal business activity that could conflict with
proper execution of the investment program, or which could impair their ability
to make impartial investment decisions.
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DISCLOSURE Employees and Investment Officials shall disclose to the City
Manager any material financial interests in financial institutions that conduct
business with the City of La Porte, and shall further disclose any large financial
or investment positions that could be related to the performance of the City's
portfolio. Employees and Investment Officers shall subordinate their personal
investment transactions to those of this jurisdiction, particularly with regard to
the timing of purchases and sales.
V. INVESTMENTS
ACTIVE PORTFOLIO MANAGEMENT The City intends to pursue active versus
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.
ELIGIBLE INVESTMENTS Assets of funds of the government of the City of La
Porte may be invested in:
A. obligations of the United States or its agencies and instrumentalities;
B. direct obligations of the State of Texas or its agencies;
C. other obligations, the principal of and interest on which are
unconditionally guaranteed or insured by the State of Texas or the United
States or its agencies and instrumentalities;
D. obligations of states, agencies, counties, cities, and other political
subdivisions of any state having been rated as to investment quality by a
nationally recognized investment rating firm and having received a rating
of not less than A or its equivalent;
E. certificates of deposit issued by state and national banks domiciled in this
state that are:
1. guaranteed or insured by the Federal Deposit Insurance Corporation,
or its successor; or
2. secured by obligations that are described by subsections A-D of this
section, which are intended to include all direct agency or
instrumentality issued mortgage backed securities rated AM by a
national recognized rating agency, or by the Public Funds Investment
Act of 1987, codified as Art. 842a-2, Revised Civil Statutes and that
have a market value of not less than the principal amount of the
certificates;
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F. fully collateralized direct repurchase agreements having a defined
termination date, secured by obligations described by subsection A-D of
this section, pledged with a third party selected or approved by the
political entity, and placed through a primary government securities
dealer, as defined by the Federal Reserve, or a bank domiciled in this
state.
G. certificates of deposit issued by savings and loans associations domiciled
in this state that are:
1. guaranteed or insured by the Federal Savings and Loan Insurance
Corporation, or its successor; or
2. secured by obligations that are described by subsections A-D of this
section, which are intended to include all direct agency or
instrumentality issued mortgage backed securities rated AAA by a
national recognized rating agency, or by the Public Funds Investment
Act of 1987, codified as Art. 842a-2, Revised Civil Statutes and that
have a market value of not less than the principal amount of the
certificates;
H. prime domestic banker's acceptances;
I. commercial paper with a stated maturity of 270 days or less from the
date of its issuance that is rated not less than A-1, P-1, or the equivalent
by at least two nationally recognized credit rating agencies;
J. SEC registered, no-load money market mutual fund with a dollar
weighted average portfolio maturity of 120 days or less whose assets
consist exclusively of the obligations that are described by subsection A-
D of this section and whose investment objectives include seeking to
maintain a stable net asset value of $1 per share;
K. local government investment funds or pools, authorized by the state for
municipality participation;
L. other investment instruments that are approved by the state for
municipality participation.
PROCUREMENT Investments of subsections A-J of this section may be made
only after competitive bids are solicited from at least three sources.
LENGTH OF INVESTMENTS Except for an amount equal to the Revenue Debt
Service Reserve Funds plus 50% of the expected ending working capital
balances for the operating funds, the City of La Porte shall invest in
instruments whose maturities do not exceed two (2) years at the time of
purchase.
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DIVERSIFICATION It is the policy of the City of La Porte 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
Audit Committee.
In establishing specific diversification strategies, the following general policies
and constraints sh~1I apply:
A. Portfolio maturities shall be staggered in a way that protects interest
income from the volatility of interest rates and that avoids undue
concentration of assets in a specific maturity sector. Securities shall be
selected which provide for stability of income and reasonable liquidity.
B. The Audit Committee shall establish strategies and guidelines for the
percentage of the total portfolio that may be invested in securities other
than repurchase agreements, treasury bill and notes, or insured and
collateralized certificates of deposits. The Audit Committee shall conduct
a semi-annual review of these guidelines, and shall evaluate the
probability of market and default risk in various investment sectors as
part of its considerations.
VI. SELECTION OF BANKS AND DEALERS
BIDDING PROCESS Depositories shall be selected through the City's banking
services procurement process, which shall include a formal request for
proposal (RFP) issued every two (2) years. 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.
INSURABILITY Banks and Savings & Loans Associations seeking to establish
eligibility for the City's competitive certificate of deposit purchase program,
shall submit financial statements, evidence of Federal insurance and other
information as required by the Director of Finance.
PRIMARY DEALERS AND APPROVED LIST For brokers and dealers of
government securities, the Audit Committee shall select only those dealers
reporting to the Market Reports Division of the Federal Reserve Bank of New
York, also known as "primary government securities dealers"" unless a
comprehensive credit and capitalization analysis reveals that other firms are
adequately financed to conduct public business. All brokers and dealers must
be authorized by the Audit Committee. Investment Officers shall not conduct
business with any firm with whom public entities have sustained losses on
investments or whom have been removed from the approved list by the Audit
Committee.
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VII. SAFEKEEPING AND CUSTODY
INSURANCE OR COLLATERAL All deposits and investments of City funds
other than direct purchases of U.S. Treasuries or U.S. Agencies shall be
secured by pledged collateral with a market value equal to no less than 100%
of the deposits or investments less an amount insured by the FDIC or FSLlC.
Evidence of the pledged collateral shall be maintained by the Director of
Finance or a third party financial institution. .Repurchase agreements shall be
documented by specific agreement noting the collateral pledged in each
agreement. Collateral shall be reviewed monthly to assure the market value of
the securities pledged equals or exceeds the related bank balances.
SAFEKEEPING AGREEMENT All safekeeping arrangements shall be in
accordance with a Safekeeping Agreement approved by the Audit Committee
which clearly defines the procedural steps for gaining access to the collateral
should the City of La Porte determine that the City's funds are in jeopardy.
The safekeeping institution, or Trustee, shall be the Federal Reserve Bank or
an institution not affiliated with the firm pledging the collateral. The
safekeeping agreement shall include the signatures of the City of La Porte, the
firm pledging the collateral, and the Trustee.
COLLATERAL DEFINED The City of La Porte shall accept only the following
securities as collateral:
A. FDIC and FSLlC insurance coverage;
B. United States Treasuries and Agencies;
C. Texas State, City, County, School or Road District bonds with a
remaining maturity of ten (10) years or less with rating from a nationally
recognized investment rating firm and having received a rating of not less
than A or its equivalent;
D. Other securities as approved by the Audit Committee.
SUBJECT TO AUDIT All collateral shall be subject to inspection and audit by
the Director of Finance or the City's independent auditors.
DELIVERY VERSUS PAYMENT Treasury Bills, Notes & Bonds and
Government Agencies' securities shall be purchased using the delivery versus
payment method. That is, funds shall not be wired or paid until verification has
been made that the collateral was received by the Trustee. The collateral shall
be held in the name of the City or held on behalf of the City. The Trustee's
records shall assure the notation of the City's ownership of or explicit claim on
the securities. The original copy of all safekeeping receipts shall be delivered
to the City.
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VIII. MANAGEMENT AND INTERNAL CONTROLS
The Director of Finance 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 bearer-form securities.
F. Clear delegation of authority.
G. Documentation on investment bidding events.
H. Written conformation of telephone transactions.
I. Reconcilement 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 as sell
computations.
O. Review of financial condition of all brokers, dealers and depository
institutions.
P. Staying informed about market conditions, changes, and trends that
require adjustments in investment strategies.
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Art. 842a BONDS-COUNTY, MUNICIPAL, ETC.
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sociations chartered under the laws of Texas or by Federal Savings and Loan Asso ' -
ti domiciled in Texas, then such mortgages, bonds, consolidated bonds issued <ler
the no Credit Act of 1971, P.L, 92-181, and as thereafter amended, debenture notes,
coIlate trust certifiCif.es or other such evidences of indebtedness, "insured counts,"
so issue nd so secured, or so acquired ,or insured, shall be regarded fo mvestment
purposes by . surance companies as "Texas Securities," within the mean' g of the laws
of Texas gove 'ng such investments.. , ,. .. .
The provisions this Act shall be cumulative of all other pr Isions of the "Civil
Statutes of the Sta f Texas, affecting the investment of funds moneys by fiduciar-
ies, guardians, admim ators, trustees and receivers, buildi and loan associations,
savings departments of ti ks, incorporated and doing busin s under the laws of Texas,
commercial banks, savings anks and trust companies, artered and doing business
under the laws of Texas, insu nce companies of any 'd and character, chartered and
transacting business under the I s of Texas, and al orporate creatures, organized and
doing business under the laws of as. . , .
. It is he~eby declared to, be the legisl 've inte enact a separate. provision of this Act"
independent of all other provisions, and e ct that any phrase, sentence, or clause of
this Act shall be declared unconstitutional all in no event affect the validity of any of
the provisions hereof. ._ . . . .
Amended by Acts 1973, 63rd Leg., p. 125
112 U.S.C.A. f 1701 et seq.
z 12 U.S.a.A. f 1724 et seq:
. 12 u.~.a.A. f 2~1 ~t Beq.
CrosB ~rerenc:e~ .
School Depository Act, B
by this article as approv. securities, Bee V.T.
C.A. Education Code, .73(4)(B).
Art. 842a-l.
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ligations wholly or portly insured by United States r state, invest-
ment in
CraBB He encel
Cer' cates of title for motor vehicles. disposi-
tion nd investment of fees, Bee art. 6687-1,
g (b);' .
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.. Art. 842a-2. Public Funds Investment Act
" Short Title .
.Sec. 1. :rhis Act may be cited as th~.Public Funds. Investme~t Act of 1987.
Authorized Investments
T~t of subsec. (a) as amended by Acts 1989, 71st Leg.; ch.. 39, 11 and. Acts
1989, 71st Leg., ch. 628, 11 . .
Sec. 2. (a) An incorporated city or town; a county, a public school district, a district or
authority' created under Article III, Section 52(b)(1) or (2), or Article XVI, Section 59, of
the Texas Constitution, an institUtion of J:ligher education as defined by Se.ction 61.003 of
the EduCation Code, a hospital district, a fresh water supply district, or any .nonprofit
corporation acting on behalf.of any of those entities may; in accordance' witlt this Act,
purchase, seIl, and invest its funds and funds under its control in the following:
, (1) obligations of the United States or itS agencies imd instrumentalities;' .. .
. (2) direct obligations' of the State of Texas or its agencies; . .. .
. (3) other obligations, the principal of and interest on which are unconditionally guaran-
teed or insured by the State of Texas or the United States or its agencies and instrumen-
talities;.~:,'; ,: - !. .. :'." .... . . . . .
, (4) obligations of states, agencies, counties, cities, and other political subdivisions of
any state having. been rated as to investment quality by a nationally recognized invest-
ment rating: fu-m and having. received a rating of not less than A. or its equivalent;
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BONDS-COUNTY, MUNICIPAL, ETC. Art. 842a-2
Title 22
,(5) certificates of deposit issued by state and national ban~ domiciled in this state that
are:
(A) guaranteed or insured by the Federal Deposit Insurance Corporation, or.its succes-
sor; or. . ...., '", ., , .. ' . _ , ' "
, (B) secured by'obligations that are described: by Subdivisions (1)-{4) of this subsection,
which are intended to include all direcf1ederal agency or instrumentality issued mortgage
backed securities that have a market value of not less than the principal amount of the
certificates or in any other manner and amount provided by law for deposits of the
investing entities;
(6) certificates of deposit issued by savings and loan associations domiciled in this state
that are: .
(A) guaranteed or insured by the Federal Savings and Loan Insurance Corporation, or
its successor; or', '
.. (B) secured by obligations that are described'by Subdivisions (1)-{4) of this subsection,
which are intended to include all direct federal agency or instrumentality issued mortgage
backed securities that have a market value of not less than the principal amount of the
certificates or in any other manner and amount provided by law for deposits of the
. . investing entities;
, (7) prime domestic bankers' acceptances;
(8) commercial paper with a stated maturity of 270 days or less from the date of its
issuance that either: ' .,
(A) is rated not less than A-I, P-I, or the equivalent by at least two nationally
recognized credit rating agencies; or . ,
(B) is rated at least A-I, P-l, or the equivalent by at least one nationally recognized
credit rating agency and is fully secured by an irrevocable letter of credit issued by a
bank organized and existing under the laws of the United States or any state thereof;
and
(9) fully collateralized repurchase agreements having a defined termination date, se-
cured by obligations described by Subdivision (1) of this subsection, pledged with a third
party selected or approved. by the political entity, and placed through a primary govern-
ment securities dealer, as defined by the Federal Reserve, or a bank domiciled in this
state. . . ' .' . . '.' ' ,
Text ofsubsec. (a) as amended by Acts 1989, 71st Leg., ch. 693, 9 .4, and Acts
1989, 71st Leg., ch. 750, 9 1 . .
~.. Sec. 2.- (a) An incorporated city or town,: a county, a public school district, an
institution of higher education as defined by,Section 61.003 of the Education Code, any
nonprofit corporation or public funds investment pool created under The Interlocal
Cooperation Act (Article 4413(32c), Vernon's Texas Civil Statutes) acting on behalf of any
of those entities, or a navigation district organized under Article III, Section 52, or Article
XVI, Section 59, of the Texas Constitution may, in accordance with this Act, purchase,
sell, and invest its funds and fund~ under its control in ,the following:' .
(1) obligations of the United States or its agencies arid instrumentalities; .
(2) direct obligations of the State of Texas or its agencies;' , .. . ,
(3) other obligations, the principal of an~ interest on which are"~con~ition~lly gUaran-
teed or insl:lred by the State of Texas or the' United States; . .: ... .
(4) obligations of states, agencies, counties, cities" an~ other political subdivisions of
any state having been rated. as to investment quality by a nationally recognized invest-
ment rating firm and having .received a rating of no~ less than A or its equivalent;
(5) certificates of deposit issued by state and national banks domi.ciled i~ this s~te that
are: .' ,
',' fA) guaranteed or insured by the Federai Deposit Insurance Corporation, or Its succes-
sor; or. . '.' I ." : . . 1'" t".. . ~: .~'.
(B) secured by obligations that are described by Subdivisions (I)-{4) of this subsection,
which are intended to include all direct agency or..instrumentality issued mortgage backed
securities rated AAA by a nationally recognized rating agency, or by Chapter 726, Acts of
305.
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Art. 8428-2 BOND~OUNTY, MUNICIPAL, ETC.
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the 67th Legislature, Regular Session, 1981 (Article 2529b-l, Vernon's Texas Civil
Statutes), alid that have a market value of not less than the principal amount of the
certificates; . . . " .
(6) fully collateralized direct repurchase agreements having a defined te~ina'tion date,
secured by obligations described by Subdivision (1) of this subsection, pledged with a third
party selected or approved by the political entity, and placed through a primary govern-
ment securities dealer, as defined by the Federal Reserve, or a bank domiciled in this
state; and " '.
(7) certificates of deposit issued by savings and loan associations domiciled in this state
that are: . .
(A) guaranteed or insured by the Federal Savings and Loan Insurance Corporation or
its successor; or" , " . ,. .
(B) secured by obligations that are described by Subdivisions (1)-(4) of this subsection,
which are intended to include all direct federal agency or instrumentality issued mortgage
backed securities that have a market value of not less than the principal amount of the
certificates. .
(b) In addition to investment in obligations, certificates, or agreements described in
Subsection (a) of this section, bond proceeds of an incorporated city. or town, a couqty, a
public school district, or a navigation district, or local revenue. of an institution of higher
education, may be invested. in common trust funds or comparable investment devices
owned or administered by banks domiciled in this state and whose assets consist
exclusively of all or a combination of the obligations described by Subsection (a) of this
section. Common trust funds of banks domiciled in this. state may be. used. if they:
(1) are available; -, . .
(2) comply with the provmions of the Internal Revenue Code of 1986 and applicable
federal regulations governing the investment of bond proceeds; and
(3) meet the cash flow requirements and the investment needs of the political subdivi-
sion or institution.
(c) In this section: .
(1) "Bond proceeds" includes but is not limited to proceeds from the sale of bonds and
reserves and funds maintained for debt service purposes. ,
(2) "Prime domestic bankers'" acceptances" means a bankers' acceptance with a stated
maturity of 270 days or less from the date of its issuance that will be, in accordance with
its tems, liquidated in full at maturity, that is eligible for collateral for borrowing from a
Federal Reserve Bank, and that is accepted by a bank organized and existing under the
laws of the United States or any state, the short-term obligations of which (or of a bank
holding company of which the bank is the largest subsidiary) are rated at least A-I, P-l,
or the equivalent by at least one nationally recognized credit. rating agency.
(3) "Repurchase agreement" means a simultaneous agreement to buy, hold for a
specified time, and then sell back at a future date, obligations described by.Subsection
(a)(1) of this section, the principal and interest of which are guaranteed by the United
States or any of its agencies, in market value of not less than the principal amount of the
funds disbursed. The term includes direct security ~epurchase agreements and. reverse
. security repurchase agreements.. ' . . ','
(d) In addition to the"'investments described by Subsection (a) of this section, an entity
listed in that subsection may, in accordance with this A~t, purchase, sell, and invest its
funds and funds under its control in an SEC-registered, no-load money market mutual
fund with a dollar-weighted average portfolio maturity of 120 days or less whose assets
consist exclusively of the obligations that are described by Subsection (8) of this section
and whose investment objectives include seeking" to maintain a stable net asset-value of $1
per share. No entity listed in Subsection (a) of this section is authorized by this Act to
invest in the aggregate more than 80 percent of its monthly average fund balance,
excluding bond proceeds, in money market mutual funds described in this subsection or to
invest ibl funds or funds under its control, excluding bond proc~eds,. in anyone money
market mutual fund in an amount that exceeds 10 percent of the total assebl of the
money market mutual fund.
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.BONDS-COUNTY, MUNICIPAL, ETC.
Title 22
Art~ 842a-2'
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. Sec. 3. (a) Investments under Section 2(bf of this Act may be made only after
competitive bids are solicited from at least three banks as provided by this section. The
bids may be solieited orally. , ' , .
(b) An incorporated city or town or a public school district must attempt to solicit bids
initially from banks located within its boundaries. If there are not three banks available
for the investments within the city's, t9~n's, or public school district's boundaries, the. '
city, town, or public school district may solicit bids from banks located within the county
or counties in which the city, town, or public school district is located in addition to those
banks, if any, that are located within the boundaries of the city, town, or public school
district. If there are not three banks available for the investments within the boundaries
of the city, town, or public school district, or of the county or counties in which it is
located, the city, town, ot: public school district may solicit bids from any bank within the
state in addition to those banks,. if any, that are located within the boundaries of the city,
town, public schQol district, county, or counties. . ,
(c) A county must attempt to solicit bids initially from 'banks located within its
boundaries. If there are not three banks available for the investments within the county,
the county may solicit bids from any bank within the state in addition to those banks, if.
any, that are located within the boundaries of the county.
(d) An institution of higher education as defined by Section 61.003 of the Education
Code or a navigation distriet must solicit bids from at least three banks located within the
state.
(e) A nonprofit corporation acting on behalf of an incorporated city or town, a county, a
public school district, or an institution of higher education as defined by Section 61.003 of
the Education Code" shall follow the procedures identified in Subsection (b), (c), or (d) of
this section, as applicable to the entity on behalf of which the nonprofit corporation .is
acting. , . .",' .
(f) If a bank has notified a governmental entity or nonprofit corporation that it is
unable or unwilling to bid for investments under Section 2(b) of this Act, the governmen-
tal entity or nonprofit corporation that receives the notification may .presume that the
bank is unable or unwilling to bid for the investments until the bank notifies the
governmental entity or nonprofit corporation otherwise in writing.
Standard of Care
Sec. 4. Investments shall be made with judgment and care, under circumstances then
prevailing, that persons of prudence, discretion, and intelligence exercise in the manage-
ment 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.
Written Policie8
Sec. 5. (a) Investments shall be .made in accordance with written policies approved by'
the governing body. The investment policies must address liquidity, diversification,
safety of principal, yield, maturity, and quality and capability of investment management,
with primary emphasis on safety and liquidity.
(b) A governing body may provide in its written policies that bids for ce~(icates of
deposit be solicited orally, in writtog, electronically, or in any combination of those
methods.
Nonapplication to Retirement Fund8
Sec. 6. This Act does not apply to the investment of funds under the control of'a
public retirement system, as defined by Section 12.001(2), Title 110B, Revised Statutes..
. Renumbered 1I5 V.T.C,A. Government Code, t 802.002(2).
Authority 18 Additional ,
See, 7. The authority granted by this Act is in addition to that granted by other law.
Acts 1987, 70th Leg" ch. 889, n 1 to 7, elf. Aug. 31, 1987. Sec, 2 amended by Acts 1989, 71lt Leg.,
ch. 628, i 1, elf. Aug. 28, 1989: Sec. 2(a) amended by Acts 1989, 71lt Leg" ch, 39, i I, eff. April 26,
1989; Acts 1989, 7lst Leg" ch. 693, i 4, elf. Aug. 28, 1989; Acts 1989, 71lt Leg., ch. 750, f I, efr.
307
BONDS-COUNTY, MUNICIPAL, ETC.
Title 22
June 16, 1989; Sec. 2(b) amended by Acts 1989, 7lst Leg., ch, 760, f 1, eff. June 16, 1989; See. Sed)
amended by Acts 1989, 71Bt Leg., ch. 760; f 2, eff. June 16, 1989; See. 6 amended by Acts 1989, 71Bt
Leg., ch. 628, f 2, eft. Aug. 28, 1989; Sec. 2(d) amended by Acts 1991, 72nd Leg., ch. 7S2, f 1, eff.
Aug. 26, 1991. ' .
Historical and Statutory Notes Gaines County solid waste management, in-
Acts 1989, 7lst Leg" ch. 628, f 6 provides: vestments and reinvestments as specified by this
article, see art. 4477-7j, . ,
"This Act takes effect immediately, except Navigation districts, investment of bond pro-
that Subsection (d), Section 2, Public Funds In- ceeds, see V.T.C.A. Water Code, f 60,347.
vestment Act of 1987 (Article 842a-2, Vernon's Political subdivisions group benefits program,
Texas Civil Statutes), as .added by Section 1 of investments, see V.T.C.A. Local Government
this Act, takes effect: (1) immediately with re- Code, fi 172.009,
spect to institutions of higher education; and (2) Public Funds Collateral Act, see, art. 2529d.
only if the consl:jtutional amendment proposed . Texas High-Speed Rail Authority, investment
by the 7Ist Legislature, Regular Session,1989; of funds, see art. 6674v.2, f 20.
[S.J.R. 69J authorizing local governments to in-
vest their funds as provided by law is approved
by the votera with respect to all other entities,
If that amendment is not approved, Subsection
(d) of Section 2 has no effect for entities other
than institutions of higher education."
Acts 1989, 7lst Leg., S.J.R. 59 was approved
by the voters at the Nov. 7, 1989 election, "
.
Art. 8428-2
Title of Act:
An Act relating to the investment of public
funds. Acts 1987, 70th Leg., ch. 889. '
Cross References
College and university funds, investment ac-
cording to this act, see V.T.C.A. Education Code,
f 51.003(b). ., . .
County funds, investments, see V.T.C.A. Local
Government Code, f 116.112, .
Crime control and prevention districts, boards
may not invest funds otherwise than as specified
by this article or art. 836 or 837, see art. 2370c-
4, fi 6.09.
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Notes of Decisions
Delegation of authority 2
Validity. 1
1. Validity
Insofar as this article purports to authorize
political corporations and political subdivisions to
invest public funds in bank-oriented money mar-
ket mutual funds or other securities of private
entities, it conflicts with article III, section 52, of
the Texas Constitution. Op.Atty.Gen,1988, No.
JM-976,
. ,
2. Delegation of authority
The Interlocal Cooperation Act, article
4413(32c), V.T,C.S" does not authorize local
governments to delegate to another entity their
authority to make investments; nor does article
842a-2, V.T.C.S., or article 4413(84c), authorize
such delegation. Op.Atty.Gen.1988, No, JM-932.
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308