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HomeMy WebLinkAbout09-28-15 Fiscal Affairs Committee Meeting CHUCK ENGELKEN, CHAIRCHUCK ENGELKEN, CHAIRJAY MARTIN Councilmember, District 2Councilmember, District 2Alternate Member 1Alternate Member 1 DARYL LEONARDDOTTIE KAMINSKIDOTTIE KAMINSKI Councilmember, District 3Councilmember, District 3Alternate Member 2Alternate Member 2 VACANT Councilmember, District 4Councilmember, District 4 CITY OF LA PORTE FISCAL AFFAIRS COMMITTEECITY OF LA PORTE FISCAL AFFAIRS COMMITTEE MEETING AGENDAMEETING AGENDA Notice is hereby given of a meeting of the City of La Porte Fiscal Affairs Committee to be held on Notice is hereby given of a meeting of the City of La Porte Fiscal Affairs Committee to be held on September 28, 2015September 28, 2015, in the City Hall Council Chambers, 604 W. Fairmont Parkway, La Porte, Texas, , in the City Hall Council Chambers, 604 W. Fairmont Parkway, La Porte, Texas, beginning at 5:00 PM regarding the items of business according to the agenda listed below:beginning at 5:00 PM regarding the items of business according to the agenda listed below: 1.Call to orderCall to order 2.Consider approval or other action regarding minutes of the August 24, 2015, meeting of the Fiscal Consider approval or other action regarding minutes of the August 24, 2015, meeting of the Fiscal Affairs Committee Affairs Committee --P. FogartyP. Fogarty 3.Review and discuss a proposed Resolution of the City of La Porte, Texas, approving General Fund Review and discuss a proposed Resolution of the City of La Porte, Texas, approving General Fund Commitments of Fund Balance for Fiscal Year 2014Commitments of Fund Balance for Fiscal Year 2014--2015 2015 --M. DolbyM. Dolby 4.Receive and review the City of La Porte Investment Policy Receive and review the City of La Porte Investment Policy --S. WolnyS. Wolny 5.Discussion and possible action regarding Banking Services Request for Proposals Discussion and possible action regarding Banking Services Request for Proposals --S. WolnyS. Wolny 6.6.Set date for next meeting Set date for next meeting Set date for next meeting Set date for next meeting ————M. DolbyM. DolbyM. DolbyM. Dolby   7.Administrative Reports Administrative Reports ——C. AlexanderC. Alexander   8.Committee Comments regarding matters appearing on agenda âCommittee Comments regarding matters appearing on agenda  ””Committee members Engelken, Committee members Engelken, Leonard, and MartinLeonard, and Martin 9.AdjournAdjourn In compliance with the Americans with Disabilities Act, the City of La Porte will provide for reasonable In compliance with the Americans with Disabilities Act, the City of La Porte will provide for reasonable accommodations for persons attending public meetings. To better serve attendees, requests should be received accommodations for persons attending public meetings. To better serve attendees, requests should be received 24 hours prior to the meetings. Please contact Patrice Fogarty, City Secretary, at 281.470.5019.24 hours prior to the meetings. Please contact Patrice Fogarty, City Secretary, at 281.470.5019. CERTIFICATIONCERTIFICATION I certify that a copy of the September 28, 2015, agenda of items to be considered by the Fiscal Affairs Committee was I certify that a copy of the September 28, 2015, agenda of items to be considered by the Fiscal Affairs Committee was placed on the City Hall Bulletin Board on September 22, 2015.placed on the City Hall Bulletin Board on September 22, 2015.               Patrice Fogarty, City SecretaryPatrice Fogarty, City Secretary   CHUCK ENGELKEN, CHAIR JAY MARTIN Councilmember District 2 Councilmember District 5 Committee Member Alternate Member 1 DARYL LEONARD DOTTIE KAMINSKI Councilmember District 3 Councilmember At Large B Committee Member Alternate Member 2 VACANT Councilmember Committee Member MINUTES OF MEETING OF FISCAL AFFAIRS COMMITTEE AUGUST 24, 2015 August 24, 2015, at 5:00 p.m., The Fiscal Affairs Committee met on in the La Porte City Hall Council Chambers, 604 West Fairmont Parkway, La Porte, Texas, to consider the following items of business: 1.Call to Order Chairman Chuck Engelken called the meeting to order at 5:02 p.m. Present were: Alternate Member 1 Jay Martin, and Alternate Member 2 Dottie Kaminski. Also present: City Secretary Patrice Fogarty, City Manager Corby Alexander, Finance Director Michael Dolby, Purchasing Manager Cherell Daeumer and Controller Phyllis Rinehart. Committee Member Daryl Leonard was absent. 2.Consider approval of Minutes of the July 27, 2015, meeting of the Fiscal Affairs Committee P. Fogarty Alternate Member 1 Jay Martin moved to approve the minutes of the January 26, 2015, meeting. MOTION PASSED. Alternate Member 2 Dottie Kaminski seconded. Ayes: Chairman Engelken, Alternate Member 1 Martin and Alternate Member 2 Kaminski Nays: None Absent: Committee Member Leonard 3.Receive and review Third Quarter (FY2015) Investment Report M. Dolby Finance Director Michael Dolby presented the Second Quarter (FY2015) Investment Report. 4.Receive and review month of March, April and May (FY2015) Purchasing Card Expenditures M. Dolby Purchasing Manager Cherell Daeumer presented the month of December (FY2014); January (FY2015) and February (FY2015) Purchasing Card Expenditures. Chairman Engelken questioned what caused the rise in local expenditures in the month of February. Ms. Daeumer responded the rise was due to the purchase of tires. 5.Set date for next meeting M. Dolby The Committee set September 28, 2015, at 5:00 p.m., as the date and time for the next meeting. Page 1 of 2 August 24, 2015, Fiscal Affairs Committee Minutes Page 2 of 2 August 24, 2015, Fiscal Affairs Committee Minutes 6.Administrative ReportsC. Alexander There were no reports. 7.Committee Comments Matters appearing on agenda; Recognition of community members, city employees, and upcoming events; Inquiry of staff regarding specific factual information or existing policy. Chairman Engelken requested Staff confirm sales taxes are coming to the City from the Spencer Cleaners and the Texaco Station located on Spencer Highway near Luella. Michael Dolby said he would provide the Committee with an update. 8.Adjourn There being no further business, the meeting was adjourned at 5:17 p.m. Respectfully submitted, ________________________________ Patrice Fogarty, City Secretary Passed and approved on the _____ day of ___________, 2015. ________________________________ Chairman Chuck Engelken Page 3 of 2 August 24, 2015, Fiscal Affairs Committee Minutes REQUEST FOR FISCAL AFFAIRS COMMITTEE AGENDA ITEMREQUEST FOR FISCAL AFFAIRS COMMITTEE AGENDA ITEM September 28, 2015September 28, 2015AppropriationAppropriation Agenda Date Requested:Agenda Date Requested: Source of Funds:Source of Funds: Michael DolbyMichael Dolby Requested By:Requested By: Account Number:Account Number: FinanceFinance Department: Amount Budgeted:Amount Budgeted: Report:Resolution:Resolution:Ordinance:Ordinance: Amount Requested:Amount Requested: Exhibits: Budgeted Item:Budgeted Item:YESYESNONO 1. Resolution Resolution SUMMARY & RECOMMENDATIONSSUMMARY & RECOMMENDATIONS   GASB 54 has a requirement that must be completed prior to the end of the fiscal year to commit fund balance of GASB 54 has a requirement that must be completed prior to the end of the fiscal year to commit fund balance of the General Fund. The General Fund fund balance can only be committed for a specific purpose by formal action the General Fund. The General Fund fund balance can only be committed for a specific purpose by formal action of the City council. Committed fund balance does not lapse at yearof the City council. Committed fund balance does not lapse at year--end.  The formal action required to commit end.  The formal action required to commit fund balance shall be by resolution. The $5,000,000 committed in fiscal year 2014 for utility improvements will fund balance shall be by resolution. The $5,000,000 committed in fiscal year 2014 for utility improvements will remain committed and will be used in the 2015remain committed and will be used in the 2015--2016 budget. $2,000,000 will be committed as of September 30, 2016 budget. $2,000,000 will be committed as of September 30, 2015 from the General Fund for Health Insurance2015 from the General Fund for Health Insurance The total committed funds as of September 30, 2015 will be $7,000,000.The total committed funds as of September 30, 2015 will be $7,000,000.                                                                     Utility Improvements                         $5,000,000                                  Utility Improvements                         $5,000,000                                   Health Insurance                                 $2,000,000                                  Health Insurance                                 $2,000,000 Action Required by the Fiscal Affairs Committee:Action Required by the Fiscal Affairs Committee: Approve resolution.Approve resolution. Approved for Fiscal Affairs Committee AgendaApproved for Fiscal Affairs Committee Agenda Corby D. Alexander, City ManagerCorby D. Alexander, City ManagerDateDate REQUEST FOR FISCAL AFFAIRS COMMITTEE AGENDA ITEMREQUEST FOR FISCAL AFFAIRS COMMITTEE AGENDA ITEM September 28, 2015September 28, 2015AppropriationAppropriation Agenda Date Requested:Agenda Date Requested: Source of Funds:Source of Funds: Shelley Wolny, TreasurerShelley Wolny, Treasurer Requested By:Requested By: Account Number:Account Number: FinanceFinance Department: Amount Budgeted:Amount Budgeted: Report:Resolution:Resolution:Ordinance:Ordinance: Amount Requested:Amount Requested: Exhibits: Budgeted Item:Budgeted Item:YESYESNONO 1. Investment Policy Investment Policy SUMMARY & RECOMMENDATIONSSUMMARY & RECOMMENDATIONS The City Council of the City of La Porte originally adopted an Investment Policy on January 13, 1992, by The City Council of the City of La Porte originally adopted an Investment Policy on January 13, 1992, by Ordinance No. 1802.  The Investment Policy governs how the City will invest the CityOrdinance No. 1802.  The Investment Policy governs how the City will invest the City’’s funds and outlines s funds and outlines administrative and legal guidelines for the Investment Officers to follow for the preservation of capital.  The Public administrative and legal guidelines for the Investment Officers to follow for the preservation of capital.  The Public Funds Investment Act requires that a City must present the Investment Policy to Council annually for review or Funds Investment Act requires that a City must present the Investment Policy to Council annually for review or amendment.  The policy was last amended on November 11, 2014.amendment.  The policy was last amended on November 11, 2014.   No changes to the policy are recommended at this time.No changes to the policy are recommended at this time. Action Required by the Fiscal Affairs Committee:Action Required by the Fiscal Affairs Committee: Receive/review the City of La Porte Investment Policy.Receive/review the City of La Porte Investment Policy. Approved for Fiscal Affairs Committee AgendaApproved for Fiscal Affairs Committee Agenda Corby D. Alexander, City ManagerCorby D. Alexander, City ManagerCorby D. Alexander, City ManagerCorby D. Alexander, City ManagerDateDateDateDate 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 Amended: November 1995 August 1997 City of La Porte, Texas November 2000 Michael G. Dolby, CPA February 2003 Director of Finance February 2005 October 2005 Shelley Wolny July 2009 Treasurer May 2011 October 2013 October 2014 POLICY I. It is the policy of the City of La Porte, Texas (the "City") to administer and invest its funds in a manner which will preserve the principal and maintain the liquidity through limitations and diversification while meeting the daily cash flow requirements of the City. The City will invest all available funds in conformance with legal and administrative guidelines, seeking to optimize interest earnings to the maximum extent possible. The purpose of this investment policyis to comply with all statutes governing the investment of the City’s funds,including the Public Funds Investment Act, Chapter 2256 of the Texas Government Code (the “ Act”), which requires the City to adopt a written investment policy regarding the investment of its funds and funds under its control. The Investment Policy addresses the methods, procedures and practices that must be exercised to ensure effective and judicious fiscal management of the City’s funds. SCOPE II. The City will strive toearn a return on funds invested at the highest investment return possible after taking in consideration the primary goals of preservation of principal and liquidity of funds invested, consistent with the policy objectives described below. This investment policy applies to the investment activities of the government of the City of La Porte, Texas. FUNDS INCLUDED The City’s funds, which are pooled together and constitute the investment portfolio, include all financialassets of all funds managed by the City, including but not limited to receipts of tax revenues, charges for services, bondproceeds, interest incomes, loans and funds received by the City where the City performs a custodial function.These funds are accounted for in the City’s Comprehensive Annual Financial Report (CAFR) and include: General Fund Special Revenue Funds Debt Service Funds Capital Projects Funds Enterprise Funds Internal Service Funds Investment income will be allocated to the various funds basedon their respective participation and in accordance with generally accepted accounting principles. OBJECTIVES III. SAFETYThe primary objective of the City's investment activity is the preservation of capital and the protection of investment principalin the overall portfolio. Each investment transaction shall seek first to ensure that capital losses are avoided, whether they are from securities defaults or erosion of market value.The City will strive to minimize credit risk by limiting investments to the safest types of investments, prequalifying the financial institutions and broker/dealers with which the City conducts business, and diversify the investment portfolio so that potential losses on individual issuers will be minimized. To minimize interest rate risk, the City will ladder the portfolio and match investments with future cash requirements and invest operating funds in shorter, more liquid securities and investments. 1 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.Because all possible cash demands cannot be anticipated, a portion of the portfolio will be invested in shares of money market mutual funds or local government investment pools that offer same day liquidity. PUBLIC TRUSTAll 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. YIELD(Optimization of Interest Earnings)The City's cash management portfolio shall be designed with the objective of regularly meetingor exceeding the average rate of return on U.S. Treasury Bills at a maturity level comparable to the City’sweighted average maturity in days. The investment program shall seek to augment returns above this threshold consistent with risk limitations identified herein and prudent investment principles. INVESTMENT STRATEGYThe City maintains a commingled portfolio for investment purposes which incorporates the specific uses and the unique characteristics of the funds in the portfolio. The investment strategy has as its primary objective assurance that anticipated liabilities are matched and adequate investment liquidity provided. The City shall pursue conservative portfolio management strategy. This may be accomplished by creating a laddered maturity structure with some extension for yield enhancement.The maximum dollar weighted average maturity of 2 years or less will be calculated using the stated final maturity date of each security. RESPONSIBILITY AND CONTROL IV. Oversight Responsibility for the investment activity of the City of La Porte shall rest with the Fiscal Affairs Committee and the City Manager.They will designate investment officer(s), receive and review quarterly reporting, approve and provide for investment officer training, approve broker/dealers, and review and adopt the Investment Policy and Strategy at least annually. DELEGATIONManagement 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. SUBORDINATESAll persons involved in investment activities will be referred to as "Investment Officers." 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 Officers.All investment officers,including the Director of Finance,will demonstrate competence in the execution of the city’s investments. All Investment Officers will insure compliance with the investment program with ongoing training and evaluation by management. 2 PRUDENCEInvestments shall be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion and intelligencewouldexercise in the management of the person’sown affairs, not for speculation,but for investment,considering the probable safety of capital and the probable income to be derived. Investment Officers acting in accordance with written procedures and this 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 the liquidity and the sale of securities are carried out in accordance with the terms of this policy. IMDEMNIFICATIONThe Director of Finance and the Investment Officer, acting in accordance with written procedures and exercising due diligence, shall not be held personally responsible for a specific investment’s credit risk or market price changes, provided that these deviations are reported immediately and the appropriate action is taken to control adverse developments. ETHICS DISCLOSURE AND CONFLICTS OF INTERESTOfficers 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 which could impair their ability to make impartial investment decisions. Employees and Investment Officers shall disclose to the City Manager any material interests in financial institutions that conduct business with the City of La Porte, and shall further disclose any personal financial or investment positions that could be related to the performance of the City's investment portfolio. Employees and Investment Officers shall refrain from undertaking personal investment transactions with the same individual with which business is conducted on behalf of the City of La Porte. An Investment Officer of the City of La Porte who has a personal business relationship with an organization seeking to sell an investment to the City of La Porte shall file a statement disclosing that personal business interest. An Investment Officer who is related within thesecond degree by affinity or consanguinity to an individual seeking to sell an investment to the City of La Porte shall file a statement disclosing that relationship. A statement required under subsection 2256.005(i) of the Act must be filed with the TexasEthics Commission and the governing body of the City of La Porte. TRAININGInvestment Officers shall attend 10 hours of investment training within 12 months after taking office or assuming duties, and 10 hours every succeeding two yearsthat begins on the first day of the fiscal year, which is October 1 st, and consists of the two consecutive fiscal years after that date. The investments training shall be provided from an independent source approved by the Fiscal Affairs Committeeto insure the quality and capability of investment management in . compliance with the ActFor the purposes of this policy, an "independent source" is defined as a professional organization, an institute of higher learning or any other sponsor other than a Business Organization with whom the City may engage in investment transactions. Training shall be in accordance with the Act and shall include education in investment controls, security risks, strategy risks, market risks, diversification of investment portfolio, and compliance with statutes governing the investment of public funds. REPORTING V. Investment reports shall be prepared quarterly and be signed and submitted by the Investment Officers, in a timely manner. These reports will be submitted to the CityManager and City Council. This report shall describe in detail the investment position of the City, disclose the market value and book value of each fund group as well as each separate investment, and state the maturity date of each security and accrued interest for the reporting period. The report shall 3 include all information as required by Section 2256.023 of the Act. It must also express compliance of the portfolio to the investment strategy contained in the City’s Investment Policy and the Act. MONITORINGThe market price of each investment shall be obtained monthly from a source such as the Wall Street Journal newspaper,the City’s custodial bank,a reputable brokerage firm or security pricing service and reported on the investment reports.Investments with minimum rating requirements will be monitored for rate changes and liquidation of such investments will be determined at such time. Monitoring credit ratings –The Investment Officer shall monitor, on no less than a monthly basis, the credit rating on all authorized investments in the portfolio based upon independent information from a nationally recognized rating agency. If any security falls below the minimum rating required by Policy, the Investment Officer shall notify the City Manager of the loss of rating, and liquidate the investment within one week. Monitoring FDIC Status for Mergers and Acquisitions –The Investment Officer shall monitor, on no less than a weekly basis, the status and ownership of all banks issuing brokered CDs owned by the City based upon information from the FDIC. If any bank has been acquired or merged with another bank in which brokered CDs are owned, the Investment Officer or Advisor shall immediately liquidate any brokered CD which places the City above the FDIC insurance level. INVESTMENTS VI. ACTIVE PORTFOLIO MANAGEMENTThe 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. AUTHORIZED INVESTMENTSThe following are authorized investments for the City andall are authorized and further defined by the Act. Only those investments listed in this section are authorized. A.Obligations, including letters of credit, of the United States or its agencies and instrumentalities;direct obligations of this state or its agencies and instrumentalities;other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, this state or the United States or their respective agencies and instrumentalities, including obligations that are fully guaranteed or insured by the Federal Deposit Insurance Corporation or by the explicit full faith and credit of the United States; andobligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent.(Section 2256.009 (a)of the Act) The following are not authorized investments under Section2256.009 (b)of the Act: obligations whose payment represents the coupon payment on the outstanding principal balance of the underlying mortgage-backed security collateral and pays not principal (Interest only bonded); obligations whose payment represents the principal stream of cash from the underlying mortgage-backed security collateral and pays no interest (Principal only bonds); 4 collateralized mortgage obligations that have a final stated maturity date of greater than10 years; and collateralized mortgage obligations, the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. B.Fully collateralized certificatesof deposit issued by a depository institution or an approved broker that has its main office or branch office in Texas, selected from a list adopted by the City,andguaranteed or insured by the Federal Deposit Insurance Corporation or its successor or the National Credit Union Share Insurance Fund orits successor;secured by obligations authorized by this subchapter, or secured in any other manner and amount provided by law for deposits of the City.(Section 2256.010of the Act) C.FDIC insured, brokered certificates of deposit securities from a bank in any USstate, delivered versus payment to the City safekeeping agent, not to exceed one year to maturity. Before purchase, the Investment Officer must verify the FDIC status of the bank on www.fdic.govto assure thatthe bank is FDIC insured. D.AAA-rated, or an equivalent rating, no-load money market mutual fundsregistered with and regulated by the Securities and Exchange Commission;havinga dollar-weighted average stated maturity of 90 days or fewer; andincludes inits investment objectives the maintenance of a stable net asset value of $1 for each share.(Section 2256.014of the Act)The Fund must provide the Citywith a prospectus and other information required by the Securities and Exchange Act of 1934 (15 U.S.C. Section 80a-1 et seq.); The Cityis not authorized by Section 2256.014 (c)of the Actto: invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves in other funds held for debt service, in mutual funds described inthe Act(Section 2256.014); invest any portion of bond proceeds, reserves and funds held for debt service, in mutual funds described in the Act (Section 2256.014);or invest its funds or funds under its control, including bond proceeds and reserves and other funds held for debt service, in any one mutual fund described in the Act (Section 2256.014)in an amount that exceeds 10 percent of the total assets of the mutual fund. E.AAA-rated, or an equivalent rating by at least one nationally recognized rating service, constant dollar, investment poolsas authorized by the City Council and as further defined by the Act, which invests in eligible securities as authorized by Section 2256.016 of the Act. EXISTING INVESTMENTSThe Investment Officer is not required to liquidate investments that were authorized investments at the time of purchase. Any investments currently held that do not meet the guidelines of this policy shall be reviewed to determine the ability to liquidate. An investment that requires a minimum rating under this subchapter does not qualify as an authorized investment during the period the investment does not have the minimum rating. An entity shall take all prudent measures that are consistent with its investment policy to liquidate an investment that does not have the minimum rating. If the investment cannot be liquidated because of material adverse change in the value since the time of purchase, and holding the investment to maturity does not negatively affect disbursements or cash flow, a recommendation of holding said investment to maturity is acceptable. 5 MAXIMUM MATURITIESThe maximum stated maturity, from the date of purchase, for any individual investment may not exceed 5 years and the maximum dollar-weighted average maturity for the pooled fund group (investment portfolio) may not exceed 2 years. DIVERSIFICATIONIt is the policy of the City to diversify its investment portfolios. Assets held in the pooled investment portfolio shall be diversified to eliminate the risk of loss resulting from over-concentration of assets in a specific maturity, specific issuer or specific class of securities. Diversification strategies shall be determined and revised periodically by the Fiscal Affairs Committee. FINANCIAL INSTRUMENTSMaximum allowable percentages of the total portfolio for investments are stated as follows: Investment TypeMaximum Limit 1.Investment Pools100% 2.Money Market Accounts10% 3.Certificates of Deposit60% 4.U.S. Government Securities80% 5.U.S. Agency Securities80% SELECTION OF FINANCIAL INSTITUTIONS AND BROKER DEALERS VII. SELECTION OF FINANCIAL INSTITUTIONSDepositories shall be selected through the City's banking services procurement process, which shall include a formal request for proposal (RFP) issued every five(5) years. In selecting depositories, the services available, service costs, and creditworthiness of institutions shall be considered, and the Director of Finance shall conduct a comprehensive review of prospective depositories’credit characteristics and financial history. The depository contract will provide for collateral if balance exceeds FDIC Insurance amounts. The City shall select financial institutions from which the City may purchase certificates of deposit in accordance with the Act and this policy and will have a written depository agreement withthe selected institution, which was approved by resolution of the Bank’s Board if collateral is required.The Investment Officer shall monitor the fiscal condition of financial institutions where certificates of deposit are held. AUTHORIZED FINANCIAL BROKER/DEALERS AND INSTITUTIONSThe Investment Officer shall maintain a list of broker/dealers and financial institutions authorized to provide investment services. These may include primary dealers or regional dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (uniform net capital rule). All financial institutions and broker/dealers who desire to become qualified bidders for investment transactions must submit: audited financial statements, proof of National Association of Security Dealers certification, and proof of state registration. Before engaging in investment transactions with a financial institutions or broker/dealers, the Investment Officershall have received, from a Qualified Representative of said firm, a signed Certification Form. (Exhibit B) This form shall attest that the individual responsible for the City's account with that firm has(1) received and reviewed the investment policy of the City; and (2) acknowledged that the business organization has implemented reasonable 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 6 authorization is dependent on an analysis of the makeup of the City’s entire portfolio or requires an interpretation of subjective investment standards.Investment Officersof the Citymay not acquire or otherwise obtainany authorized investment described in the investment policy from a person who has not delivered a signed Certification Form. The Fiscal Affairs Committee shall at least annually review, revise, and adopt a list of qualified broker/dealersand other financial institutions that are authorized to engage in investment transactions with the City. (Exhibit A) COMPETITIVE BIDDINGAll investment transactions must be competitively transacted and executed with broker/dealers or financial institutions that have been authorized by the City. The City will obtain at least three competitive offers. Exception: New issues will not be required to be competitively transacted as all broker/dealers would show the same price and yield. COLLATERAL VIII. COLLATERALIZATION OF PUBLIC DEPOSITSCollateralization requirements are governed by the Texas Government Code Chapter 2257 (Public Funds Collateral Act). All bank deposits, certificates of deposit, and repurchase agreements shall be secured by pledged collateral. In order to anticipate market changes and provide a level of security for all funds, the required minimum collateral level will be a market value equal to noless than 102% of the deposits.Collateral levels should be monitored andmaintained by the financial institution. Repurchase agreements shall be documented by specific agreement noting the collateral pledged in each agreementand should be monitored daily. Collateral shall be reviewed monthly to assure the market value of the securities pledged equals or exceeds the related bank balances. Collateral shall always be held in the City’s name by an independent third party with whom the City of La Porte has a current custodial agreement. Evidence of the pledged collateral shall be maintained by a written agreement. A safekeeping receipt must be supplied to the City of La Porte for any transaction involving sales/purchases/maturities of securities and/or underlying collateral, which the City of La Porte will retain. The right of collateral substitution is granted provided the substitution has prior approval of the City and is followed by the delivery of an original safekeeping receipt to the City, and replacement collateral is received prior to the release of original collateral. COLLATERAL DEFINEDThe City shall accept only the following securities as collateral: A.FDIC insurance coverage; B.United States Treasuries and Agencies; C.Obligations, including letters of credit, of the United States or its agencies and instrumentalities. D.Other securities as approved by the Fiscal Affairs Committee. SUBJECT TO AUDITAll collateral shall be subject to inspection and audit by the Director of Finance or the City's independent auditors. SAFEKEEPING AND CUSTODY IX. SAFEKEEPING AGREEMENTAll securities owned by the City shall be held in the City’s designated third party safekeeping. The third party custodian shall be required to issue safekeeping receipts to the City listing each specific security, description, maturity, cusip number yield and/or coupon, market valueand other pertinent information. Each safekeeping receipt 7 shall clearly indicate that the instrument is held for the City of La Porte. All safekeeping arrangements shall be documented by the Investment Officer. DELIVERY VERSUS PAYMENTAll investment transactionsshall be executedon a delivery versus paymentbasis. 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. 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. MANAGEMENT AND INTERNAL CONTROLS X. TheDirector 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 Officersof 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 authorityto subordinate staff members G.Documentation on investment bidding events H.Written confirmation of transactionsfor investments and wire transfers I.Reconcilement and comparisons of security receipts with the investment subsidiary records J.Compliance with investment policies K.Accurate andtimely reports L.Validation of investment maturity decisions with supporting cash flow data M.Adequate training and development of Investment Officers O.Review of financial condition of all brokers, dealers and financial institutions P.Staying informed about market conditions, changes, and trends that require adjustments in investment strategies Q. Monitor credit ratings R. Monitor FDIC status for mergers and acquisitions for brokered CD’s COMPLIANCE AUDITThe City shall perform, in conjunction with its annual financial audit, a compliance audit of management controls on investments and adherence to the entity's established investment policies. The audit shall include a formal review of the quarterly investment reports by an independent auditor and the results reported to the governing body by the independent auditor. Also, the governing body shall review its investment policy and investment strategy not less than annually and adopt a written instrument by rule, order, ordinance, or resolution stating that it has reviewed the investment policy and strategy, and recorded any changes made to them. 8 Exhibit A City of La Porte Approved List of Brokers/Dealers and Investment Pools Brokers/Dealers Coastal Securities Wells Fargo Amegy Bank Investment Pools TexPool LOGIC Investment Pool 9 Exhibit B TEXAS PUBLIC FUNDS INVESTMENT ACT CERTIFICATION FORM As required by Texas Government Code 2256.005 (k-l) CITY OF LA PORTE, TEXAS This certification is executed on behalf of the City of La Porte, Texas (the Investor) and ___________________________ (the Seller) pursuant to the Public Funds Investment Act, Chapter 2256, Government Code, Texas Codes Annotated (the Act) in connection with investment transactions conducted between the Investor and Dealer. The Undersigned Qualified Representative of the Seller hereby certifies on behalf of the Seller that: 1.The Qualified Representative is duly authorized to execute this Certification on behalf of the Seller, and 2.The Qualified Representative has received and reviewed the Investment Policy furnished by the Investor, and 3.The Seller has implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the Seller and the Investor that are not authorized by the entity’s investment policy, except to the extent that this authorization is dependent on an analysis of the makeup of the entity’s entire portfolio or requires an interpretation of subjective investment standards. Qualified Representative ________________________________ Signature ________________________________ Name (Printed): ________________________________ Title: ________________________________ Date: 10 Exhibit C City of La Porte, Texas Investment Strategy Statement The City of La Porte, Texas (the "City") will strive to administer and invest its pooled funds at the highest investment return possible while always taking into account the primary goals of preservation of principal and liquidity of funds invested consistent with the City's investment policy. The City's funds, which are pooled together and constitute the investment portfolio, include 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. The City will never invest its funds in a security that is deemed unsuitable to the financial requirements ofthe City. Maturities will be staggered in a manner that meets the cash flow needs of the City. The primary investment objective is the preservation and safety of principal. Each investment transaction shall seek first to ensure that principal losses are avoided, whether they are from security defaults or erosion of market value. 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. The City shall always maintain a highly diversified investment portfolio in order to reduce the amount of credit and market risk exposed to the City's portfolio. After first considering safety and liquidity, the City's investment portfolio shall be designed with the objective of regularly exceeding the average rate of return on U.S. Treasury Bills at a maturity level comparable to the City’s weighted average maturity in days. The City shall seek to augment returns above this threshold consistent with risk limitations identified in the City's investment policy and prudent investment principles. 11 REQUEST FOR FISCAL AFFAIRS COMMITTEE AGENDA ITEMREQUEST FOR FISCAL AFFAIRS COMMITTEE AGENDA ITEM September 28, 2015September 28, 2015AppropriationAppropriation Agenda Date Requested:Agenda Date Requested: Source of Funds:Source of Funds: Shelley Wolny, TreasurerShelley Wolny, Treasurer Requested By:Requested By: Account Number:Account Number: FinanceFinance Department: Amount Budgeted:Amount Budgeted: Report:Resolution:Resolution:Ordinance:Ordinance: Amount Requested:Amount Requested: Exhibits: Budgeted Item:Budgeted Item:YESYESNONO 1. Evaluation Summary Evaluation Summary SUMMARY & RECOMMENDATIONSSUMMARY & RECOMMENDATIONS On September 1, 2015, the City opened proposals for Banking Services.  Four banks responded.On September 1, 2015, the City opened proposals for Banking Services.  Four banks responded.   The proposals submitted by the banks were analyzed based on five main areas: (1) the cost of services; (2) the The proposals submitted by the banks were analyzed based on five main areas: (1) the cost of services; (2) the ability to provide services required; (3) the creditworthiness of bank, experience and continuity of bank and bank ability to provide services required; (3) the creditworthiness of bank, experience and continuity of bank and bank officials; (4) time deposit interest rates; (5) and the completeness and clarity of proposal.officials; (4) time deposit interest rates; (5) and the completeness and clarity of proposal.   Based on our opinion that one respondent has the ability and commitment to offer a superior level of customer Based on our opinion that one respondent has the ability and commitment to offer a superior level of customer service to the City and a lower cost of services provided, we believe that the proposal submitted by Amegy Bank service to the City and a lower cost of services provided, we believe that the proposal submitted by Amegy Bank provides the best overall benefit to the City of La Porte.provides the best overall benefit to the City of La Porte. Action Required by the Fiscal Affairs Committee:Action Required by the Fiscal Affairs Committee: Discuss Banking Services Request for Proposals.Discuss Banking Services Request for Proposals. Approved for Fiscal Affairs Committee AgendaApproved for Fiscal Affairs Committee Agenda Corby D. Alexander, City ManagerCorby D. Alexander, City ManagerCorby D. Alexander, City ManagerCorby D. Alexander, City ManagerDateDateDateDate 6.36.13.33.22.120.9 CAPITAL ONE 24.6 7.27.73.63.62.5 WELLS FARGO 7.78.13.93.92.626.1 AMEGY BANK RFP 15505- BANKING DEPOSITORY SERVICES EVALUATION SUMMARY 6.26.53.32.62.120.6 CHASE Final Scores Creditworthiness of bank, experience and continuity Completeness and clarity of proposal Ability to provide services required Criteria Time deposit interest rates of bank and bank officials Cost of Service