May 11, 2020 REGULAR MEETING OF THE CITY COUNCIL OF THE
CITY OF NEDERLAND
4:30 P_rrm_ May il, 2020
1. MEETING
The meeting was called to order at 4:30 p.m. by Mayor Albanese at the Nederland City
Office Building, 207 N. 12t^ Street, Nederland, Texas. See attached for quorum.
This meeting was closed to in-person attendance by the public_ A temporary
suspension of the Open Meetings Act to allow telephone or videoconference public
meetings has been granted by Governor Abbott. Telephonic and videoconferencing
capabilities were utilized to allow individuals to address the City Council_
The following statement was posted:
"PURSUANT TO SECTION 30_07, PENAL CODE (TRESPASS BY LICENSE HOLDER
WITH AN OPENLY CARRIED. HANDGUN), A PERSON LICENSED UNDER
SUBCHAPTER H, CHAPTER 411, GOVERNMENT CODE (HANDGUN LICENSING
LAW), MAY NOT ENTER THIS PROPERTY WITH A HANDGUN THAT IS CARRIED
OPENLY_"
2_ INVOCATION AND PLEDGE OF ALLEGIANCE
The invocation and pledge of allegiance were led by Gay Ferguson, City Clerk.
3_ CONSENT AGENDA - All consent agenda items listed are considered to be routine by
the City Council and will be enacted by one motion. There will be no separate
discussion of these items unless a councilmember so requests, in which event the item
will be removed from the Consent Agenda and considered separately_
A motion was made by Mayor Pro Tem Neal and seconded by Councilmember Root to
approve the Consent Agenda Items a-b as presented. MOTION CARRIED_
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
a. Minutes - April 27, 2020 regular meeting
b. March 2020 Departmental Reports
4_ REGULAR AGENDA
a. Talmadge Austin, Councilmember Ward I and Emmett Hollier, Councilmember
Ward III were sworn in by Gay Ferguson, City Clerk.
b. A motion was made by Mayor Pro Tem Neal and seconded by Councilmember Root
to nominate Counci[member Hollier as Mayor Pro Tempore in accordance with
Section 3.06 of the City Charter. MOTION CARRIED_
Minutes Continued, May 11, 2020
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
c. A motion was made by Councilmember Austin and seconded by Mayor Pro Tern
Hollier to accept the Quarterly Investment Report. MOTION CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
d. A motion was made by Councilmember Root and seconded by Mayor Pro Tem
Hollier to approve Resolution No. 2020-07, approving a review of the City's
Investment Policy. MOTION CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
e. A motion was made by Councilmember Austin and seconded by Councilmember
Root to appoint Wathen, DeShong &Junker, LLP to perform the City's audit for the
fiscal year 2019-2020. MOTION CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
f. A motion was made by Councilmember Root and seconded by Councilmember Neal
to amend Ordinance No. 2019-25, utility rates and regulations in response to the
Coronavirus Disease 2019 (COVID-19). MOTION CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
g. A motion was made by Councilmember Neal and seconded by Mayor Pro Tern
Hollier to approve an amendment to the agreement for Central Dispatch Facility
and Information Technology Department. MOTION CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
h. A motion was made by Councilmember Root and seconded by Mayor Pro Tem
Hollier to amend the Emergency COVID-19 Paid Leave Policy. MOTION CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
i. A motion was made by Mayor Pro Tem Hollier and seconded by Councilmember
Austin to amend the employment agreement between the City of Nederland and
the Nederland City Manager Christopher Duque. MOTION CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
5. COMMUNICATION
City Manger's Report -
*Robert Woods gave a brief construction update:
• Wastewater sewer rehab project is moving forward. They are working on
Hardy and Nederland Avenue and on Hardy near the wastewater treatment
plant.
• Asphalt Street Rehabilitation contractor is finishing work on Detroit Street.
They will move to S. 2nd then to S. 13th
Minutes Continued, May 11, 2020
• Concrete Street Rehabilitation contractor is working on Helena and 27th
Street for the next few weeks.
• Hodgson and Bourque Road Rehab is out for bids and bids will open on May
19th.
• Hodgson Street Lift Station project will be issuing the advertising notice with
bid opening around June 9th
• The City has had an increase in water usage by 19%.
Chris Duque thanked Chief Porter and Chief Morton for their continued work during the
pandemic.
6. ADJOURN
There being no further business a motion was made by Mayor Albanese and
seconded by Mayor Pro Tern Hollier to adjourn the meeting at 5:00 p.m. MOTION
CARRIED.
Ayes: Mayor Albanese, Councilmembers Austin, Neal, Hollier, and Root.
Noes: None.
E. )4.• 624 00,00
•
r\ 40 • 'Jon Albanese, Mayor
,�G• � ,,�/ •'(")O; City of Nederland, Texas
._ ._, .A � Ali
ay Fergusoj, y Clerk
City of Nederland, Texas
CITY OF NEDERLAND
COUNCIL MEETING ATTENDANCE SHEET
NAME TITLE PRESENT ABSENT
Don Albanese Mayor v
Council Member-Ward I
Talmadge Austin V Billy Neal Council Member-Ward II
Emmett Hollier Council Member-Ward III kr
Sylvia Root Council Member-Ward IV V
Chris Duque City Manager v
Gay Ferguson City Clerk
Jesse Branick City Attorney v
Cheryl Dowden Director of Finance
Gary Porter Police Chief v
Terry Morton Fire Chief V
Robert Woods Director of Public Works
George Wheeler Building Official
Victoria Klehn Librarian \7
Holly Guidry Human Resources Director V
Joni Underwood Executive Secretaryv
Angela Fanette Parks Director
on Albanese, ayor
A. , aomwjik..__ay Fergu-41n, City Cer
May 11, 2020
Date
Don Albanese,Mayor
/ a e Billy Neal,Mayor Pro-Tern
Talmadge Austin,Coundlmember
City of Nede1and Emmett Holter,Councilmember
Sylvia Root,Coundlmember
10 r e j Christopher Duque,try Manager
n.
P.O.Box 967•Nederland,Texas 77627•(409)723-1503•FAX(409)723-1550
Investment Report
For the Quarter Ending March 31,2020
This report has been prepared in accordance with the Public Funds Investment Act(Section
2256.023,Government Code),which requires that a quarterly report be submitted to City
Council detailing investment transactions and performance for the reporting period.
Submitted by the Inv-stment Officers of the City of Nederland
A
Chris Duque t ity Manager
KOObi d-----
Cheryl owden,Director of Finance
`Programed for Progress
City of Nederland
Summary of Account Activity
Total Portfolio -All Accounts
For Quarter Ending March 31,2020
Investments at Beginning of Period (1-1-20) $ 35,970,161.46
Purchases 1,989,466.27
Maturities 21,050,000.00
Investments at End of Period(3-31-20) $ 16,909,627.73
Maturity Summary at
March 31, 2020
•Less than 3 months
■3 to 9 months
09 to 12 months
•Greater than 12 months
City of Nederland
Summary of Account Activity
Total Portfolio -All Accounts
For Quarter Ending March 31, 2020
Balance Balance
1/1/2020 Purchases Maturities 3/31/2020
General Fund $ 14,788,142.18 $ 54,908.20 $ 7,000,000.00 $ 7,843,050.38
Library Fund 43,815.60 30,191.32 74,006.92
Library Fund-Zaruk Memorial 10,478.21 43.72 10,521.93
2017 Street Improvement Bond Fund 1,513,251.40 2,841.36 1,150,000.00 366,092.76
Water& Sewer Fund 4,651,004.45 918,176.48 5,569,180.93
Solid Waste Fund 1,552,380.93 907,416.51 2,459,797.44
Street Improvement Fund 3,539,279.87 12,123.03 3,500,000.00 51,402.90
Police Narcotics Fund 75,262.18 35,315.61 110,577.79
2018 WW Project 9,611,564.99 27,807.69 9,400,000.00 239,372.68
Bond Redemption Fund 184,981.65 642.35 185,624.00
$ 35,970,161.46 $ 1,989,466.27 $21,050,000.00 $ 16,909,627.73
Fund Allocation at March 31, 2020
Police Narcotics Fund
0.65%
Street Improvement Fund Solid Waste Fund
0.30% 14.55%
2017 Street Improvement
Bond Fund General Fund
2.16% 46.38%
Bond Redemption Fund
1.10%
Water&Sewer Fund Library Fund-Zaru 2018 WW Project
32.93% Memorial 1.42%
0.06%
Library Fund
0.44%
Investment Report Schedule
Investments for the Quarter ended March 31,2020
INVESTMENT POOL -TEXPOOL
Average
Days to Interest Interest
Period Held Maturity Rate Market Principal Earned Book Value
General Fund 01/01/20 03/31/20 1 1.3956% $ 7,788,142.18 54,908.20 $ 7,843,050.38
Water&Sewer 01/01/20 03/31/20 1 1.3956% 5,551,004.45 18,176.48 5,569,180.93
Bond Redemption Fund 01/01/20 03/31/20 1 1.3956% 184,981.65 642.35 185,624.00
Library Special 01/01/20 03/31/20 1 1.3956% 73,815.60 191.32 74,006.92
Library Special-Zaruk Memorial 01/01/20 03/31/20 1 1.3956% 10,478.21 43.72 10,521.93
2017 Street Improvement Bond Fund 01/01/20 03/31/20 1 1.3956% 363,251.40 2,841.36 366,092.76
Solid Waste Fund 01/01/20 03/31/20 1 1.3956% 2,452,380.93 7,416.51 2,459,797.44
Street Improvement Fund 01/01/20 03/31/20 1 1.3956% 39,279.87 12,123.03 51,402.90
2018 WW Project 01/01/20 03/31/20 1 1.3956% 211,564.99 27,807.69 239,372.68
Police Narcotic Fund 01/01/20 03/31/20 1 1.3956% 110,262.18 315.61 110,577.79
Totals for TEXPOOL Investments $ 16,785,161.46 $124,466.27 $16,909,627.73
*Texpool is rated AAAm by Standard&Poor's,which is the
highest rating a local government investment pool can achieve
Investment Report Schedule
Investments for the Quarter ended March 31,2020
INTEREST EARNED ON DEMAND DEPOSITS
Average Interest Earned
Days to Interest Quarter ended
Period Held Maturity Rate March 31,2020
Bond Redemption Fund 01/01/20 03/31/20 1 0.4558% $ 56.09
Capital Outlay Fund 01/01/20 03/31/20 1 0.4558% 1,911.27
Court Technology Fund 01/01/20 03/31/20 1 0.4558% 13.14
Equipment Replacement Funds 01/01/20 03/31/20 1 0.4558% 4,142.37
Fire Department Special Fund 01/01/20 03/31/20 1 0.4558% 92.96
General Fund 01/01/20 03/31/20 1 0.4558% 2,414.00
Library Special Fund 01/01/20 03/31/20 1 0.4558% 18.35
MCML Dispatch 01/01/20 03/31/20 1 0.4558% 782.73
Motel Occupancy Tax Fund 01/01/20 03/31/20 1 0.4558% 167.59
2017 Street Improvement Bond Fund 01/01/20 03/31/20 1 0.4558% (166.42)
Parks&Recreation Special Fund 01/01/20 03/31/20 1 0.4558% 560.92
Police Narcotic Fund 01/01/20 03/31/20 1 0.4558% 63.63
Solid Waste Fund 01/01/20 03/31/20 1 0.4558% 1,976.29
Street Improvement Fund 01/01/20 03/31/20 1 0.4558% 1,051.78
SSES Fund 01/01/20 03/31/20 1 0.4558% 860.49
2018 WW Project 01/01/20 03/31/20 1 0.4558% (668.02)
Water Plant Construction Fund 01/01/20 03/31/20 1 0.4558% 24.98
Wastewater Construction Fund 01/01/20 03/31/20 1 0.4558% 26.28
W&S Certificate Fund 01/01/20 03/31/20 1 0.4558% 281.46
Water&Sewer Fund 01/01/20 03/31/20 1 0.4558% 1,471.24
$ 15,081.13
Investment Report Schedule
March 31, 2020
Interest Earnings for Quarter Ended March 31, 2020
Bond Redemption Fund $ 698.44
Capital Outlay Fund 1,911.27
Court Technology Fund 13.14
Equipment Replacement Funds 4,142.37
Fire Department Special Fund 92.96
General Fund 57,322.20
Library Special Fund 209.67
Library Special Fund-Zaruk Memorial 43.72
MCML Dispatch 782.73
Motel Occupancy Tax Fund 167.59
2017 Street Improvement Bond Fund 2,674.94
Parks&Recreation Special Fund 560.92
Police Narcotic Account 379.24
Solid Waste Fund 9,392.80
Street Improvement Fund 13,174.81
SSES Fund 860.49
2018 WW Project 27,139.67
Water Plant Construction Fund 24.98
Wastewater Construction Fund 26.28
W& S Certificate Fund 281.46
Water& Sewer Fund 19,647.72
$ 139,547.40
AMENDMENT TO ORDINANCE NO. 2019-25
AN AMENDMENT TO ORDINANCE NO. 2019-25 OF
THE CITY COUNCIL OF THE CITY OF NEDERLAND,
TEXAS THAT ESTABLISHED WATER AND SEWER
RATES, WATER METER DEPOSITS, WATER AND
SEWER CONNECTION FEES, WATER AND SEWER
MAINTENANCE FEES, TRASH REMOVAL, AND
GARBAGE RATES, AND PROVIDED FOR THE
ADDITION OF STATE MANDATED SALES TAX TO
THE GARBAGE PORTION OF THE RATE, INSIDE
AND OUTSIDE THE CITY OF NEDERLAND, TEXAS,
AND FURTHER PROVIDED FOR INTEREST
PENALTIES, RE-CONNECTION CHARGES,
TRANSFER FEES, AND RETURNED CHECK FEES,
REPEALED ORDINANCE NO. 2018-31, AND
ESTABLISHED AN EFFECTIVE DATE.
WHEREAS,the Nederland City Council on August 26,2019 approved Ordinance No.2019-
25,which provided utility rates and regulations;and
WHEREAS,the Coronavirus Disease 2019(COVID-19)that has been declared a pandemic
by the World Health Organization impacted Nederland and the surrounding area, and it is
necessary for the City to facilitate the community's economic continuity and recovery.
NOW,THEREFORE,BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF NEDERLAND,
TEXAS:
SECTION 1. The statements set out in the preamble to this Ordinance are true and
correct.
SECTION 2. Ordinance No.2019-25 is hereby revised with the following revisions:
A. Section 23. Validation is renumbered to Section 24. Validation.
B. Section 23. Disaster is added:
SECTION 23. Disaster.
In the event of a declared disaster, such as a hurricane, tornado,
flood, ice storm, pandemic, etc. significantly impacting the
community, the City Manager is authorized to waive fees, penalties,
etc. for up to 60 days from the date of the disaster. The waiver of
fees, penalties, etc. shall not exceed $150.00 for residential
customers or $250.00 for commercial or industrial customers for
each request or incidence. The City Manager is authorized to waive
disconnection of utility services for non-payment for a period of NO
MORE THAN 90 DAYS from the date of the disaster. The effective
date of Section 23. Disasters is March 23, 2020.
SECTION 3. The meeting at which this Ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act,Texas
Government Code,Chapter 551.
SECTION 4. The Ordinance shall be effective from and after its passage.
PASSED AND APPROVED by the City Council of the City of Nederland,Texas at a regular
meeting this the 11TH day of MAY,2020.
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Albanese, Mayor
City of Nederland,Texas
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"'�miumu��u`O
ATTEST:
A
Gay Ferguson City
City of Nederland,Texas
APPROVED AS TO FORM AND LEGALITY:
,,
Jes'e Bra , City Attorney
C'Ey of ederland,Texas
CITY OF NEDERLAND
RESOLUTION NO. 2020-07
A RESOLUTION OF THE CITY OF
NEDERLAND, TEXAS, REVIEWING AND
APPROVING THE CITY'S PUBLIC FUNDS
INVESTMENT POLICY AS PRESENTED
WHEREAS, Section 2256.005(e) of the Texas Government Code requires the
governing body of an investing entity to adopt a written investment policy regarding the
investment of its funds and funds under its control and to review said written investment
policy on an annual basis; and,
WHEREAS, on November 27, 1995 by Resolution 1995-13, the City Council
approved and adopted a written Investment Policy for the City regarding investment of
public funds.
NOW,THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF NEDERLAND,TEXAS:
THAT the City of Nederland's Investment Policy, substantially in the form attached
hereto as"Exhibit A,"has been reviewed and is hereby adopted without modification.
PASSED AND APPROVED this the 11th day of May 2020.
.s" OF•NFD�cf;%
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o Don Albanese, Mayor
=o /\ of City of Nederland, Texas
2•'c'�. •'c7p
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T. ,
ay rergu on, City er•
City of Nederland, Texas
APPROVED AS TO FORM AND LEGALITY:
Je -e Br. i , City Attorney
C'y of ederland, Texas
"Exhibit A"
CITY OF NEDERLAND
INVESTMENT POLICY
Amended 5-13-19
The purpose of this document is to set forth specific investment policy and strategy
guidelines for the City of Nederland in order to achieve the goals of safety, liquidity,
yield, and public trust for all investment activity. This policy serves to satisfy the
statutory requirements (specifically the Public Funds Investment Act, V.T.C.A.
Government Code, Chapter 2256 (the "Act") to define, adopt and review a formal
investment strategy and policy.
INVESTMENT STRATEGY
The City of Nederland maintains portfolios which utilize four specific investment
strategy considerations designed to address the unique characteristics of the fund
groups represented in the portfolios:
A. Investment strategies for operating funds and commingled pools containing
operating funds have, as their primary objective, to assure that anticipated
cash flows are matched with adequate investment liquidity. The secondary
objective is to create a portfolio structure which will experience minimal
volatility during economic cycles. The dollar weighted average maturity of
365 days or less will be calculated using the stated final maturity date of each
security.
B. Investment strategies for debt service funds shall have as the primary
objective the assurance of investment liquidity adequate to cover the debt
service obligations on the required payment date. Securities purchased shall
not have a stated final maturity date which exceeds the debt service payment
date.
C. Investment strategies for debt service reserve funds shall have as the primary
objective the ability to generate a dependable revenue stream to the
appropriate debt service fund from securities with a low degree of volatility.
Securities should be of high quality and, except as may be required by the
bond ordinance specific to an individual issue, of short to intermediate-term
maturities. Volatility shall be further controlled through the purchase of
securities carrying the highest coupon available, within the desired maturity
and quality range, without paying a premium, if at all possible. Such
securities will tend to hold their value during economic cycles.
D. Investment strategies for special projects or special purpose fund portfolios
will have as their primary objective to assure that anticipated cash flows are
matched with adequate investment liquidity. The stated final maturity dates
of securities held should not exceed the estimated project completion date.
•
I. SCOPE
The investment policy applies to all financial assets of the City of Nederland. The
funds are accounted for in the City's Comprehensive Annual Financial Report
(CAFR) and include:
*General Fund
*Special Revenue Funds
*Debt Service Funds
*Capital Project Funds
*Enterprise Funds
*Internal Service Funds
*Any new fund created by the legislative body, unless specifically exempted
II. OBJECTIVES
The City of Nederland shall manage and invest its cash with four objectives, listed in
order of priority: Safety, Liquidity, Yield, and Public Trust. The safety of the
principal invested always remains the primary objective. All investments shall be
designed and managed in a manner responsive to the public trust and consistent
with State and Local law.
The City shall maintain a comprehensive cash management program which includes
collection of accounts receivable, vendor payment in accordance with invoice terms,
and prudent investment of available cash. Cash management is defined as the
process of managing monies in order to insure maximum availability and maximum
yield on short-term investment of pooled idle cash.
SAFETY
The primary objective of the City's investment activity is the preservation of capital
in the overall portfolio. Each investment transaction shall be conducted in a
manner to avoid capital losses, whether they be from securities defaults or erosion
of market value.
LIQUIDITY
The City's investment portfolio shall be structured such that the City is able to meet
all obligations in a timely manner. This shall be achieved by matching investment
maturities with forecasted cash flow requirements.
YIELD
The City's cash management portfolio shall be designed with the objective of
2
attaining a rate of return throughout budgetary and economic cycles,
commensurate with the City's investment risk constraints and the cash flow
characteristics of the portfolio.
PUBLIC TRUST
All participants in the City's investment process shall seek to act responsibly as
custodians of the public trust. Investment officials shall avoid any transactions
which might impair public confidence in the City's ability to govern effectively.
III. RESPONSIBILITY AND CONTROL
DELEGATION OF AUTHORITY AND TRAINING
Authority to manage the City's investment program is derived from an ordinance
approved by the City Council. The Director of Finance and the City Manager are
designated as investment officers of the City and are responsible for investment
decisions and activities. The Director of Finance shall establish written procedures
for the operation of the investment program, consistent with this investment policy.
TRAINING
The investment officers shall attend at least one training session relating to the
officer's responsibility under the Act within twelve (12) months after assuming
duties, and not less than (8) eight hours of training every (2) two years, relating to
their investment responsibilities. The two-year period shall begin on the first day of
the City's fiscal year and consist of the two consecutive fiscal years after that date.
Training must include education in investment controls, security risks, strategy
risks, market risks, diversification, and compliance with the PFIA. The training
must be provided by an independent source approved by the governing body or
designated investment committee. For these purposes, courses or seminars offered
by the Government Finance Officers Association, Government Finance Officers
Association of Texas, Texas Municipal League, Southwest School of Government
Finance, University of North Texas, North Central Texas Council of Governments,
Texas Association of Counties, Treasury Management Association or the
Government Treasurers Organization of Texas will satisfy the training requirements.
INTERNAL CONTROLS
The Director of Finance is responsible for establishing and maintaining an internal
control structure designed to ensure that the assets of the entity are protected from
loss, theft or misuse. The internal control structure shall be designed to provide
reasonable assurance that these objectives are met. The concept of reasonable
assurance recognizes that (1) the cost of a control should not exceed the benefits
likely to be derived; and (2) the valuation of costs and benefits requires estimates
3
and judgments by management. Accordingly, the Director of Finance shall establish
a process for annual independent review by an external auditor to assure
compliance with policies and procedures.
PRUDENCE
The standard of prudence to be applied by the investment officer shall be the
prudent investor rule which states: All investments shall be made with judgment
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. In determining whether an officer has
exercised prudence with respect to an investment decision, the determination shall
be made taking into consideration:
1. The investment of all funds, or funds under the City's control,
over which the officer had responsibility rather than a
consideration as to the prudence of a single investment.
2. Whether the investment decision was consistent with the written
policy of the City.
The investment officer, acting in accordance with written procedures and exercising
due diligence, shall not be held personally responsible for a specific security's credit
risk or market price changes, provided that these deviations are reported
immediately, and that appropriate action is taken to control adverse developments.
ETHICS AND CONFLICTS
City staff 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 the ability to make impartial investment decisions. City staff
shall disclose to the City Manager any material financial interests in financial
institutions that conduct business with the City and they shall further disclose
positions that could be related to the performance of the City's portfolio. City staff
shall subordinate their personal financial transactions to those of the City,
particularly with regard to timing of purchases and sales.
An investment officer of the City, who has a personal business relationship with an
organization seeking to sell an investment to the City, shall file a statement
disclosing that personal business interest. An investment officer who is related
within the second degree by affinity or consanguinity to an individual seeking to sell
an investment to the City shall file a statement disclosing that relationship. A
statement required under this subsection must be filed with the Texas Ethics
Commission and the governing body of the entity.
4
•
•
IV. REPORTING
QUARTERLY REPORTING
The Director of Finance shall submit a signed quarterly investment report that
summarizes investment transactions for all funds covered under this policy for the
preceding reporting period. The quarterly investment report shall include a succinct
management summary that provides a clear picture of the status of the current
investment portfolio and transactions made over the last quarter. This management
summary will be prepared in a manner which will allow the City to ascertain
whether investment activities during the reporting period have conformed to the
investment policy. The report will be provided to the City Manager and City
Council. The report will include the following:
A. A listing of the individual securities held at the end of the reporting period.
B. Additions and changes to the market value during the period.
C. Listing of investments by maturity date.
D. Statement of compliance of the City's investment portfolio with State Law and
the investment strategy and policy approved by the City Council.
V. INVESTMENT PORTFOLIO
Assets of the City of Nederland may be invested in the following instruments
provided, however, that at no time shall assets of the City be invested in any
instrument or security not authorized for investment under the Act, as the Act may
from time to time be amended.
AUTHORIZED INVESTMENTS
A. Obligations of the United States of America, its agencies and instrumentalities.
B. Direct obligations of the State of Texas and agencies thereof.
C. Other obligations, the principal of and interest on which are unconditionally
guaranteed by the State of Texas or United States of America.
D. Obligations of the States, agencies thereof, Counties, Cities, and other political
subdivisions of any state having been rated as 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 of state and national banks domiciled in Texas,
guaranteed or insured by the Federal Deposit Insurance or its successor or
5
C '
secured by obligations described in A through D above, which are intended to
include all direct agency or instrumentality issued mortgage backed securities
rated AAA by a nationally recognized rating agency, or by Article 2529b-1,
V.T.C.S., and that have a market value of not less than the principal amount of
the certificates.
F. Fully collateralized direct repurchase agreements with a defined termination
date secured by obligations of the United States or its agencies and
instrumentalities pledged with a third party, selected by the Director of Finance,
other than an agency for the pledger. Repurchase agreements must be
purchased through a primary government securities dealer, as defined by the
Federal Reserve, or a bank domiciled in Texas.
G. Investments Pools which meet the requirements of Chapter 2256.016 of the
Public Funds Investment Act and are rated not less than AAA or an equivalent
rating by at least one nationally recognized rating agency.
H. Not less than quarterly, the Investment Officers will monitor the credit rating for
each held investment that has a Public Fund Investment Act required minimum
rating.
NOT AUTHORIZED
The City's authorized investments options are more restrictive than those allowed by
State law. State law specifically prohibits investment in the following investment
securities.
A. Obligations whose payment represents the coupon payments on the
outstanding principal balance of the underlying mortgage-backed security
collateral and pays no principal.
B. Obligations whose payment represents the principal stream of cash flow from
the underlying mortgage-backed security collateral and bears no interest.
C. Collateralized mortgage obligations that have a stated final maturity date of
greater than ten (10) years.
D. Collateralized mortgage obligations the interest rate of which is determined by
an index that adjusts opposite to the changes in a market index.
HOLDING PERIOD
The City of Nederland intends to match the holding periods of investment funds
with liquidity needs of the City. In no case will the average maturity of investments
of the City's operating funds exceed two (2) years. The maximum final stated
maturity of any investment shall not exceed five (5) years.
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Investments in all funds shall be managed in such a way that the market price
losses resulting from interest rate volatility would be offset by coupon income and
current income received from the volume of the portfolio during a twelve (12) month
period.
RISK AND DIVERSIFICATION
The City of Nederland recognizes that investment risks can result from issuer
defaults, market price changes, or various technical complications leading to
temporary illiquidity. Risk is controlled through portfolio diversification which shall
be achieved by the following general guidelines:
A. Risk of issuer default is controlled by limiting investments to those instruments
allowed by the Act, which are described herein.
B. Risk of market price changes shall be controlled by avoiding over-concentration
of assets in a specific maturity sector, limitation or average maturity of
operating funds investments to one year, and avoidance of over-concentration of
assets in specific instruments other than U.S. Treasury Securities and Insured
or Collateralized Certificates of Deposit.
C. Risk of illiquidity due to technical complications shall be controlled by the
selection of securities dealers as described herein.
D. Diversification by investment type shall be established by the following
maximum percentages of investment type as compared to the total investment
portfolio at the time of each investment transaction:
a. U.S. Treasury Bills/Notes/Bonds 100%
b. U.S. Agencies & Instrumentalities 100%
c. States, Counties, Cities 86 Other 75%
d. Certificates of Deposit 75%
e. Eligible Investment Pools 100%
E. Bond Proceeds may be invested in a single security or investment if it is
determined that such an investment is necessary to comply with Federal
Arbitrage restrictions or to facilitate arbitrage record keeping and calculation.
VI. SELECTION OF BANKS AND DEALERS
DEPOSITORY
At least every five (5) years a Depository shall be selected through the City's banking
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services procurement process. In selecting a depository, the credit worthiness of
institutions shall be considered, and the Director of Finance shall conduct a review
of prospective depositories credit characteristics.
SECURITIES DEALERS
All financial institutions and broker/dealers who desire to become qualified for
investment transactions must supply the following as appropriate:
*Proof of National Association of Securities Dealers (NASD) certification;
*Proof of state registration;
*Certification of having read the City's investment policy signed by a registered
principal of the organization; and
*Acknowledgment that the organization has implemented reasonable
procedures and controls in an effort to preclude imprudent investment
activities arising out of investment transactions conducted between the
City and the organization.
VII. SAFEKEEPING AND CUSTODY
INSURANCE OR COLLATERAL
All deposits and investments of City funds other than direct purchases of U. S.
Treasuries or Agencies shall be secured by pledged collateral. In order to anticipate
market changes and provide a level of security for all funds, the collateralization
level will be 100% of market value of principal and accrued interest on the deposits
or investments less an amount insured by the FDIC or FSLIC. Evidence of the
pledged collateral shall be maintained by the Director of Finance or a third-party
financial institution. Collateral shall be reviewed monthly to assure that the
market value of the pledged securities is adequate.
SAFEKEEPING AGREEMENT
Collateral pledged to secure deposits of the City shall be held by a safekeeping
institution in accordance with a safekeeping agreement which clearly defines the
procedural steps for gaining access to the collateral should the City of Nederland
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.
COLLATERAL DEFINED
The City of Nederland shall accept only the following securities as collateral:
A. FDIC insurance coverage;
B. Direct obligations of the United States or its agencies and instrumentalities;
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C. Obligations, the principal and interest on which, are unconditionally
guaranteed or insured by the State of Texas; and/or
D. A bond of the State of Texas or of a county, city or other political subdivision or
the State of Texas having been rated as investment grade (investment rating no
less than "A" or its equivalent) by a nationally recognized rating agency with a
remaining maturity of ten (10) years or less.
SUBJECT TO AUDIT
All collateral shall be subject to inspection and audit by the Director of Finance or
the City's independent auditors.
DELIVERY VS. PAYMENT
Treasury Bills, Notes, Bonds and Governmental Agencies' securities shall be
purchased using the delivery vs. payment method. That is, funds shall not be wired
or paid until verification has been made that the correct security was received by
the Trustee. The security 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.
VIII. INVESTMENT POLICY ADOPTION
The City of Nederland investment policy shall be adopted by resolution of the City
Council. The policy shall be reviewed for effectiveness on an annual basis by the
City Council.
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GLOSSARY OF
COMMON TREASURY TERMINOLOGY
Agencies: Federal agency securities. introductory material, and a detailed
Statistical Section.
Asked: The price at which securities are
offered. Coupon: (a) The annual rate of interest
that a bond issuer promises to pay the
Bid: The price offered for securities. bondholder on the bond's face value.
(b) A certificate attached to a bond
Broker: A broker brings buyers and evidencing interest due on a payment
sellers together for a commission paid date.
by the initiator of the transaction or by
both sides; he does not position. In the Dealer: A dealer, as opposed to a
money market, brokers are active in broker, acts as a principal in all
markets in which banks buy and sell transactions, buying and selling for his
money and in interdealer markets. own account.
Certificate of Deposit (CD): A time Debenture: A bond secured only by the
deposit with a specific maturity general credit of the issuer.
evidenced by a certificate. Large-
denomination CD's are typically Delivery versus payment: There are two
negotiable. methods of delivery of securities:
delivery versus payment and delivery
Collateral: Securities, evidence of versus receipt (also called free).
deposit or other property which a Delivery versus payment is delivery of
borrower pledges to secure repayment securities with an exchange of money
of a loan. Also refers to securities for the securities. Delivery versus
pledged by a bank to secure deposits of receipt is delivery of securities with an
public monies. exchange of a signed receipt for the
securities.
Comprehensive Annual Financial
Report (CAFR): The official annual Discount: The difference between the
report for the City of Nederland. It cost price of a security and its value at
includes five combined statements and maturity when quoted at lower than
basic financial statements for each face value. A security selling below
individual fund and account group original offering price shortly after sale
prepared in conformity with GAAP. It also is considered to be at a discount.
also includes supporting schedules Discount Securities: Non-interest-
necessary to demonstrate compliance bearing money market instruments that
with finance-related legal and are issued at a discount and redeemed
contractual provisions, extensive at maturity for full face value, e.g., U. S.
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Treasury bills. Presidents. The President of the New
York Federal Reserve Bank is a
Diversification: Dividing investment permanent member while the other
funds among a variety of securities Presidents serve on a rotating basis.
offering independent returns. The Committee periodically meets to set
Federal Reserve guidelines regarding
Federal Credit Agencies: Agencies of the purchases and sales of Government
Federal government set up to supply Securities in the open-market as a
credit to various classes of institutions means of influencing the volume of
and individuals, e.g., S 85 L's, small bank credit and money.
business firms, students, farmers, farm
cooperatives, and exporters. Federal Reserve System: The central
bank of the United States created by
Federal Deposit Insurance Corporation Congress and consisting of a seven (7)
(FDIC): A federal agency that insures member Board of Governors in
bank deposits, currently up to Washington, D. C., twelve (12) regional
$100,000 per deposit. banks and approximately 5,700
commercial banks that are members of
Federal National Mortgage Association the system.
(FNMA): FNMA, like GNMA, was
chartered under the Federal National Government National Mortgage
Mortgage Association Act in 1938. Association (GNMA or Ginnie Mae):
FNMA is a federal corporation working Securities guaranteed by GNMA and
under the auspices of the Department issued by mortgage bankers,
of Housing and Urban Development, commercial banks, savings and loan
H.U.D. It is the largest single provider associations, and other institutions.
of residential mortgage funds in the Security holder is protected by full faith
United States. Fannie Mae, as the and credit of the U. S. Government.
corporation is called, is a private Ginnie Mae securities are backed by
stockholder-owned corporation. The FHA, VA, or FMHM mortgages.
corporation's purchases include a
variety of adjustable mortgages and Liquidity: A liquid asset is one that can
second loans in addition to fixed-rate be converted easily and rapidly into
mortgages. FNMA's securities are also cash without a substantial loss of value.
highly liquid and are widely accepted. In the money market, a security is said
FNMA assumes and guarantees that all to be liquid if the spread between bid
security holders will receive timely and asked prices is narrow and
payment of principal and interest. reasonable size can be done at those
quotes.
Federal Open Market Committee
(FOMC): Consists of seven (7) members Local Government Investment Pool
of the Federal Reserve Board and five (5) (LGIP): The aggregate of all funds from
of the twelve (12) Federal Reserve Bank political subdivisions that are placed in
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the custody of the State Treasurer for the New York Federal Reserve Bank as
investment and reinvestment. directed by the FOMC in order to
influence the volume of money and
Market Value: The price at which a credit in the economy. Purchases inject
security is trading and could reserves into the bank system and
presumably be purchased or sold. stimulate growth of money and credit;
sales have the opposite effect. Open
market operations are the Federal
Master Repurchase Agreement: To Reserve's most important and most
protect investors, many public investors flexible monetary policy tool.
will request that repurchase agreements
be preceded by a master repurchase Portfolio: Collection of securities held by
agreement between the investor and the an investor.
financial institution or dealer. The
master agreement should define the Primary Dealer: A group of government
nature of the transaction, identify the securities dealers that submit daily
relationship between the parties, reports of market activity and positions
establish normal practices regarding and monthly financial statements to the
ownership and custody of the collateral Federal_Reserve Bank of New York and
securities during the term of the are subject to its informal oversight.
investment, provide remedies in the Primary dealers include Securities and
case of default by either party and Exchange Commission (SEC) registered
clarify issues of ownership. The master securities broker-dealers, banks, and a
repurchase agreement protects the few unregulated firms.
investor by eliminating the uncertainty
of ownership and hence, allowing Prudent Person Rule: An investment
investors to liquidate collateral if a bank standard. Investments shall be made
or dealer defaults during the term of the with judgment and care, under
agreement. circumstances then prevailing, which
persons of prudence, discretion and
Maturity: The date upon which the intelligence exercise in the management
principal or stated value of an of their own affairs, not for speculation,
investment becomes due and payable. but for investment, considering the
probable safety of their capital as well
Money Market: The market in which as the probable income to be derived.
short-term debt instruments (bill,
commercial paper, bankers' Qualified Public Depositories: A
acceptances, etc.) are issued and financial institution which does not
traded. claim exemption from the payment of
any sales or compensating use or ad
Open Market Operations: Purchases valorem taxes under the laws of this
and sales of government and certain state, which has segregated for the
other saturates in the open market by benefit of the commission eligible
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collateral having a value of not less than Yield: The rate of annual income
its maximum liability, and which has returns on an investment, expressed as
been approved by the Public Deposit a percentage. (A) Income Yield is
Protection Commission to hold public obtained by dividing the current dollar
deposits. income by the current market price of
the security. (B) Net Yield or Yield to
Rate of Return: The yield obtainable on maturity is the current income yield
a security based on its purchase price minus any premium above par or plus
or its current market price. This may any discount from par in purchase
be the amortized yield to maturity on a price, with the adjustment spread over
bond or the current income return. the period form the date of purchase to
the date of maturity of the bond.
Safekeeping: A service to customers
rendered by banks for a fee whereby
securities and valuables of all types and
descriptions are held in the bank's
vaults for protection.
Secondary Market: A market made for
the purchase and sale of outstanding
issues following the initial distribution.
Securities 85 Exchange Commission:
Agency created by Congress to protect
investors in securities transactions by
administering securities legislation.
Treasury Bills: A non-interest-bearing
discount security issued by the US.
Treasury to finance the national debt.
Most bills are issued to mature in three
(3) months, six (6) months, or one (1)
year.
Treasury Bond: Long-term U. S.
Treasury securities having initial
maturities of more than ten (10) years.
Treasury Notes: Intermediate term
coupon bearing U. S. Treasury
securities having initial maturities from
one (1) to ten (10) years.
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