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ORD 2001-21 - Annual Budget [Oct. 2001-Sept. 2002] 09-18-2001ORDINANCE NO. 2001 -21 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF HUNTSVILLE, TEXAS, FINDING THAT ALL THINGS REQUISITE AND NECESSARY HAVE BEEN DONE IN PREPARATION AND PRESENTMENT OF AN ANNUAL BUDGET; APPROVING AND ADOPTING THE OPERATING AND CAPITAL IMPROVEMENTS BUDGET FOR THE CITY OF HUNTSVILLE, TEXAS, FOR THE PERIOD OCTOBER 1, 2001, THROUGH SEPTEMBER 30, 2002; AND PROVIDING FOR AN EFFECTIVE DATE HEREOF. WHEREAS, on August 4, 2001, which was more than thirty days before the end of the City's fiscal year and more than thirty days before the adoption of this ordinance, the City Manager of the City Huntsville, Texas, submitted a proposed budget for the ensuing fiscal year according to Section 11.05 of the Charter of the City of Huntsville, Texas, and Texas Local Government Code Section 102.005; and WHEREAS, the City Manager filed a copy of the proposed budget with the City Secretary and the budget was available for public inspection at least fifteen days before the budget hearing and tax levy for the fiscal year 2000 -2001 (Texas Local Government Code § 102.006); and WHEREAS, the itemized budget shows a comparison of expenditures between the proposed budgetand theactual expenditures for the same orsimilar purposes for the preceding year and projects for which expenditures and the estimated amount of money carried for each [Texas Local Government Code § 102.103(a)]; and WHEREAS, the budget contains financial information of the municipality that shows the outstanding obligations of the City, the available funds on hand to the credit of each fund, the funds received from all sources during the preceding year; the funds available from all sources during the ensuing year; the estimated revenue available to cover the proposed budget; and the estimated tax rate required to cover the proposed budget [Texas Local Government Code § 102.103(b)]; and WHEREAS, on August 22, August 26, and September 2, 2001, the City Secretary published notice in the City's official newspaper of a public hearing relating to the budget, which include one publication not earlier than the 30th day or later than the tenth day before the date of the hearing (Texas Local Government Code § 102.0065); and WHEREAS, on September 4, 2001, the City Council of the City of Huntsville held a public hearing relating to the budget; and WHEREAS, the budget for the year October 1, 2001, through September 30, 2002, has been presented to the City Council, and the City Council has held a public hearing with all notice as required by law, and all comments and objections have been considered; and WHEREAS, the City Council now makes changes to the budget that it considers warranted by law or in the best interest of the municipal taxpayers; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF HUNTSVILLE, TEXAS, that: SECTION 1: City Council adopts the budget for the City of Huntsville, Texas, now before the City Council for consideration and attached, as the budget for the City for the period of October 1, 2001, through September 30, 2002. SECTION 2: The appropriation for the ensuing fiscal year for operating expenses, debt service and capital outlay budgets shall be fixed and determined as follows: I. General Fund $ 10,697,122 11. General obligation Debt Service Fund 1,195,999 Ill. Hotel/Motel Tax Special Revenue Fund 504,946 IV. Street Special Revenue Fund 1,964,857 V. Police Special Revenue Fund 46,540 Vi. Airport Special Revenue Fund - VII. Library Special Revenue Fund 4,000 VIII. Court Security/Technology Special Revenue Fund - IX. Fleet Management internal Service Fund 1,041,965 X. Equipment Replacement - Fleet Internal Service Fund 720,200 XI. Equipment Replacement - Technology Internal Service Fund 120,000 XII. Equipment Replacement - Fire internal Service Fund - XIII. Planning and Development Internal Service Fund 1,479,646 XIV. Water Fund 9,642,851 XV. Wastewater Fund 6,223,031 XVI. Solid Waste Fund 3,555,895 XVII. Stormwater Drainage Utility Fund - XVIII. Golf Course Operations Fund 753,195 XIX. Medical Insurance Internal Service Fund 1,032,000 XX. information Technology Internal Service Fund 492,921 XXI. Oakwood Cemetery operations Fund 171,778 XXII. Library Endowment Fund XXIII. Oakwood Cemetery Endowment Fund 15,000 Total S 39,661,946 SECTION 3: Projects described for fiscal year 2001-2002 in the Capital improvements budget portion of the 2001-2002 budget are approved at the cost level indicated, subject to the availability of funding of project costs from the funding source(s) identified for each project: 2-ATZTI. R11 4 � Swimming Pool Project 200,000 Log Cabin Project 10,000 GENERAL GOVERNMENT AND FACILITIES: Wynne Home Improvements 301,774 Service Center Renovations/Furnishing 8,955 Information Technology 300,000 Fire Station Project 160,000 Library Project 30,000 �31111*4*101 Streets 455,465 UTILITIES: WASTEWATER: Rework Elkins Lake Wastewater System - Phase 1 170,000 Extension of Wastewater to Majestic Forest Area 198,900 Wastewater - Westridge Interceptor System 612,427 Wastewater - Westridge Area Collection System 567,510 Wastewater - Hwy 30 West, McGary Creek Interceptor 500,000 Parker Creek Interceptor /Collector - FM 247 Area 71.300 TOTAL APPROPRIATIONS SECTION 4: City Council has reviewed the retirement plan for the City employees and approves participation in the City's ICMA -RC (International City /County Management Association Retirement Corporation) Section 457 plan for employees eligible to participate in the TMRS system in an amount equal to 15.5 %, less the percentage cost of the TMRS plan. SECTION 5: City Council approves an increase in the monthly payment for a full -time employee to the City's Medical insurance Internal Service Fund from the current $190.00 per month to $230.00 per month, per budgeted position. SECTION 6: City Council approves a transfer of an amount equal to two (2 %) percent of the gross revenues received during Fiscal Year 2001 -2002 from all water, wastewater, and solid waste collection and disposal customers, except contractual customers, and deposited in the Water, Wastewater, and Solid Waste Funds to the Street Special Revenue Fund to compensate the City for the use of streets and rights -of -way by the water, Wastewater, and Solid Waste Funds. SECTION 7: Fiscal and Budgetary Policies as detailed in the 2001 -2002 budget are approved as attached (Exhibit A). SECTION 8: The Comprehensive Compensation Plan and employee allocations as detailed in the Organization /Staffing section of the 2001 -2002 budget are approved as attached (Exhibit B). SECTION 9: City Council has reviewed the investment policies and investment strategies, and the Investment and Banking Policies are approved as attached (Exhibit C). SECTION 10: The City Secretary is directed to maintain a copy of the adopted budget, to file a copy of it with the City Library and the County Clerk, and to publish a notice saying the budget is available for public inspection [Texas Local Government Code §§ 102.008 and 102.009(d)]. SECTION 11: Council may amend this budget from time to time as provided by law for the purposes of authorizing emergency expenditures or for municipal purposes, provided, however, no obligation shall be incurred or any expenditure made except in conformity with the budget. Texas Local Government Code §§ 102.009 - 102.011; Huntsville City Charter §§ 11.06- 11.07. SECTION 12: The City Manager may, within the policies adopted within this budget, authorize transfers between budget line items; City Council may transfer any unencumbered appropriated balance or portion of it from one office, department, or agency to another at any time, or any appropriation balance from one expenditure account to another within a single office, department, or agency of the City. Huntsville City Charter § 11.06. SECTION 13: City Council expressly repeals all previous budget ordinances and appropriations if in conflict with the provisions of this ordinance. if a court of competent jurisdiction declares any part, portion, or section of this ordinance invalid, inoperative, or void for any reason, such decision, opinion, or judgment shall in no way affect the remaining portions, parts, or sections, or parts of a section of this ordinance, which provisions shall be, remain, and continue to be in full force and effect. SECTION 14: This ordinance shall take effect immediately after its passage. PASSED AND APPROVED on this the 18th day of September, 2001. THE CITY OF HUNTSVILLE, TEXA . Z,/— MD William B. Green, Mayor AX;(EST: A4Z 4'6 obanna Welter, City secretarV� :9]1 - APPROVED S TO FO ---P-5-61(7isham, City Attorney FISCAL AND BUDGETARY POLICIES 1. STATEMENT OF PURPOSE The purpose of the Fiscal and Budgetary Policies is to identify and present an overview of policies dictated by state law, the City Charter, City ordinances, and administrative policies. The aim of these policies is to achieve long -term stability and a positive financial condition. These policies provide guidelines to the administration and finance staff in planning and directing the City's day -to -day financial affairs and in developing financial recommendations to the City Council. These policies set forth the basic framework for the overall fiscal management of the City. Operating independently of changing circumstances and conditions, these policies assist in the decision- making process. These policies provide guidelines for evaluating both current activities and proposals for future programs. These policies represent long- standing principles, traditions and practices which have guided the City in the past and have helped maintain financial stability. An important aspect of the policies is the application of budget and fiscal policies in the context of a long -term financial approach. The scope of these policies span accounting, auditing, financial reporting, internal controls, operating and capital budgeting, revenue management, cash and investment management, expenditure control, asset management and debt management. The City Council and/or Finance Committee annually review and approve the Fiscal and Budgetary Policies as part of the budget process. II. BASIS OF ACCOUNTING A. Accounting in Accordance With GAAP. The City's finances shall be accounted for in accordance with generally accepted accounting principals as established by the Governmental Accounting Standards Board. 1) Organization of Accounts. The accounts of the City shall be organized and operated on the basis of funds and account groups. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance - related legal and contractual provisions. Account groups are a reporting device to account for certain assets and liabilities of the governmental funds not recorded directly in those funds. 2) Fund Structure. The City of Huntsville uses the following fund groups: Governmental Funds General Fund General Obligation Debt Service Fund Capital Projects Funds Special Revenue Funds: Street Library Special Revenues Police Special Revenues X Municipal Court Special Revenues Airport Special Revenues Hotel /Motel Tax & Arts 15 Proprietary Funds: Enterprise Funds: Water Wastewater Solid Waste Storrnwater Drainage Utility Golf Course Operations Internal Service Funds: Medical Insurance Fleet Management Planning & Development Equipment Replacement Information Services (future) Utility Billing (future) Fiduciary Funds: Library Endowment Trust 3) Governmental Fund Types. Governmental funds are used to account for the government's general government activities and include the General, Special Revenue, General Obligation Debt Service and Capital Project funds. Governmental fund types shall use the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures are recognized when the related fund liability is incurred, if measurable, except for principal and interest on general long-term debt, which are recorded when due, and compensated absences, which are recorded when payable from currently available financial resources. 4) Proprietary Fund Types. Proprietary fund types are used to account for the City's business type activities (e.g., activities that receive a significant portion of their funding through user charges). The City has two types of proprietary funds: Enterprise Funds and Internal Service Funds. The City's Proprietary fund types are accounted for on a flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Enterprise funds receive their revenues primarily through user charges for service. Internal Service funds receive their revenues primarily from the other funds of the City. 5) Nonexpendable Trust Fund. The Library Endowment Fund, is used to account for endowments received by the City for Library purposes. The only money available for expenditures in this fund is the accumulated interest earnings. 6) Encumbrance Accounting. The City shall utilize encumbrance accounting for its Governmental fund types, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation. 65� III. OPERATING BUDGET A. PREPARATION. The operating budget is the City's annual financial operating plan. The budget includes all of the operating departments of the City, the debt service fund, all capital projects funds, internal service funds, and all special revenue funds of the City. An annual budget shall be prepared for all funds of the City, with the exception that capital projects will be budgeted on a project length basis, rather than an annual basis. The budget is to be prepared by the City Manager and Finance Department with the cooperation of all City Departments. 1, Basis of Budget. Operating budgets are adopted on a basis consistent with generally accepted accounting principles as promulgated by the Governmental Accounting Standards Board, with exceptions, including that depreciation is not included in the budget, capital purchases are budgeted in the year of purchase, unmatured interest on long-term debt is recognized when due, and debt principal is budgeted in the year it is to be paid. a) Governmental Fund Types are budgeted on a modified accrual basis, with exceptions as noted above. Revenues are included in the budget in the year they are expected to become measurable and available. Expenditures are included in the budget when they are measurable, a liability is incurred, and the liability will be liquidated with resources included in the budget. b) Capital project budgets are project length budgets and are budgeted on a modified accrual basis. c) Proprietary fund types are budgeted generally on an accrual basis with exceptions as noted above. Revenues are budgeted in the year they are expected to be earned and expenses are budgeted in the year the liability is expected to be incurred. The emphasis is on cash transactions in lieu of non-cash transactions, such as depreciation. The focus is on the net change in working capital. 2. Legal Level of Control. The budget shall be adopted at the "legal level of control," which is, by division, within individual funds. The level at which management, without prior council approval, loses the ability to reapply budgeted resources from one use to another is known as the budgets' "legal level of control." The City has a number of levels of detail in the operating budgets - the fund, the department, the division, the object and the line item. Example: Fund - General Fund Department - Public Safety Division - Police Object - Salaries, Other Pay and Benefits Line Item - Regular Salaries In the above example, the legal level of control is the budget total for the Police Division. Department Heads may not exceed budget allocations at the object code level in controllable account without City Manager approval. Y7 3. Line Item. A detail budget supporting requested allocations shall be presented to City Council for review during the budget review process. 4. Identify Available Funds. The budget shall be sufficiently detailed to identify all available funds. The format will include estimated beginning funds, sources of funds, uses of funds, and estimated remaining funds at budget year end. An actual prior year, estimated current year and proposed budget shall be presented. 5. Interfund Transfers. A summary showing transfers and charges between funds will be provided during the budget process to explain the "double counting" of revenues and expenditures. 6. Periodic Reports. The City will maintain a budgetary control system to ensure adherence to the budget and will prepare periodic reports comparing actual revenues, expenditures and encumbrances with budgeted amounts. 7. Self Sufficient Enterprise Funds. Enterprise operations, Water, Wastewater and Solid Waste, Golf Course Operations, and Stormwater Drainage Utility, shall be totally self sufficient. 8. Administrative Cost Reimbursement. Proprietary fund budgets shall include a reimbursement to the General Fund to pay a proportionate share of administrative costs. Documentation to support the transfer shall be presented to City Council during the budget process. 9. Charges to Other Funds by Internal Service Funds. Charges by internal service funds to user divisions and funds shall be documented as part of the budget process. 10. Appropriations Lapse. Annual Appropriations lapse at year end. Items purchased through the formal purchase order system (i.e., the encumbered portions), and not received by fiscal year end ordered, are presented to City Council for re- appropriation in the subsequent fiscal year. To be eligible for automatic re- appropriation in a subsequent year, the goods or services must have been ordered in good faith and appropriated in the year encumbered. Any unencumbered appropriations at year end may be appropriated by the governing body in the subsequent year. B. PLANNING. Budgeting is an essential element of the financial planning, control, and evaluation process of municipal government. The budget planning process is for a three to five year period recognizing that budgets are influenced by decisions made in prior year budgets and that decisions made in the current year budgets serve a precursor to future budget requirements. The City shall recognize both short-term needs and objectives in relation to the long -term goals of the City. C. BUDGET PROCESS. 1. Proposed Budget. The City Charter requires that the City Manager submit to the City Council a proposed budget at least 30 days prior to the end of the fiscal year that presents a complete financial plan for the ensuing year. Past practice has been to present the budget to City Council at least six weeks prior to fiscal year end. 4,, IF a) The budget shall include four basic segments for review and evaluation: (1) personnel costs, (2) base budget (same level of service) for operations and maintenance costs, (3) decision packages for capital and other (non-capital) project costs, and (4) revenues. In the base budget, the City Manager may elect to include decision package items, or replacement items with a cost of up to $5,000, and may include in the base budget scheduled replacements in the Equipment Replacement Fund. b) The budget review process shall include City Council participation in the development of each of the four segments of the proposed budget. c) The budget process will allow the opportunity for the City Council to address policy and fiscal issues. d) A copy of the proposed budget shall be filed with the City Secretary when it is submitted to the City Council. 2. Modified Incremental Approach. The operating budget for the prior year shall serve as the starting point for budget estimates. Increases or decreases shall be detailed in supporting documents. Detail supporting sheets shall be prepared for each object series. 3. Adoption. Upon the presentation of a proposed budget document to the City Council. the City Council shall call and publicize a public hearing. The City Council shall subsequently adopt by Ordinance such budget, as it may have been amended, as the City's Annual Budget, effective for the fiscal year beginning October 1. If the City Council takes no action to adopt a budget on or prior to September 27th, the budget as submitted by the City Manager, is deemed to have been finally adopted by the City Council. 4. Government Finance Officers Association. The annual budget shall be submitted to the Government Finance Officers Association (GFOA) for evaluation and consideration for the Distinguished Budget Presentation Award. D. BALANCED BUDGET. The budget shall be balanced using a combination of current revenues and available funds [defined in Section 111(a)]. Current year operating expenses shall be funded with current year generated revenues. Proprietary Funds with outstanding revenue bonds shall not rely on funds available from the prior year to balance the operating budget. No budget shall be adopted unless the total of estimated revenues, income, and funds available is equal to or in excess of such budget. E. REPORTING. Periodic financial reports shall be prepared to enable the Department Heads to manage their budgets and to enable monitoring and control of the budget. A quarterly budget review shall be presented to City Council in sufficient detail to allow decision making. F. CONTROL. Operating Expenditure Control is addressed in Section V of these Policies. X 17 G. CONTINGENT APPROPRIATION. As part of the budget, an adequate contingent appropriation of no less than 3% of the total allocations, less debt and transfers to capital projects, in each of the operating funds shall be established. This contingent appropriation, titled "Reserve for Future Allocation ", shall be disbursed only by transfer to another departmental appropriation. Transfers from this item shall be controlled as outlined in Section V B of these policies. H. EMPLOYEE BENEFITS. The City budget process shall include a review of employee benefits. Medical Insurance Fund - The Finance Committee shall review rates to be charged for employee and dependent coverage. The City shall pay the cost of employee coverage, and the dependent coverage may be purchased at the employee's cost. Changes in benefits shall be at the recommendation of the Trustees of the Employee Medical Plan. 2. Retirement Plan - The City is a member of the Texas Municipal Retirement System (TMRS). The City limits its participation in the employees' retirement plan to 15.5% of payroll. Employees working at least 1000 hours per year shall contribute 7% to the TMRS plan, and the City's match will be established at a rate that will not exceed the 15.5% maximum rate. Retaining the annual repeating updated service credits will be a priority in the funding. The difference between the TMRS rate and the 15.5% budget shall be deposited to the benefit of the employees in a supplemental retirement plan. Any budgeted funds not spent will revert back to the unallocated monies in the appropriate fund. 3. Workers Compensation Insurance - The City shall participate in the Texas Municipal League (TML) Workers Compensation Risk Pool. Rates for required coverage will be established by the Pool, adjusted for experience on an annual basis. Refunds that maybe granted through the pool will be prorated between the City funds. Unspent monies will revert back to the appropriate fund. 4. Social Security/Medicare - The City does not pay Social Security for employees. Medicare is paid for employees hired after March 31, 1986. 5. Recommendations for adjustments to the pay and classification system will be made annually by the Finance Committee in order to maintain external parity and internal equity. Recommendations will be built into the proposed basic budget. # 10 IV. RESERVES /UNALLOCATED FUNDS A. OPERATING RESERVES /FUND BALANCES. The City shall maintain unallocated reserves in operating funds to pay expenditures caused by unforeseen emergencies or for shortfalls caused by revenue declines, and to eliminate any short -term borrowing for cash flow purposes. Generally, unallocated reserves for all funds excluding Special Revenue and capital projects funds shall be maintained at a minimum amount of 16.67% of the annual budget (excluding transfers to capital projects) for each fund unless specifically identified in this section. Unallocated reserves shall not be used to support long -term, on -going operating expenditures unless they exceed the recommended reserve. This reserve is defined as unreserved current assets [less inventory] minus current liabilities payable from these assets. For purposes of defining this reserve, the accrued liabilities for unpaid vacation and sick leave pay shall be calculated as 25% of the total liability for unpaid sick leave and vacation. B. FUND BALANCES USED FOR CAPITAL EXPENDITURES. Reserves shall be used for one time capital expenditures only if: 1. there are surplus balances remaining after all reserve and fund allocations are made; or the City has made a rational analysis with justifying evidence that it has an adequate level of short and long -term resources. C. SPECIFIC APPROPRIATION BY CITY COUNCIL. If fund balances are used to support one time capital and one time non - operating expenditures, the funds must be specifically appropriated by the City Council, D. SPECIAL REVENUE FUNDS. Monies in the Special Revenue Funds shall be expended for their intended purposes, in accordance with an approved budget. There is no reserve requirement, with the exception of the Hotel /Motel Tax and Arts Special Revenue Fund. The Hotel/Motel Tax and Arts Special Revenue Fund reserves shall be at least 10% of the annual tourism and Visitors Center Operations budget or at a level approved by City Council. Adequate reserves are essential due to the cyclical nature of this revenue source. E. CAPITAL PROJECT FUNDS. Monies in the Capital Projects Funds shall be expended in accordance with an approved budget. There is no reserve requirement. Interest income will be used to offset construction costs or interest expense on the debt issue. F. GENERAL OBLIGATION DEBT SERVICE FUND AND INTEREST ACCOUNTS. Reserves in the General Obligation Debt Service Fund and Water and Wastewater Funds, Interest and Sinking accounts shall be maintained as required by outstanding bond indentures. Reduction of reserves for debt shall be done only with City Council approval after Council has conferred with the City's financial advisor to insure there is no violation of bond covenants. G. DEBT COVERAGE RATIOS. Debt Coverage Ratios shall be maintained as specified by the bond covenants. � 1% H. MEDICAL INSURANCE FUND RESERVE. A reserve shall be established in the City's Health Insurance Fund to avoid potential shortages. Such reserve shall be used for no purpose other than for financing losses under the insurance program. Excess reserves shall be used to reduce premiums charges; an insufficient reserve shall be increased by adjustments to the premium. The reserve shall be approximately 25 % of anticipated un-reimbursed claims for the budget year. V. REVENUE MANAGEMENT A. CHARACTERISTICS OF THE REVENUE SYSTEM. The City strives for the following optimum characteristics in its revenue system: 1. Simplicity and Certainty. The City shall strive to keep the revenue classification system simple to promote understanding of the revenue sources. The City shall describe its revenue sources and enact consistent collection policies to provide assurances that the revenue are collected according to budgets and plans. 2. Equity. The City shall make every effort to maintain equity in its revenue system structure. The City shall minimize all forms of subsidization between entities, funds, services, utilities, and customers. 3. Realistic and Conservative Estimates. Revenues are to be estimated realistically. Revenues of volatile nature shall be budgeted conservatively. 4. Centralized Reporting. Receipts will be submitted daily to the Finance Department for deposit and investment. Daily transaction reports and supporting documentation will be prepared. 5. Review of Fees and Charges. The City shall review all fees and charges annually in order to match fees and charges with the cost of providing that service. 6. Aggressive Collection Policy. The City shall follow an aggressive policy of collecting revenues. Utility services will be discontinued (i.e. turned off) for non-payment in accordance with established policies and ordinances. The attorney responsible for delinquent tax collection, through the central collection agency, shall be encouraged to collect delinquent property taxes using an established tax suit policy and sale of real and personal property to satisfy non-payment of property taxes. B. NON-RECURRING REVENUES. One-time or non-recurring revenues will not be used to finance current ongoing operations. Non-recurring revenues will be used only for one-time expenditures such as capital needs. C. PROPERTY TAX REVENUES. All real and business personal property located within the City shall be valued at 100% of the fair market value based on the appraisal supplied by the Walker County Appraisal District. Reappraisal and reassessment is as provided by the Appraisal District. A ninety-six percent (96%) collection rate shall serve each year as a goal for tax collections and the budgeted revenue projection. Property tax rates shall be maintained at a rate adequate to fund an acceptable service level. Based upon taxable values, rates will be adjusted to fund this service level. Collection services shall be contracted out with a central collection agency, currently the Walker County Appraisal District. D. INTEREST INCOME. Interest earned from investment of available monies, whether pooled or not, shall be distributed to the funds in accordance with the equity balance of the fund from which monies were invested. E. USER -BASED FEES AND SERVICE CHARGES. For services associated with a user fee or charge, the direct and indirect costs of that service shall be offset wholly or partially by a fee where possible. There shall be an annual review of fees and charges to ensure that the fees provide adequate coverage of costs of services. Full fee support for operations and debt service costs shall be required in the Proprietary Funds. Partial fee support shall be generated by charges for miscellaneous licenses and fines, sports programs, and from other parks, recreational, cultural activities, and youth programs. F. UTILITY RATES. The City shall review and adopt utility rates annually that generate revenues required to cover operating expenditures, meet the Iegal requirements of applicable bond covenants, and provide for an adequate level of working capital. This policy does not preclude drawing down cash balances to finance current operations if legal requirements of the bond covenants are met. G. COST REIMBURSEMENTS TO THE GENERAL FUND. The General Fund shall be reimbursed by other funds for a proportionate share of administrative costs. Documentation to support the transfer shall be presented to City Council as part of the budget process. H. INTERGOVERNMENTAL REVENUES fGRANTSISPECIALREVENUES. Grant revenues and other special revenues shall be spent for the purpose(s) intended. The City shall review grant match requirements and include in the budget all grant revenues and expenditures. REVENUE MONITORING. Revenues actually received are to be regularly compared to budgeted revenues and reported to the City Council quarterly. J. REVENUE PROJECTIONS. The City shall project revenues for a five year period and will update this projection annually. Each existing and potential revenue source shall be re- examined annually. VI. EXPENDITURE CONTROL A. APPROPRIATIONS. The responsibility for budgetary control lies with the Department Head. Department Heads may not approve expenditures that exceed monies available at the object code level. Capital expenditures are approved by the City Council on a per project basis. Personnel allocations may not be changed without the approval of City Council. B. AMENDMENTS TO THE BUDGET. In accordance with the City Charter, the City Council may transfer any unencumbered appropriated balance or portion thereof from any office, department, or agency to another at any time. C. CENTRAL CONTROL. Unspent funds in salary and capital allocation object codes may not be spent for any purpose other than their specifically intended purpose without prior authorization of City Council. W D. CITY MANAGER'S AUTHORITY TO AMEND BUDGET. 1. Reserve for Future Allocation. The City Manager may authorize transfers of $3,000 or less from the budgeted Reserve for Future Allocation without prior City Council approval. The cumulative total of transfers approved by the City Manager, without prior Council approval, may not exceed 25% of the budgeted Reserve for Future Allocation. 2. Transfer Between Line Items. The City Manager may, without prior City Council approval, authorize transfers between budget line items within a division and may authorize transfers of $3,000 or less between divisions with the exception that: a) Regular personnel allocations may not be changed; b) Salary and benefit saving due to vacancies may not be transferred from the object code; and c) Savings from City Council - approved capital purchases may not be spent for other than their intended purpose. 3. Capital Project Budgets. The City Manager shall have the authority to transfer amounts between line items of a capital project budget and to transfer monies from a project's Contingency Reserve to fund change orders on the project. The City Manager, without prior Council approval, may approve a change order to a construction or engineering contract in an amount not to exceed $25,000, as long as the cumulative total of all change orders to the project do not exceed the State allowed maximum of 25% of the original contract price. Change orders approved by the City Manager shall be presented to Council at their next regularly scheduled meeting. 4. Reports to Council. Transfers from the reserve for future allocation or transfers between divisions authorized by the City Manager shall be reported to City Council on a quarterly basis for review by the City Council as part of the regular quarterly budget review. E. PURCHASING. All purchases shall be made in accordance with the Purchasing Procurement and Disposition Policies approved by the Finance Committee. The following shows a summary of approval requirements for purchases. X 11' APPROVAL REQUIREMENTS FOR PURCHASES ✓ Denotes signature approval F. PROMPT PAYMENT. All invoices approved for payment by the proper City authorities shall be paid by the Finance Department within thirty (30) calendar days of receipt, in accordance with the provisions of state law. Proper procedures shall be established that enables the City to take advantage of all purchase discounts, except in the instance where payments can be reasonably and legally delayed in order to maximize the City's investable cash. VII. CAPITAL IMPROVEMENTS PROGRAM AND THE CAPITAL BUDGET. A. PROGRAM PLANNING. The City shall develop and maintain a multi-year plan for capital improvements and make capital improvements in accordance with the approved plan. The Capital Improvements Program will be updated annually. The Capital Improvements Program (CIP) is a planning document and does not authorize or fund projects. The planning time frame for the capital improvements program will normally be five to ten years. B. BUDGET PREPARATION. The capital budget shall evolve from the Capital Improvements Program. Capital project expenditures must be appropriated in the capital budget. A funding source and resource availability shall be presented to the City Council at the time a project is presented for funding. The City's Capital Budget is to be prepared annually in conjunction with the operating budget on a fiscal year basis to ensure that capital and operating needs are balanced against each other. Projects approved for funding from the Capital Improvements Program will be included in the Capital Budget. C. PROJECT LENGTH BUDGET. A budget for a capital project shall be a project length budget. At the end of the fiscal year, the unspent budget of an approved capital project shall automatically carry forward to the subsequent fiscal year until the project is completed. ile IT Supervisor Department Purchasing city City Dollar Figure Or Director Director Agent Manager Council Designee Less than $1,000 ✓ $1,000 to less than $3,000 (Quotation Form) $3,000 to $8,000 ✓ ✓ ✓ $8,000 to less than $5,900 $25,000 ✓ ✓ ✓ ✓ (Purchase Order) 115;000 $25,000 or more (Formal Bids - State ✓ ✓ ✓ ✓ Required) I ✓ Denotes signature approval F. PROMPT PAYMENT. All invoices approved for payment by the proper City authorities shall be paid by the Finance Department within thirty (30) calendar days of receipt, in accordance with the provisions of state law. Proper procedures shall be established that enables the City to take advantage of all purchase discounts, except in the instance where payments can be reasonably and legally delayed in order to maximize the City's investable cash. VII. CAPITAL IMPROVEMENTS PROGRAM AND THE CAPITAL BUDGET. A. PROGRAM PLANNING. The City shall develop and maintain a multi-year plan for capital improvements and make capital improvements in accordance with the approved plan. The Capital Improvements Program will be updated annually. The Capital Improvements Program (CIP) is a planning document and does not authorize or fund projects. The planning time frame for the capital improvements program will normally be five to ten years. B. BUDGET PREPARATION. The capital budget shall evolve from the Capital Improvements Program. Capital project expenditures must be appropriated in the capital budget. A funding source and resource availability shall be presented to the City Council at the time a project is presented for funding. The City's Capital Budget is to be prepared annually in conjunction with the operating budget on a fiscal year basis to ensure that capital and operating needs are balanced against each other. Projects approved for funding from the Capital Improvements Program will be included in the Capital Budget. C. PROJECT LENGTH BUDGET. A budget for a capital project shall be a project length budget. At the end of the fiscal year, the unspent budget of an approved capital project shall automatically carry forward to the subsequent fiscal year until the project is completed. ile IT D. BUDGET AMENDMENT. All budget amendments shall be in accordance with State law. City Manager authority to amend the budget is identified in Section VI - D. E. FINANCING PROGRAMS. Alternative financing sources will be explored. Debt shall be used only to acquire major assets. The term of the debt issue may not exceed the expected useful life of the asset. F. REPORTING. Periodic financial reports shall be prepared to enable the Department Heads to manage their capital budgets and to enable the Finance Department to monitor and control the authorized capital budget. Capital project status reports shall be presented to the City Council at least quarterly. G. EVALUATION CRITERIA. Capital investments shall foster goals of economic vitality, neighborhood vitality, infrastructure preservation, provide service to areas lacking service and improve services in areas with deficient services. Evaluation criteria for selecting which capital assets and projects to include for funding shall include the following: • mandatory projects • efficiency improvement • policy area projects • project's expected useful life • availability of state/federal grants • prior commitments • maintenance projects • project provides a new service • extent of usage • effect of project on operation and maintenance costs • elimination of hazards VIII. ACCOUNTING, AUDITING, AND FINANCIAL REPORTING A. ACCOUNTING. The Finance Director is responsible for establishing the Chart of Accounts and for recording financial transactions. B. AUDITING. 1. Qualifications of the Auditor. In conformance with the City's Charter, the City shall be audited annually by independent accountants ("auditor"). The CPA firm must demonstrate that it has staff to conduct the City's audit in accordance with generally accepted auditing standards and contractual requirements. The auditor must be licensed by the State of Texas. 2. Responsibility of Auditor to City Council and Finance Committee. The auditor is retained by and is accountable to the City Council. The auditor shall communicate directly with the Finance Committee as necessary to fulfill its legal and professional responsibilities. The auditor's report on the City's financial statements shall be completed within 120 days of the City's fiscal year end. Selection of Auditor. The City shall request proposals for audit services at least once every three years. The City shall select the auditor by May 31, of each year. V Ito 4. Contract with Auditor. The agreement between the independent auditor and the City shall be in form of a written contract. A time schedule for completion of the audit shall be included. 5. Scope of Audit. All general purpose statements, combining statements and individual fund and account group statements and schedules shall be subject to a full scope audit. C. FINANCIAL REPORTING. External Reporting. As a part of the audit, the auditor shall assist with preparation of a written Comprehensive Annual Financial Report (CAFR) to be presented to the City Council. The CAFR shall be prepared in accordance with generally accepted accounting principles (GAAP) and shall be presented annually to the Government Finance Officer's Association (GFOA) for evaluation and consideration for the Certificate of Achievement for Excellence in Financial Reporting. 2. Availability of Reports. The comprehensive annual financial report shall be made available to the elected officials, bond rating agencies, creditors and citizens. 3. Internal Reporting. The Finance Department shall prepare internal financial reports, sufficient to plan, monitor, and control the City's financial affairs. IX. INVESTMENTS AND CASH MANAGEMENT A. DEPOSITORY BANK. A Depository Bank shall be selected by the City Council for a two year period. A request for proposal shall be used as the means of selecting a Depository Bank. The Depository Bank shall specifically outline safekeeping requirements. B. DEPOSITING OF FUNDS. The Finance Director shall promptly deposit all City funds with the Depository Bank in accordance with the provisions of the current Bank Depository Agreement and the City Council approved Investment Policies. Investments and reporting shall strictly adhere to the City Council approved Investment Policies. C. INVESTMENT POLICY. All funds shall be invested in accordance with the approved investment policy. Investment of City funds emphasizes preservation of principal. Objectives are, in order, safety, liquidity and yield. A procedures manual shall be approved by the Finance Committee. D. MONTHLY REPORT. A monthly cash and investment report shall be prepared. X. ASSET MANAGEMENT A. FIXED ASSETS AND INVENTORY. A fixed asset of the City is defined as a purchased or otherwise acquired piece of equipment, vehicle, furniture, fixture, capital improvement, or addition to existing land, buildings, etc. A fixed asset's cost or value is $5,000 or more, with an expected useful life greater than one year. IK 17 B. MAINTENANCE OF PHYSICAL ASSETS. The City will maintain its physical assets at a level adequate to protect the City's capital investment and minimize future maintenance and replacement costs. The budget will provide for the adequate maintenance and the orderly replacement of fixed assets. C. OPERATIONAL PROCEDURES MANUAL. Records shall be purged that do not meet the capitalization criteria and operational procedures shall be in accordance with a fixed asset records procedure manual. D. SAFEGUARDING OF ASSETS. The City's fixed assets will be reasonably safeguarded and properly accounted for. Responsibility for the safeguarding ofthe City's fixed assets lies with the Department Head in whose department the fixed asset is assigned. E. MAINTENANCE OF RECORDS. The Finance Department shall maintain the records of the City's fixed assets including description, cost, department of responsibility, date of acquisition and depreciation where applicable. F. ANNUAL INVENTORY. An annual inventory of assets shall be performed by each department using guidelines established by the Finance Department. Such inventory shall be performed by the Department Head or the designated agent. The Department Head shall use a detailed listing and shall be responsible for a complete review of assigned fixed assets. A signed inventory list shall be returned to the Finance Department. G. INFRASTRUCTURE MAINTENANCE. The City recognizes that deferred maintenance increases future capital costs. Funds shall be included in the budget each year to maintain the quality of the City's infrastructure. Replacement schedules should be developed in order to anticipate this inevitable ongoing and obsolescence of infrastructure. H. SCHEDULED REPLACEMENT OF ASSETS. As a part of the ongoing replacement of assets, the City has established the Equipment Replacement Fund. This fund will receive contributions from each of the operating funds in relation to the estimated replacement cost and estimated life of each piece of covered equipment. Additionally, annual contributions from each of the operating funds will be designated for future replacement of vehicles and rolling stock. Beginning in FY 2001-2002, this fund will be expanded to include computers and other office equipment. XI. DEBT MANAGEMENT A. DEBT ISSUANCE. The City shall issue debt only as specifically approved by the City Council and expenditure of such monies shall be in strict accordance with the designated purpose. B. ISSUANCE OF LONG-TERM DEBT. The issuance of long-term debt is limited to use for capital improvements or projects that cannot be financed from current revenues or resources. Debt may be issued for the purposes of purchasing land or rights-of-way and/or improvements to land, street improvements, or construction projects to provide for the general good. For purposes of this policy, current resources are defined as that portion of fund balance in excess of the required reserves. The payback period of the debt will be limited to the estimated useful life of the capital projects or improvements. The City may use long -term debt financing when it can be determined that future citizens will receive a benefit from the improvement. ;4 /� C. The City shall strive to schedule debt issues to take advantage of the small issuer status designation in regard to Federal Arbitrage laws. D. PAYMENT OF DEBT. When the City utilizes long -term debt financing it will ensure that the debt is financed soundly by realistically projecting the revenue sources that will be used to pay the debt; and financing the improvement over a period not greater than the useful life of the improvement. E. TYPES OF DEBT. 1. General Obligation Bonds (G.O.'s). General obligation bonds shall be used only to fund capital assets of the general government, and not used to fund operating needs of the City. General obligation bonds are backed by the full faith and credit of the City as well as the ad valorem tax authority of the City. The term of a bond issue shall not exceed the useful life of the asset(s) funded by the bond issue. General obligation bonds must be authorized by a vote of the citizens of the City of Huntsville. 2. Revenue Bonds (R.B.'s). Revenue bonds shall be issued as determined by City Council to provide for the capital needs of any activities where the capital requirements are necessary for continuation or expansion of a service which produces a revenue and for which the asset may reasonably be expected to provide for a revenue stream to fund the debt service requirements. The term of the obligation may not exceed the useful life of the asset(s) to be funded by the bond issue. 3. Certificates of Obligation (C.O.'s). Certificates of obligation may be used in order to fund capital assets. Debt service for C.O.'s may be either from general revenues or backed by a specific revenue stream or streams or by a combination of both. C.O.'s may be used to fund capital assets where full bond issues are not warranted as a result of the cost of the asset(s) to be funded through the instrument. Infrastructure and building needs may also be financed with Certificates of Obligation, after evaluation of financing alternatives by the City's Financial Advisor. The term of the obligation may not exceed the useful life of the asset(s) to be funded by the proceeds of the debt issue. 4. Tax Anticipation Notes. Tax Anticipation Notes may be used to fund capital assets of the general government or to fund operating needs of the City. Tax Anticipation Notes are backed by the full faith and credit of the City as well as the ad valorem tax authority of the City. The term of a note issue shall not exceed the useful life of the asset(s) funded by the debt issued or seven years whichever is less. F. METHOD OF SALE. The City shall use a competitive bidding process in the sale of bonds and certificates of obligation unless some other method is specifically agreed to by City Council. G. FINANCIAL ADVISOR. The Finance Committee will recommend to the City Council a financial advisor to oversee all aspects of any bond issue. P? H. ANALYSIS OF FINANCING ALTERNATIVES. Staff will explore alternatives to the issuance of debt for capital acquisitions and construction projects. These alternatives will include, but not be limited to, 1) grants in aid, 2) use of reserves, 3) use of current revenues, 4) contributions from developers and others, 5) leases, and 6) impact fees. 1. DISCLOSURE. Full disclosure of operations shall be made to the bond rating agencies and other users of financial information. The City staff, with the assistance of financial advisors and bond counsel, shall prepare the necessary materials for presentation to the rating agencies, and shall aid in the production of Offering Statements. DEBT STRUCTURING. The City will generally issue debt for a term not to exceed 20 years. The City will exceed a 20 year term only upon recommendation of the City's Financial Advisor and in no case shall the term of the debt issue exceed the life of the asset acquired. The repayment schedule shall approximate level debt service unless operational matters dictate otherwise or if market conditions indicate a potential savings could result from modifying the level payment stream. Consideration of market factors, including tax - exempt qualification, and minimum tax alternatives will be given during the structuring of long -term debt instruments. K. FEDERAL REQUIREMENTS. The City will maintain procedures to comply with arbitrage rebate and other Federal requirements. L. BIDDING PARAMETERS. The notice of the sale of bonds will be carefully constructed so as to ensure the best possible bid for the City, in light of the existing market conditions and other prevailing factors. Parameters to be examined include: • Limits between lowest and highest coupons • Coupon requirements relative to the yield curve • Method of underwriter compensation, discount or premium coupons • Use of bond insurance • Call provisions XII. INTERNAL CONTROLS A. WRITTEN PROCEDURES. Wherever possible, written procedures shall be established and maintained by the Finance Department for all functions involving cash handling and/or accounting throughout the City. These procedures shall embrace the general concepts of fiscal responsibility set forth in this policy statement. B. DEPARTMENT HEAD RESPONSIBILITIES. Each Department Head is responsible to ensure that good internal controls are followed throughout the Department, that all Finance Department directives or internal controls are implemented, and that all independent auditor internal control recommendations are addressed. XIII. RISK MANAGEMENT A. RESPONSIBILITY. The Director of Community Services is responsible for the general risk liability insurance risk management function of the City. Recommendations for deductibles, limits of coverage, etc. shall be presented to the Finance Committee for review. B. SELF INSURED HEALTH INSURANCE. The Director of Community Services shall be responsible for administration of the Medical Insurance Health Plan. A detailed annual report shall be given to the Finance Committee that includes available funds, expected payouts in the plan, reinsurance costs and a rate recommendation. The presentation shall include a proposed budget for a period coinciding with the City's fiscal year, XIV. ROLE OF THE FINANCE COMMITTEE OF CITY COUNCIL The finance committee appointed by City Council upon recommendation of the Mayor shall have responsibilities including: A. Monitoring and recommending changes to the Investment Policy; B. Managing the audit; C. Overseeing of the City's Medical Insurance Health Plan; D. 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IL IL 02 z 0 CL w '2 to 0 CR (D P- � -7 C) 0 E F. -00 KO > as 0 w a. -0 W 0)(0 ul cli OD It 0 E Z IL c F- V� c6 N^ to w U) C,4 U) — — x x 60 69 60 w I-- 0: IL z 0 Cl) 00 LO CO CY) co r, A LO V V) N 2 w VL c6 Olt 0 F- cof-) E I-- CL r 0 . 19 rg F- v M o a. o -.= -25 -6 CCLO i c c o o m 0 t:! C: CL CD 4) Z 2 i-I M E (D 0 4) 0 0 v = 0 .4 -E -E (D p Gu u c U-0 c c c c m CL U) U) r --o C c m :3 'm —2— E (D' I E E E C C 4) to -" 3' C 4) Y U) L) <0 L) 2 w o U) C, C-4 Cri N N SUMMARY OF PERSONNEL BY DIVISION AND DEPARTMENT BUDGET BUDGET BUDGET 1999-00 2000-01 2001-02 GENERAL FUND Charter Offices City Manager 1.00 1.00 2.00 City Secretary 1.00 1.00 - City Attorney 1.00 1.00 1.00 City Judge 1.00 1.00 1.00 Charter Office Support 2.00 2.00 TOTAL 6.00 6.00 4.00 Organization & Staff Development Department Human Resources - - 3.00 Risk Management/Safety/Emergency Management 1.00 TOTAL - - 4.00 Finance Department Finance 3.00 3.00 3.00 Accounting 3.00 3.63 4.00 Purchasing - - 1.00 Municipal Court - - 4.00 TOTAL 6.00 6.63 12.00 Public Works Department Public Works Administration 6.00 5.00 4.00 Parks Administration/Recreation - 2.00 - Parks Maintenance 12.66 11.66 Street 19.00 - - Technical/Regulatory - - 1.00 Central Inspection 6.00 - - Fleet Maintenance/Warehouse 11.00 - - TOTAL 54.66 18.66 5.00 Community Services Department Community Services Administration 2.50 2.50 1.00 Parks/Recreation - - 1.00 Parks Maintenance - 13.66 Main Street Program - 1.00 - Library 8.00 8.00 9.00 Cultural Services 2.00 2.00 2.00 Municipal Court 4.00 4.00 - Management Information Services (MIS) 4.00 4.00 - Building Services 2.00 2.00 2.00 Purchasing 1.00 1.00 - Human Resources 1.00 1.00 - TOTAL 24.50 25.50 28.66 SUMMARY OF PERSONNEL BY DIVISION AND DEPARTMENT BUDGET BUDGET BUDGET 1999 -00 2000 -01 2001 -02 Public Safety Department Public Safety Administration 2.00 2.00 2.00 Police 42.00 43.00 46.00 Fire 5.00 5.00 6.00* Dispatch Services 6.00 - - TOTAL 55.00 50.00 54.00 Planning & Development Department Central Inspection - 6.00 8.00 Health Inspection/Animal Control - 2.00 2.00 TOTAL - 8.00 10.00 Economic Development Economic Development - - 2.00 Main Street Program - - 1.00 TOTAL - - 3.00 TOTAL GENERAL FUND 146.16 114.79 120.66 STREET FUND Public Works Department Street - 19.00 19.00 TOTAL - 19.00 19.00 TOTAL STREET FUND 19.00 19.00 FLEET MANAGEMENT FUND Public Works Department Fleet/Warehouse Management Administration - 3 .00 3.00 Garage Operations 8.00 8.00 TOTAL - 11.00 11.00 TOTAL FLEET MANAGEMENT FUND 11.00 11.00 INFORMATION TECHNOLOGY FUND Information Technology Services - - 6.00 TOTAL INFORMATION TECHNOLOGY FUND 6.00 SUMMARY OF PERSONNEL BY DIVISION AND DEPARTMENT BUDGET BUDGET BUDGET 1999-00 2000-01 2001-02 PLANNING & DEVELOPMENT FUND Planning & Development Department Planning & Development Administration - 3.00 4.00 Design/Survey Services - 9.00 10.00 Planning & Development Services - 3.00 3.00 GIS Services - 2.00 - TOTAL - 17.00 17.00 TOTAL PLANNING & DEVELOPMENT FUND - 17.00 17.00 WATER AND SEWER FUND Public Works Department Water Production 4.00 - - Water Distribution 9.00 - - Wastewater Collection 9.00 - - A.J. Brown WWTP 6.00 - - N.B. Davidson WWTP 3.50 - - Lab/Compliance 2.50 - - Sewer Line Monitoring 2.00 - - Community Development 15.00 - - TOTAL 51.00 - - Finance Department Customer Service 7.63 - - TOTAL 7.63 - - TOTAL WATER AND SEWER FUND 58.63 - WATER FUND Public Works Department Water Production - 4.00 4.00 Water Distribution - 9.00 12.00 TOTAL - 13.00 16.00 Finance Department Utility Billing - 8.00 9.00 TOTAL - 8.00 9.00 TOTAL WATER FUND 21.00 25.00 SUMMARY OF PERSONNEL BY DIVISION AND DEPARTMENT BUDGET BUDGET BUDGET 1999 -00 2000 -01 2001 -02 WASTEWATER FUND Public Works Department Public Works Department Wastewater Collection - 11.00 11.00 A.J. Brown WWTP - 6.00 6.00 N.B. Davidson WWTP - 3.50 3.50 Robinson Creek WWTP - - 3.00 Lab /Compliance - 2.50 3.00 TOTAL TOTAL WASTEWATER FUND 23.00 26.50 23.00 26.50 SOLID WASTE FUND Public Works Department Commercial Collection 8.00 7.00 7.00 Solid Waste Disposal 9.00 9.00 9.00 Residential Collection 13.00 13.00 13.00 Recycling - 1.00 1.00 Street Sweeping 2.00 - 1.00 TOTAL 32.00 30.00 31.00 TOTAL SOLID WASTE FUND 32.00 30.00 31.00 STORMWATER DRAINAGE UTILITY FUND Public Works Department Street Sweeping TOTAL TOTAL STORMWATER DRAINAGE UTILITY FUND 1.00 - 1.00 - 1.00 OAKWOOD CEMETERY OPERATIONS FUND Community Services Department Oakwood Cemetery Operations - - 2.00 TOTAL OAKWOOD CEMETERY OPERATIONS FUND - 2.00 CAPITAL CONSTRUCTION Public Works Department Capital Construction Crew 5.00 5.00 4.00 TOTAL CAPITAL CONSTRUCTION 5.00 5.00 4.00 SUMMARY OF PERSONNEL BY DIVISION AND DEPARTMENT BUDGET BUDGET BUDGET 1999 -00 2000 -01 2001 -02 GOLF COURSE OPERATIONS FUND Communitv Services Department Golf Course Operations - - 1.00 Golf Pro Shop Operations - - 1.00 TOTAL GOLF COURSE OPERATIONS FUND - - 2.00 ** TOTAL ALL FUNDS 241.79 241.79 264.16 * Additional Firefighter dependent on funding 1/2 of cost by County. ** During startup year, one Superintendent, a Pro Shop Manager, will be hired in January 2002. Maintenance employees may be hired late in the fiscal year. Current plans are to hire an Assistant Superintendent in July 2002, a Maintenance I in June 2002, and four Sam Houston State University interns in June 2002. In FY 2002- 03, an Assistant Pro Shop Manager, a Pro Shop Assistant, a Mechanic, a Grill Manager, and four part -time cart and grill employees will be added. BUDGET BUDGET BUDGET 1999 -00 2000 -01 2001 -02 Budgeted actual number of full -time employees 238 238 261 Budgeted actual number of part -time employees 7 7 3.16 (excluding seasonal help and part -time firefighters) FY 2001 -02 budgeted Dart -time emplovees (full -time equivalents) Parks Maintenance Horticulture Library Clerk I Library Clerk I N.B. Davison WWTP Maintenance II Solid Waste Disposal Clerk I Solid Waste Disposal Maintenance II Budgeted interns /Student Workers FY 2001 -02 Finance SHSU Student Worker Utility Billing SHSU Student Worker Garage Operations Student Worker Information Technology SHSU Student Worker Central Office Services Student Worker Budgeted number of part -time firefighters 66 50 50 50 50 50 1 1 1 2 1 2/2 �U 5 6 40 40 40 SUMMARY OF PERSONNEL BY DIVISION AND DEPARTMENT BUDGET BUDGET BUDGET 1999 -00 2000 -01 2001 -02 GOLF COURSE OPERATIONS FUND Community Services Department Golf Course Operations - - 1.00 Golf Pro Shop Operations - - 1.00 TOTAL GOLF COURSE OPERATIONS FUND - - 2.00 ** TOTAL ALL FUNDS 241_.79 241.79 264.16 * Additional Firefighter dependent on funding ' /z of cost by County. ** During startup year, one Superintendent, a Pro Shop Manager, will be hired in January 2002. Maintenance employees may be hired late in the fiscal year. Current plans are to hire an Assistant Superintendent in July 2002, a Maintenance I in June 2002, and four Sam Houston State University interns in June 2002. In FY 2002- 03, an Assistant Pro Shop Manager, a Pro Shop Assistant, a Mechanic, a Grill Manager, and four part-time cart and grill employees will be added. BUDGET BUDGET BUDGET 1999 -00 2000 -01 2001 -02 Budgeted actual number of full -time employees 238 238 261 Budgeted actual number of part-time employees 7 7 3.16 (excluding seasonal help and part-time firefighters) FY 2001 -02 budgeted part-time employees (full -time equivalents) Parks Maintenance Horticulture .66 Library Clerk I .50 Library Clerk I .50 N.B. Davison WWTP Maintenance II .50 Solid Waste Disposal Clerk I .50 Solid Waste Disposal Maintenance II .50 Budgeted interns �� L�LLn,� 1 5 6 FY 2001- 02ka —t Finance SHSU Student Worker i Utility Billing SHSU Student Worker 1 Garage Operations Student Worker I Information Technology SHSU Student Worker 2 Central Office Services Student Worker 1 Budgeted number of part-time firefighters 40 40 40 �4f 31 SUMMARY OF PERSONNEL CHANCES Summary of Personnel Changes FY 2000 -01 Budget $ 241.79 Robinson Creek W WTP First Year Operations Plant Operator 1.00 Maintenance II 2.00 Oakwood Cemetery First Year Operations Crewleader 1.00 Maintenance IV 1.00 Golf Course Operations Superintendent IV 1.00 Note: Additional employees to be hired as course nears completion Golf Pro Shop Golf Pro Shop Manager 1.00 Note: Additional employees to be hired as course nears completion Public Safety Police Officers 2.00 Warrant Officer 1.00 Firefighter 1.00 Planning & Development Code Inspector 1.00 Administrative Assistant (shared with newly structured Community Services) 1.00 Information Technology Services Director 1.00 Accounting Mid -year change from part-time to full -time Accountant .37 Utility Billing Maintenance IV 1.00 Water Distribution Crewleader 1.00 Maintenance 11 2.00 Lab Services Part -time to full -time Lab Technician .50 Library Two Part-Time Clerks 1.00 Public Works Administration Assistant Public Works position deleted -1.00 Superintendent IV - Public Works Operations added 1.00 Public Works Technical /Regulatory Superintendent III - Technical Advisor Added 1.00 CIP Construction Crew Superintendent III position deleted -1.00 -3,7— SUMMARY OF PERSONNEL CHANGES Community Services Restructured Community Services Director renamed Economic Development Director -1.00 Community Services Director appointed for restructured department 1.00 Superintendent II position deleted in Parks Maintenance -1.00 Two Crewleaders in Parks Maintenance division 2.00 Clerk I - Part-Time position deleted -.50 Economic Development Economic Development Director part of Community Service Restructuring 1.00 Administrative Assistant 1.00 Net Position Additions/Deletions 22.37 FY 2001 -02 Budget 264.16 Other Changes Not Affecting Total Allocations: • Organization & Staff Development Department (OSDD) was created mid -year. The City Secretary was appointed as Director of this department. • One of the two employees previously budgeted in the Charter Office Support division is budgeted in the City Manager division and reclassified to an Administrative Assistant pay grade. The second employee transferred to the OSDD and is reclassified to Staffing Coordinator. • Risk Management/Safety functions were centralized mid -year in OSDD, and a position transferred from the Community Services Department. The Emergency Management function, previously in the Police Division, is part of this new division's responsibilities. • The Purchasing and Municipal Court divisions were moved from the Community Services Department to the Finance Department. • The ParkslRecreation and Parks Maintenance functions were moved from the Public Works Department to the Community Services Department. • In the Utility Billing division, one of the Meter Reader positions was reclassified to a Crewleader position to allow for field supervision. • The Main Street division was moved from the Community Services Department to the Economic Development Department. • The clerical position working with permitting was transferred from Public Works Administration to the Planning & Development Department. • Four MIS employees in the General Fund and one GIS employee in the Planning & Development Fund are transferred to the new Information Technology Services Department. • A Maintenance IV position in the CIP Construction Crew was reclassified to Crewleader because of the deletion of the Superintendent position to allow for field supervision. ;9 33 EMPLOYEE ALLOCATION BY CLASSIFICATION BUDGET BUDGET BUDGET BUDGET BUDGET CLASSIFICATION 1999-00 2000-01 2001-02 2000-01 2001-02 City Manager 1.00 1.00 1.00 104,755 110,760 City Attorney 1.00 1.00 1.00 83,600 89,600 City Secretary 1.00 1.00 - 45,980 - City Judge 1.00 1.00 1.00 32,400 37,400 City Planner - 1.00 1.00 47,880 49,108 Director of Finance 1.00 1.00 1.00 67,728 71,100 Director of Community Services 1.00 1.00 1.00 62,856 63,000 Director of Economic Development - - 1.00 - 66,000 Director of Planning & Development/ City Engineer 1.00 1.00 1.00 70,896 74,000 Director of Public Safety 1.00 1.00 1.00 67,152 71,000 Director of Information Technology - - 1.00 - 66,000 Director of Organization & Staff Development/City Secretary - 1.00 - 50,400 Director of Public Works 1.00 00 1.00 1.00 72,804 75,000 Assistant Director 1.00 1.00 - 59,412 - Accountant 1.00 1.00 - 44,056 - Accountant I - - 1.00 - 33,196 Accountant 11 - - 1.00 - 44,980 Accounts Payable Clerk 1.00 1.00 1.00 29,516 30,200 Administrative Coordinator for Finance 1.00 1.00 1.00 40,168 40,996 Administrative Assistant 2.00 2.00 4.00 56,720 101,472 Animal Control Officer 1.00 1.00 1.00 27,936 28,524 Assistant I - Circulation 2.00 2.00 2.00 38,259 41,538 Assistant III - Finance 1.00 1.00 1.00 27,356 27,944 Assistant IV 4.00 3.00 3.00 83,350 89,059 Assistant Librarian 1.00 1.00 1.00 34,783 36,636 Building Services Technician 1.00 1.00 1.00 25,770 25,274 Building Services Technician IV 1.00 1.00 1.00 31,629 30,122 Catalog/Circulation Technician 2.00 2.00 2.00 59,312 61,188 Clerk - Library - PT - - 1.00 - 15,240 Clerk - PT - - Clerk I I.00 00 1.00 1.00 22,980 22,936 Clerk I - PT 1.00 1.00 .50 20,366 8,360 Clerk 11 1.00 1.00 1.00 17,703 19,750 Clerk 11- PT .63 .63 - 10,983 - Communication Operator 1 5.00 - - Communication Operator 11 1.00 - - - - Court Clerk 2.00 2.00 2.00 51,292 54,159 Crewleader 7.00 7.00 13.00 242,869 393,617 Crewman 1 11.00 11.00 11.00 210,809 216,409 Cultural Services Coordinator 1.00 1.00 1.00 43,006 45,236 Customer Assistant 2.00 3.00 2.00 85,712 59,904 Customer Service Clerk 1.00 2.00 2.00 48,062 52,486 Customer Service/Billing Clerk 1.00 1.00 1.00 29,680 30,316 Data Control Clerk 1.00 1.00 1.00 21,138 22,692 Design Engineer 1.00 1.00 1.00 62,470 63,180 Design Technician - 1.00 2.00 29,904 46,439 Division Head - Planning & Development 1.00 1.00 1.00 53,441 56,208 ,-, T EMPLOYEE ALLOCATION BY CLASSIFICATION BUDGET BUDGET BUDGET BUDGET BUDGET CLASSIFICATION 1999 -00 2000 -01 2001 -02 2000 -01 2001 -02 Driver 11.00 11.00 11.00 $ 301,991 $ 308,544 Electrical Technician 1.00 1.00 1.00 38,649 40,524 Equipment Operator 8.00 8.00 7.00 231,074 205,723 Evidence Technician 1.00 1.00 1.00 32,688 33,372 Fire Chief 1.00 1.00 1.00 54,622 57,182 Firefighters 4.00 4.00 5.00 132,339 166,919 Firefighters - PT (40) 73,760 73,760 Fire Hydrant Maintenance 1.00 1.00 1.00 24,507 26,442 GIS Administrator 1.00 1.00 - 34,704 - GIS Design Technician 2.00 - - - - GIS Technician - 1.00 - 22,020 - Health Inspector 1.00 1.00 1.00 39,492 40,368 Human Resources Coordinator 1.00 1.00 1.00 38,235 40,216 Inspector 3.00 5.00 6.00 174,403 206,844 IT Manager /Analyst - - 1.00 - 51,666 IT Analyst - - 3.00 - 119,479 IT Help Desk/Web Technician - - 1.00 - 31,678 Lab Analyst 1.00 1.00 2.00 32,792 45,218 Lab Assistant - PT .50 .50 - 8,353 - Landscape Maintenance - PT .66 .66 .66 19,230 19,618 Librarian 1.00 1.00 1.00 44,081 46,338 Lieutenant 3.00 3.00 3.00 176,255 184,476 Lift Station Operator 2.00 2.00 2.00 59,716 60,988 Main Street Program Manager - 1.00 1.00 26,244 32,805 Maintenance I 6.00 6.00 6.00 93,692 100,630 Maintenance II 26.00 26.00 30.00 580,523 634,561 Maintenance II - PT .50 .50 .50 9,828 9,078 Maintenance III 5.00 5.00 5.00 109,000 115,540 Maintenance III - PT .50 .50 .50 11,847 12,734 Maintenance IV 5.00 5.00 7.00 147,389 192,478 Mechanic 5.00 5.00 5.00 164,612 167,840 Meter Reader 3.00 3.00 2.00 66,028 40,392 MIS Help Desk/Web Technician 1.00 1.00 - 28,579 - MIS Manager 1.00 1.00 - 49,149 - MIS Operations Analyst 2.00 2.00 - 77,635 - Municipal Court Coordinator 1.00 1.00 1.00 40,072 40,900 Office Supervisor 1.00 1.00 1.00 33,537 35,238 Parking Enforcement Official 1.00 1.00 1.00 27,492 27,840 Parks Supervisor 1.00 1.00 - 39,760 - Payroll /Accounting Clerk 1.00 1.00 1.00 33,417 34,372 Planning & Development Project Coordinator 1.00 1.00 1.00 26,683 28,214 Planning Officer /Development Coordinator 1.00 1.00 1.00 36,986 38,819 Plant Operator 5.00 5.00 6.00 173,631 193,266 Police Officer 29.00 30.00 32.00 1,130,180 1,257,094 Program Assistant 1.00 1.00 - 36,204 - Property Research Coordinator 1.00 1.00 1.00 33,292 33,976 Purchasing Agent 1.00 1.00 1.00 40,516 41,344 Receptionist 1.00 1.00 1.00 21,184 21,832 Recreation Coordinator 1.00 1.00 1.00 43,904 44,636 EMPLOYEE ALLOCATION BY CLASSIFICATION BUDGET BUDGET BUDGET BUDGET BUDGET CLASSIFICATION 1999 -00 2000 -01 2001 -02 2000 -01 2001 -02 Registered Surveyor 1.00 1.00 1.00 $ 47,519 $ 49,290 Risk Manager /Safety Coordinator - - 1.00 - 42,408 Senior Circulation Assistant 2.00 2.00 2.00 46,348 48,888 Senior Court Clerk 1.00 1.00 1.00 30,120 30,756 Senior Customer Service Clerk 1.00 1.00 1.00 31,820 34,022 Senior Mechanic 1.00 1.00 1.00 40,064 40,940 Sergeant 5.00 5.00 5.00 257,621 268,065 Staffing Coordinator - - 1.00 - 35,404 Superintendent I 3.00 3.00 3.00 130,331 125,883 Superintendent If 2.00 2.00 2.00 90,269 67,670 Superintendent 111 8.00 8.00 9.00 408,456 453,479 Superintendent IV - - 2.00 - 101,426 Survey Party Chief 2.00 2.00 2.00 64,712 67,196 Survey Technician 3.00 3.00 3.00 70,723 74,240 Transfer Station Operator 1.00 1.00 1.00 34,008 35,740 Utility Line Locator 1.00 1.00 1.00 29,844 30,480 Vacuum Truck Operator 1.00 1.00 1.00 27,132 28,539 Warrant Officer - - 1.00 - 27,672 Total Employee Allocations: 241.79 241.79 264.16 $ 8,093.995 $ $.946.471 Other Personnel Allocations: Interns /Student Workers SHSU Student Worker - Information Technology Services (2) $ - $ 11,600 SHSU Student Worker - Finance 6,240 11,076 SHSU Student Worker - Utility Billing - 8,320 Student Worker - Garage Operations 5,828 6,240 Student Worker - Central Office Services 6.240 Total Interns /Student Workers $ 12,068 $ 43,476 Seasonal Parks Maintenance $ 56,924 $ 42,000 Street 34.287 34.287 Total Seasonal $ 91,211 $ 76,287 Other Allocation for Pay Increase 222,374 Golf Course Operations - Workers to be added late in year 38,417 Overtime 309.135 361$31 Total Other $ 309,135 $ 624,622 Total Other Personnel Allocations S. 412,414 $ 744,385 TOTAL PERSONNEL ALLOCATIONS $ 8,506.409 $- ,690.856 ;All �5 ,� t)(Aibi CITY OF HUNTSVILLE TEXAS September 18, 2001 INVESTMENT AND BANKING POLICIES 67 TABLE OF CONTENTS PART I - INVESTMENT POLICY I. Purpose of Policy ........................ ............................... II. Scope of Policy ......................... ............................... III. Designation of Investment Officers ......................................... IV. Investment Training ...................... ............................... V. Ethics and Conflict of Interest ............................................. VI. Objectives ............................. ............................... VII. Market Yield (Benchmark)/Market Price of Investments ........................ VIII. Investment Strategies .................................................... IX. Prudence /Standard of Care ................ ............................... X. Diversification .......................... ............................... XI. Maximum Maturities .................................................... XII. Purchase Procedures ..................... ............................... XIII. Collateralization ........................................................ XIV. Safekeeping and Custody .................. ............................... XV. Internal Control/Compliance Audit ......................................... XVI. Authorized Financial Dealers and Institutions ................................ XVII. Authorized Investments .................................................. XVIII. Investment Pools ....................... ............................... XIX. Reporting ............................. ............................... XX. Policy Adoption ........................ ............................... 2 2 2 3 3 3 4 4 5 5 6 6 6 7 7 7 8 12 14 14 PART H - BANKING SERVICES POLICY I. Establishment of Banking Depository ....... ............................... 14 II. Collateralization Requirements /Safekeeping and Custody ...................... 16 Glossary.................................. ............................... 18 Appendix I - State Law List of Authorized Investments MAIJ CITY OF HUNTSVILLE INVESTMENT AND BANKING POLICIES PART I - INVESTMENT POLICY I. PURPOSE OF POLICY This policy is adopted by the City Council to direct and limit the financial affairs of the City of Huntsville. It is the policy of the City of Huntsville to invest public funds in a manner which will obtain a rate of return throughout budgetary and economic cycles while meeting the cash flow demands of the City and conforming to all state and local statutes governing the investment of public funds. This policy sets forth the investment and banking program of the City of Huntsville, Texas and the guidelines to be followed in achieving its objectives. H. SCOPE OF POLICY This policy applies to all funds or financial resources available for investment by the City accounted for in the City ofHuntsville, Texas Comprehensive Annual Financial Report and include the General Fund, General Obligation Debt Service Fund, Hotel/Motel Tax Special Revenue Fund, the Capital Projects Funds, the Water and Sewer Fund, the Sanitation Fund, the City's self - funded Health Insurance Fund, the Library Endowment Nonexpendable Trust Fund, and will include any new fund created by the City Council unless specifically exempted by City Council. These policies do not, however, govern funds that are managed under separate investment programs such as retirement funds, pension funds, deferred compensation funds and certain private donations, that are maintained as required by federal and state law, other local policies, or donor stipulations. M. DESIGNATION OF INVESTMENT OFFICERS The authority to manage the City of Huntsville investment program is derived from State Statute, the City Charter, and these investment policies. Management responsibility for the investment program is hereby delegated to the City Manager and Finance Director, designated as Investment Officers for the City of Huntsville, who shall establish written procedures for the operation of the investment program consistent with this investment policy and shall be responsible forthe operation of the investment program consistent with this investment policy. The Director of Finance, under general supervision of the City Manager, shall direct the cash management program of the City. (See City Charter Art. XI). The City Manager and/or Director of Finance may deposit, withdraw, invest, transfer, and manage City funds. The Investment Officers shall report to the Finance Committee of City Council. The Finance Committee, appointed by the Mayor, shall be responsible for monitoring, reviewing and making recommendations regarding the City's investment program to the City Council. IV. 0ATESTMENT TRAINING The Finance Director and City Manager shall attend investment training on an annual basis that includes education in investment controls, security risks, strategy risks, market risks and general compliance with state law. Not less than once in a two -year period, the investment officers shall receive not less than 10 hours of instruction relating to investment responsibilities. 39 V. ETHICS AND CONFLICT OF INTEREST Officers and employees involved in the investment function shall refrain from personal business activity that could conflict with proper execution of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the Finance Committee of the City Council any material financial interest in financial institutions that conduct business with the City, and they shall further disclose any large personal financial/investment positions that could be related to the performance of the City of Huntsville, particularly with regard to the time of purchases and sales. Investment officers shall comply with Texas Government Code section 2256.005(I) relating to personal business relationships with a business organization offering to engage in an investment transaction with the City of Huntsville. VI. OBJECTIVES The objectives of the City's investment policies are, in order of priority: preservation and safety of principal, liquidity and yield/return on investments. The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs. A. Preservation and safety ofprincipal shall be the foremost objective ofthe City's investment program. Preservation and safety of principal shall be obtained through protection of principal and safekeeping. The City shall control risk of loss due to the failure of a security issuer or guarantor. Such risk shall be controlled by investing in the safest types of securities, by qualifying the financial institution with whom the City will transact, and by portfolio diversification. 2. The City shall also control risks of loss by requiring collateral for depository bank funds to be held by a financial institution separate from the depository bank. B. Liquidity shall be achieved by matching investment maturities with forecasted cash flow requirements and by investing in securities with active secondary markets. A security may be liquidated to meet unanticipated cash requirements, to redeploy cash into other investments expected to out perform current holdings, or to otherwise adjust the City's portfolio. C. Yield/Return on Investments. The City of Huntsville investment portfolio is designed with the objective of attaining a rate of return throughout budgetary and economic cycles commensurate with the City of Huntsville investment risk constraints and the cash flow characteristics of the portfolio. Investments, other than the overnight cash concentration account, shall be made in permitted obligations at yields equal to or greater than the bond equivalent yield on United States Treasury obligations of comparable maturity. HE VII. MARKET YIELD (BENCHMARK)/MARKET PRICE OF INVESTMENTS The market yield benchmark shall be a yield equal to the bond equivalent yield on United States Treasury obligations of comparable maturity. If selling a security prior to a fixed date maturity at a gain or loss, the investment officers shall notify the Finance Committee of City Council at its next meeting. The City shall monitor the market price of investments as of the end of each month through reports provided by brokers and/or the use of a purchased service or available software. The City of Huntsville shall generally invest funds with the intent to hold to maturity. Investment selection shall be based on legality, appropriateness, liquidity, and risk/return considerations. Monies designed for immediate expenditure should be passively invested to allow for liquidity to pay upcoming disbursements, (payroll, debt service payments, payables, etc.), and allow for structuring the investment portfolio on a "laddered" basis. The City of Huntsville maintains portfolios that utilize four specific investment strategies designed to address the unique characteristics of the fund groups represented in the portfolios: A. Operating Funds have as their primary objective the assurance that anticipated cash flows are matched with adequate investment liquidity. The secondary objective is to create a portfolio structure that will experience minimal volatility during economic cycles. The weighted average days to maturity of these funds shall be less than 365 days and shall be calculated using the stated final maturity date for each security. B. DebtService 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 that exceeds the debt service payment date. C. 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. In addition to the bond ordinance specific to an individual bond issue, which sets out investment parameters, securities shall have a maturity of less than five years. Investments shall be limited to obligations of the United States or its agencies and instrumentalities or in approved investment pools. D. 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. These portfolios should include at least 10% in highly liquid securities to allow for flexibility and unanticipated project outlays. The stated final maturity dates of securities held should not exceed the estimated project completion date. A singular repurchase agreement may be utilized if disbursements are allowed in the amount necessary to satisfy any expenditure request. This investment structure is commonly referred to as a flexible repurchase agreement. � �l IX. PRUDENCE /STANDARD OF CARE Investments shall be made with the judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. In determining whether the City's investment officers have exercised prudence with respect to an investment decision, the determination shall be made taking into consideration, the investment of all funds, or funds under the City's control, over which they have responsibility rather than a consideration as to the prudence of a single investment, and whether the investment decision is consistent with this investment policy. X. DIVERSIFICATION The City of Huntsville will diversify its investments by security type and institution. With the exception of U.S. Treasury securities and authorized pools, no more than 50% of the total investment portfolio will be invested in a single security type or with a single financial institution. Diversification will also include terms of maturity as well as instrument type and issue. Investments shall not exceed more than 20% of the capitalization of the financial institution other than the main depository. Bond proceeds may be invested in a single security or investment which exceeds the City's diversification limits ifthe Investment Officers, with concurrence ofthe Finance Committee, determine that such an investment is necessary to comply with Federal arbitrage restriction or to facilitate arbitrage record keeping and calculation. i 1 In order to stabilize yield for budgeting purposes, the City shall maintain a portion of its investments in obligations with maturities greater than one year. No investment shall be made with a maturity greater than five years without express authority of the Finance Committee of the City Council. In determining the amount of investment longer than one year, cash flow and unallocated reserve funds will be evaluated. The maximum dollar - weighted average maturity allowed based on the stated maturity date for the portfolio shall not exceed 2 years. XH. PURCHASE PROCEDURES A. The City may, without further bidding, utilize any program established through the Texas Interlocal Cooperation Act that invests in funds authorized by the Public Funds Investment Act; or purchase certificates of deposit or other approved securities through its primary depository bank. When possible, other investments should be made after competitive bids are solicited. Competitive bids may be solicited orally, in writing, electronically, or in any combination of these methods. An offer worksheet shall be kept for each bid transaction showing the name of dealer/bank contacted, amount of principal to be invested, yield quoted, type of investment, fund designation, maturity date, issue date, length of time invested, and cusip number. Purchase of security shall not be made at a price that exceeds the existing market value of the security. ILA The delivery shall be made under normal and recognized practices in the securities and banking industries, including the book entry procedure of the Federal Reserve Bank. The deposit shall be held in the name of the City of Huntsville and shall be evidenced by a trust receipt of the bank with which the securities are deposited. XHL COLLATERA.LIZATION Collateralization will be required on two types of investments. certificates of deposit and repurchase (and reverse) agreements. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be at least 102% of the market value of principal and accrued interest. The City chooses to limit collateral to obligations of the United States or its agencies and instrumentalities, and direct obligations of the State of Texas or its agencies and instrumentalities. Collateral will always be held by an independent third party with whom the entity has a current custodial agreement. Collateral substitution is allowed. XIV. SAFEKEEPING AND CUSTODY All security transactions, including collateral for repurchase agreements entered into by the City of Huntsville shall be conducted on a delivery vs. payment (DVP) basis. Securities shall be held by a third party custodian. Safekeeping receipts shall be required. XV. INTERNAL CONTROL/COMPLIANCE AUDIT A system of internal controls shall be established. As part of the City's annual audit, an independent auditor shall review internal controls, investment practices, investment performance, quarterly reports prepared by the investment officers and the result of the review shall be reported to the Finance Committee of the City Council. A compliance audit of management control on investments and adherence to investment policies is to be included. XVI. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS The City Council shall approve at least three broker /dealers upon recommendation of the Finance Committee for use by the designated investment officers. The broker /dealers may include primary dealers and regional dealers that qualify under Securities and Exchange Commission Rule 150 -1 (uniform net capital rule). The selection process shall include a proposal process with potential broker /dealers providing a completed broker /dealer questionnaire, certification of having read the City of Huntsville investment policy, proof ofNational Association of Security Dealers certification and proof of state registration. The selected broker /dealers must provide a written instrument certifying that they have received and reviewed the City's Investment Policy and acknowledge that the business organization has implemented reasonable procedures and control, in an effort to preclude investment transactions conducted between the entity and the organization that are not authorized by the City's Investment Policy. An investment officer may not buy any securities from a firm that has not filed this instrument. An annual review of the financial condition and registrations of qualified bidders is to be conducted by the City Manager or Finance Director and a current audited financial statement is required to be on file for each broker /dealer that conducts transactions with the City. The Finance Committee shall review, revise and adopt a list of qualified brokers that are authorized to engage in investment transactions with the City. XVH. AUTHORIZED INVESTMENTS The City of Huntsville may invest only in the safest type of securities and in accordance with Texas state law (Appendix I). There are two general categories of authorized investments for the City of Huntsville: (1) investments which the designated investment officers may invest without prior approval from the Finance Committee; and, (2) investments that require prior Finance Committee approval. A. Authorized investments that do not require prior approval of Finance Committee: 1. Obligations of, or Guaranteed by, Governmental Entities: a. obligations of the United States or its agencies and instrumentalities; b. direct obligations of the State of Texas or its agencies and instrumentalities, C. 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 [its] instrumentalities; d. obligations 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. e. The following are not authorized investments under this section: 1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage - backed security collateral and pays no principal; 2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage - backed security collateral and bears no interest; 3) collateralized mortgage obligations that have a stated final maturity date greater than 10 years; and 4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. 2. Certificates of Deposit: Certificates of deposit issued by state and national banks or a savings bank domiciled in Texas that are: a. guaranteed or insured by the Federal Deposit Insurance Corporation, or comparable insurance entities or their successors; or R- b. secured in any other manner and amount provided by law for deposits of the City. B. Authorized investments requiring prior approval of the Finance Committee: 1. Collateralized Mortgage Obligations (CMO's) directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States. The stated maturity date can not be greater than 10 years and the interest rate can not be determined by an index that adjusts opposite to the changes in a market index. 2. Repurchase Agreements "Repurchase agreement" means a simultaneous agreement to buy, hold for a specified time, and sell back at a future date obligations described by Texas Government Code section 2256.009(a)(1), at a market value at the time the funds are disbursed of not less than the principal amount of the funds disbursed. The term includes a direct security repurchase agreement and a reverse security repurchase agreement. The primary dealer and the City of Huntsville must sign a Master Repurchase Agreement which details acceptable types of collateral; the standard for collateral custody and control; the collateral valuation and initial margin, accrued interest, a requirement of marking to market, and margin call; the method of transmitting security income; and, the condition for agreement termination and acceptable methods for delivery of securities and collateral. A fully collateralized repurchase agreement is an authorized investment if the repurchase agreement has a defined termination date, is secured by obligations described by Texas Government Code section 2256.009(x)(1), and, requires the securities being purchased by the City to be pledged to the City, held in the City's name, and deposited at the time the investment is made with the City or with a third party selected and approved by the City, and is placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in Texas. Notwithstanding any other law, the term of any reverse security repurchase agreement may not exceed 90 days after the date the reverse security repurchase agreement is delivered. Money received by the City under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments, but the term of the authorized investments acquired must mature not later than the expiration date stated in the reverse security repurchase agreement. Al- 3. Bankers' Acceptances A bankers' acceptance is an authorized investment if the bankers' acceptance: (a) has a stated maturity of 270 days or fewer from the date of its issuance; (b) will be, in accordance with its terms, liquidated in full at maturity; (c) is eligible for collateral for borrowing from a Federal Reserve Bank; and (d) is accepted by a bank organized and existing under the laws of the United States or any state, if the short- term obligations of the bank, or of a bank holding company of which the bank is the largest subsidiary, are rated not less than A -I or P -1 or an equivalent rating by at least one nationally recognized credit rating agency. 4. Commercial Paper Commercial paper is an authorized investment ifthe commercial paper has a stated maturity of 270 days or fewer from the date of its issuance and is rated not less than A -1 or P -1 or an equivalent rating by at least two nationally recognized credit rating agencies or 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. 5. Mutual Funds a. A no -load money market mutual fund is an authorized investment if. (1) the mutuaifund is registered with and regulated by the Securities and Exchange Commission; (2) provides the investing entity with a prospectus and other information required by the Securities Exchange Act of 1934 (I5 U.S.C. Section 78a et seq.) or the Investment Company Act of 1940 (15 U.S.C. Section 80a -1 et seq.); (3) has a dollar- weighted average stated maturity of 90 days or fewer; and (4) includes in its investment objectives the maintenance of a stable net asset value of $1 for each share. b. In addition to a no -load money market mutual fund permitted as an authorized investment in Subsection (a), a no -load mutual fund is an authorized investment under this subchapter if the mutual fund: 1) is registered with the Securities and Exchange Commission; 2) has an average weighted maturity of less than two years; 3) is invested exclusively in obligations approved by this subchapter; 4) is continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent; and 5) conforms to the requirements set forth in Texas Government Code sections 2256.016(b) and (c) relating to the eligibility of investment pools to receive and invest funds of investing entities. C. The City is not authorized by this section to: 1) invest in the aggregate more than 80 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in money market mutual funds described in Subsection (a) or mutual funds described in Subsection (b), either separately or collectively; 2) invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in mutual funds described in Subsection (b); 3) invest any portion of bond proceeds, reserves and funds held for debt service, in mutual funds described in Subsection (b); or; 4) 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 Subsection (a) or (b) in an amount that exceeds 10 percent of the total assets of the mutual fund. C. Effect of Loss of Required Rating 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. The City shall take all prudent measures that are consistent with its investment policy to liquidate an investment that does not have the minimum rating. XVIII. INVESTMENT POOLS A. The City may invest in eligible investmentpools as defined by the Public Funds Investment Act, which meet criteria outlined in chapter Texas Government Code section 2256.016 and section 2256.019. The Council shall authorize participation in the pool by resolution or ordinance. B. The City must receive from the pool an offering circular or other similar disclosure instrument that contains, at a minimum, the following information: 1. a description of eligible investment securities; 2. the maximum average dollar- weighted maturity allowed, based on the stated maturity date, of the pool; 3. the maximum stated maturity date any investment security within the portfolio has; 4. a written statement of investment policy and objectives; the size of the pool; 6. the names of the members of the advisory board of the pool and the dates their terms expire; 7. the custodian bank that will safekeep the pool's assets; a description of how the securities are safeguarded (including the settlement process) and how often the securities are priced; 8. whether the intent of the pool is to maintain a net asset value of one dollar and the risk of market price fluctuation; 9. whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of payment, such as insurance or guarantees, and a description of the secondary source of payment; 10. the name and address of the independent auditor of the pool and how often the program is audited; 11. the requirements to be satisfied for an entity to deposit funds in and withdraw funds from the pool including how often and what size deposits and withdrawals are allowed, and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool; and; 12. the performance history of the pool, including yield, average dollar- weighted maturities, and expense ratios; 13. a description of interest calculations and how it is distributed and how gains and losses are treated; 14. a schedule for receiving statements and portfolio listings; 15. an explanation of whether reserves, retained earnings, etc. are utilized by the pool; 16. a fee schedule, including when and how it is assessed; 17. an explanation of whether the pool is eligible and/or will it accept bond proceeds. C. To maintain eligibility to receive funds from and invest funds on behalf of an entity under this chapter, an investment pool must furnish to the investment officer or other authorized representatives of the entity: 1. investment transaction confirmations; and 2. a monthly report that contains, at a minimum, the following information: a. the types and percentage breakdown of securities in which the pool is invested; b. the current dollar- weighted average maturity, based on the stated maturity date, of the pool; C. the current percentage of the pool's portfolio in investments that have stated maturities of more than one year; d. the book value versus the market value of the pool's portfolio, using amortized cost valuation; e. the size of the pool; f. the number of participants in the pool; g. the custodian bank that is safekeeping the assets of the pool; h. a listing of daily transaction activity of the entity participating in the pool; i. the yield and expense ratio of the pool; j. the portfolio managers of the pool; and k. any changes or addenda to the offering circular. D. The City by contract may delegate to an investment pool the authority to hold legal title as custodian of investments purchased with its local funds. M E. "Yield" shall be calculated in accordance with regulations governing the registration of open -end management investment companies under the Investment Company Act of 1940, as promulgated from time to time by the Federal Securities and Exchange Commission. XIX. REPORTING Not less than quarterly, the Finance Director shall prepare and submit to the City Council a written report of investment transactions for the preceding reporting period. The report shall describe in detail the investment position of the City on the date of the report, and state compliance of the investment portfolio, as it relates to the investment strategy and investment policies. The report shall contain a summary statement prepared in compliance with generally accepted accounting principles of each pools fund group that states the beginning market value for the reporting period, additions and changes to the market value during the period, the ending market value for the period, a comparison to the benchmark bond equivalent yield or United States Treasury obligation of comparable maturity and fully accrued interest for the reporting period. The report shall state the book value, market value, and maturity date of each separately invested asset as of the beginning and end of the reporting period by the type of security and fund type invested. The fund for which each individual investment was acquired shall be reported. The report shall be presented to the Council and shall be jointly signed by the Finance Director and City Manager within 21 days after the end of the period. On a monthly basis, the Finance Director shall provide to the City Council, in summary form, a report showing by fund, total cash, monies in investment pools and securities by type and maturity date, and a summary of interest earnings. XX. POLICY ADOPTION The City of Huntsville investment policy shall be adopted by ordinance of the City Council. The policy shall be reviewed annually by the Finance Committee, and any modifications made thereto must be approved by the City Council. Annually, City Council shall adopt a resolution stating that it has reviewed the investment policy and investment strategies. The resolution shall record any changes made to the investment policy or investment strategies. PART H - BANKING SERVICES POLICY The City Council shall approve a financial institution/institutions to act as a depository bank for a two year period. I. ESTABLISHMENT OF BANKING DEPOSITORY A. The City Council shall select a bank, credit union or savings association as its primary depository for normal banking transactions. In addition, the City may designate one or more other depositories for investment transactions. B. The City's primary banking depository shall have a branch located in the City. C. Not more than four weeks and not less than one week before the City Council considers applications for its depository, the City shall publish at least once in the City's official newspaper a notice of the meeting at which applications are to be received. D. A bank, credit union or savings association desiring to be selected as the city depository must deliver its application to the City Secretary on or before the time stated in the notice. The application shall be accompanied by an affidavit disclosing conflicts of interest, if any, that apply to the selection of the depository. The City's Finance Committee may, as directed by City Council, review the applications and prepare a recommendation regarding the selection of depositories for Council. E. The City Council may, after considering the application and the recommendation, if any, of its staff and/or Finance Committee: select as city depositories one or more banks, credit unions or savings associations that offer the most favorable terms and conditions for the handling of the municipal funds; or 2. reject any or all of the applications. F. The City shall retain the right to withdraw any municipal funds deposited in a depository that are not immediately required to pay obligations of the City and invest those funds as outlined in these Investment and Banking Policies. G. The Director of Finance shall immediately deposit in the depository to the credit of the City any money received. H. Except as provided for wire transfers to other depositories or ACH transfers, the funds of the City may be paid out of a depository only on the checks of the City. I. Checks must be signed by the Mayor and either the City Manager or Finance Director. A facsimile signature may be used by the Mayor and/or City Manager. Checks must be authorized by the Mayor, City Manager, or Finance Director. K. No check shall be drawn on a special, fund created to pay bonded indebtedness other than to pay principal or interest on the indebtedness, or to invest the fund as provided by these polices or law. L. All checks shall be payable by the depository at its place of business. M. The Director of Finance may, with approval of Council, pay a bond, coupon, or other indebtedness of the City at a place other than the depository if by its terms the indebtedness is payable on maturity at the other location. H. COLLATERALIZATION REQUIREMENTS /SAFEKEEPING AND CUSTODY A. All public funds held in a checking account or time deposit at a bank or other depository shall be secured by eligible security. An eligible security means: a surety bond; 2. investment securities (obligations of the United States or its agencies and instrumentalities); or 3. ownership or beneficial interest (but not merely an option contract to purchase or sell) any authorized investment. B. The market value of the collateral shall equal at least 102% of the cash value of a repurchase agreement. Otherwise, market value of the investment securities used as collateral should be at least equal to the deposits of public funds increased by the amount of any accrued interest and reduced by the extent of insurance through an agency of the United States. C. Safekeeping 1. A depository for the City may deposit investment securities pledged to secure deposits of public funds with a custodian that the City has approved as a custodian and that is either: a. a state or national bank domiciled in the State of Texas and which has a capital stock and permanent surplus of not less than $5 million. b. the Texas Treasury Safekeeping Trust Company; or C. a Federal Reserve Bank or its branches. 2. The securities shall be held in trust by the custodian to secure the deposit of public funds of the City in the depository pledging the securities. 3. On receipt of the investment securities, the custodian shall immediately, by book entry or otherwise, identify on its books and records the pledge of the securities to the City and shall promptly issue and deliver to the Director of Finance of the City trust receipts for the securities pledged. The security evidenced by the trust receipts is subject to inspection by the City or its agents at any time. 4. A custodian holding in trust investment securities of a depository may deposit the pledged securities with a permitted institution. These securities shall be held by the permitted institution to secure funds deposited by the City in the depository pledging the securities. On receipt of the securities, the permitted institution shall immediately issue to the custodian an advice of transaction or other document evidencing the deposit of the securities. When the pledged securities held by a custodian are deposited, the permitted institution may apply book entry procedures to the securities. The records of the permitted institution shall at all times reflect the name of the custodian depositing the pledged securities. The trust receipts the custodian issues to the City shall indicate that the custodian has deposited with the permitted institution the pledged securities held in trust for the depository pledging the securities. The custodian shall maintain separate, accurate, and complete records relating to the pledged investment securities and all transactions relating to the pledged investment securities. D. The Director of Finance shall inform its depositories of significant changes in the amount or activity of public funds reasonably in advance of such changes. -'-5r GLOSSARY ACH: Automated Clearing House. AGENCIES: Federal agency securities. ASKED: The price at which securities are offered. BANKERS' ACCEPTANCE (BA): A draft or bill of exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer. BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer. BOND PROCEEDS: Proceeds from the sale of bonds, notes, and other obligations issued by an entity, and reserves and funds maintained by an entity for debt service purposes. BOOK VALUE: The original acquisition cost of an investment plus or minus the accrued amortization or accretion. BROKER: A broker brings buyers and sellers together for a commission. CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a certificate. Large - denomination CD's are typically negotiable. COLLATERAL: Securities, evidence of deposit or other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs): Debt obligations collateralized by pools of mortgages. The collateral can consist of conventional whole loans or agency - backed securities such as GNMAs, FNMAs or FHLMCs. The monthly cash flow generated from the pool is transformed into a series of securities with differing average lives and maturities. CMOs are issued by investment banks, commercial banks, the FNMA and the FHLMC. The issuer takes a higher yielding security and carves it up into different classes with lower interest rates and shorter maturities. COMMERCIAL PAPER: Commercial Paper consists of short-term note issues by large corporations. Maturity is 270 days or less. There is no explicit coupon rate and interest is figured on a discount basis in the same manner as for Treasury Bills. COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the City of Huntsville. It includes five combined statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed Statistical Section. COUPON: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. CUSIP NUMBER: A unique nine -digit identification number permanently assigned by the Committee on Uniform Securities Identification Procedures to each publicly traded security at the time of issuance. If the security is in physical form, the CUSIP number is printed on its face. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. DEBENTURE: A bond secured only by the general credit of the issuer. DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. DISCOUNT SECURITIES: Non - interest bearing money market instruments that are issued a discount and redeemed at maturity for full face value, e.g. U.S. Treasury Bills. DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns. FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g. S & L's, small business firms, students, farmers, farm cooperatives, and exporters. FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures bank deposits. FEDERAL FARM CREDIT BANKS (FFCB): The Federal Farm Credit Banks Consolidated Systemwide Bonds are obligations of the 37 Farm Credit Banks. The Farm Credit Administration which is an independent agency of the U.S. Government supervises the Farm Credit System. FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open- market operations. FEDERAL HOME LOAN BANKS (FHLB): The institutions that regulate and lend to savings and loan associations. The Federal Home Loan Banks play a role analogous to that played by the Federal Reserve Bank vis -a -vis member commercial banks. FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): The Federal Home Loan Mortgage Corporation, also known as Freddie Mac, is an agency of the Federal Government. The Participation Certificates (PC) issued by Freddie Mac are full faith and credit obligations of an agency of the U.S. Government. In that all loans purchased by Freddie Mac are either FHA/VA mortgages originated by members of the Federal Home Loan Bank System or other HUD- approved mortgages. FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA OR FANNIE MAE): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder -owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed -rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. -1V 63 FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. FINANCIAL INSTITUTIONS: As used in these policies also refers to Security Broker/Dealers doing business with the City. FUNDS: Public funds in the custody of a local government that the investing entity has authority to invest. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA OR GINNIE MAE): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FMHM mortgages. The term "passthroughs" is often used to describe Ginnie Maes. INVESTMENT POOL: An entity created under this code to invest public funds jointly on behalf of the entities that participate in the pool and whose investment objectives in order of priority are (a) preservation and safety of principal; (b) liquidity; and (c) yield. LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. MARKET VALUE: The current face or par value of an investment multiplied by the net selling price of the security as quoted by a recognized market pricing source quoted on the valuation date. MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase - reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer - lender to liquidate the underlying securities in the event of default by the seller- borrower. MATURITY: The date upon which the principal or stated value of an investment becomes due and payable. MONEY MARKET: The market in which securities are traded that have one year or less until their maturity. MONEY MARKET MUTUAL FUNDS: A mutual fund with investments that mature within one year. MUTUAL FUNDS: A type of investment company that pools investments from participants to purchase a portfolio and give to investors fractional ownership of the created portfolio. A mutual fund redeems investors' shares at the net asset value of the shares. NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A trade association that helps regulate the performance of the over-the-counter securities market. NET ASSET VALUE (PER SHARE): The value of the securities underlying one share in the investment company. NO-LOAD MONEY MARKET MUTUAL FUND: A mutual fund that imposes no initial sales charges or fees. OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid. OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool. PORTFOLIO: Collection of securities held by an investor. PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC)-registered securities broker-dealers, banks, and a few unregulated firms. PRUDENT PERSON RULE: An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state--the so-called legal list. In other states the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital. QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. QUALIFIED REPRESENTATIVE: A person who holds a position with a business organization, who is authorized to act on behalf of the business organization, and who is one of the following: (A) for a business organization doing business that is regulated by or registered with a securities commission, a person who is registered under the rules of the National Association of Securities Dealers; (B) for a state or federal bank, a savings bank, or a state or federal credit union, a member of the loan committee for the bank or branch of the bank or a person authorized by corporate resolution to act on behalf of and bind the banking institution; or (C) for an investment pool, the person authorized by the elected official or board with authority to administer the activities of the investment pool to sign the written instrument on behalf of the investment pool. RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. RATING AGENCY: A nationally recognized investment rating firm including Moodys and Standard & Poors that assigns a rating to a debt issue. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money, that is, increasing bank reserves. State Statute defines repurchase agreement as a simultaneous agreement to buy, hold for a specific time, and sell back at a future date obligations described in State Statute Section 2256.009 a(1) (obligations of the United States or its agencies and instrumentalities) at a market value at the time the funds are disbursed of not less than the principal amount of the funds disbursed. The term includes a direct security repurchase agreement and a reverse repurchase agreement. REVERSE REPURCHASE AGREEMENT: See Repurchase Agreement. 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. SEC RULE I5C3 -1: See Uniform Net Capital Rule. SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution. SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEPARATELY INVESTED ASSET: An account or fund of a state agency or local government that is not invested in a pooled fund group. STATE AGENCY: An office, department, commission, board, or other agency that is part of any branch of state government, an institution of higher education, and any nonprofit corporation acting on behalf of any of those entities. TREASURY BILLS: A non - interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year. TREASURY BOND: Long -term U.S. Treasury securities having initial maturities ofmore than 10 years. TREASURY NOTES: A non - interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months or one year. UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker - dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond. tro