Agenda

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Item # 20.

Council Meeting

Meeting Date:	10/13/2020
Department:	Finance
Pillars:	Gold Standard in Financial Health

AGENDA CAPTION:

Present, Discuss, and Consider Action on a Resolution to Adopt the Town of Addison Investment Policy for Fiscal Year 2020-2021.

BACKGROUND:

The Public Funds Investment Act (PFIA) requires the Council to annually adopt the Town's Investment Policy. The document has been drafted to comply with all aspects of the PFIA. This policy applies to the investment and management of all funds of the Town. Direct management responsibility for the investment program is delegated by the City Council to the Chief Financial Officer. The investment policy has the following priorities:

Preservation and safety of principal
Understanding the suitability of the investment to the financial requirements of the Town
Liquidity
Marketability of the investment if the need arises to liquidate the investment prior to maturity
Diversification of the investment portfolio
Yield

Finance staff, along with the Town's investment adviser, Hilltop Securities, determined that the following changes to the existing policy served the Town's best interest:

Section III - Added investment strategies for each fund represented in the investment portfolio to better align with best practices.
Section IV - Limiting bonding requirements to only the CFO and Controller.
Section VII - Authorized Security Investments:
- Paragraph D - Increased the maximum allowable maturity of Certificate's of Deposit from 3 years to 5 years
- Paragraph E - Increased the maximum allowable maturity of Commercial Paper from 180 days to 270 days
- Paragraph K - Increased the maximum allowable maturity of Other Obligations from 2 years to 5 years
- Added Paragraph L - Obligations of states, agencies, counties, cities, and other political subdivisions of any state have been rated as to investment quality by a nationally recognized investment rating firm and having received a rating of not less than "A" or its equivalent with a maturity not to exceed five (5) years from the date of purchase.
Section VIII - Other Investment Guidelines:
- Added the exception to competitive bidding to exclude government securities issued at par.
- Added liquidation exemption for existing investments as follows: The Town is not required to liquidate investments that were authorized investments at the time of purchase. The Town shall consider the time remaining until maturity, the quality of the investment, and the quality and amounts of any collateral which may be security the investment in determining whether to hold the investment until maturity or to redeem the investment.
Section IX - Extended the weighted average maturity of the investment portfolio from 18 to 24 months.
Section X - Investment Limits:
- Local Government Investment Pools - Increased the maximum allowable investment from 40 to 70 percent of total portfolio.
- Municipal Bonds - Made the maximum allowable investment 50% of total portfolio whereas the previous investment policy was silent on the maximum level of investment.

The attached resolution includes the Town's Investment Policy in Exhibit A.

RECOMMENDATION:

Administration recommends approval.

Attachments
Resolution - Fiscal Year 2020-2021 Investment Policy
Presentation - FY 2020-2021 Investment Policy
Hilltop Securities Investment Policy Letter
Investment Policy - Redline Version