HomeMy WebLinkAboutContract 35273 (2)�
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INVESTMENT ADVISORY AGREEMENT
BETWEEN
PATTERSON & ASSOCIATES and
THE CITY OF FORT WORTH, TEXAS
This Investment Advisory Agreement dated as of the 17th day of April, 2007 (the "Agreement") is
made and entered into by and between Patterson Capital Management, L.P,, dba Patterson & Associates
("P&A"), a registered investment advisor and funds management Texas limited partnership and the City
of Fort Worth, Texas (the ��Client").
PREAMBLE
WHEREAS, the Client has determined to select and appoint P&A to act as its investment advisor
for funds and securities to manage, maintain, and invest monies and securities and to perform the
advisory services described herein,
NOW THEREFORE, for and in consideration of the mutual promises, covenants, and agreements
herein contained and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree with each other as follows:
ARTICLE I. Definitions
"Authorized Investments" shall mean those investments authorized and defined in the Client's
Investment Policy made a part of this Agreement and attached hereto as Exhibit A.
"Authorized Representative(s) of the Client" shall mean the duly authorized officers,
members of the City Council or their delegated representatives, empowered to execute instructions and
take other necessary actions under this Agreement on behalf of the Client designated in writing, attached
hereto as Exhibit D.
"Authorized Representative(s) of P&A" shall mean any employee of P&A who is designated
in writing by P&A as an authorized representative for purposes of this Agreement, attached hereto as
Exhibit D.
ARTICLE II. Creation of PortFolio and Account(s)
Section 2.01. Creation of a Separate and Distinct Portfolio(s). P&A, on behalf of the
Client, hereby creates and establishes for management and reporting purposes a separate and distinct
portFolio(s) (individually and collectively referred to hereinafter as the "Portfolio") to be managed as a
separate and distinct fund, held in the Client's name at Client's safekeeping institution. P&A shall invest
and manage all monies deposited by the Client into the Portfolio. Client will determine the number of
Portfolios to be established and maintained in accordance with Client needs. All Portfolios shall be
segregated and held distinct from all other funds held or invested by P&A.
ARTICLE III. Operation of Portfolio(s)
Section 3.01. Depository Services.
maintained in the Client's name and in the
The Portfolio and securities owned by the Portfolio will be
designated depository of t e C,bient a d the Cl;�nt may
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authorize P&A to conduct security transactions in that account for Client. All fees and expenses for
depository account maintenance and transactions will be paid by Client.
Section 3.02. Delivery versus Pavment. All securities managed by P&A will be settled on a
delivery versus payment (DVP) basis into the Client designated Depository Account. DVP will assure that
no Client funds are released until the security is received and verified by the Depository of the Client.
Section 3.03. Separation of Portfolios. The Portfolio(s) shall be segregated and distinctly
invested from all other funds managed by P&A.
ARTICLE IV. Investment Duties and Services
Section 4.01. Prudence. P&A hereby agrees to manage the Portfolio(s) with judgment and
care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise
in the management of their own affairs, not for speculation, but for investment, considering the probable
safety of their capital as well as probable income to be derived (the ��Prudent Person Standard'�. This
Prudent Person Standard shall be applied to the investment of all Portfolios and Accounts with the same
degree of care and assuming the same duty as the Client.
Section 4.02. Investment Advisory Services. P&A shall provide full advisory services and
management of Client's Portfolio(s) to include market advice, portfolio structure advice, trade execution
and settlement on an ongoing basis. All investments shall made be in accordance with applicable laws,
ordinances, rules and regulations and Client's Investment Policy, attached hereto and made a part hereof
as Exhibit A(collectively, ��Client Authorized Investments". P&A certifies that all funds shall be invested
only in Client Authorized Investments.
Client Designation of Funds. Client has full discretion to designate the amount of funds to be
placed in Portfolio(s) or in separate investments in accordance with cash flow needs. Client has full
discretion to designate the amount of funds to be placed in Portfolio(s) or in a local government
investment pool or money fund as authorized by the Client's governing body for liquidity.
Client Directives. Monies held in the Portfolio(s) shall be invested and reinvested in Client
Authorized Investments selected by P&A and approved by Client before settlement, if required. Client
reserves the right to notify its depository of pending trades and approve settlement of those trades.
Client reserves the right to approve any and all trades. P&A will utilize only Client approved
broker/dealers.
Trade Aggregation. For the purpose of purchase transactional efficiency or market price
advantage involving funds of the Portfolio(s) P&A may aggregate these funds with other Client funds for
investment. However, Client funds and securities shall never be commingled with other Client funds and
Client transactions will be specifically segregated on all brokerage transactions and settled separately into
Client depository.
Section 4.03. Confirmations. P&A will establish all necessary procedures for Client to receive
independent trade confirmations from all broker/dealers for each transaction in the Portfolio.
Independent confirmations will be sent directly to the Client, and P&A, for audit trail purposes.
Section 4.04. Reportinq. P&A shall provide monthly and quarterly reports detailing and
summarizing all investments and Portfolio transactions at a minimum. Client shall define all reporting
needs for information needed on a daily, monthly or quarterly basis. P&A shall submit all reports to the
Client of its transactions promptly after the end of each month. Such report shall indicate at a minimum
the balances remaining in the Portfolio and each account, the interest earned, all deposits and
withdrawals, and a detailed inventory of all securities and positions for the period. All reports shall fulfill
applicable statutory requirements. Reports will include information for GASB 31, and 40 reporting on an
annual basis.
Section 4.05. Presentations. An Authorized Representative of P&A will be available to
present reports or attend presentations to the Client or the Client's governing body as required by the
Client.
Section 4.06. Earnings and Losses from Investments. The Client and P&A agree that all
funds in the Portfolio shall be invested only in Client Authorized Investments. All earnings and profits
from the investment of funds in any Portfolio(s) shall be credited to and deposited in the Portfolio(s)
unless designated by Client. All losses resulting from the investment of funds in any PortFolio(s) shall be
charged to such Portfolio or account.
Section 4.07. Liabili . P&A, or any P&A employee, shall not be held liable for any act or
omission to act on behalf of herself, her agents, employees or other persons EXCEPT FOR ACTS OR
OMISSIONS ARISING FROM THE NEGLIGENCE OR MALFEASANCE, OR VIOLATION OF
APPLICABLE LAW, ORDINANCE, RULE OR REGULATION, BY PBcA, INCLUDING, BUT NOT
LIMITED TO, PBrA AUTHORIZED REPRESENTATIVES AND ANY OTHER PBcA EMPLOYEES.
Common law and the federal securities laws impose liabilities under certain circumstances on persons
who act in good faith, and therefore nothing herein shall in any way constitute a waiver or limitation of
any rights which the Client may have under common law or any federal securities laws. This Section 4.07
shall survive termination or expiration of this Agreement.
Section 4.08. Dispute Resolution; Venue. The parties hereto shall attempt to resolve any
controversy or claim arising out of or relating to this Agreement, or the breach thereof, through
consultation and negotiation in good faith and a spirit of mutual cooperation. However, if those attempts
fail, the parties agree to attempt to resolve any misunderstandings or disputes arising from this
Agreement through non-binding mediation at a location in Fort Worth, Tarrant County, Texas. Such
mediation shall be conducted by a mediator that is mutually selected by the parties, acting reasonably
and in good faith, for a duration not to exceed thirty (30) hours collectively, unless the parties mutually
agree to extend that duration. Costs of the mediation shall be borne equally between the parties. If any
controversy or claim arising out of or relating to this Agreement is not resolved through mediation, the
parties may mutually agree to have the matter decided by arbitration which shall be conducted in Fort
Worth, Tarrant County, Texas before three (3) arbitrators (unless both parties agree on one (1)
arbitrator) designated by the American Arbitration Association (the ��AAA"), in accordance with the terms
of the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the United States
Arbitration Act (Title 9 of the United States Code), or if such Act is not applicable, any substantially
equivalent state law. The parties further agree that the arbitrator(s) will decide which party must bear
the expenses of the arbitration proceedings. Notwithstanding anything provided herein to the contrary,
this section does not constitute a waiver of any right provided by the federal securities laws, including the
right to choose the forum, whether by arbitration or adjudication, in which to seek resolution of the
dispute. Venue for any action, whether real or asserted, at law or in equity, shall lie exclusively in state
courts located in Tarrant County, Texas or the United States District Court for the Northern District of
Texas — Fort Worth Division.
ARTICLE V. Expenses and Reports
Section 5.01. Fee and Expenses. The Client agrees to pay to P&A on a monthly basis, in
arrears, an amount sufficient to reimburse P&A for the cost of performing the duties contemplated under
this Agreement in accordance with the Fee Schedule, attached hereto and made a part hereof as Exhibit
B. P&A shall advise the Client monthly in writing of the amount of such costs. This itemized invoice shall
set forth the services provided for the Portfolio(s) and the cost incurred. The invoice will be provided to
the Client by the fifth (5) business day of the succeeding month. Payment on the charges shall be made
within ten (10) business days after receipt of invoice. The total amount of fees payable by Client under
this Agreement shall not exceed $30,000.00.
Section 5.03. Records. P&A shall keep a book of records in which complete and correct
entries shall be made of all transactions relating to the holdings, balances and values in the Portfolio(s) in
accordance with generally accepted accounting principles. Such records shall be available for inspection
at all reasonable hours of the business day and under reasonable conditions by the Client.
Section 5.04. Client Con�identialitv. All records and information regarding the Client will be
held as confidential by P&A.
ARTICLE VI. Miscellaneous
Section 6.01. Notices. Any notices, Letters of Instruction, requests or demands required or
permitted to be given hereunder shall be given in writing and shall be deemed duly given when mailed by
registered or certified mail, postage pre-paid, addressed or telefaxed as follows (or as subsequently
directed in writing by the applicable party):
To the Client: Jenny Townsend
Assistant City Treasurer
City of Fort Worth
1000 Throckmorton Street
Fort Worth, Texas 76102
Telephone: (817)- 392-6030
Telefax: (817) 392-8181
E-mail: jenny.townsend@fortworthgov.org
To P&A: Linda T. Patterson
Patterson & Associates
301 Congress Avenue
Suite 570
Austin, Texas 78701
Telephone: (512) 320-5042
Telefax: (512) 320-5041
E-mail: linda@patterson.net
Section 6.02. Severabilitv. If any provision of this Agreement shall be held or deemed to be
or in fact shall be illegal, inoperative, or unenforceable, the same shall not affect any other provision or
provisions herein contained or render the same invalid, inoperative, or unenforceable to any extent
whatsoever.
Section 6.03. Limitation of Riqhts. With the exception of the rights herein expressly
conferred, nothing in or to be implied from this Agreement is intended or shall be construed to give any
person other than the parties hereto any legal or equitable right, remedy or claim under or in respect to
this Agreement or any of the covenants, conditions and provisions herein contained; this Agreement and
all of the covenants, conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and herein provided.
The Client further agrees that P&A's responsibilities hereunder are limited to the management of
the Portfolio(s) as herein described and the providing of reports and information herein required; P&A
shall not be liable for any losses from investments made and transfers made in accordance with the
procedures set forth in this Agreement.
Notwithstanding anything to the contrary herein, Client has not waived and does not waive any
governmental powers or immunities that may be afforded to Client by applicable law.
Section 6.04. Execution of Counterparts. This Agreement may be simultaneously executed
in several separate counterparts, each of which shall be an original and all of which shall constitute but
one and the same instrument.
Section 6.05. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas and is performable in Tarrant County, Texas.
Section 6.06. Captions. The captions or headings in this Agreement are for convenience only
and in no way define, limit, or describe the scope or intent of any provisions, articles, or sections of this
Agreement.
Section 6.07. Amendment. The Client and P&A may supplement or amend this Agreement
only if evidenced in a writing signed by both parties.
Section 6.08. Termination. This Agreement may be terminated by either party hereto, with
or without cause, by tendering ninety (90) days prior written notice in the manner set forth in Section
6.01 hereof. In addition, the Client may terminate this Agreement within five (5) business days of the
date hereof, with or without cause and without penalty, by notifying P&A in the manner set forth in
Section 6.01 hereof of its decision to terminate the Agreement.
Section 6.09. Term. Unless terminated earlier in accordance with Section 6.08 or 6.10 hereof,
the term of this Agreement shall commence on April 17, 2007 and expire at 11:59 P.M. CDT October 16,
2007.
Section 6.10. AssiAnment. This Agreement shall not be assignable by either party hereto, by
operation of law or otherwise, without the prior written consent of the other party hereto. Any
assignment in violation of this Section 6.10 shall result in the termination of this Agreement upon
provision of written notice by the non-defaulting party.
Section 6.11. Ownership Chanqe. P&A shall notify the Client in writing of any change in its
partnership ownership within a reasonable time after such change, not to exceed thirty (30) calendar
days.
Section 6.12. SEC Document Disclosure. The Client, by execution of this document,
acknowledges the receipt of P&A's most current ADV Part II disclosure document as required by the SEC.
Section 6.13. Insurance. P&A shall provide the Client with certificate(s) of insurance
documenting policies of the following minimum coverage limits that are to be in effect prior to
commencement of any work pursuant to this Agreement:
6.13.1. Commercial General Liability (CGL)
$1,000,000 each occurrence
$2,000,000 aggregate limit
Coverage shall include but not be limited to the following: premises/operations, independent contractors,
products/completed operations, personal injury, and contractual liability. Insurance shall be provided on
an occurrence basis, and as comprehensive as the current Insurance Services Office (ISO) policy. The
City of Fort Worth shall be named as Additional Insured.
6.13.2. Workers' Compensation
Statutory limits
Employer's liability
$100,000 Each accident/occurrence
$100,000 Disease - each employee
$500,000 Disease - policy limit
Workers' Compensation and Employers' Liability coverage with limits consistent with statutory benefits
outlined in the Texas Workers' Compensation Act (Art. 8308 — 1.01 et seq. Tex. Rev. Civ. Stat.) and
minimum policy limits for Employers' Liability as stated. The policy shall contain a Waiver of Subrogation
in favor of the City of Fort Worth.
6.13.3. Automobile Liability
$1,000,000 each accident on a combined single limit basis
Split limits are acceptable if limits are at least:
$250,000 Bodily Injury per person /
$500,000 Bodily Injury per accident /
$100,000 Property Damage
A commercial business policy shall provide coverage on "Any Auto", defined as autos owned, hired and no
n-owned.
6.13.4. Errors & Omissions (Professional Liability)
$5,000,000 each claim
$5,000,000 aggregate limit
The policy's retroactive date shall be coincident with or prior to the date of the contractual agreement.
The certificate of insurance shall state that the coverage is claims-made and include the retroactive date.
The insurance shall be maintained for the duration of the contractual agreement and for five (5) years
following completion of the service provided under the contract. An annual certificate of insurance
submitted to the City shall evidence coverage.
Applicable to all policies:
The required insurance shall not be canceled, limited in scope or coverage, or non-renewed, until after
thirty (30) days prior written notice has been given to the City of Fort Worth. Any deductible in excess of
$25,000.00 must be acceptable to and approved by the City's Risk Management Division.
The insurers for all policies must be licensed and/or approved to do business in the State of Texas. All
insurers must have a minimum rating of A VII in the current A.M. Best Key Rating Guide. If the rating is
below that required, written approval of Risk Management is required.
Section 6.14. Right to Audit. P&A agrees that Client shall, until the expiration of three (3)
years after �nal payment under this Agreement, have access to and the right to examine at reasonable
times any directly pertinent books, documents, papers and records of the P&A involving transactions
relating to this Agreement. P&A agrees that Client shall have access during normal working hours to all
necessary P&A facilities and shall be provided adequate and appropriate work space in order to conduct
audits in compliance with the provisions of this section. Client shall give P&A reasonable advance notice
of intended audits. P&A further agrees to include in all its subcontractor agreements hereunder a
provision to the efFect that the subcontractor agrees that Client shall, until expiration of three (3) years
after �nal payment of the subcontract, have access to and the right to examine at reasonable times any
directly pertinent books, documents, papers and records of such subcontractor involving transactions
related to the subcontract, and further that Client shall have access during normal working hours to a!I
subcontractor facilities and shall be provided adequate and appropriate work space in order to conduct
audits in compliance with the provisions of this paragraph. Client shall give subcontractor reasonable
notice of intended audits. This Section 6.14 shall survive termination or expiration of this Agreement
IN WITNESS WHEREOF the parties hereto have cause this Agreement to be executed in
multiple counterparts as of the date first set forth above.
CITY OF FORT WORTH, TEXAS
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gY: GC u- 1,i'� �!"� ,; �� 'c�': i�c �
Nam : � Karen L. Montgome� ��
Assistant City Manager/CFO `%
Patterson Capital Management, L.P. dba
PATTERSON & ASSOCIATES
By: Patterson & Associates, Inc. General Partner
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By:
Name: �Linda T. Patterson
President
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Att st: � � ��l��r�.� �C��� i��i ���y Attest: �
�, Marty �'iendrix
City Secretary
Date: �
Approved as to Form:
Date: �/�"���"'"�/
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Name: Peter Vaky
Assistant City A orney
M&C: C-22062 4-17-07
EXHIBIT A
CLIENT'S INVESTMENT POLICY
Client Investment Policy is made part of this Investment Advisory Agreement in order to assure that all
investment decisions conform to the policy and parameters established by the Client and its governing
body. As the Policy changes with Council action the Client will provide the amended Policy to P&A and
the most recent amended and adopted Policy will control the Client's investments.
i.
CITY OF FORT WORTH, TEXAS
FISCAL YEAR 2006 - 2007
To establish and document a policy fi•amework for fiscal decision-making, the City Manager will
develop and maintain a comprehensive set of Financial Management Policy Statements. The aim of
these policies is to ensure that financial t�esources are available to meet the present and future needs
of the citizens of Fort Worth. Specifically this policy fi�amework mandates the pursuit of the
following fiscal objectives:
1. Revenues: Design, maintain and administer a t•evenue system that will assure a reliable,
equitable, diveisified and sufficient revenue stream to support desired City services.
2. Expendituf•es: Identify priority services, establish appropriate service levels and administer
the expenditure of available resources to assure fiscal stability and the effective and efficient
delivery of services.
Fzrnc� Balance/Retained Ear�nings: Maintain the fund balance and retained earnings of the
various operating funds at levels sufficient to protect the City's creditworthiness as well as its
financial position from emergencies.
4. Capital Expenditza°es anc� Impi°ovements: Review and monitor the state of the City's capital
assets, setting priorities for the addition, replacement and renovation of such assets based on
needs, funding alternatives, and availability of resources.
Debt: Establish guidelines for debt financing that will provide needed capital equipment and
infi�astructure improvements while minimizing the impact of debt payments on current
revenues.
Investments: Invest the City's cash to ensure its safety, provide for necessary liquidity and
optimize yield.
7. Inte��gove�°nmental Relations: Coordinate efforts with other governmental agencies to
achieve common policy objectives, share the cost of providing governmental services on an
equitable basis and support favorable legislation at the state and federal level.
8. Gi°ants: Seelc, apply for and effectively administer federal, state and foundation grants-in-
aid, which address the City's current priorities and policy objectives.
9. Economic Development.• Initiate, encout•age and participate in economic development efforts
to create job opportunities and sri�engthen the local economy.
10. Fiscal Monitoring: Prepare and present regular reports that analyze, evaluate, and forecast
the City's financial performance and economic condition.
11. Financial Consultants: With available resources, seek out and employ the assistance of
qualified fnancial advisors and consultants in the management and administration of the
City's iinancial functions.
12. Accozrnting, Auditing and Financial Reporting: Comply with prevailing federal, state and
local statutes and regulations, as well as current professional principles and practices.
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13. Reti��ement Systen7: Ensure that the Employees' Retirement Fund is adequately funded and
operated for the exclusive benefit of the participants and their beneficiaries.
14. Inte��nal Cont��ols: Maintain an internal control structure designed to provide reasonable
assurance that City assets are safeguarded and that the possibilities for material errors in the
City's financial records are minimized.
15. E-Comme��ce: To fully utilize available technologies to expedite cash payments and receipts,
enhance employee productivity and provide customer satisfaction.
2 � Fiu��ncial P'I�in��geme►it Polic�� �t�temeuts
I.
To design, maintain and administer a revenue system that will assure a reliable, equitable, diversified
and sufficient revenue stream to suppoi�t desired City services.
A. Balance and Divei°sifrcation in Revenue Sources
The City shall strive to maintain a balanced and diversified revenue system to protect the
City from fluctuations in any one source due to changes in local economic conditions, which
adversely impact that source.
B. User� Fees
For services that benefit specific users, the City shall establish and collect fees to recover the
costs of those seivices. The City Council shall determine the appropriate cost recovery level
and establish the fees. Where feasible and desirable, the City shall seek to recover full direct
and indirect costs. User fees shall be reviewed on a regular basis to calculate their full cost
recoveiy levels, to compare them to the current fee structure, and to recommend adjustments
where necessary.
C. Property Tax Reverrues/Tax Burden
The City shall endeavor to reduce its reliance on property tax revenues by revenue
diversification, implementation of user fees, and economic development. The City shall also
strive to minimize the property tax burden on Fort Worth citizens.
D. Utility/Enteipi°ise Fzrnds Use�� Fees
It is the intention of the City that all utilities and enterprise funds be self-supporting. As a
result, utility rates and enterprise funds user fees shall be set at levels sufficient to cover
operating expenditures, meet debt obligations, provide additional funding for capital
improvements, and provide adequate levels of worlcing capital. The City shall seek to
eliminate all forms of subsidization to utility/enterprise funds from the General Fund.
E. Adminish�ative Se��vices Cha��ges
The City shall establish a method to determine annually the administrative services charges
due the General Fund fi�om enteiprise funds for overhead and staff support. Where
appropriate, the enterprise funds shall pay the General Fund for direct services rendered.
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F. Revenzre Estimates for� Budgetirrg
In order to maintain a stable level of seivices, the City shall use a conservative, objective,
and analytical approach when preparing revenue estimates. The process shall include
analysis of probable economic changes and their impacts on revenues, historical collection
rates, and trends in revenues. This approach should reduce the likelihood of actual revenues
falling short of budget estimates during the year and should avoid mid-year service
reductions.
G. Revenue Collection and Administ�°ation
The City shall maintain high collection rates for all revenues by lceeping the revenue system
as simple as possible in order to facilitate payment. In addition, since revenue should exceed
the cost of producing it, the City shall strive to control and reduce administrative costs. The
City shall pursue to the full extent allowed by state law all delinquent taxpayers and others
overdue in payments to the City.
H. Write-Off of Uncollectible Accounts
The City shall monitor payments due to the City (accounts receivable) and periodically write-
off accounts where collection efforts have been exhausted and/or collection efforts are not
feasible or cost-effective.
Bonzrses and Royalties fi�om Gas Well Development Leases (M&C G-14767,
Ap��il26, 2005)
Bonuses and royalties received by the City from gas well development leases shall be
recorded as follows:
Bonuses
A one-time administrative fee shall be deducted once each year from all gas well bonuses
and recorded in the Engineering Fund. The administrative fee will partially fund the salaries
for Engineering Department staff that provide program administration support. The fee will
be reviewed annually and will cover the cost of services provided. The remainder of the
lease bonuses received from the gas well development leases shall be recorded as follows:
bonuses from gas well leases located on airport property will be recorded in the Municipal
Airports Fund; bonuses from gas well leases located on water department property will be
recorded in the Water and Sewer Enterprise Fund; bonuses from gas well leases located on
Lalce Worth lands (not including the Fort Worth Nature Center and Refuge and the body of
water) will be recorded in the Lake Worth Gas Revenue Fund; bonuses from gas well leases
located underneath the body of water at Lake Worth will be recorded in the Water and Sewer
Enteiprise Fund; bonuses from gas well leases located at the Fort Worth Natur•e Center and
Refuge will be recorded in the Special Trust fund and designated for use at the Nature
Center; bonuses from gas well leases located in City right of ways will be recorded in the
Street Maintenance Fund; and bonuses from gas well leases located on general City property
will be recorded in the Capital Projects Reserve Fund.
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Bonuses fi�om gas well leases on parlc land will be recorded in the Parks and Community
Services Department Capital Improvements Fund and will be designated for use for capital
improvements at the pai•ks where the gas well leases are located (well parks). Capital
improvement expenditures on well parlcs shall be capped at a level commensurate with
funding those items identified in an approved park master plan. Bonus proceeds in excess of
the cap shall be directed to a Park System Endowment Fund.
Ro. ay lties
Royalties shall be apportioned to the department that owns or manages the land where gas
well leases are located. Royalties received from gas well leases located on airport property
shall be recorded in the Municipal Airports Fund; royalties received from gas well leases
located on water and sewer property shall be recorded in the Water and Sewer Fund;
royalties received fi•om gas well leases located on City right of ways shall be recorded in the
Contract Street Maintenance Fund; royalties from Lalce Worth properties (not including the
Fort Worth Nature Center and Refuge and the body of water) will be recorded in the Lalce
Worth Gas Revenue Fund; royalties from gas well leases located underneath the body of
water at Lake Worth will be r•ecorded in the Water and Sewer Enteiprise Fund; royalties from
gas well leases located at the Fort Worth Nature Center and Refuge will be recorded in the
Special Trust fund and designated for use at the Nature Center. Royalties received from gas
well leases located on other general fund property shall be recorded in the Capital Projects
Reserve Fund.
Royalties received from gas well leases located on park land shall be allocated two thirds
(2/3) to the Citywide Parlc Capital Improvement Program and one third (1/3) to a Park
System Endowment Fund. The royalty allocation shall continue on the two thirds (2/3), one
third (1/3) distribution until the Park System Endowment Fund achieves a$2 million balance.
Upon establishment of the $2 million endowment fund balance, 100% of the annual royalties
shall be allocated to the Citywide Park Capital Improvement Program; three fourths (3/4) of
the annual endowment fund interest shall be allocated to the Citywide Park Capital
Improvement Program; and one fourth (1/4) of the annual interest earned shall be added to
the park endowment principal. In each following year, the annual royalties and endowment
interest shall be similarly distributed.
The Citywide Pai•k Capital Improvement Program shall only be used to pay for non-routine
and one-time capital improvement expenditures such as land and building purchases,
construction projects with at least a 10-year life, feasibility, design and engineering studies
related to such projects, capital equipment and special vehicles or equipment with at least a
10-year life.
Gas well lease revenues derived from park lands are intended to provide additional funding
for the preservation and development of the parlc system. As such base funding in the Parlcs
and Community Services Department's operating budget shall not be supplanted by gas well
lease revenue.
A sunset review of this Gas Well Revenue Distribution Policy shall be conducted five (5)
years after application of the approved policy.
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II.
To assure fiscal stability and the effective and efficient delivery of services, through the
identification of necessary services, establishment of appropriate service levels, and careful
administration of the expenditure of available resources.
A. Current Firnding Basis
The City shall operate on a current funding basis. Expenditures shall be budgeted and
controlled so as not to eYceed current revenues plus the planned use of fund balance
accumulated through prior year savings. (The use of fund balance shall be guided by the
Fund Balance/Retained Earnings Policy Statements.)
B. Avoidance of Operating Deficits
The City shall take immediate corrective actions if at any time during the fiscal year
expenditure and revenue re-estimates are such that an operating deficit (i.e., projected
expenditures in excess of projected revenues) is projected at year-end. Corrective actions can
include a hiring freeze, expenditure reductions, fee increases, or use of fund balance within
the Fund Balance/Retained Earnings Policy. Expenditure deferrals into the following fiscal
year, short-term loans, or use of one-time revenue sources shall be avoided to balance the
budget.
C. Maintenance of Capital Assets
Within the resources available each fiscal year, the City shall maintain capital assets and
infrastructure at a sufficient level to protect the City's investment, to minimize future
replacement and maintenance costs, and to continue service levels.
D. Periodic Pi°og-�°am Reviews
The City Manager shall undertalce periodic staff and third-party reviews of City programs for
both efficiency and effectiveness. The privatization and contracting of services with other
governmental agencies or private entities will be evaluated as alternative approaches to
service deliveiy. Programs which are determined to be inefficient and/or ineffective shall be
reduced in scope or eliminated.
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E. PZrrchasing
The City shall conduct its purchasing and procurement functions efficiently and effectively,
fully complying with applicable State laws and City ordinances. Staff shall make eveiy effort
to maximize discounts and capitalize on savings available through competitive bidding and
"best value" purchasing.
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To maintain the fund balance and retained earnings of the various operating funds at levels suffcient
to protect the City's creditworthiness as well as its financial positions from unforeseeable
emergencies.
A. General Fui�cl Undesignated Func� Balance
The City shall strive to maintain the General Fund undesignated fund balance at 10 percent
of the current year's budget appropriation for operations and maintenance, which is defined
as the total budget less the annual transfer from the General Fund to the debt service funds.
After completion of the annual audit, if the undesignated fund balance exceeds 10 percent,
the excess must be specifically designated for subsequent year expenditures or transferred to
the Capital Projects Reserve Fund (The use of the Capital Projects Reserve Fund shall be
guided by the Capital Expenditures and Improvements Policy Statements.)
B. Retained Earnings of Othei• Ope��ating Fzinds
In other enterprise operating funds, the City shall strive to maintain positive retained earnings
positions to provide sufficient reserves for emergencies and r•evenue shortfalls. Specifically,
in the Water and Sewer Enteiprise Fund, an operating reserve will be established and
maintained at 20 percent of the curr•ent year's budget appropriation for operation and
maintenance, which is defined as the total budget less debt service and capital project
expenditures.
C. Use of FZmd Balance/Retainecl Earnings
Fund Balance/Retained Earnings shall be used only for emergencies, non-recurring
expenditures, or major capital purchases that cannot be accommodated through current year
savings. Should such use reduce the balance below the appropriate level set as the objective
for that fund, restoration recommendations will accompany the decision to utilize said
balance.
D. Retainecl Eai�nings of Interrral Service Funds
The City shall not regularly maintain positive retained earnings in excess of 20 percent of the
current year's operation and maintenance expense in an internal service fund. Normally,
when an internal service fund's retained earnings exceed 20 percent, the City shall reduce the
charges for services provided by the internal service fund to other City operating funds.
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E. Debt Service FZrnds
The City shall maintain sufficient reserves in its debt service funds, which shall equal or
exceed the reserve fund balances required by bond ordinances, consistent with the covenants
in the bond ordinances pertaining to the tax-exempt status of such bonds.
F. Benefit and Inszn�ance Fzrnds
The City shall seek to maintain reserves in its benefit and insurance funds at the following
levels:
1. Property and Casualtv Insurance Fund — 25 percent of projected expenditures in the
fund's proposed annual budget.
2. Worker's Compensation Fund — 25 percent of projected annual operating
expenditures.
3. Group Health and Life Insurance Fund — 25 percent of the prior 12-months claims
and administrative expenditures. The purpose of reserves in this fund includes the
accumulation of sufficient funds to meet the liability for incurred but unreported
claims in the event the City's self-funded benefits program is terminated and to
reduce the need for purchasing stop-loss reinsurance.
4. Unemployment Compensation Fund — 25 percent of projected annual operating
expenditures.
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IV.
To review and monitor the state of the City's capital assets, setting priorities for the addition,
replacement and renovation of such assets based on needs, funding alternatives, and availability of
resources.
A. Capital Imp��oven�ents Planning
The City shall review annually the needs for capital improvements and equipment, the
current status of the City's infi•astructw•e, replacement and renovation needs, and potential
new projects. All projects, ongoing and proposed, shall be prioritized based on an analysis of
current needs and resource availability. For every capital project, all operation, maintenance
and replacement costs shall be fully costed.
B. Replacement of Capital Assets on a Regulaf� Schedzde
The City shall annually prepare a schedule for the replacement of its non-infrastructure
capital assets. Within the t•esources available each fiscal year, the City shall replace these
assets according to the aforementioned schedule.
C. Capital Expenditur�e Financing
The City recognizes that there are three basic methods of financing its capital requirements.
It can budget the funds from current revenues; it can take the funds from fund
balance/retained earnings as allowed by the Fund Balance/Retained Earnings Policy; or it can
borrow money through debt. Debt financing includes general obligation bonds, revenue
bonds, certificates of obligation, lease/purchase agreements, certificates of participation,
commercial paper, e� tax notes, and other obligations permitted to be issued or
incurred under Texas law. Guidelines for assuming debt are set forth in the Debt Policy
Statements.
D. Capital Projects Rese��ve Fund
A Capital Projects Reserve Fund shall be established and maintained to accumulate
reimbursements fi�om other governmental agencies for the prior purchase of real property
assets, proceeds from an occasional sale of surplus real property as approved by Council,
bonuses and royalties received from gas well leases (as described in "Revenues" Policy
Statements, Section I., Bonuses and Royalties from Gas Well Development Leases), and
transfers fiom the General Fund undesignated fund balance. This fund shall only be used to
pay for non-routine and one-time expenditures such as land and building purchases,
construction and maintenance projects with at least a 10-year life, feasibility, design and
engineering studies related to such projects, capital equipment and vehicles with at least a 10-
year life, and technology improvements with at least a 5-year life. Expenditures fi�om this
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Fund shall be aimed at protecting the health and safety of citizens and employees, protecting
the existing assets of the City, ensuring public access to City facilities and information, and
promoting community-wide economic development.
E. Denaolition Filnd
Generally, proceeds from the sale of surplus real property assets, other than Lake Worth
leases, shall be escrowed and designated for paying the costs of demolishing substandard and
condemned buildings and for the maintenance of tax foreclosed properties the City maintains
as trustee. Exceptions to this general policy shall be approved by the Council prior to the use
of these proceeds for other puiposes.
F. Lake Woi°th Infrash°zrctzn�e Fzrnd
Proceeds from the sale of Lalce Worth leases shall be escrowed and designated for water and
wastewater improvements within the area of the City of Fort Worth surrounding and
adjoining Lalce Worth.
G. Sznplars Bond Fzrnds (M&C G-14�41, July 27, 2004)
A"Restricted Residual Account" shall be established to record and manage surplus project
funds. Surplus project funds may remain after the completion of a specific, voter-approved
bond project or may result when a bond project is eliminated or modified. Funds in the
Restricted Residual Account may be used for other projects within the voted purpose of the
bonds to:
• Finance cost overruns on bond projects within the same bond proposition.
• Fund emergency projects (as defined in AR C-9)
• Reduce outstanding debt at the end of the bond program
• Fund newly identified projects within the voted purposes of an approved bond
proposition only after all voter-approved projects within that same proposition are
completed.
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V.
To utilize debt financing which will provide needed capital equipment and infi•astructure
improvements while minimizing the impact of debt payments on current revenues.
A. Use of Debt Financing
Debt financing, to include general obligation bonds, revenue bonds, cet�tificates of obligation,
certificates of participation, commercial paper, tax notes, lease/purchase agreements, and
other obligations permitted to be issued or incurred under Texas law, shall only be used to
purchase capital assets and equipment that cannot be prudently acquired from either current
revenues or fund balance/retained earnings and to fund infrastructure improvements and
additions. The useful life of the asset or project shall exceed the payout schedule of any debt
the City assumes.
B. Asszrmption ofAdditional Debt
The City shall not assume more tax-supported general purpose debt than it retires each year
without conducting an objective analysis as to the community's ability to assume and support
additional debt service payments. When appropriate, self-supporting revenue bonds shall be
issued before general obligation bonds. To the extent permitted by State law, commercial
paper may be issued in the City's tax-supported and revenue-supported bond programs in
order to: (1) provide appropriation authority for executing conh�acts on bond-funded projects;
(2) provide interim construction financing; and (3) take advantage of lower interest rates in
the short-term variable rate marlcet; all of which provide the City with flexibility in timing its
entry into the long-term fixed rate market.
C. Affordabiliry Taj°gets
General Obligation Bonds
The City shall use an objective analytical approach to determine whether it can afford
to assume new general puipose debt, both General Obligation bonds, tax notes, and
Certificates of Obligation, beyond what it retires each year. This process shall
compare generally accepted standards of affordability to the current numerical values
for the City. These standards shall include debt per capita, debt as a percent of
taxable value, debt service payments as a percent of current revenues and current
expenditures, and the level of overlapping net debt of all local taxing jurisdictions.
The process shall also examine the direct costs and benefits of the proposed
expenditures. The decision on whether or not to assume new debt shall be based on
these costs and benefits, the current conditions of the municipal bond market, and the
City's ability to "afford" new debt as determined by the aforementioned standards.
The City shall strive to achieve and/or maintain these standards at a low to moderate
classification.
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2. Certificates of Obli . a�
Certificates of Obligation may be issued without a public election to finance any
public work project or capital improvement, as permitted by State law. However, it is
the policy of the City to utilize Certificates of Obligations to finance public
improvements only in special circumstances and only after determining the City's
ability to assume additional debt based on the standards identified above. Those
special circumstances in which Certificates might be issued include, but are not
limited to, situations where:
• Cost overruns on a general obligation bond-financed capital improvement
have occurred;
•`Bmergency" conditions require a capital improvement to be funded rapidly;
• Financial opportunities unexpectedly arise to leverage funds from other
entities and reduce the City's capital cost for a community improvement;
• A capital improvement is a revenue-producing facility, but due to the nature
of the project or the time it talces for the facility to become operational and
produce revenues, the improvement may not generate sufficient revenues
throughout the life of the improvement to support the indebtedness secured
solely by the revenues to be produced by the improvement;
• It would be more economical to issue Certificates of Obligation rather than
issuing revenue bonds; and
• The timing of the construction of a capital improvement and the expense of
calling a bond election for a single proposition would, in the opinion of staff
and with the approval of the Council, warrant the issuance of Certificates of
Obligation to finance the capital improvement.
3. Revenue Bonds
Generally, for the City to issue new revenue bonds, revenues, as defined in the
ordinance authorizing the revenue bonds in question, shall be a minimum of 125% of
the average annual debt service and 110% of the debt service for the year in which
requit•ements are scheduled to be the greatest, but should be maintained at 150% of
the maximum annual debt service for financial planning purposes. Annual
adjustments to the City's rate structw•es will be made as necessaiy to maintain a 150%
coverage factor. Exceptions to these standards for special-purpose revenue projects
must be fully explained and justiiied.
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D. Debt Sh�uctzn°e
Generally, the City shall issue bonds with an average life of no greater than 10.5 years for
general obligation bonds and no greater than 12.0 yeais for revenue bonds. The structure
should approximate level principal on general obligation bonds and level debt service for
revenue bonds. There shall be no debt structures, which include increasing debt service
levels in subsequent years, with the first and second year of a bond payout schedule the
exception. There shall be no "balloon" bond repayment schedules which consist of low
annual payments and one large payment of the balance due at the end of the term. There
shall always be at least interest paid in the frst fiscal year after a bond sale and principal
starting generally no later than the second fiscal year after the bond issue. Noimally, there
shall be no capitalized interest included in the debt structure unless there are no historical
reserves upon which to draw. The outstanding general obligation debt and revenue debt of
the City may each be comprised of a variable rate component (including commercial paper
and auction rate bonds) not to exceed 25% of each such category of debt. With respect to the
issuance of revenue bonds for a stand-alone or self-suppoi-ting project, the average life and
debt seivice structures shall be consistent with the revenue-generating capability of the
project, and the City malce take into account similar project financings by other governmental
entities to determine such matters.
E. Call Provisio�s
Call provisions for bond issues shall be made as short as possible consistent with the lowest
interest cost to the City. When possible, all bonds shall be callable only at par.
F. Sale Process
The City shall use a competitive bidding process in the sale of debt unless the nature of the
issue warrants a negotiated sale. The City shall attempt to award the bonds based on a true
interest cost (TIC) basis. However, the City may award bonds based on a net interest cost
(NIC) basis as long as the financial advisor agrees that the NIC basis can satisfactorily
determine the lowest and best bid.
G. Timing of Sales
The City will use the appropriation author•ity available through cammercial paper programs
to begin capital projects approved under those programs. When significant funds (in excess
of $10 million) have been expended on those projects, the City will sell long-term bonds to
reimburse the City's cash portfolio and to fi�ee up appropriation authority. This process will
ensure the timely initiation and completion of capital projects, while improving the City's
ability to time its entry into the long-term fixed rate market and to manage its debt issuances
and debt payments in or•der to minimize the impact on tax rates and utility rates.
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H. Rating Agencies Pi°esentations
Full disclosure of operations and open lines of communication shall be made to the rating
agencies. City staff, with assistance of financial advisors, shall prepare the necessaty
materials and presentation to the rating agencies. Credit ratings will be sought from one or
more of the nationally recognized municipal bond rating agencies, currently Moody's,
Standard & Poor's, and Fitch, as recommended by the City's financial advisor.
COYitlYlZllYlg DISCIOSZfl�e
The City is committed to pc•oviding continuing disclosure of financial and pertinent credit
information relevant to the City's outstanding securities and will abide by the provisions of
Securities and Exchange Commission (SEC) Rule 15c2-12 concerning primaiy and
secondary market disclosure. City staff, with the assistance of the City's financial advisors
and, if necessary, the City's bond counsel, will undertalce to update financial and pertinent
credit information within six months of the end of the City's fiscal year and at such other
times as may be indicated by material changes in the City's fnancial situation.
J. Debt Refunding
City staff and the financial advisor shall monitor the municipal bond marlcet for opportunities
to obtain interest savings by refunding outstanding debt. As a general rule, the present value
savings of a particular refunding should exceed 3.5% of the refunded maturities.
K. Inte��est Eai�nings
Interest earnings received on the investment of bond proceeds shall be used to assist in
paying the interest due on bond issues, to the extent permitted by law.
L. Lease/Pu�•chase Ag��eements
Over the lifetime of a lease, the total cost to the City will generally be higher than purchasing
the asset outright. As a result, the use of lease/purchase agreements and certificates of
participation in the acquisition of vehicles, equipment and other capital assets shall generally
be avoided, particularly if smaller quantities of the capital asset(s) can be purchased on a
"pay-as-you-go" basis.
M. Proposals fi�on� Investment Bankers
The City welcomes ideas and suggestions fi•om investment banlcers and will seelc to reward
those firms which submit unique and innovative ideas by involving them in negotiated
underwritings. Unsolicited proposals should be submitted to the City's financial advisors
simultaneously with their submission to the City's Finance Department. City staff will
review and confer with financial advisors to determine viability of proposals.
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N. Unde���J°iting Syndicates
The City attempts to involve qualified and experienced firms, which consistently submit
ideas to the City and actively participate in the City's competitive sales in its negotiated
undet•writings. In conjunction with the City's financial advisors, City staff will recommend
the sh�ucture of underwriting syndicates which will be effective for the type and amount of
debt being issued. The City will consider its M/WBE goals in structuring syndicates.
O. Interest Rate Swaps
The City will consider the utilization of interest rate swap transactions only as they relate to
the City's debt management program and not as an investment instrument or hedge. As a
result, any swap transaction should not impair the outstanding bond rating of the City or
negatively affect the amount of credit enhancement capacity available to the City. The City
is always open to innovative ideas and proposals; however, before a commitment is made on
a proposed transaction, the proposed transaction as well as variations from the following
guidelines shall be fully explained and justified to the Council.
1. The Transaction
❑ Will comply with all applicable outstanding bond ordinance and insurance
covenants.
❑ Will be a market transaction for which competing quotes can be obtained at the
discretion of the City staff, upon the advice of the City's financial advisor.
❑ Will include a market termination provision with third party involvement.
o Will produce a material economic benefit not attainable through the use of
conventional debt instruments.
❑ Will introduce no leverage in order to produce an economic benefit.
❑ Will not impair the utilization of outstanding call features on outstanding bonds.
❑ Will be structured to minimize any basis risk, tax-law risk and credit risk to the
City.
❑ Will not cause the total amount of swap transactions to exceed 40 percent (40%)
of the outstanding indebtedness of a particular fund.
2. The Counterpartv
❑ Shall pay all costs associated with the transaction. All fees and expenses paid by
the counterparty to third parties will be disclosed in writing to the City.
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❑ Must have a rating at least equal to that of the City's indebtedness against which
the transaction is to be entered, or must provide for the purchase of a credit
enhancement to enhance its rating to the rating of such City indebtedness.
❑ Shall consider downgrade protection, when possible and cost effective.
❑ Shall not assign the swap contract without the consent of the City.
❑ Shall clearly explain the impact on the transaction of the counterparty's
bankruptcy.
3. Analysis
❑ Swap proposals submitted by investment firms for consideration by the City shall
include a clear analysis, which identifies both the potential benefits and risks
associated with the proposed transaction.
❑ The City's financial advisor will produce an analysis of various interest rate
market fluctuations at periodic inteivals to demonstrate the impact of interest rate
marlcet movements.
❑ The City's cost of the transaction and any anticipated future costs will be included
in the cost/benefit analysis.
❑ The City's financial advisor will monitor the results of an adopted swap
transaction throughout its life and recommend termination when substantial
economic benefit would accrue to the City upon termination.
4. Le�al
❑ The documentation of the swap shall be in the form of an International Swaps and
Derivatives Association, Inc., Master Agreement with attachments, commonly
referred to as an ISDA document.
❑ The swap, whenever possible, shall be transacted under Texas law and
jurisdiction.
❑ Approval of the transaction must be obtained from the State Attorney General, to
the extent required by Texas law.
5. Disclosure
❑ Disclosure of the terms of the swap will be made in accordance with then
prevailing industiy standards.
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P. Synthetic Advanced Refirndings
The City will consider synthetic advance refundings, which produce a material economic
benefit and will in no way impair the outstanding bond rating of the City.
The present value savings of the transaction must be quantifiable, exceed 7 percent
(7%) of the refunded maturities, and not be based on projection.
2. Proposals submitted by investment firms for consideration by the City shall identify
and address not only the benefits of the proposed transaction, but the potential
negative impacts as well.
3. Additional transaction costs such as bond counsel, trustee, and financial advisor shall
be included in the savings calculation required above.
4. The City's financial advisor shall produce an analysis of the implications of paying a
forward premium vs. waiting to the current call date of the bonds.
5. Approval of the transaction must be obtained from the State Attorney General, to the
extent required by Texas law.
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To invest the City's cash in such a manner so as to ensure the absolute safety of principal and
interest, to meet the liquidity needs of the City, and to achieve the highest possible yield.
A. Cash Management Policy (M&C G-9552, March 12, 1992)
Subject to approval by the City Manager and the Director of Finance, the City Treasurer is
both authorized and required to promulgate a written Statement of Cash Management Rules
and Regulations governing the City's cash management and investment activities (exclusive
of the investment activities of the Employees' Retirement Fund), and to institute and
administer such specific procedures and criteria as may be necessary to ensure compliance
with the City's cash management policy and the Public Funds Investment Act. Specifically,
this policy mandates the pursuit of the following overall goals and objectives:
All aspects of cash management opet•ations shall be designed to ensure the absolute
safety and integt•ity of the City's financial assets.
2. Cash management activities shall be conducted in full compliance with prevailing
local, state and federal regulations. Furthermore, such activities shall be designed to
adhere to guidelines and standards promulgated by such professional organizations as
the American Institute of Certified Public Accountants (AICPA), the Governmental
Accounting Standards Board (GASB) and the Government Finance Officers
Association (GFOA).
Operating within appropriately established administrative and procedural parameters,
the City shall aggressively pursue optimum financial rewards, while simultaneously
controlling its related expenditur•es. Therefot•e, cash management functions that
engender interaction with outside financial intermediaries shall be conducted in the
best financial and administrative interests of the City. In pursuit of these interests, the
City will utilize competitive bidding practices wherever practicable, affording no
special financial advantage to any individual or corporate member of the financial or
investment community.
4. The City shall design and enforce written standards and guidelines relating to a
variety of cash management issues, such as the eligibility or selection of various
financial intermediaries, documentation and safekeeping requirements; philosophical
and operational aspects of the investment function; and such other functional and
administrative aspects of the cash management program which necessitate standard
setting in pursuit of appropt�iate prudence, enhanced protection of assets or procedural
improvements.
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5. Investments of the City, or of funds held in its possession in a fiduciaiy capacity,
shall be made with the exercise of that judgment and care, under circumstances then
prevailing, which persons of prudence, discretion, and intelligence exercise in the
management of their own affairs, not for speculation, but for investment, considering
the probable safety of their capital, as well as the probable income to be derived.
Investmerrt Sh�ategy (M&C G-11199, Azrgarst 21, 1995 - Modified March 31, 1997)
The City of Fort Worth maintains a Consolidated Portfolio in which it pools its funds for
investment purposes. The City's cash management program seeks to achieve three objectives
in this order of priority: safety of principal, adequate liquidity to meet daily cash needs, and
fnally a reasonable yield commensurate with the preservation of principal and liquidity. The
following investment strategy has been designed to accomplish these objectives:
L The City invests in "money marlcet instruments," very creditworthy, highly liquid
investments with maturities of one year or less, and in intermediate-term securities of
high credit quality with maturities no greater than five years. The City will only
invest in those securities specified in its "List of Eligible Investments". These include
U.S. Treasury Bills and Notes, high quality obligations of certain U.S. agencies and
instrumentalities, and AAA-rated local government investment pools and no-load
money market mutual funds. Any securities not on this list will not be eligible
investments.
2. At all times, the City shall maintain a cash position sufficient to meet daily liquidity
requirements. This will be accomplished by maintaining approximately 15 percent of
the total portfolio in money marlcet funds, local government investment pools and/or
overnight repurchase agreements. The City shall also position some investments to
provide liquidity for certain predictable obligations such as debt service payments.
3. The City shall not exceed a weighted average maturity of two years
Consolidated Portfolio. The City shall strive to maintain this weighted
maturity by investing funds according to the following general
diversification guidelines:
Maturity Cash 1 Year 2 Year 3 Yeai• 4 Year
Day Range 0 1-365 365-730 730-1095 1095-1460
°/a 10 28 14.25 14.25 14.25
Portfolio
5 Year
1460-1825
14.25
for the
average
maturity
There may be times when the City has more or less of its funds in any one maturity cell due
to cash flow needs, prevailing market conditions, and other factors. The maturity
diversification schedule serves as a general guideline for malcing investment decisions. In
this way, the portfolio will be able to take advantage of rising interest rates by re-investing
maturing securities at higher yields. In falling rate environments, it will proft fi•om having
investments that were made at higher interest rates.
'S�g;.�k�4'H��� l i12dk2adL�,1Aa6,�lt r'QD�9F� i->y'<iif,';t14:�3fl.�
Following this discipline ensures that the City will always have sufficient cash available for
daily needs, preseives its principal and never has too much money in any one maturity area,
whether it be short-term or long. In this manner, the Consolidated Portfolio will earn a
competitive yield without assuming unacceptable rislc.
C. Intei°est EaJ�nirrgs
Interest eat•ned from investments shall be distributed to the operating, internal service, and
other City funds from which the money was provided, with the exception that interest
earnings received on the investment of bond proceeds shall be attributed and allocated to
those debt service funds responsible for paying the principal and interest due on the particular
bond issue.
D. Designated Investment Con�mittee
Upon Council adoption of the Cash Management Policy and the promulgation of the
Statement of Cash Management Rules and Regulations, a Cash Management Taslc Force
comprised of the Assistant City Manager over Finance, the Finance Department Director, the
City Treasurer, the Assistant City Treasurers, and other City staff as deemed appropriate by
the City Manager is established. This group serves as the City's designated investment
committee required under the State Public Funds Investment Act. The Task Force �
regularly examines and evaluates the City's cash management and investment activities and
recommends revisions to operational rules and regulations, the Cash Management Policy,
and the Investment Strategy. Modifications to the administrative rules and regulations will
be submitted to the City Manager for approval. Amendments to the Cash Management
Policy and/or Investment Strategy will be presented to the Council for adoption.
E. Investment Portfolio Rating
The City has received an AAA rating of its investment portfolio fi�om Fitch. The City will
manage its cash according to procedures and strategies to maintain such a rating.
�'Ai".;.!,�lt�'§�A� 1/Naiil.�7��1i3.�vr�. A'r.;3lF'y^� ;_�cri+i�'i��i:'i�i:'�, /„�
.: � '�:.�' ..j, � .tii. '�7' 'c' �`�.: � � .'s:. �'i:: S� .'�' r:�
24 Financial I1�an��gemeut Policy State�nents
vll.
To coordinate efforts with other governmental agencies to achieve common policy objectives, share
the cost of providing government services on an equitable basis, and support favorable legislation at
the state and federal levels.
A. Inte��local Coope�•ation in Delive��ing Se��vices
In order to promote the effective and efficient delivery of services, the City shall actively
seek to work with other local jurisdictions in joint purchasing consortia, sharing facilities,
sharing equitably the costs of service deliveiy, and developing joint programs to improve
se�vice to its citizens.
B. Legislative Pi�og��am
The City shall cooperate with other jurisdictions to actively oppose any state or federal
regulation or proposal that mandates additional City programs or services and does not
provide the funding to implement them. Conversely, as appropriate, the City shall support
legislative initiatives that provide more funds for priority local programs.
i'JildiiFl�'tei� l�i�ciil l�'_'SI"€�.'.134� S"iiliC'�1 `1i.AaCsii���il:i /:'i
i� �111� 1 w��.� l r�
;,r: , 'u4lt�Ni�`I6�� i ����eB�3�€_'1ktlC`§➢d i`QDik�'C' ,�a`<a[�Ysi�'p9[;;
VIII.
To seek, apply for and effectively administer federal, state and foundation grants-in-aid that address
the City's current priorities and policy objectives.
A. Grant Guidelines
The City shall apply, and facilitate the application by others, for only those grants that are
consistent with the objectives and high priority needs previously identified by Council. The
potential for incurring ongoing costs, to include the assumption of support for grant-funded
positions from local revenues, will be considered prior to applying for a grant.
B. Indii�ect Costs
The City shall recover full indirect costs unless the funding agency does not permit it. The
City may waive or reduce indirect costs if doing so will significantly increase the
effectiveness of the grant.
C. GJ°ant Review
All grant submittals shall be reviewed fot• their cash match requirements, their potential
impact on the operating budget, and the extent to which they meet the City's policy
objectives. Departments shall seelc Council approval prior• to submission of a grant
application. Should time constraints under the grant program malce this impossible, the
department shall obtain approval to submit an application from the appropriate Assistant City
Manager and then, at the earliest feasible time, seek formal Council approvaL If there are
cash match requirements, the source of funding shall be identified prior to application. An
annual report on the status of grant programs and their effectiveness shall also be prepared.
D. Grant Program Te��minatiorr
The City shall terminate grant-funded programs and associated positions when grant funds
are no longer available unless alternate funding is identified.
. � , ,
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,
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2� �'ivancial 1VIana�;ement Policy �t�te�a�ents
IX.
To initiate, encourage and participate in economic development efforts, which create job
opportunities and strengthen the local economy.
A. Positive Bzrsrness Errvironment
The City shall endeavor, through its regulatoty and administrative functions, to provide a
positive business environment in which local businesses can grow, flourish and create jobs.
The Council and City staff will be sensitive to the needs, concerns and issues facing local
businesses.
B. Commitment to Business Expansion, Dive��srfication, and Job Creation
The City shall encourage and participate in economic development efforts to expand Fort
Worth's economy and tax base and to increase local employment. These efforts shall not
only focus on newly developing areas but on "central city" areas, the Central Business
District, and other established sections of Fort Worth where development can generate
additional jobs and other economic benefits. The "central city" is defined, by the Council, as
the area within Interstate Loop 820 consisting of:
■ All Community Development Block Grant (CDBG)—eligible census block
groups; and
■ All state-designated enterprise zones within Inteistate Loop 820; and
■ All census block groups that are contiguous by 75 percent or more of their
perimeter to CDBG-eligible block groups or enterprise zones.
C. Tax Abatements
The City shall follow a tax abatement policy (adopted June 15, 2004, M&C G-14362) to
encourage investment and development throughout Fort Worth. The City shall use due
caution in the analysis of any tax incentives used to encourage development. Factors
considered in evaluating proposed abatements for development include the location of the
project, its size, the number of temporary and permanent jobs created, the costs and benefits
for the City and its impact on Fort Worth's economy. Tax abatement contracts may contain
certain conditions to the receipt, both initially and throughout the term of the contract, of the
abatement. The City will annually review tax abatement contracts to ensure the community
is receiving promised benefits, and the Council may seek to modify, re-negotiate, or
terminate an abatement contract if it is determined that the firm receiving the abatement has
failed to keep its part of the agreement.
�'1il�lilCl�� 1�,�llillla��iX[�Yl% �'tr�Y��/ �Et�i�:YgiQ�i"zi� �`'%
D. Inc�•ease Non-residential Share of Tax Base
The City's economic development program shall seelc to expand the non-residential share of
the tax base to decrease the tax burden on residential homeowners.
E. Coo��dinate Efforts ��ith Othe�• Jurisdictions
The City's economic development program shall encourage close cooperation with other
local jurisdictions, chambers of commerce, and groups interested in promoting the economic
well being of this area.
F. Use of Othef� Incentives
The City shall use enterprise zones, tax increment reinvestment zones, or other incentives as
allowed by law to encourage new investment and business expansion in target areas as
designated by resolution of the Council. Petitions presented to the City Council seeking the
creation of a tax increment reinvestment zone shall be considered by the City Council in a
manner consistent with applicable TeYas law. The City shall also coordinate with state and
federal agencies on offering any incentive programs they may provide for potential economic
expansion. The factors used to evaluate possible recipients of any incentives shall include
those listed in C. Tax Abatements. Economic development incentive agreements involving
tax abatements or grants of public funds shall be subject to prior review and approval of the
Council.
.Jtil' J I!Yxi Maa.Yi7N � I� i.�:ia`'.�� P��G-'e.+!W � lr�ii�;t_�a _)Aci4=�.u�i Ni�.lJ
X.
To prepare and present regular reports that analyze, evaluate and forecast the City's financial
performance and economic condition.
A. Financial Statzrs and Peifo��Jna�ce Repoi�ts
Monthly reports comparing expenditures and revenues to current budget, projecting
expenditures and revenues through the end of the year, noting the status of fund balances to
include dollar amounts and percentages, and outlining any remedial actions necessary to
maintain the City's financial position shall be prepared for review by the City Manager and
the Council.
B. Five year Forecast of Revenues a�d Expenditui�es
A five-year forecast of revenues and expenditures, to include a discussion of major trends
affecting the City's financial position, shall be prepared in anticipation of the annual budget
process. The forecast shall also examine critical issues facing the City, economic conditions,
and the outlook for the upcoming budget year. The document shall incorporate elements of
the International City Management Association financial trend monitoring system to provide
fui�ther insight into the City's financial position and to alert the Council to potential problem
areas requiring attention.
C. Status Reports on Capital Projects
A summary report on the contracts awarded, capital projects completed and status of the
City's various capital programs will be prepared at least quarterly and presented to the City
Manager and Council.
D. Compliance with Cozrncil Policy Staten�ents
The Financial Management Policy Statements will be reviewed annually by the Council and
updated, revised or refined as deemed necessary. Policy statements adopted by the Council
are guidelines, and occasionally, exceptions may be appropriate and required. However,
exceptions to stated policies will be specifically identified, and the need for the exception
will be documented and fully explained.
�'iJ_Yeikl�'IE�� 1✓li.ii�llc7�till�ll(�"�3�. F'ii'llt�/,:7tciE4'�&';.'a"tl.�i . ,.J�I
��� �. ���� � �
3� Fiu�ncial I4'Ianage��lcnt Polic�� �tateinc»ts
XI.
To employ the assistance of qualified financial advisors and consultants as needed in the
management and administration of the City's financial functions. These areas include but are not
limited to investments, debt administration, financial accounting systems, program evaluation, and
financial impact modeling. Advisors shall be selected using objective questionnaires and requests
for qualifications/proposals based upon demonstrated expertise relative to the scope of work to be
performed and appropriately competitive fees.
+-'ltt<i61�3_i �� J..-f�4 .��t_l�c1C i -;��.� ,}� v .'•3a-�'�:_�.,., .. ,
���1�` ���� � �
-`.A .�g`r'.; ;c'�;1:7 � T'�F�O��fT @,1F`5d��� !�j?p'.�t'� ��I�'��',' h �i.. 7d�6-!,�
To comply with prevailing local, state, and federal regulations, as well as current professional
principles and practices relative to accounting, auditing, and financial reporting.
A. Confornaance to Accoarntin P� rinci�les
The City's accounting practices and financial reporting shall conform to Generally Accepted
Accounting Principles (GAAP) as promulgated by the Governmental Accounting Standards
Board (GASB), the American Institute of Certi�ied Public Accountants (AICPA), and the
Government Finance Officers Association (GFOA).
B. Po�aila�° Re�oi�tinQ
In addition to issuing a Comprehensive Annual Financial Report (CAFR) in conformity with
GAAP, the City may supplement its CAFR with a simpler, "popular" report designed to assist
those citizens who need or desire a less detailed overview of the City's financial activities. This
report should be issued no later than six months after the close of the fiscal year.
C. Selection o�Auditof�s
Every five years, the City shall request proposals from all qualified firms, including the current
auditors if their past performance has been satisfactoiy, and the Council shall select an
independent firm of certified public accountants to perform an annual audit of the books of
account, records and transactions, certifying the financial statements of the City and reporting the
results and recommendations to the Council.
D. Audit Con��letion
The City seeks to have its CAFR and Single Audit of Federal and State grants completed within
120 days of the close of its previous fiscal year, which ends September 30. In the event the
presentation of the CAFR and Single Audit is delayed beyond the last Council meeting in
February, the City Manager shall provide a report on the status of the audit and the expected
completion date of the CAFR and Single Audit to the City Council at its first meeting in March.
�-- =- _— _ � �- - - �_ � _-- --�- -.--_--� -_ � _._-_ � ��
Finailcial �a�tage�nenE I�olicy �tatements ;�:; S�'; .?;��• ,a 2�,�t�i l j.? 3ti
�:�Ju l v�.v�S�.,ti f
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,3(, Fin�uci�l Nlb�nagenient Palico� �tatemei�ts
XIII.
To ensure that the Employees' Retirement Fund is adequately funded and operated for the exclusive
benefit of the participants and their beneficiaries:
A. Benefit Improvements
The Board of Directors of the Employees' Retirement Fund shall certify to the Council the
actuarial impact of any proposed benefit improvements or changes in contribution levels.
The Council will assure that sufficient funding will be available to pay for the liabilities
created by benefit improvements and other plan changes. Improvements should generally be
designed to benefit the membership of the Retirement System as a whole.
B. Qzral�ed Plan
The City will maintain the qualified status of the Retirement System. As deemed necessary
from time to time, the City will request a"determination letter" from the IRS relative to
whether or not the City's retirement system conforms to the Internal Revenue Code in order
to assure the tax-exempt status of the income earned on the Retirement Fund's investments,
the retiree pension payments and the accrued benefits for active employees.
C. Funding Level
The City will ensure that the Retirement Fund remains sufficiently funded to ensure that all
retirement benefits can be paid as they become due. Appropriate contribution levels will be
maintained from both the City and members of the Fund, and the Fund will be required to
obtain annual actuarial evaluations to monitor its funding level on an ongoing basis.
'i_�u 14-_,0__. � �',ILL21�: ___. -. . - �. �� �� _�-1r.-, ,.,
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:ii> k'�i�i±k➢fl:i'r�� 1�1��k123t,�'ah's>>)�F. H E3'�e�.": �'1�a7�'�l4C'n�N��
XIV.
To establish and maintain an internal control structure designed to provide reasonable assurance that
City assets are safeguarded and that the possibilities for material errors in the City's financial records
are minimized.
A. Pro�er� Azrtho�°izations
Procedures shall be designed, implemented and maintained to ensure that financial
transactions and activities are properly reviewed and authorized.
B. Separation o Dzrties
Job duties will be adequately separated to reduce to an acceptable level the opportunities for
any person to be in a position to both perpetrate and conceal errors or irregularities in the
normal course of assigned duties.
C. Proper Recoi�din�
Procedures shall be developed and maintained that will ensure financial transactions and
events are properly recorded and that all financial reports may be relied upon as accurate,
complete and up-to-date.
D. Access to Assets and Recoi^ds
Procedures shall be designed and maintained to ensure that adequate safeguards exist over
the access to and use of financial assets and records.
E. Independent Checks
Independent checks and audits will be made on staff performance to ensure compliance with
established procedures and proper valuation of recorded amounts.
F. Costs and Benefits
Internal control systems and procedures must have an apparent benefit in terms of reducing
and/or preventing losses. The cost of implementing and maintaining any control system
should be evaluated against the expected benefits to be derived from that system.
�"lilrtll.?'d'r.t? ��✓:tri�lxi'��`i:4i.i'iiP u. s.Pl�c� �lY lr _'fl.k'Erli� �%'%
� �I ! � � �� �, 3f � � i � �
�.{� F'iu�ncial Nian��genient �'olic�� Stateme.nts
XV.
To fully utilize available technologies to expedite cash payments and receipts, enhance employee
productivity and provide customer satisfaction.
A. Farllv Inte��ated Financial Svstems
All E-Commerce systems and procedures must fully and transparently integrate with the
City's financial and accounting systems, its depository bank systems, and any other City
information system which interfaces with an E-Commerce system.
B. En7er�� Technologies
The City will worlc closely with its depository banlc and other financial partners to evaluate
and implement those new technologies that prove to be efficient and effective in pursuit of
the City's E-Commerce goals.
C. T�encloi� E-Pavrnents
The City will actively migrate vendor payments fi•om paper checks to other forms of
payment, including but not limited to: 1) Automated Clearing House (ACH) payments; 2)
Wire transfers; and 3) Procurement Card payments.
D. Direct De�osits
The City will actively migrate payroll payments from paper checks, to electronic formats,
including but not limited to: 1) Direct deposits and 2) Electronic pay cards.
E. Inte��net Pavment Options
Worlcing with its depository bank and other financial partners, the City will seek to develop
and implement internet payment options which will allow customers and citizens to pay bills
due the City conveniently and securely.
'_'atP.c'dlt='ie�l 1��r1ar.�6�._t.ai:�,A�t. y'�1�('��� .�i. e�::i.-e1i.;:Yi�> -'.-'�ii
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d2 F'i�iancial NIanagen�e�it Yolicy �t�tcme»ts
EXHIBIT B
FEE SCHEDULE
The investment advisory services described under the terms of this Agreement are being provided in
accordance with the following fee schedule.
Services are provided for a monthly fee of: $ 5,000.00
Fees are calculated by P&A on services rendered in the preceding quarter and the invoice provided to the
Client by the fifth (5) business day of the succeeding month.
Fees are due and payable within ten (10) business days after receipt of invoice.
EXHIBIT C
Securities and Exchange Commission ADV FORM, PART II
This form is being provided the Client in accordance with SEC Regulations 204-3 for Registered
Investment Advisors. This disclosure document must be provided the Client not less than 48 hours prior
to entering any investment advisory contract. Failure to do so can result in a voidable contract. P&A
shall provide to Client an updated ADV Form on an annual basis in accordance with SEC Regulations.
�
EXHIBIT D
AUTHORIZED REPRESENTATIVES
Authorized Representatives of the Client
Name/Title Phone Fax e-mail
Jenny �ownsend
Ac�tinc� 'T'reasurer 81%-392-60"�0 £�17-'�A�-Rlf�l ,7�n���_� own�Pn���rl�tworthgov:org
Lena Ellis (as of June 4, 2007)
Finance Director 817-392-8514 817-392-8966 Lena.Ellis@fortworthgov.org
Karen Montgomery 817-392-6222
Assitant City Manager/CFO
Authorized Representatives of P&A
Name/Title Phone
Linda T. Patterson
President
Howard Herring
Portfolio Manager
William MacArthur
Portfolio Manager
Rikki Ramirez
Portfolio Assistant
512-320-5042
512-320-5042
512-320-5042
512-320-5042
817-392-6134 Karen.Montgomery@fortworthgov.org
Fax e-mail
512-320-5041 I i nda@ patterson. net
512-320-5041 howie@patterson.net
512-320-5041 will@patterson.net
512-320-5041 rikki@patterson.net
�
Page 1 of 2
City of Fort Worth, Texas
Mayor and Council Communication
COUNCIL ACTION: Approved on 4/17/2007
DATE: Tuesday, April 17, 2007
LOG NAME: 131NVADVPAT
REFERENCE NO.: **C-22062
SUBJECT:
Authorize Execution of Investment Advisory Agreement with Patterson & Associates
RECOMMENDATION:
It is recommended that the City Council:
1. Authorize the City Manager to execute a contract for investment advisory services with Patterson &
Associates for an amount not to exceed $30,000.00; and
2. Authorize the contract term to begin on April 17, 2007, and expire on October 16, 2007.
DISCUSSION:
The City Treasurer, Skipper Shook, has taken another position with the City in the Water Department,
effective on Monday, April 16th. In the interim, the City Manager's O�ce has named Assistant Treasurer
Jenny Townsend as Acting Treasurer. The City has opened the position and expects to fill it sometime in
the next two months.
Staff also recommends retaining Patterson & Associates as its investment advisor to help manage the
portfolio and to maintain the portfolio's AAA-rating.
Former Fort Worth City Treasurer (1986 - 1991) Linda Patterson leads Patterson & Associates and its team
of professionals with a combined 100 years of investment and public funds experience. The firm is a
Securities and Exchange Commission Registered Investment Advisory firm. The firm's professionals will
provide non-discretionary investment advisory services and will work closely with staff for reliable and timely
cash flow information and then making the portfolio decisions that best meet those needs.
Patterson & Associates will work directly with staff to assure the cash flow needs and to provide information
on market conditions and their portfolio views and investment actions. The firm will never have any access
to or control over the City's funds or the securities in the portfolio. The firm will make investment decisions,
adhering to the City's established Investment Policy and Strategy, as market opportunities occur. Staff will
have the final approval of any investment transaction and will monitor execution with its depository bank,
Chase.
The monthly cost of the service will not exceed $5,000.00. Over the term of the proposed agreement, the
total costs will not exceed $30,000.00. All fees will be charged directly to investment earnings before the
earnings are distributed to the various funds.
http://www.cfwnet.org/council�acket/Reports/mc�rint.asp 5/3/2007
Page 2 of 2
FISCAL INFORMATION/CERTIFICATION:
The Finance Director certifies that funds are available in the current Finance Department operating budget,
of the General Fund. Funds for this expenditure will be offset through savings from other accounts.
TO Fund/Account/Centers
Submitted for City Manager's Office by:
Originating Department Head:
Additional Information Contact:
FROM Fund/Account/Centers
GG01 539120 0134010 $30,000.00
Karen Montgomery (6222)
Richard Zavala (Acting) (8313)
Jack Dale (8357)
http://www.cfwnet.org/council�acket/Reports/mc�rint.asp 5/3/2007