HomeMy WebLinkAboutIR 9168 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9168
To the Mayor and Members of the City Council December 15, 2009
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SUBJECT: UPDATE OF PUBLIC FUNDS INVESTMENT ACT AND ITS IMPACT
ON GAS WELL REVENUES
The purpose of this report is to provide the City Council with an update on the Public Funds
Investment Act and its impact on gas well revenues. Staff briefed the Audit and Finance Advisory
Committee on December 3, 2009, and the Committee directed staff to update the City Council via
Informal Report.
The Public Funds Investment Act (PFIA) establishes parameters for the investment of public
funds. As such, the City of Fort Worth maintains a consolidated portfolio that is designed to
maintain safety of principal, provide adequate liquidity, remain diversified, and achieve
reasonable yield. The City's investment policy, as defined in the Financial Management Policy
Statements, allows for investment in: money-market funds, collateralized certificates of deposit,
US Treasuries, federal agencies, repurchase agreements, and commercial paper.
During the 81't Texas Legislative Session, staff worked to amend the PFIA so that the City could
invest revenues generated from the gas well program in a broader spectrum of investment
vehicles. On September 30, 2009 Senate Bill 894 became law, and amended the PFIA allowing
a municipality to invest revenues received from oil, gas, or other mineral development pursuant to
Subtitle B, Title 9, Property Code (Texas Trust Code). The amendment to the Public Funds
Investment Act resents an opportunity pportunity to achieve a higher yield on the investment of gas well
revenues. However, the opportunity to earn a higher yield also carries additional risk to the
principal.
In anticipation of an amendment to the PFIA, the City Council established a nine-member citizen
committee known as the Trust Advisory Council (TAC). On June 10, 2008, Resolution 3624-06-
2008, referencing the Financial Management Policy Statements (FMPS), formally established the
TAC. The role of the TAC is to:
...serve as a financial advisor to the Trustee of the Trust ensuring financial
stability, monitoring fund performance, recommending the amount of funds
available for disbursement annually, and recommending fund management
decisions. The Trust Advisory Council is to also make recommendations to the
Trustee and the City concerning the general administration of the Trust, Further,
the Trust Advisory Council is to exercise the roles with respect to the amendment
and termination of the Trust Agreements
The TAC had its first meeting on July 10, 2008, During this meeting, the TAC raised concerns
regarding personal liability because of its role in advising the Trustee. Later, on November 1 ,
2008, TAC activities were put on hold pending changes to the Public Funds Investment Act.
Now that -the PFIA has successfully been amended, staff will move ,-ward to complete the
creation 0111 the tru
instrument, it is n ic, t that Creation , :h trust will b Completed
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INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 918$
To the Mayor and Members of the City Council December 15, 2009
% Page 2 of 2
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SUBJECT: UPDATE OF PUBLIC FUNDS INVESTMENT ACT AND ITS IMPACT
ex a ON GAS WELL REVENUES
early 2010. Staff will continue to work with outside legal counsel to determine the appropriate
process necessary for the transfer of funds into the trust.
Staff will also prepare an amendment, for City Council consideration, to Resolution 3624-06-
2008. Concurrently, staff will update the Financial Management Policy Statements to be
consistent with the aforementioned recommendation. The TAC's issue of personal liability can be
addressed by amending the resolution and FMPS so that the TAC does not serve as a financial
advisor to the Trustee. Instead, the TAC would advise the City Manager of the investment
strategy, and the City Manager would then interface with the Trustee and bring the TAC's
recommendations to the City Council. Furthermore, the TAC's role in recommending the amount
of funds available for disbursement will be unchanged, and it will be at the discretion of the City
Council to determine the use of those funds. It is anticipated that the amended resolution and
revised Financial Management Policy Statements will be presented for City Council consideration
in February, 2010.
Contact will be made with the TAC to discern the members' interest to continue to serve on the
Trust Advisory Council.
Please contact Greg Jordan, Financial Management Services Assistant Director, at (817) 392-
8843 with any questions.
Dale A. Fisseler, P.E.
City Manager
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