§ 70-467. Authorized investments

In accordance with authorizing federal and state laws, the county's depository contract, and appropriate approved collateral provisions, the county may utilize the following methods for the investment of county funds:

(1) Obligations of the United States or its agencies and instrumentalities.

(2) Direct obligations of the state or its agencies and instrumentalities.

(3) Collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States.

(4) Other obligations, the principal of and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the state or the United States or their respective agencies and instrumentalities.

(5) Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent. However, in accordance with the provisions of V.T.C.A., Government Code § 2256.009(b), the following are not authorized investments under this section:

a. Obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal.

b. Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest.

c. Collateralized mortgage obligations that have a stated final maturity date of greater than ten years.

d. Collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.

(6) Certificates of deposit issued by a bank, a savings and loan association, or a savings bank organized under the laws of this state, another state, or federal law that has its main office or branch office in this state which is guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor; or secured by obligations described in V.T.C.A., Government Code § 2256.009(a), including mortgage-backed securities directly issued by, a federal agency or instrumentality that have a market value of not less than the principal amount of the certificates, but excluding those mortgage-backed securities of the nature described by V.T.C.A., Government Code § 2256.009(b), or secured in any other manner and amount provided by law for deposits of the investing entity.

(7) Fully collateralized repurchase agreements authorized under V.T.C.A., Government Code § 2256.011, Government Code, if the repurchase agreement has a defined termination date; is secured by obligations described by V.T.C.A., Government Code § 2256.009(a)(1); and requires the securities being purchased by the entity to be pledged to the entity, held in the entity's name, and deposited at the time the investment is made with the entity or with a third party selected and approved by the entity; and is placed through a primary government securities dealer, as defined by the Federal Reserve, or a financial institution doing business in the state. "Repurchase agreement" means a simultaneous agreement to buy, hold for a specified time, and sell back at a future date, obligations described by V.T.C.A., Government Code § 2256.009(a)(1) at a market value at the time the funds are dispersed of not less than the principal amount of the funds dispersed. The term includes a direct security repurchase agreement and reverse security repurchase agreement.

Notwithstanding any other law, the term of any reverse security repurchase agreement may not exceed 90 days after the date the reverse security repurchase agreement is delivered. Money received by an entity under the terms of a reverse security repurchase agreement shall be used to acquire additional authorized investments, but the term of authorized investments acquired must mature not later than the expiration date stated in the reverse security repurchase agreement.

(8) Bankers' acceptances, are an authorized investment under V.T.C.A., Government Code § 2256.012, which has a stated maturity of 270 days or fewer from the date of its issuance; will be, in accordance with its terms, liquidated in full at maturity; is eligible for collateral for borrowing from a Federal Reserve Bank; is accepted by a bank organized and existing under the laws of the United States or any state, if the short-term obligations of the bank, or of a bank holding company of which the bank is the largest subsidiary, are rated not less than A-1+ or P-1 or an equivalent rating of at least one nationally recognized credit rating agency. Such transactions shall not exceed five percent of the total county investment portfolio, and all such endorsing banks shall come only from a list of entities who are constantly monitored as to financial solvency.

(9) Commercial paper with a stated maturity of 270 days or fewer from the date of its issuance; which is rated not less than A-1+ or P-1 or an equivalent rating by at least two nationally recognized credit rating agencies, or one nationally recognized credit rating agency and is fully secured by an irrevocable letter of credit issued by a bank organized and existing under the laws of the United States or any state. Such transactions shall not exceed 30 percent of the total county investment portfolio with no more than five percent in any one name, with no more than ten percent of the total county investment portfolio maturing on any given day, and all such providers of letters of credit shall come only from a list of entities who are constantly monitored as to financial solvency.

(10) No-load money market mutual funds regulated by the Securities and Exchange Commission which have a dollar-weighted average stated maturity of 90 days or fewer and includes in its investment objectives the maintenance of a stable net asset value of $1.00 for each share. A no-load mutual fund is an authorized investment under this article if the mutual fund: is registered with the Securities and Exchange Commission; provides the county with a prospectus and other information required by federal law; has an average weighted maturity less than two years; is invested exclusively in obligations approved by V.T.C.A., Government Code § 2256.014; is continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent; and conforms to the requirements set forth in V.T.C.A., Government Code, § 2256.016(b) and (c), relating to the eligibility of investment pools to receive and invest funds of investing entities. The county is not authorized to invest in the aggregate more than 15 percent of its monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service, in mutual funds as herein set forth above; invest any portion of bond proceeds, reserves and funds held for debt service, in mutual funds herein described above; or invest its funds or funds under its control, including bond proceeds and reserves and other funds held for debt service, in any one mutual fund as herein set out above in an amount that exceeds ten percent of the total assets of the mutual fund.

(11) The county may invest its funds and funds under its control through an eligible investment pool if the commissioners court by official court order authorizes investment in the particular pool. An investment pool shall invest the funds it receives from entitles in authorized investments permitted by state statutes by providing at a minimum the following information:

a. The types of investments in which money is allowed to be invested;

b. The maximum average dollar-weighted maturity allowed, based on the stated maturity date, of the pool;

c. The maximum stated maturity date any investment security within the portfolio has;

d. The objectives of the pool;

e. The size of the pool;

f. The names of the members of the advisory board of the pool and the dates their terms expire;

g. The custodian bank that will safekeep the pool's assets;

h. Whether the intent of the pool is to maintain a net asset value of $1.00 and the risk of market price fluctuation;

i. Whether the only source of payment is the assets of the pool at market value or whether there is a secondary source of payment, such as insurance or guarantees, and a description of the secondary source of payment;

j. The name and address of the independent auditor of the pool;

k. The requirements to be satisfied for an entity to deposit funds in and withdraw funds from the pool and any deadlines or other operating policies required for the entity to invest funds in and withdraw funds from the pool;

l. The performance history of the pool, including yield, average dollar-weighted maturities, and expense ratios.

To be eligible to receive funds from and investments on behalf of the County, an investment pool must be rated no lower than AAA or AAA-m or at an equivalent rating of at least one nationally recognized rating service.

(12) To maintain eligibility to receive funds from and invest funds on behalf of an entity, an investment pool must furnish to the investment officer:

a. Investment transaction confirmations;

b. A monthly report that contains, at a minimum, the following information:

1. The types and percentage breakdown of securities in which the pool has invested;

2. The current average dollar-weighted maturity, based on the stated maturity date, of the pool;

3. The current percentage of the pool's portfolio in investments that have stated maturities more than one year;

4. The book value versus the market value of the pool's portfolio, using amortized cost valuation;

5. The size of the pool;

6. The number of participants in the pool;

7. The custodian bank that is safekeeping the assets of the pool;

8. A listing of daily transaction activity of the entity participating in the pool;

9. The yield and expense ratio of the pool;

10. The portfolio managers of the pool;

11. Any changes or addenda to the offering circular.

An entity by contract may delegate to an investment pool the authority to hold legal title as custodian of investments purchased with its local funds.

For purposes of investment in an investment pool "yield" shall be calculated in accordance with regulations governing the registration of open-end management investment companies under the Investment Company Act of 1940, as promulgated from time to time by the Federal Securities and Exchange Commission.

(Ord. No. 99-2004, § VII, 10-26-1999; Ord. No. 2000-2287, § VII, 11-14-2000)