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Home My WebLink AboutRes 26-26 Investment PolicyRevised 9/2026 Page 1 of 6 Investment Policy Outline 1. Policy Statement 2. Scope 3. Objectives & Strategy 4. Legal Limitations, Responsibilities & Authority 5. Authorized & Prohibited Investments 6. Policy Acceptance Policy Statement It is the policy of the Town of Westlake (“the Town”) that all funds shall be managed and invested in conformance with State and Federal regulations, applicable bond covenants and ordinances, and this adopted written Investment Policy. The administration of the Town’s funds and the investment of those funds shall be handled to achieve the overall objectives of safety, liquidity, public trust, and yield. Eﬀective cash management is recognized as essential to good ﬁscal management. Cash management and investment strategy development will prioritize interest earnings as a viable Town revenue source. The Town’s portfolio shall be designed and managed in a manner responsive to the public trust and consistent with this Policy. It is the intent of the Town to comply with all State and Federal laws, including but not limited to the Texas Public Funds Investment Act (the "Act", Texas Government Code, Chapter 2256), the Securities and Exchange Commission, and the Internal Revenue Service statutes. The earnings from investments will be used in a manner that best serves the public trust and interests of the Town. Scope This Investment Policy applies to all the investment activities conducted by the Town and Westlake Academy, including, but not limited to the investment of general funds, reserve funds, interest and sinking funds, and bond funds. Retirement funds are not governed by this Policy. This Policy established guidelines for who can invest public funds, how those funds will be invested, and the process for reviewing and/or amending investment strategies and this Policy. Objectives & Strategy Objectives The Town’s investment objectives include those outlined in the Act. The primary strategic objectives for investment activities are listed in order of their priority: • Preservation and Safety of Principal – The primary objective of all investment activity is the preservation of capital and the safety of principal in the overall portfolio. The suitability of each investment decision will be made on the basis of safety and minimizing risk, as deﬁned within this Policy. Revised 9/2026 Page 2 of 6 • Liquidity – The Town's investment portfolio will remain suﬃciently liquid to enable it to meet all operating requirements which might be reasonably anticipated. Investment decisions will be based on cash ﬂow analysis of anticipated expenditures through management of diversiﬁed instruments, maturity dates, and regular market analysis. • Yield – The Town's investment portfolio shall be designed with the objective of attaining a reasonable market rate of return, while maintaining consistency with this Policy. For bond proceeds subject to arbitrage restrictions, the primary objectives shall be to obtain a fair market rate, to minimize costs associated with the investment of such funds, and to comply with bond covenants. • Diversiﬁcation – Diversiﬁcation is required in the portfolio's composition as a mechanism to achieve the stated safety, liquidity, and yield objectives. Diversiﬁcation of the portfolio will include diversiﬁcation by maturity and market sector and will include the solicitation from multiple broker/dealers or banks for diversiﬁcation and market coverage. Competitive bidding will be used on each sale or purchase. • Suitability – The Town will evaluate each investment opportunity individually and in the context of the Town’s total portfolio for safety, liquidity, and yield. • Marketability – The Town’s investments will be limited to those prescribed within the Policy and whose marketability supports the Town’s liquidity requirements and maturity limitations. Strategy The investment strategy of the Town is to minimize risk of avoidable loss while seeking a reasonable rate of return and adhering to this Policy. The investment strategies by fund are as follows: • Operating Funds – Operating Funds are pooled cash assets that comprise the majority of the Town’s portfolio and include all Town operating funds, Academy operating funds, and long-term reserves. The primary investment strategy for these funds seek to assure that anticipated cash ﬂows are matched with adequate investment liquidity to ensure continued operations. Reserves established in accordance with the Town’s cash reserves policy or designated for speciﬁc purposes and time frames may be invested for longer terms. The secondary objective is to create a portfolio structure which will minimize volatility while providing competitive yields on funds. • Debt Service Funds – The primary strategy for Debt Service Funds is to ensure adequate funds are available to cover the debt service obligations as required by the schedules of each issuance. Surplus funds outside the debt service principal and interest requirements will be invested according to investment targets and strategies for Operating Funds. In general, the ﬁnal maturity dates of investments should not exceed the expected project completion date(s) for which debt was issued and meet all underlying bond covenants. • Bond Reserve Funds – Bond Reserve Funds are reserves required by bond covenant or other contractual requirement to be maintained through the life of the debt issue. These funds generally do not have a need for liquidity and may be invested in longer term maturities within the overall guidelines of this Policy, bond covenants, and arbitrage restrictions. These funds have maturity and yield limitations based on the ﬁnal maturities and coupon rates of the issuances. • Other Funds – All other funds include both bond proceeds and operating funds set aside for identiﬁed Capital Projects or Special Purposes. The funds should be invested to match projected cash ﬂow requirements of projects with suﬃcient liquidity to meet unanticipated project outlays. Revised 9/2026 Page 3 of 6 The maximum weighted average maturity of the portfolio will be no more than three (3) years and the maximum stated maturity of any security will not exceed ﬁve (5) years. The funds are combined for investment purposes but the unique needs of all the funds in the portfolio are recognized and represented. Legal Limitations, Responsibilities & Authority Legal Limitations The Town is subject to the Public Funds Investment Act (Texas Government Code §2256), the Public Funds Collateral Act (Texas Government Code §2257), Securities & Exchange Commission requirements, and Internal Revenue Service requirements, as activities and transactions dictate. The Town’s Policy is speciﬁcally written to ensure all transactions and involved parties comply with the Act and applicable authorities. Should any applicable legal requirements or Policy be violated with a transaction or other action, the Town will immediately cease engaging in that activity, pending a review and analysis, which will be shared with the Council/Board for further direction. The Town is legally required to adopt a written Investment Policy that includes authorized investments, the maximum allowable stated maturity of an individual investment, methods to monitor the market prices of investments, and settlement of transactions. Responsibilities & Authority Town Council/Board of Trustees The Town Council/Board of Trustees are responsible for considering the quality and capability of staﬀ, ﬁnancial advisors, and consultants involved in investment management and procedures. The Council/Board must approve a written investment policy not less than once a year. The Council/Board is also responsible for approving agreements with the Town’s Financial Advisor and the list of Broker/Dealers. The Council/Board delegates all administrative authority required to carry out the objectives and strategies listed within the Policy. Investment Oﬃcers The Town Manager and Director of Finance, acting on behalf of the Council/Board, are designated as the Investment Oﬃcers of the Town and are responsible for all investment management decisions and activities. All participants in the investment process shall seek to act responsibly as custodians of the public trust, in compliance with the “prudent investor rule” outlined in Texas Government Code §2256.006. The Investment Oﬃcers shall develop and maintain written administrative procedures for the operation of the investment program, which are consistent with this Investment Policy. Procedures will include safekeeping, wire transfers, banking services contracts, and other investment-related activities. The Investment Oﬃcers shall be responsible for all transactions undertaken and shall establish a system of internal controls to regulate the activities of subordinate oﬃcials and staﬀ. The Investment Oﬃcers shall designate a staﬀ person as a liaison/deputy in the event circumstances require timely action and the Investment Oﬃcers are not available. No oﬃcer or designee may engage in an investment transaction except as provided under the terms of this Policy and the procedures established by the Investment Oﬃcers. Revised 9/2026 Page 4 of 6 Investment Oﬃcers are required to undertake the training required by the Act, §2556.008, and engage in any reasonable additional training that ensures staﬀ is capable of safeguarding the Town’s invested assets. The Act requires Investment Oﬃcers to attend at least one training from an independent source with at least ten hours of instruction within twelve months of assuming these duties. The Investment Oﬃcers must attend investment training not less than once in a two year period and for not less than eight hours, or the amount required by the Act. Investment Oﬃcers shall report the activities of investment transactions and market conditions to the Council/Board no less than quarterly. The Investment Oﬃcers are also responsible for ensuring all required reporting is completed accurately and timely to the appropriate authorities or interested parties. This does include reporting compiled by other consultants or resources. Investment Oﬃcers acting in good faith and in accordance with these policies and procedures shall be relieved of personal liability. Financial Advisors The Investment Oﬃcers may select a Financial Advisor to advise the Town on the investment of Town funds and other responsibilities, including but not limited to investment strategy, security selection, competitive bidding, investment and debt reporting and documentation, arbitrage compliance, and reﬁnancing or defeasance of outstanding obligations. The Financial Advisor must be appropriately registered and licensed, as required by appropriate governing body and statute. The Financial Advisor will be presented to the Council/Board for agreement approval, as prescribed by need or agreement renewal schedule. Investment Advisor The Town may select an Investment Advisor to advise the Town on the investment of Town funds and other responsibilities, including but not limited to the maintenance of liquidity, competitive bidding and security selection, investment reporting and documentation, and safekeeping requirements. The Investment Advisor must be appropriately registered and licensed, as required by appropriate governing body and statute. The Investment Oﬃcers may also delegate these tasks to a qualiﬁed Investment Advisor that would be bound to this policy. The Investment Advisor will be selected by the Investment Oﬃcers and presented to the Finance Committee and Financial Advisor for acceptance. Broker/Dealer The Town shall establish a list of approved broker/dealers, which qualify under SEC rule 15C3-1 (uniform net capital rule) and from which it will conduct security transactions. Each prospective business organization must provide current ﬁnancial statements, resumes of key sales personnel, and a completed broker/dealer questionnaire. The Financial condition of each qualiﬁed ﬁrm shall be reviewed annually. Broker/dealers will receive a copy of the Town’s Policy and must ensure compliance in order to be considered or continue as an approved party. All broker/dealers are required to acknowledge receipt the policy and their ability to adhere to all the Policy through their established procedures and controls in writing prior to doing any business with the Town. Revised 9/2026 Page 5 of 6 It is the responsibility of approved broker/dealers to notify the Town, in writing, of any changes within their organization that may preclude them from compliance with the Policy, including, but not limited to, changes in internal controls or policies, statutory changes which may impact transactions or Policy compliance, changes relating to key personnel, or any other factor which may result in non-compliance with any piece of this Policy. The approved list of broker/dealers (exhibit A) shall be reviewed with the Council/Board annually for performance and compliance. A broker/dealer on the Town’s approved list is not guaranteed business and must acknowledge that the Investment Oﬃcers will enter into transactions in the best interest of the Town, which will focus on safety, liquidity, yield, and diversiﬁcation. Authorized & Prohibited Investments The Town shall evaluate the suitability of each investment opportunity presented in accordance with this Policy. Authorized Investments The following investments are considered authorized by the Council/Board, pending compliance with the objectives and strategy listed within the Policy: • Obligations of, or guaranteed by, the Town, as deﬁned in Texas Government Code §2256.009, including but not limited to obligations backed by the full faith and credit of this state or the United State or their respective agencies and instrumentalities and interest-bearing banking deposits guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC). • Certiﬁcate of deposits (CDs), as deﬁned in Texas Government Code §2256.010, include funds guaranteed or insured by the FDIC or funds invested by an entity through a broker or depository institution. • Repurchase agreements, as deﬁned in Texas Government Code §2256.011, are fully collateralized investments with a deﬁned termination date, secured by a combination of cash and obligations, requires the securities being purchased by the Town to be pledged to Town and held in the Town’s name. • Commercial paper, as deﬁned in Texas Government Code §2256.013, has a stated maturity of 365 days or fewer from issuance and is rated not less than A-1, P-1, or an equivalent rating. • Mutual funds, as deﬁned in Texas Government Code §2256.014, includes no-load money market mutual funds registered with the SEC and adheres to the time limitations in statute. The Town is not authorized to invest more than 15% of its monthly average fund balance, nor have its bond proceeds and reserves make up more than 10% of the mutual fund balance. • Guaranteed investment contracts, as deﬁned in Texas Government Code §2256.015, include direct placement or purchases of instruments with a deﬁned termination date and must be pledged to the Town. The Town must receive bids from at least three (3) separate providers with no material ﬁnancial interest in the instruments and will endeavor to select the highest yield and lowest cost instrument that also meets the objectives of this Policy. The Town will use its list of approved Broker/dealers to source bids whenever possible. • Investment pools are authorized investments, as deﬁned in Texas Government Code §2256.016, responsible for pooling investing entities’ funds and managing investments in compliance with the Act. Investment pools are required to report on their performance, participants, and Revised 9/2026 Page 6 of 6 portfolio to the Town at least monthly, maintain compliance with the Act for all investments, and maintain a continuous credit rating of no lower than AAA or AAA-. The Council/Board must authorize participation in any investment pool via resolution at an open and regularly scheduled meeting. The Town shall not invest any more than 50% of its average monthly fund balance with a single investment pool. • Bonds, debentures, or similar debt obligations rated at least A-1 and issued by a public institution included but not limited to an institution of higher education, municipal utility, ports and navigation districts, independent school districts, or public junior college. The Town will adhere to accounting requirements and fund qualiﬁcations listed within each authorized type in the Act. The above listed descriptions of authorized investments are summarized for Policy presentation. Authorized investments have additional qualiﬁed instruments and limitations listed within the Act. The Investment Oﬃcers are responsible for ensuring compliance with the Act for all instruments or transactions, including for the above-mentioned investments. Should the Town be presented with a prudent investment opportunity not explicitly authorized by this Policy, the Town will consider the instrument only if it meets the additional criteria of authorized investments listed in the Act. The Investment Oﬃcer is responsible for notifying the Council/Board as soon as practicable and presenting an amendment to this Policy to include the instrument. Prohibited Investments The Town shall not invest any public funds in a manner which violates applicable State or Federal law, regulatory agency requirements, bond covenants, or this Policy. Expressly prohibited investments include: • Investments with a stated maturity of more than ﬁve (5) years. • Investments with ﬁnancial institutions that are not federally insured or collateralized with eligible securities. • Investments that would not comply with the Texas Ethics Commission’s deﬁnition of an elected oﬃcial or Investment Oﬃcer with a personal business relationship to the security issuer. • Investments that cannot be executed “delivery versus payment” (DVP) through the Town’s safekeeping agent. By doing so, the Town’s funds are not released until the Town has received the securities purchased. • Investments which violate, or will violate prior to maturity, any provision of this Policy or applicable State and Federal law. Policy Acceptance This Policy shall be reviewed not less than annually by the Town Manager and Director of Finance. Any revisions or amendments will be presented to Town Council/Board of Trustees and will be included in the formal approval. The Council is required by the Act to adopt a written investment policy, which will be done annually. This Policy may be presented outside the above prescribed timeline if applicable statutes, bond covenants, or investment instruments dictate. Updated as of 09/2026 Resolution 26-26: Exhibit B Approved Broker/Dealers Frost Bank Hilltop Securities SAMCO Schwab Fidelity This list will be updated as needed and provided to Council for approval with the investment policy, not less than annually. Inclusion on this list does not guarantee business; direct instrument purchases will be made based on yield, instrument type, and maturity for cash ﬂow purposes.