BUDGET POLICIES AND GUIDELINES The fiscal year of the City begins on October 1st and ends on September 30th of the following calendar year. The fiscal year is used for both budgeting and accounting purposes. In preparing a budget, certain policies and guidelines must be understood and followed by each budgeting unit to maintain consistency. Policies and guidelines used in developing this budget include: • Revenue estimates are based on three (3) to five (5) year historic receipts, adjusted for rate increases, while considering current economic conditions, being careful not to overestimate revenue. • Budgeting that is dependent upon variables such as weather conditions (rain, dust, temperature, etc.) should consider normal conditions as opposed to above or below normal, unless there is a specific knowledge otherwise. • All services, which are based on a user-fee concept, should make an effort to be self- supported by those fees. • The City uses Zero-based budgeting for expenditures to better allocate resources based on needs, benefits and improving customer service. Every department function has been reviewed and justified in detail by the division manager. This motivates staff to take greater initiative and responsibility in decision making, while eliminating waste and obsolescence. • Capital replacements should be limited to items which are no longer functional, unable to be repaired, not economically repairable, or a safety hazard. Once the item is replaced, it should be sold in the City auction. Preparation and Submission of the Budget Under City Charter, the City Manager is responsible for preparing and recommending a balanced budget for City Council consideration. The City Manager determines guidelines for City department and division heads to use in preparing their budgets. These guidelines are based on Council goals, anticipated revenues, desired levels of service, and capital needs. Finance oversees the budget preparation process. Department heads are responsible for their divisional expenditure estimates. During the budget process, salary information is provided to them by Finance. In estimating expenditures, department heads base their estimates on historical data adjusted for trends and possible rate changes. The Budget Process: January Finance sends out 5 year development requests to all departments. February Finance begins the Cost Allocation Plan process. City departments return 5 year development requests to Finance. March 33
Transcript
BUDGET POLICIES AND GUIDELINES
The fiscal year of the City begins on October 1st and ends on September 30th of the following calendar year. The fiscal year is used for both budgeting and accounting purposes. In preparing a budget, certain policies and guidelines must be understood and followed by each budgeting unit to maintain consistency. Policies and guidelines used in developing this budget include:
• Revenue estimates are based on three (3) to five (5) year historic receipts, adjusted for rate increases, while considering current economic conditions, being careful not to overestimate revenue.
• Budgeting that is dependent upon variables such as weather conditions (rain, dust, temperature, etc.) should consider normal conditions as opposed to above or below normal, unless there is a specific knowledge otherwise.
• All services, which are based on a user-fee concept, should make an effort to be self-
supported by those fees.
• The City uses Zero-based budgeting for expenditures to better allocate resources based on needs, benefits and improving customer service. Every department function has been reviewed and justified in detail by the division manager. This motivates staff to take greater initiative and responsibility in decision making, while eliminating waste and obsolescence.
• Capital replacements should be limited to items which are no longer functional, unable to
be repaired, not economically repairable, or a safety hazard. Once the item is replaced, it should be sold in the City auction.
Preparation and Submission of the Budget Under City Charter, the City Manager is responsible for preparing and recommending a balanced budget for City Council consideration. The City Manager determines guidelines for City department and division heads to use in preparing their budgets. These guidelines are based on Council goals, anticipated revenues, desired levels of service, and capital needs. Finance oversees the budget preparation process. Department heads are responsible for their divisional expenditure estimates. During the budget process, salary information is provided to them by Finance. In estimating expenditures, department heads base their estimates on historical data adjusted for trends and possible rate changes. The Budget Process: January Finance sends out 5 year development requests to all departments. February Finance begins the Cost Allocation Plan process. City departments return 5 year development requests to Finance. March
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Capital, New Program, and Fleet replacement forms are sent out to all departments. April Cost Allocation Plan to be completed by month end. May Pay Plan information is due from Human Resources and City Manager by beginning of month, to be completed by Finance by the end of month. Budget training for directors and staff is conducted by Finance Staff. Preliminary revenues / expenditures are due to Finance from departments by middle of month, along with preliminary estimates from the Appraisal District. By late May, capital requests are due. Generally, capital items are land, equipment, building and structures that can be permanently identified as an individual unit of property with an anticipated useful life of five (5) years or more that constitutes a tangible, permanent addition to the value of City assets and do not constitute repair or maintenance. Capital cost should generally exceed $5,000. (If less than $5,000, then the item should be a component unit of an asset meeting the criteria.) June Departmental Goals / Objectives / Accomplishments are due to Finance during the first week. First round of budget reviews with City Manager and department heads are held middle of the month. Preliminary budget is due to City Manager by end of month. July Second round of budget reviews with City Manager and department heads are held during the first 2 weeks. Certified Tax Roll is due from the Appraisal District. Finance fine-tunes the revenue estimates. Revenue estimates are based on three (3) to five (5) year historic receipts, adjusted for rate increases, while considering current economic conditions, being careful not to overestimate revenue. August No later than the first regularly scheduled Council meeting in August, the City Manager submits to City Council, the proposed budget for the following fiscal year. The budget provides a complete plan for the fiscal year. September Adoption of the Budget - The proposed budget is kept on file in the City Secretary’s office and in the Library for inspection by the public. City Council sets a time and place for a public hearing on the budget and publishes notice of the hearing at least ten days before the date of the hearing. At the public hearing, all interested persons are given the opportunity to speak for or against any item contained in the budget. After the public hearing, the City Council may insert additional items or make increases or decreases to any item in the budget, except those fixed by law. However, before making any additions or increases, the Council must again set a time and place for another public hearing and publish notice of the public hearing along with the proposed addition or increase at least ten days before the date of the hearing. After the hearing, the Council may make the additions or increases, but if total proposed expenditures are increased, total anticipated revenue must be increased to at least the total of the proposed expenditures. The budget must be adopted by a majority vote of the members of the whole Council by September 30th. If Council fails to so adopt, then the budget as submitted by City Manager is considered adopted and it remains in effect for the fiscal year. Amending the Budget In case of grave public necessity, emergency expenditures to meet unusual and unforeseen conditions, which could not, by reasonable diligent thought and attention, have been included in the original budget, may from time to time be authorized by the Council as amendments to the original budget. Any amendment providing for additional expenditures shall also provide for reductions in other expenditures or supplemental revenues to fund such amendments, or an
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amount from unreserved fund balance as a supplement. Such supplements and amendments shall be approved in an ordinance and shall become an attachment to the original budget. If a department expects expenditures to go over a budgeted line item, a “Request for Transfer of Budgeted Funds” form is completed by the department head. This form is completed and signed by the department head and then sent to Finance. The Director of Administrative Services and/or the City Manager (if transfer is over $5,000.00) approve the request. The Capital Improvement Program (CIP), for the acquisition, expansion or rehabilitation of capital assets, is a five year financial plan that is updated annually. However, only those projects with expenditures during the first year of the CIP are financed and adopted as a part of the Annual Budget.
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FINANCIAL POLICIES AND PRACTICES
INTRODUCTION These financial policies set forth the basic framework for the fiscal management of the City. They were developed within the parameters established by applicable provisions of the Texas Local Government Code and the City of Greenville Charter. The policies are to be reviewed on an annual basis by the City Council and modified to accommodate changing circumstances or conditions. PURPOSE The purpose of the City of Greenville Financial Policies and Practices are to:
A. Demonstrate to the citizens of Greenville, the investment community and the bond rating agencies that the City is committed to a strong fiscal operation.
B. Provide guidelines for future policy-makers and financial managers on common
financial goals and strategies. C. Fairly present and fully disclose the financial position of the City in conformity to
Generally Accepted Accounting Principals (GAAP).
D. Demonstrate compliance with finance-related legal and contractual issues in accordance with the Texas Local Government Code and other legal mandates.
BACKGROUND The City’s accounts and budgets for all general government funds use the modified accrual basis. This method recognizes revenues when they are measurable and available and expenditures when goods and services are received, except for principal and interest on long-term debt, which is recognized when paid. General government funds include the general fund, special revenue funds, debt service fund and general capital project funds. Proprietary funds, which include the enterprise and internal service funds are accounted and budgeted using the accrual basis of accounting. Under this method, revenues are recognized when they are earned and expenses when they are incurred. The budgeted funds for the City of Greenville include:
General Fund which accounts for all financial resources except those required to be accounted for in another fund, and include basic governmental services such as Police, Fire Streets Libraries and Parks functions among others.
Special Revenue Funds (SRF) account for specific revenues which are
restricted for Specified purposes.
Debt Service Fund is used to account for the payment of general long-term debt principal and interest.
Capital Project Funds are used to account for the acquisition or construction of major capital facilities other than those financed by enterprise activities.
Internal Service Funds account for goods or services provided by one internal department to another. The City uses this system to recognize the full cost for fleet replacement and maintenance, facility maintenance and computer replacement and maintenance.
Enterprise Funds include the City’s “business like” activities including all of the utility funds, golf course, sanitation and airport.
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FINANCIAL POLICY The City will manage its finances in a sound and prudent manner. It is the City’s desire to develop and maintain programs to help assure its ability to pay the long-term costs necessary to provide the level and quality of service desired by its citizens. To establish a basic framework for the fiscal management of the City and to provide an authoritative guide for conducting the City’s financial affairs, the City will follow the adopted Financial Policy and Practices. The Financial Policy and Practices will incorporate the requirements of the City Charter and the Texas Local Government Code and be reviewed annually by the Council’s Finance and Audit Committee. The document will cover long-term financial planning, reserves and fund balances, financial reporting, accounting, revenues, budgeting, debt, capital projects, disaster recovery, grant management and related matters.
FINANCIAL PRACTICES Long-term Financial Plan
1. The City shall establish and maintain a long-term financial plan that considers future projects, new revenues, anticipated expenditures, and the City’s goals.
2. The annual budget shall be prepared in conjunction with the long-term financial
plan’s goals and objectives. 3. The City will update replacement and maintenance plans annually and incorporate
them into the long-term plan. Fund Balance Policy The City of Greenville is responsible to its citizens for the care and management of public funds; concurrently, the City must provide adequate funding for the services it is obligated to provide its citizens. The purpose of this policy is to establish a key element of the financial stability of the City by setting guidelines for fund balance. Fund balance is an important measure of economic stability. It is essential that the City maintain adequate levels of fund balance to mitigate financial risk that can occur from unforeseen revenue fluctuations, unanticipated expenditures, and similar circumstances. The fund balance also provides cash flow liquidity for the City’s general operations. In order to comply with the Governmental Accounting Standard Board’s (GASB) Statement No. 54, Fund Balance Reporting and Government Fund Type Definitions, the fund balance section of the balance sheets of the governmental funds has been modified. This change has been made in order for the City’s new fund balance components to focus on “the extent to which the government is bound to honor constraints on the specific purposes for which amounts in the fund can be spent” (GASB Statement No. 54, paragraph 54). Previously, the fund balance section focused on whether these resources were available for appropriation. It also distinguished the unreserved fund balance from the reserved fund balance. In order to show compliance with GASB Statement No. 54, however, the components of the new fund balance include the following line items: a.) the nonspendable fund balance, b.) restricted fund balance, c.) committed fund balance, d.) assigned fund balance, and e.) unassigned fund balance. The implementation of these new components is intended to decrease confusion and help serve the needs of the financial statement users. For further explanation of each fund balance component, please see the following.
a.) Nonspendable fund balance (inherently nonspendable) Include the: • Portion of net resources that cannot be spent because of their form, and
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• Portion of net resources that cannot be spent because they must be maintained intact.
• Examples are inventory or permanent funds.
b.) Restricted fund balance (externally enforceable limitations on use) Include amounts subject to:
• Limitations imposed by creditors, grantors, contributors, or laws and regulations of other government(s).
• Limitations imposed by law through constitutional provision or enabling legislation.
• Examples include grants and child safety fees.
c.) Committed fund balance (self imposed limitation set in place prior to the end of the period):
• Limitation imposed at the highest level of decision making that requires formal action at the same level to remove.
• For the City, the City Council is the highest level of decision making authority and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Council at the City’s Council meeting.
• The resolution must either be approved or rescinded, as applicable, prior to the last day of the fiscal year for which the commitment is made. The amount subject to the constraint may be determined in the subsequent period.
d.) Assigned fund balance (limitation resulting from intended use) consists of amounts
where the: • Intended use is established by the body designated for that purpose. • The City Council has authorized the City Manager as the official authorized to
assign fund balance to a specific purpose as approved by this fund balance policy.
• In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund.
e.) Unassigned fund balance (residual net resources) is the:
• Total fund balance in the general fund in excess of nonspendable, restricted, committed, and assigned fund balance.
• Excess of nonspendable, restricted, and committed fund balance over total fund balance.
• Unassigned amounts are technically available for any purpose. It is the goal of the City to achieve and maintain a fund balance in the general fund that is equal to 20% of operating expenditures. The City considers a balance of less than 15% to be cause for concern, barring unusual or deliberate circumstances.
Reserves & Fund Balance
1. The City will establish and maintain a prudent level of financial resources and reserves to:
a. Meet future planned obligations and unplanned contingencies and; b. Protect against reducing service levels or raising taxes and fees because of
temporary revenue shortfalls or unpredicted one-time expenditures.
2. The City will establish reserves for replacement of facilities and equipment. 3. The City will avoid utilizing fund balances for operational expenditures.
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4. Fund balances shall be used only for non-recurring capital expenditures and projects.
5. The City will strive to maintain fund balances as a percent of operating expenditures in the General Fund, the Water/Wastewater Utility Fund, Airport Fund, and General Debt Service Fund according to the following table:
Fund Target Minimum Maximum General 20% 15% 25% Water 20% 15% 25% Airport 20% 15% 25% General Debt Svc 1/12 of next fiscal year P&I If fund balance falls below the goal or has a deficiency, staff shall develop a plan for City Council that addresses the shortfall. When multiple categories of fund balance are available for expenditure (for example, a construction project is being funded partly by a grant, funds set aside by the City Council, and unassigned fund balance), the City will start with the most restricted category and spend those funds first before moving down to the next category with available funds. The categories, in order of level of restriction, are as follows:
o Nonspendable fund balance o Restricted fund balance o Committed fund balance o Assigned fund balance o Unassigned fund balance
Financial Reporting 1. The City Manager shall submit to the City Council at least quarterly a report covering the
financial condition of the City. This report will compare actual revenues and expenditures to budgeted amounts for all major funds. The City Manager will also present a mid-year report to the City Council within 60 days following the end of the second fiscal quarter which updates the status of projects and related financial goals set forth in the budget.
2. A Comprehensive Annual Financial Report (CAFR) shall be prepared at the end of each
fiscal year. The report shall be prepared in accordance with generally accepted accounting principles (GAAP) and shall include a report from an independent certified public accountant designated by the City Council. The report shall be made available for public inspection and shall become a part of the records of the City. The results of the audit will be presented to the City Council no later than March 31 of the following year.
3. The City will strive to receive and retain the Certificate of Achievement for Excellence in
Financial Reporting for its CAFR and the Distinguished Budget Presentation for its annual budget document which are awarded annually by the Government Finance Officers Association of the United States and Canada (GFOA).
4. Every three to five years, the City will issue requests for proposal to choose an auditor for
a period not to exceed five years. Basis of Accounting
1. The City will account for City finances in accordance with generally accepted accounting principles established by the Governmental Accounting Standards Board. Periodic financial reports of actual revenue received and expenditures made or accrued will be provided to the City Council to monitor the financial status of the City.
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2. The City utilizes fund accounting to account for the City’s general government activities which include the General, Special Revenue, Debt Service, and Capital Projects Funds.
3. The City uses the modified accrual basis of accounting. Revenues, under the modified
accrual basis of accounting, are recognized when susceptible to accrual, which is when they are “measurable and available”. “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to pay liabilities of the current period. Ad valorem, sales and franchise taxes are accounted for using the modified accrual basis along with interest income. All other revenues are recognized when received because they are not measurable until they are actually received.
Expenditures are recognized when the related fund liability is incurred, if measurable, except for principal and interest on general long-term debt, which are recorded when due, and compensated absences, which are recorded when payable from currently available financial resources.
4. The City utilizes encumbrance accounting whereby purchase orders are utilized to
reserve a portion of the annual budgeted appropriations for future payment when due. Operating Policy
1. Departmental and program expenditures shall be reflective of activity-based costing to include full cost consisting of both direct and indirect costs. Cost allocations shall be reviewed periodically.
2. Investments shall be managed in accordance with the current Investment Policy.
Investments shall comply with federal, state and local laws. Investments will consider protection of principal first with the intent to maximize earnings as well as provide the daily cash needs. Investments shall be made to maximize interest earnings but shall not be speculative in nature. Investment managers shall exercise prudence in managing the overall portfolio, rather than consideration as to the prudence of a single investment.
3. The City's investment practices will be conducted in accordance with the City Council
approved Investment Policy. A quarterly report on investment performance will be provided by the Finance Director to the City Manager for presentation to the City Council.
4. The primary objective is the preservation of capital in the overall portfolio through
diversification of investments. The portfolio shall remain sufficiently liquid to enable the City to meet its obligations as they become due. Investments will be managed to maximize the return on investments while remaining within the objectives of safety and liquidity.
5. Fixed assets shall be safeguarded by properly classifying, recording, and tagging the
asset. An inventory of the assets is to be maintained and is to include the description, cost, date of acquisition, department, location and asset identification number. Periodic inventory inspections of fixed assets shall be conducted. Fixed assets include items meeting both the dollar minimum of $5,000 and have a useful life of two years or more. For constructed assets, the criteria apply to the completed project. Computer software is considered a fixed asset when its cost exceeds $5,000 and its life exceeds two years.
6. City Council shall designate a city depository. The term of the depository shall be two
years with options for renewal in accordance with State law.
7. The City Manager is authorized to write off bad debt accounts of less than $1,000 which have been delinquent for more than 120 days. These accounts will be aggressively pursued for collection by any lawful and available means. Accounts which are in bankruptcy status involving a claim of $1,000 or less, which require the City to make an
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election to the bankruptcy court, will be referred to the City Manager, with a recommendation by the City Attorney. The City Manager shall report all bad debt write-offs to the City Council. All accounts involving write-offs greater than $1,000 shall be referred directly to the City Council for write off, or further recommended action.
8. The City shall use non-recurring resources and fund balances to fund non-recurring
expenditures. Recurring revenues only shall be used to fund recurring expenditures.
9. Rates for water and sewer enterprise activities shall be maintained at levels sufficient to ensure that annual revenues will be available to pay all direct and indirect costs of the enterprise activities, including costs of operation, capital improvements, maintenance and principal and interest requirements on outstanding debt.
10. Enterprise funds shall adequately compensate the general fund (and other applicable
funds) for administrative and/or management services provided to the enterprise fund. Transfers from enterprise activities to the general fund for administrative services shall not exceed the estimated costs incurred by the general fund in providing such services. Payments in lieu of taxes and franchise fee payments shall be paid by enterprise funds to other appropriate funds. The basis for each transfer shall be fully identified each year in the proposed budget.
11. Sound appraisal procedures and practices will be monitored by the City in order to keep
property values current. The City will use due caution in the analysis of any incentives that are used to encourage development. A cost/benefit (fiscal impact) analysis will be performed as part of the evaluation. The City will periodically review the tax abatement policy and perform routine audits on companies receiving tax abatements.
12. Contract progress payments which exceed $15,000 in value do not require Council
approval provided the contractual document authorizes such payments and the Council has approved the contract by ordinance. Final payments against the contract shall be made only with Council authorization via ordinance
13. In accordance with State law, all uncontested invoices will be paid within 30 days of
proper receipt. Procedures will be used to take advantage of all purchase discounts where considered cost effective. However, payments will also be reasonably delayed in order to maximize the City's cash available for investments, where such delay does not violate the agreed upon payment terms.
Revenues
1. The revenue projections shall be made conservatively in order that actual revenues
should meet or exceed the budgeted revenues for the year. 2. The City will aggressively pursue revenue collection to assure that collectible monies due
the City are received in a timely manner. 3. The City should endeavor to maintain a diversified and stable revenue base in order to
prevent overall revenue shortfalls as a result of periodic fluctuations in any one revenue source. Each existing and potential revenue source will be re-examined annually.
4. The City will seek Federal and State grants and reimbursements for costs whenever
possible.
5. The City will investigate potential new revenue sources, including the capture of user fees.
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6. The City will strive to obtain franchise agreements that incorporate a franchise or rental fee with all public utilities (including municipally owned utilities). The fee structure will be similar to other cities in the area and allowed by the Public Utility Commission.
7. The City will continue an aggressive program to reduce the level of delinquent taxes.
The minimum collection rate objective is 98.5%.
8. Tax exemptions presently allowed by the City will be monitored. Additional residential or non-profit property exemptions must be approved by the City Council or as stipulated by ordinance.
9. Interest earned from investments will be distributed to the funds in accordance with the
equity balance of the fund from which the monies were provided to be invested.
10. Increases in the net assessed valuation of the property tax base will be divided between two categories:
a. new growth and, b. increased value resulting from re-valuation of existing property.
The Council will consider new growth and a percentage of increased value resulting from re-valuation of existing property as revenue for the upcoming budget year. Each year in the preparation of the annual budget and in setting of the tax rate, the portion of increase attributed to re-valuation of existing property should not all be considered revenue but should be used in considering the lowering of the property tax rate.
Budget Administration
1. The City will prepare an Annual Budget and maintain a budgetary control system to ensure expenditures are made in accordance with the adopted annual budget.
2. The City’s annual budgets are prepared and adopted on a basis consistent with generally
accepted accounting principles. The proposed budget and accompanying message shall be presented by the City Manager to the City Council on or before the first regularly scheduled meeting in August.
3. The legal level of budgetary control is at the fund level. At any time during the fiscal year,
the City Manager may transfer any part of the unencumbered appropriation balance or the entire balance thereof between programs or general classification of expenditure within an office, department or organizational unit within a fund. At any time during the fiscal year, at the request of the City Manager, the Council may, by Ordinance, transfer any part of the unencumbered appropriation balance or the entire balance thereof from one office, department or organizational unit to another in a different fund. (Prop. No. 6, 2005). Any revision that alters total expenditures of any fund must be approved by the City Council.
4. Each Director, appointed by the City Manager, will be responsible for the administration
of his/her departmental budget.
5. The goal of the City is to balance the operating budget with current revenues, whereby, current revenues would match and fund on-going expenditures/expenses. Excess balances in the operating funds from previous years would then be used for non-recurring expenditures/expenses or as capital funds.
6. A contingent appropriation in an amount not more than five percent (5%) of the total
general fund expenditure shall be set aside to be used in case of unforeseen items of expenditures. Such contingent appropriation shall be under the control of the City Manager and distributed after approval by the City Council. The proceeds of the contingent appropriation shall be disbursed only by transfer to other departmental
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appropriation, the spending of which shall be charged to the departments or activities for which appropriations are made.
7. All appropriations lapse at the end of the fiscal year unless specifically approved by the
City Manager.
Debt Management
1. The City shall maintain good communications with the major bond rating agencies concerning the City’s financial condition and shall follow a policy of full disclosure in every financial report and official bond statement. The City will maintain sound fiscal management practices to maintain and improve current bond ratings.
2. The City will limit long-term borrowing to capital improvements that cannot be financed
from current revenues.
3. The City’s legal limit on the amount of taxes that may be levied for debt service is $2.50 per $100 of assessed value. Currently, no direct funded debt limitation is imposed on the City under State law.
4. Capital projects, financed through the issuance of bonds, shall be financed for a period
not to exceed the expected weighted average useful life of the assets.
5. Prior to issuance of new general obligation (GO) debt, consideration shall be given to forecasted tax rate requirements, ratio of net GO debt to assessed taxable value and net GO debt per capita.
6. Revenue bond coverage requirements provide for financial stability in Enterprise Funds.
Coverage requirements are defined as the amount of system net revenue available to pay average annual debt service. Bond coverage requirements shall be no less than 1.25X of current debt service.
7. The City Council shall exhibit a willingness to raise the revenue to fully fund the debt
necessary to implement the adopted capital improvement plan and to maintain the City’s bond rating.
8. Long-term debt shall not be incurred to finance current operations. Long-term debt shall
be defined as debt requiring more than seven years to retire. Short-term or interim debt shall be defined as debt requiring seven years or less to retire, and may be used to fund purchases of machinery, equipment (including office equipment) and vehicles.
9. Certificates of Obligation shall be used sparingly and with the following considerations:
a. Certificates of Obligation should be used only to fund tax-supported projects
previously approved by the voters; or non-tax, revenue-supported projects approved by the City Council.
b. If issued for an enterprise system they will be limited to only those projects which
can demonstrate the capability to support the certificate debt either through their own revenues or other pledged sources other than ad valorem taxes.
c. Certificates of Obligation backed by a tax pledge or a Combination Tax and
Revenue pledge which are not part of a previously voter approved project will be used only in case of an unanticipated emergency as a financing mechanism to pay contractual obligations for: construction contracts, purchase of materials, supplies, equipment, machinery, buildings, land R-O-W for authorized needs and purposes and for payment of professional services as defined by law.
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d. The City Council will use General Obligation Bonds with voter approval and Revenue Bonds with the appropriate public notice to fund long-term capital needs.
Capital Projects
1. The City will develop and annually update a Five (5) Year Capital Improvement Program
(a list of all proposed capital improvements that are to be undertaken during the ensuing five fiscal years) and an Annual Capital Projects Budget.
2. The City will schedule capital improvements in accordance with an adopted Capital
Projects Budget.
3. Capital project budgets shall be developed and shall identify the impact of implementing said projects on future annual operating budgets. Estimates of future revenues necessary for these expenditures shall be identified prior to the approval of such capital improvements.
4. Expenditures shall not be incurred nor shall contracts be awarded without the
appropriation of available funds.
5. Each item submitted for the Capital Improvement Program shall include a summary of proposed project, cost estimates including future operating costs, recommended time schedule and potential funding source.
6. The life of a capital project fund shall correspond to the utilization of the resources in the
fund and budgets shall span the amount of time necessary to utilize funding. 7. The estimated cost of capital replacement for enterprise funds such as water and sewer
will be updated annually to ensure that rates and charges are covering the full cost of operating these programs.
8. The City shall utilize the most beneficial method of financing capital projects from the
following sources: pay-as-you-go, pay-as-you-use (bonds, short-term notes and lease purchasing), lease-purchase, joint financing with other government entities, special assessments and Federal and State grant programs.
Computer Disaster Recovery
1. The City provides many essential services to their citizens. State and local governments have a duty to ensure that disruptions in the provision of essential services are minimized following a disaster.
2. The Information Technology Division shall be assigned the responsibility for coordinating
the City’s computer disaster recovery efforts should an emergency disrupt the City’s reliance on technology. These efforts shall include instructions for restoring files, alternatives for data input, and reestablishment of the City’s communication networks.
3. The IT Division shall perform regular and timely back-up of computer data and the
transportation and storage of back-up data off site. Grant Management Grants often provide appropriate and necessary revenue to complete a project needed by the citizens of Greenville. This policy provides guidance in the steps and roles for the City staff who are involved in the process.
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1. Department is responsible for –
• Preparing all appropriate grant application material; • Providing sufficient data to allow city management to evaluate the costs and
benefits of the proposed grant; • Obtaining appropriate approvals for submission and acceptance of grant • Knowing the operational and budgetary impact these grants have upon the
City organization. • Accumulating the appropriate accounting detail and supporting
documentation; • Preparation of reports required by the grantor; • Providing to Finance the following:
i. Grant Award Letter; ii. Grant Contract; iii. City Council minutes of action; iv. Notice of Grant Award Form; v. An administrative manual (this includes audit guides and programs,
accounting procedures and administrative guides). This will enable the Accounting and Budget Departments to maintain grant files which are accurate and current.
• Providing copies of all grant amendments and other communication given after the grant is awarded to all agents involved in the grant administration process.
2. Finance is responsible for –
• Assisting departments with any problems or questions regarding the grant submission process.
• Scheduling audit of grant programs. Audits will be conducted either by city staff auditors or by outside auditors.
• Coordinating the accounting and recording for all receipts and disbursements related to the grant. Finance will determine setup and maintain the most appropriate method(s) of accounting for grant related transactions.
• Provide assistance to auditors as needed.
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INVESTMENT POLICY
Introduction It is the policy of the City of Greenville, Texas, and GEUS (collectively herein referred to as City) that after allowing for the anticipated cash flow requirements of the City and giving due consideration to the safety and risk of investment, all available funds shall be invested in conformance with these legal and administrative guidelines, seeking to optimize interest earnings to the maximum extent possible. Effective cash management is recognized as essential to good fiscal management. Investment interest is a source of revenue to City funds. The City’s investment portfolio shall be designed and managed in a manner intended to optimize this revenue source, to be responsive to public trust, and to be in compliance with legal requirements and limitations. Investments shall be made with the primary objectives of:
• Suitability of investment vehicle; • Preservation and safety of principal; • Maintenance of sufficient liquidity and security marketability to meet operating needs; • Diversification of investments to avoid unreasonable or avoidable risks; and • Attaining a rate of return commensurate with risk constraints and cash flow requirements.
GEUS is a component unit of the City of Greenville and is governed by a separate Board of Trustees. The Board of Trustees responsibility and authority is defined by the City of Greenville Charter, Article XI-A. The Board of Trustees has sole responsibility and authority to enact and enforce the Investment Policy. Policy Scope This Investment Policy shall govern the investment of all financial assets of the City. These funds are accounted for in the City’s Comprehensive Annual Financial Report (the “CAFR”) and include:
• General Fund; • Special Revenue Funds; • Debt Service Funds, including reserves and sinking funds, to the extent not required by
law or contract to be kept segregated and managed separately; • Capital Projects Funds; • Enterprise Funds; • Trust and Agency Funds, to the extent not required by law or contract to be kept
segregated and managed separately; • GEUS Funds, to the extent not required by law or contract to be kept segregated and
managed separately; • Any new fund created by the City, unless specifically exempted from this Policy by the
City or by law. The City will consolidate cash balances from all funds to maximize investment earnings. Investment income will be allocated to the various funds based on the funds average daily cash balance and in accordance with generally accepted accounting principles. This Investment Policy shall apply to all transactions involving the financial assets and related activity for all the foregoing funds. However, this Policy does not apply to the assets administered for the benefit of the City by outside agencies under deferred compensation programs. GEUS contracts with the City for investment services under the general direction of GEUS’s General Manager. Changes to this policy require advance approval of GEUS’s Board of Trustees.
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General Objectives The City shall manage and invest its cash with six primary objectives, listed in order of priority: suitability, preservation and safety of principal, liquidity, marketability, diversification, and yield (expressed as optimization of interest earnings within risk constraints and cash flow requirements). All investments shall be designed and managed in a manner responsive to the public trust and consistent with state and local law. The City shall maintain a comprehensive cash management program, which includes collection of account receivables, vendor payments in accordance with invoice terms, and prudent investment of available cash. Cash management is defined as the process of managing monies in order to ensure maximum cash availability and maximum earnings on short-term investment of idle cash. Suitability The suitability of an investment is at the very heart of the investment process. This concept is a fundamental one, both from a legal perspective and in terms of putting the City's money to work both sensibly and prudently. When money is invested unsuitably, there is a high probability of unacceptable loss. While the Public Funds Investment Act establishes broad risk constraints, it is the primary objective of this investment policy to outline what types of investments are suitable for the City. This concept means that an investment is appropriate in terms of the City’s willingness and ability to take on a certain level of risk. It is essential that both these criteria be met. If an investment is to be suitable, the City must understand the nature of the risks and the possible consequences. Preservation and Safety of Principal The preservation and safety of principal is the primary objective when determining the suitability of an investment vehicle. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit and interest rate risk. Credit Risk – The City will minimize credit risk, the risk of loss due to the failure of the issuer or backer of the investment, by:
• Limiting investments to the safest types of investments; • Pre-qualifying the financial institutions and broker/dealers with which the City will do
business; and • Diversifying the investment portfolio so that potential losses on individual issuers will be
minimized. Interest Rate Risk – The City will minimize the risk that the interest earnings and the market value of investments in the portfolio will fall due to changes in general interest rates, by:
• Structuring the investment portfolio so that investments mature to meet cash requirements for ongoing operations, thereby avoiding the need to liquidate investments prior to maturity;
• Investing operating funds primarily in certificates of deposit, shorter-term securities, money market mutual funds, or local government investment pools functioning as money market mutual funds; and
• Diversifying maturities and staggering purchase dates to minimize the impact of market movements over time.
Liquidity The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that investments mature concurrent with cash needs to meet anticipated demands. Because all possible cash demands cannot be anticipated, a portion of the portfolio will be invested in shares
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of money market mutual funds or local government investment pools functioning as money market mutual funds that offer same-day liquidity. Marketability Marketability is defined as the measure of the ability of a security to be bought and sold. If there is an active marketplace for a security, it has good marketability. Marketability is similar to liquidity, except that liquidity implies that the value of the security is preserved, whereas marketability simply indicates that the security can be bought and sold easily. It is an objective of the City’s investment policy to invest in securities that can be easily converted into cash. Such securities will generally have highly liquid markets thereby allowing the security to be sold at a reasonable price very quickly. Diversification The City’s investment portfolio shall remain sufficiently diversified in order to reduce risk, by investing in a variety of assets. Risk is reduced when asset values do not move up and down in perfect synchrony. A diversified portfolio will have less risk than the weighted average risk of its constituent assets, often less risk than the least risky of its constituents. Therefore, the City, a risk-averse investor, will diversify to the extent outlined in this investment policy. Yield The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. Standards of Care Investment Officer This investment policy and outlining of investment practices and authorities are compiled in accordance with state legislation, Section 2256.005(f) which requires the governing body to designate one or more investment officers. Under the direction of the City Manager and the General Manager of GEUS, the City’s Finance Director has custody of all investments and invested funds and is thus referred to as the Investment Officer. Responsibility and authority for daily investment transactions and cash management reside with the Finance Director (the Investment Officer). The Finance Director is also responsible for considering the quality and capability of staff involved in investment management and procedures and with investment decisions and shall establish detailed written procedures. All participants in the investment process shall seek to act responsibly as custodians of public trust. The Investment Officer shall, within 12 months after taking office or assuming duties, attend an investment training session no less than once every two (2) fiscal years and shall receive not less than ten (10) hours of instruction relating to investment responsibilities. This training must include education in investment controls, security risks, strategy risks, market risks, and compliance with the Public Funds Investment Act. The investment training session shall be provided by an independent source approved by the Investment Committee. For purposes of this policy, an “independent source” from which investment training shall be obtained shall include a professional organization, an institute of higher learning, or any other sponsor other than a business organization with whom the City may engage in an investment transaction. The Texas Municipal League (TML), the Government Finance Officers Association of Texas (GFOAT), the Government Treasurer’s Association of Texas (GTOT), the University of North Texas (UNT), North Texas Council of Governments (NTCOG), American Institute of Certified Public
Accountants (AICPA), and the Government Finance Officers Association (GFOA) are approved independent training sources. Investment Committee There shall be established an Investment Committee to assist in monitoring the performance and structure of the City’s portfolio. Members of this committee should include, but are not limited to, the City of Greenville Finance Director (as Chair), the Accountant(s) in the City of Greenville’s Finance Department, and GEUS Accountant(s). The committee shall meet not less than bi-annually to review the investment portfolio of the City and at such other times as necessary. The results of such review will be provided in writing to the City Manager, the City Council, the GEUS General Manager, and the GEUS Board of Trustees.
Prudence The standard of prudence used by the City shall be the “prudent person rule” and shall be applied in the context of managing the overall portfolio. The prudent person rule, for purposes of the City’s investment policy, is defined as follows: A legal maxim restricting the discretion in the City’s account to investments that a prudent person seeking reasonable income and preservation of capital might buy for his or her own portfolio The Investment Officer and his/her designees shall perform their duties in accordance with the policies and procedures set forth in the policy. The Investment Officer and his/her designees acting in good faith and in accordance with these policies and procedures shall be relieved of personal liability. Internal Controls The Finance Director or his/her designee is responsible for establishing and maintaining an internal control structure designed to ensure that the financial assets of the City are protected from loss, theft, or misuse. The internal control structure shall be designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits require estimates and judgments by management. Accordingly, the Finance Director or his/her designee shall establish a process for annual independent review by an external auditor in conjunction with the annual audit to assure compliance with policies and procedures. The internal controls shall address the following points:
• Control of collusion • Separation of transactions authority from accounting and record keeping • Custodial safekeeping • Avoidance of physical delivery securities • Clear delegation of authority to subordinate staff members, and • Written confirmation for telephone (voice) transactions for investments and wire transfers.
Ethics and Conflicts of Interest Investment Officers involved in the investment process shall refrain from personal business activity that would conflict with the proper execution and management of the investment program, or that would impair their ability to make impartial decisions. Investment Officers shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Investment Officers shall refrain from undertaking personal investment transactions with the same individual with which business is conducted on behalf of the City. An Investment Officer of the City who has a personal business relationship with an organization seeking to sell an investment to the City shall file a statement disclosing that personal business interest. An Investment Officer who is related within the second degree by affinity or consanguinity to an individual seeking to sell an investment to the City shall file a statement disclosing that relationship. A statement required under this subsection must be filed with the Texas Ethics Commission and the City.
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Authorized Dealers and Institutions Selection It is the policy of the City to purchase securities only from those institutions on the City’s approved list of brokers/dealers and banks (exhibit A). This list may be revised as the City’s investment needs change. All securities dealers must be registered and certified with the Texas State Securities Commission, National Association of Security Dealers (NASD), and Securities and Exchange Commission (SEC). The Investment Committee shall evaluate the financial institutions’ and brokers/dealers’ soundness to the extent they consider necessary. Investigation may include review of rating agency reports, review of call reports, and analysis of management, profitability, capitalization, and asset quality. Financial institutions and brokers/dealers with whom the City wishes to conduct business shall provide the financial data requested by the City. An institution must be approved by the Investment Committee and added to the approved list before any business can be transacted with the City. The Investment Committee shall also be able to limit the number of authorized securities dealers/banks doing business with the City as required. All banks will be Federal Reserve member banks or banks located within the City of Greenville which enter into a depository agreement and are approved by the Investment Committee. No investment will be placed with Savings and Loans institutions. A copy of this investment policy will be forwarded to any institution or broker/dealer seeking to sell authorized investments to the City. A Qualified Representative of the institution or broker/dealer shall return to the City a written instrument (exhibit B) that states that the Qualified Representative has received and thoroughly reviewed the investment policy of the City and acknowledged that reasonable procedures and controls have been implemented by such institution or broker/dealer in an effort to preclude imprudent investment activities arising out of investment transactions conducted between the City and the institution or broker/dealer. The City shall not purchase any securities from any institution or broker/dealer that does not execute and deliver to the City the above instrument. Competitive Selection of Investments The City will practice competitive bidding when purchasing an investment to help strengthen the investment process. All investments will be competitively bid and placed with vendors guaranteeing the highest rate of return. The right is reserved to reject the most financially favorable bid if it is disruptive to the investment strategy of the City. The bids received for each investment will be documented. A minimum of three bids will be required for each investment purchased. Actual risk of default shall be minimized by adequate collateralization. Market risk shall be minimized by diversification. Diversification shall be directed toward investment instruments, fund types, and security dealers. Diversification Diversification of funds and investments must be accompanied by competitive bidding of all investments to assure diversification among securities dealers. The City shall seek to conduct its investment transactions with several competing, reputable investment security dealers and brokers to protect principal while achieving full advantage of the market. To assure diversification of financial institutions, business involving two party transactions (i.e. repurchase agreements, BAs, and Commercial Paper) with any one investment broker should be limited to thirty percent (30%) of PAR of the total portfolio for any reporting period. In this way, bankruptcy, receivership, or legal action would not immobilize the City’s ability to meet payroll and/or other expenses. Depositories The Texas City Depository Act, Texas Local Government Code, Chapter 105, prescribes procedures for selection of a City depository designating that both general-law and home-rule cities are "authorized to receive applications (as depository) for the custody of City funds from
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any bank corporation, association, or individual banker doing business with the City." This clause indicates that cities are not required to designate one central depository. The City may designate one or more banks as its primary depository through a request for proposal process. This centralization is designed to maximize investment capabilities and minimize banking cost. The depository designation does not limit investment activity to one financial institution. The considerations the City will use to consummate a banking services contract shall include: • Full service capabilities,
• Submission of financial statements and availability schedules, • Collateralization of the total City funds on deposit at the bank, • Statement of staff experience and equal opportunity employment practices, and
• Cost of banking services. Obtaining competitive proposals on the City depository specifications is the responsibility of the Finance Director (the Investment Officer). Selection of the depository shall be based on the institutions offering the most favorable terms and conditions for the handling of the City’s funds and the services available to the City. State law permits a contract period up to five years. The City’s contract shall not exceed these five years with annual performance reviews by the Investment Committee. Special banking needs may be contracted for by the City outside this policy if approved by the Finance Director (the Investment Officer). Safekeeping and Custody The City shall contract with a bank or banks for the safekeeping of securities either owned by the City as part of its investment portfolio or held as collateral to secure financial institution deposits. Securities owned by the City shall be held in the City’s name as evidenced by safekeeping receipts of the institution holding the securities. Safekeeping institutions shall be independent from the parties involved in the investment transaction. Collateral for deposits will be held by a third party custodian designated by the City and pledged to the City as evidenced by safekeeping receipts of the institution with which the collateral is deposited. Original safekeeping receipts shall be obtained. Collateral may be held by a Federal Reserve Bank or branch of a Federal Reserve Bank, a Federal Home Loan Bank, or a third party bank approved by the City and eligible under state law. Suitable and Authorized Investments The following are acceptable investment instruments for the City:
• Obligations of the United States or its agencies and instrumentalities. • Direct obligations of the State of Texas or its agencies and instrumentalities. • 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.
• Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas or the United States or their respective agencies or instrumentalities.
• 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.
• Certificates of deposit issued by a state or national bank domiciled in the State of Texas or a savings and loan association domiciled in the State of Texas and guaranteed or insured by the FDIC or its successor and secured by obligations of the United States or its agencies and instrumentalities.
• Fully collateralized repurchase agreements having a defined termination date, secured by obligations of the United States or its agencies and instrumentalities, and requiring the
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securities being purchased to be pledged to the City and deposited with the City or with a third party selected and approved by the City. A Repurchase Agreement must be signed with the counter parties. All counter parties must be authorized financial dealers and institutions as defined in this policy.
• Banker’s acceptance that has a stated maturity date of 270 days or fewer from the date of its issuance, will be liquidated in full at maturity, is eligible for collateral for borrowing from a Federal Reserve Bank, and 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 by at least one nationally recognized credit rating authority.
• Commercial paper that has a stated maturity date of 270 days or fewer from the date of its issuance and is rated not less than A-1 or P-1 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.
• No-load money market mutual fund registered and regulated by the Securities and Exchange Commission, has a dollar-weighted average stated maturity of 90 days or fewer, is continuously rated as to investment quality by at least one nationally recognized investment firm of not less than AAA or its equivalent, and includes in its investment objectives the maintenance of a stable net asset value of $1 for each share. (Money market mutual funds must provide the City a prospectus and other information required by the Securities Exchange Act of 1934).
• No-load mutual fund that is registered with the Securities and Exchange Commission, has an average weighted maturity of less than two years, is invested exclusively in obligations of the United States or its agencies or instrumentalities, is continuously rated as to investment quality and volatility 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 this policy for investment pools. (Money market mutual funds must provide the City a prospectus and other information required by the Securities Exchange Act of 1934).
The following are not authorized investments of the City of Greenville and its component units:
• An obligation whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal.
• Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest.
• Collateralized mortgage obligations that have a stated final maturity date of greater than 10 years.
• Collateralized mortgage obligations, the interest rate of which is determined by an index that adjusts opposite to the changes in a market index.
In addition, an investment pool is an authorized investment if the City, by rule, order, ordinance, or resolution authorizes investment in that particular pool. To be eligible, the investment pool must be continuously rated not less than AAA, AAAm, or equivalent by at least one nationally recognized rating service and may have a weighted average maturity no greater than 90 days and must furnish to the City the following information:
• Types of investments in which the money is allowed to be invested. • The maximum average dollar-weighted maturity allowed based on stated maturity date of
the pool. • The maximum stated maturity date of any investment security within that portfolio. • The objectives of the pool. • The size of the pool. • The names of the members of the advisory board of the pool and the dates their terms
expire. • The custodian bank that will safe keep the pool’s assets.
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• Whether the intent of the pool is to maintain a net asset value of one dollar and the risk of market price fluctuation.
• 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.
• The name and address of the independent auditor of the pool. • 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.
• The performance history of the pool, including yield, average dollar-weighted maturities, and expense ratios.
To maintain eligibility as an authorized investment of the City, the pool must furnish to the City: • Investment transaction confirmations. • Monthly report including types and percentage breakdown of securities in which the pool
has invested, current average dollar-weighted maturity of the pool, current percentage of the pool’s portfolio in investments that have stated maturities of more than one year, and the carrying value of the pool’s portfolio using amortized cost valuation.
• The size of the pool. • The number of participants in the pool. • The custodian bank that is safekeeping the assets of the pool. • A listing of daily transactions activity of the City. • The yield and expense ratio of the pool. • The portfolio managers of the pool. • Any changes or addenda to the circular offering.
Collateralization Consistent with the requirements of the Public Funds Investment Act, it is the policy of the City to require full collateralization of all City funds on deposit with a depository bank. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 102% of market value of principal and accrued interest on the deposits less any amount insured by the FDIC. At its discretion, the City may require a higher level of collateralization for certain investment securities. Securities pledged as collateral shall be held by an independent third party with whom the City has a current custodial agreement. The Finance Director or his/her designee is responsible for entering into collateralization agreements with third party custodians in compliance with this investment policy. The agreements are to specify the acceptable investment securities for collateral, including provisions relating to possession of the collateral, the substitution or release of investment securities, ownership of securities, and the method of valuation of securities. A clearly marked evidence of ownership (safekeeping receipt) must be supplied to the City. Collateral shall be reviewed at least monthly to assure that the market value of the pledged securities is adequate.
Collateral Defined The City shall accept only the following types of collateral: • Obligations of the United States or its agencies and instrumentalities; • Direct obligations of the state of Texas or its agencies and instrumentalities; • 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;
• Obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized rating firm not less than A or its equivalent with a remaining maturity of ten (10) years or less;
• A surety bond issued by an insurance company rated as to investment quality by a nationally recognized rating firm not less than A, or its equivalent; and
• A letter of credit issued to the City by the Federal Home Loan Bank.
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Collateralized investments often require substitution of collateral. Any broker or financial institution requesting substitution must contact the Finance Director (the Investment Officer), or in the Director’s absence, any member of the Investment Committee for approval and settlement. The substituted collateral’s value will be calculated and the substitution approved if its value is equal to or greater than the original collateralization level. The Finance Director (the Investment Officer), or his/her designee, must give immediate notification of the decision to the bank or third party holding the collateral. Substitution is allowable for all transactions but should be limited, if possible, to minimize potential administrative problems and transfer expense. The Finance Director (the Investment Officer) may limit substitution and assess appropriate fees if substitution becomes excessive or abusive. The financial institutions with which the City invests and/or maintains other deposits shall provide, as requested by the City, a listing of the City’s certificates of deposit and other deposits at the institution and a listing of collateral pledged to the City marked to current market prices. The listing shall include total pledged securities with the following:
• Name, • Type/description, • Par value, • Current market value, • Maturity date, • Rating of investment quality by Moody’s, Standard & Poor’s, (both if available), or another
nationally recognized rating firm. Subject to Audit All collateral shall be subject to inspection and audit by the City’s designated Investment Officer or the City’s independent auditors. Investment Parameters Maximum Maturities The longer the maturity of investments the greater their price volatility; therefore, it is the City’s policy to concentrate its investment portfolio in shorter-term securities in order to limit principal risk caused by changes in interest rates. The City attempts to match its investments with anticipated cash flow requirements. The City will not directly invest in securities maturing more than limits established in the Investment Strategies section of this investment policy from the date of purchase; however, as applicable, authorized investments may be collateralized using longer dated investments. Diversification The City recognizes that investment risks can result from issuer defaults, market price changes, or various technical complications leading to temporary illiquidity. Risk is controlled through portfolio diversification that shall be achieved by the following general guidelines:
• Limiting investments to avoid over concentration in investments from a specific issuer or business sector (excluding U.S. Treasury securities and financial institution deposits that are fully insured and collateralized in accordance with state and federal law);
• Limiting investment in investments that have higher credit risks; • Investing in investments with varying maturities; and • Continuously investing a portion of the portfolio in readily available funds such as bank
deposits, constant dollar local government investment pools, money market mutual funds, or overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations.
Investment Strategies State statutory provisions authorize specific investment instruments as categorized by four major fund types: (1) general operating funds, (2) debt service funds, (3) reserve funds, and (4) capital improvement funds.
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Investments shall reflect the objective of the fund for which they are made. In a pooled cash situation, therefore, the proportional investments shall reflect the fund type ratio of the pool. This differentiation between funds is appropriate because of the objective, rate of return, and risk tolerance of each fund type. Within the objectives of maximization on investment volume and rate of return, the objectives of the funds must be ensured. The objectives of each fund are based on the purchasing power required by the fund, safety of principal, desired rate of return on investment, and long-term stability requirements. General Operating Funds: These funds shall have as their primary objectives: safety, investment liquidity, and maturity sufficient to meet anticipated cash flow requirements.
1. Suitability: Any investment eligible in the Investment Policy is suitable. 2. Safety: All investments shall be of high quality securities with no perceived default risk.
Market price fluctuations will occur. Managing the weighted average days to maturity for the General Operating Fund’s portfolio to less than 365 days and restricting the maximum allowable maturity to three years will minimize the price volatility of the overall portfolio.
3. Liquidity: The General Operating Fund requires the greatest short-term liquidity. Short-term investment pools and money market mutual funds will provide daily liquidity and may be utilized as a competitive yield alternative to fixed maturity investments.
4. Marketability: Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash flow requirement. Historical market “spreads” between the bid and offer prices of a particular security-type of less than a ten basis points will define an efficient secondary market.
5. Diversification: Investment maturities should be staggered throughout the cash flow cycle. Diversifying the appropriate maturity structure out through two years will reduce market cycle risk.
6. Yield: Attaining a competitive market yield for comparable security-types and portfolio restrictions is the desired objective. The yield of an equally weighted, rolling three-month U.S. Treasury Bill portfolio will be the minimum yield objective.
Debt Service Funds: Investment strategies for debt service shall have as their objective sufficient investment liquidity to timely meet debt service payment obligations in accordance with provisions in the bond documents.
1. Suitability: Any investment eligible in the Investment Policy is suitable. 2. Safety: All investments shall be of high quality securities with no perceived default risk.
Market price fluctuations will occur. However, by managing Debt Service Funds to not exceed the debt service payment schedule the market risk of the overall portfolio will be minimized.
3. Liquidity: Debt Service Funds have predictable payment schedules with reduced liquidity requirements. Investment maturities should not exceed the anticipated cash flow requirements. Investments pools and money market mutual funds may provide a competitive yield alternative for short term fixed maturity investments.
4. Marketability: Securities with active and efficient secondary markets are not necessary as the event of an unanticipated cash flow requirement is not probable.
5. Diversification: Market conditions influence the attractiveness of fully extending maturity to the next “unfunded” payment date. At no time shall the debt service schedule be exceeded in an attempt to bolster yield.
6. Yield: Attaining a competitive market yield for comparable security-types and portfolio restrictions is the desired objective. The yield of an equally weighted, rolling three-month U.S. Treasury Bill portfolio will be the minimum yield objective.
Reserve Funds: Investment strategies of Reserve Funds shall have as their primary objective the generation of a dependable revenue stream from high quality securities in accordance with provisions in the bond documents.
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1. Suitability: Any investment eligible in the Investment Policy is suitable. 2. Safety: All investments shall be of high quality securities with no perceived default risk.
Market price fluctuations will occur. However, managing Reserve Fund maturities to not exceed the call provisions of the borrowing reduces the investment’s market risk if the debt is redeemed and the Reserve Fund liquidated. No stated final investment maturity shall exceed the final maturity of the borrowing.
3. Liquidity: Reserve Funds have no anticipated expenditures. The Funds are deposited to provide annual debt service payment protection to the debt holders. Market conditions and arbitrage regulation compliance determine the advantage of security diversification and liquidity.
4. Marketability: Securities with less active and efficient secondary markets are acceptable.
5. Diversification: Market conditions and the arbitrage regulations influence the attractiveness of staggering the maturity of fixed rate investments for Reserve Funds. At no time shall the final debt service payment date of the bond issue be exceeded in an attempt to bolster yield.
6. Yield: Achieving a positive spread to the applicable borrowing cost is the desired objective. Reserve Fund portfolio management shall at all times operate within the limits of the Investment Policy’s risk constraints.
Capital Improvement Funds: Investment strategies for capital improvement funds shall have as their primary objective sufficient investment liquidity to timely meet capital project obligations. If the City has funds from bond proceeds, they shall be invested in accordance with provisions in the bond documents.
1. Suitability: Any investment eligible in the Investment Policy is suitable. 2. Safety: All investments shall be of high quality securities with no perceived default risk.
Market price fluctuations will occur. However, by managing Capital Improvement Funds to not exceed the anticipated expenditure schedule the market risk of the overall portfolio will be minimized.
3. Liquidity: Capital Improvement Funds programs have reasonably predictable draw schedules reducing liquidity requirements. Investment pools and money market mutual funds will provide readily available funds or a competitive yield alternative for short term fixed maturity investments.
4. Marketability: Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash flow requirement. Historical market “spreads” between the bid and offer prices of a particular security-type of less than a ten basis points will define an efficient secondary market.
5. Diversification: Market conditions and arbitrage regulations influence the attractiveness of staggering the maturity of fixed rate investments for Capital Improvement Funds. Generally, when investment rates exceed the applicable cost of borrowing, the City is best served by locking in most investments. If the cost of borrowing cannot be exceeded, then concurrent market conditions will determine the attractiveness of diversifying maturities or investing in shorter and larger amounts. At no time shall the anticipated expenditure schedule be exceeded in an attempt to bolster yield. A singular repurchase agreement may be utilized if disbursements are allowed in the amount necessary to satisfy any expenditure request. This investment structure is commonly referred to as a flexible repurchase agreement.
6. Yield: Achieving a positive spread to the applicable borrowing cost is the desired objective. Capital Improvement Fund portfolio management shall at all times operate within the limits of the Investment Policy’s risk constraints.
Reporting The Investment Officer shall prepare an investment report, monthly, that summarizes the investment strategies employed in the most recent month and describes the portfolio in terms of investment securities, maturities, and shall explain the total investment return for the month. The investment report shall be prepared in compliance with generally accepted accounting principals and the PFIA. This report will be prepared in a manner that will allow the City to
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ascertain whether investment activities during the reporting period have conformed to the Investment Policy. The report, in addition to the above stated requirements, will include the following:
• The investment position of the City; • The signature of the Investment Officer; • A summary statement which includes the following:
o Beginning market value, o Additions and changes, o Ending market value, o Accrued interest, o Book value and market value, o Maturity date, o Account or fund, o Statement of compliance with investment strategy and the PFIA;
• The report shall not be prepared less than quarterly, • The report will be formally reviewed at least annually by an independent auditor.
Annual Compliance Audit The City of Greenville and its component units, in conjunction with its annual financial audit, shall perform a compliance audit of management controls on investments and adherence to the Investment Policy. Also, the auditors conducting the annual financial audit must review the investment reports prepared to comply with these statutes. The review should be accomplished annually and the results reported to the City of Greenville’s and its component units’ governing bodies. Investment Policy Adoption The City’s Investment Policy shall be adopted by resolution of the appropriate City governing bodies. It is the City’s intent to comply with state laws and regulations. The City’s Investment Policy shall be subject to revisions consistent with changing laws, regulations, and needs of the City. The appropriate City governing body shall adopt a resolution stating that it has reviewed the Policy and investment strategies annually, approving any changes or modifications.
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March 201213 Council Meeting27 Council MeetingApril 201210 Council Meeting24 Council Meeting - Work Session with City Council for Mid-Year Budget Review29 Preliminary estimate due from Appraisal DistrictMay 20121 Send out 5-Year Plan for updates from departments.8 Council Meeting9 2012-2013 Budget Kickoff - Assumptions (10:00 am Civic Center)11 Pay Plan Assumptions due from HR and CM to Finance14 5-Year Business Plan Development updates due from departments,
(includes: Capital, New Programs, and Fleet)17-21 Budget & General Ledger Training (Library Meeting Room)22 Council Meeting23-25 P-Card Training (Civic Center)23 Cost Allocation Plan Complete24 Changes to Pay Plan Complete25 11-12 Revenue / Expenditures - Year to Date Projections (with Assumptions) Due
to Finance25 12-13 Revenue / Expenditures - Projections (with Assumptions) Due to Finance30-31 First Round of Budget Reviews with City Manager and department headsJune 20121-6 First Round of Budget Reviews with City Manager and department heads continues12 Council Meeting15 Council / Staff Retreat (Civic Center - tentative)24 Preliminary budget due to City Manager26 Council MeetingJuly 20126 Department Goals / Objectives / Accomplishments due to Finance9-13 Second Round of Budget Reviews with City Manager and department heads10 Council Meeting - Strategic Planning Session with City Council (Tentative)24 Council Meeting25 Certified roll due from Appraisal District
City of GreenvilleBudget Calendar
Fiscal Year 2012-2013
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City of GreenvilleBudget Calendar
Fiscal Year 2012-201328 Revenue Estimates finalized29 Preliminary Budget review with City Manager and FinanceAugust 20125 Publish “Notice of Effective Rate” (County Tax Assessor publishes this notice)14 Council Meeting - Proposed Budget presented to City Council 14 File Proposed Budget – City Secretary (City Charter requirement)17 72 Hour notice for Public Hearing on Budget (open meeting notice)
for 8/21 Budget Workshop21 Budget Workshop (Civic Center - all day)24 72 Hour notice for Public Hearing on Budget (open meeting notice)
for 8/28 Council Meeting28 Council Meeting
Council Agenda Items (Tentative) If proposed rate will exceed lower of rollback or effective rate1. Council must vote to place a proposal to adopt rate on the agenda of a future meeting, an action item Vote must be recorded and proposal must specify desired rate.2. If motion passes must schedule 2 public hearings on the proposal.
31 Website Post “Notice of Public Hearings on Tax Increase”TV Run 60 sec ad, 5X/day between 7 a.m. – 9 p.m.
September 20127 72 Hour notice for Public Hearing on Budget (open meeting notice) 11 Council Meeting - Public Hearing on Budget14 72 Hour notice for Public Hearing on Budget (open meeting notice) 18 Council Meeting - Second Public Hearing on Budget18 Publish “Notice of Vote on Tax Rate” (Truth in Taxation Form-p.56)( g p p
adopt rate no less than 7 no more than 14 days after 2nd public hearing on tax 18 Website Post “Notice of Vote on Tax Rate”
TV Run 60 sec ad, 5X/day between 7 a.m. – 9 p.m.
25 Council Meeting - Adopt Budget - Adopt Tax Rate
File Approved Budget – City Secretary, County Clerk, and City Library (City Charter requirement)
October 201231
Budget Book Completed and Submitted to the Government Finance Officers Association's (GFOA) Distinguished Budget Presentation Award Program
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City of Greenville, TexasEstimated Ad Valorem Tax Revenue and Trend Information
July 31, 2011, Actual Year-to-Date 2011 1,382,052,700$ 0.47% 9,512,520$ 98.47%Certified Assessed Value as of July 25, 2012 2012 1,453,602,702$ 5.18% 9,964,363$ 98.50%
* Amount represents the total amount of current and delinquent taxes collected compared to levy.
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City of Greenville, TexasAnalysis of Changes in Market Value
Agricultural Qualified Agricultural Land 28,447,389$ 28,040,856$ (406,533)$ -1.43%Non-Qualified Agricultural Land 7,528,048 7,059,061 (468,987) -6.23%Farm or Ranch Improvement 6,187,070 6,242,650 55,580 0.90%Sub-Total 42,162,507$ 41,342,567$ (819,940)$ -1.94%
CommercialCommercial Real Property 280,133,820$ 278,573,872$ (1,559,948)$ -0.56%Commercial Personal Property 111,682,714 112,428,519 745,805 0.67%Sub-Total 391,816,534$ 391,002,391$ (814,143)$ -0.21%
IndustrialIndustrial Real Property 52,988,860$ 58,258,560$ 5,269,700$ 9.94%Industrial Personal Property 266,557,530 325,795,410 59,237,880 22.22%Sub-Total 319,546,390$ 384,053,970$ 64,507,580$ 20.19%
UtilitiesGas Distribution System 4,748,610$ 4,909,820$ 161,210$ 3.39%Electric Company 368,610 1,718,980 1,350,370 366.34%Telephone Company 5,677,590 4,897,270 (780,320) -13.74%Cable Television Company 1,717,950 3,455,500 1,737,550 101.14%Pipeland Company 264,370 277,050 12,680 4.80%Other Type of Utility 105,030 97,210 (7,820) -7.45%Sub-Total 12,882,160$ 15,355,830$ 2,473,670$ 19.20%
Total All Property 2,407,082,171$ 2,470,158,712$ 63,076,541$ 2.62%
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2012 Property Tax Rates in City of Greenville
This notice concerns 2012 property tax rates for City of Greenville. It presents infonnation about threetax rates. Last year's tax rate is the actual rate the taxing unit used to detennine property taxes last year.This year's effective tax rate would impose the same total taxes as last year if you compare propertiestaxed in both years. This year's rollback tax rate is the highest tax rate the taxing unit can set beforetaxpayers can start tax rollback procedures. In each case these rates are found by dividing the totalamount of taxes by the tax base (the total value of taxable property) with adjustments as required bystate law. The rates are given per $100 of property value.
Last year's tax rate:Last year's operating taxesLast year's debt taxesLast year's total taxesLast year's tax baseLast year's total tax rate
This year's effective tax rate:Last year's adjusted taxes(after subtracting taxes on lost property)This year's adjusted tax base(after subtracting value of new property)
= This year's effective tax rate
$7,024,080$2,586,082$9,610,162
$1,374,844,3270.699000/$100
$9,571,363
$1,441,512,7430.663980/$100
0.100662/$1000.563318/$100
In the first year a hospital district or city collects the additional sales tax to reduce property taxes, itmust insert the following lines unless its first a4iustment was made last year:
- Sales tax adjustment rate= Effective tax rate
This year's rollback tax rate:Last year's adjusted operating taxes(after subtracting taxes on lost property andadjusting for any transferred function, tax incrementfinancing, state criminal justice mandate and!orenhanced indigent health care expenditures)This year's adjusted tax base
= This year's effective operating ratex 1.08 = this year's maximum operating rate+ This year's debt rate
A hospital district or city that collects the additional sales tax to reduce property taxes, includingone that collects the tax for the first time this year, must insert the following lines:
Statement of IncreaselDecreaseIf City of Greenville adopts a 2012 tax rate equal to the effective tax rate of 0.563318 per $100 of value, taxes would decrease compared to2011 taxes by $ 1,484,935.
Schedule A: Unencumbered Fund Balances:The following estimated balances will be left in the unit's property tax accounts at the end of the fiscal year. These balances are notencumbered by a corresponding debt obligation.
Type of Property Tax FundTax Fund
Balance404,893
Schedule B: 2012 Debt Service:The unit plans to pay the following amounts for long-term debts that are secured by property taxes. These amounts will be paid fromproperty tax revenues (or additional sales tax revenues, if applicable).
Other Total PaymentAmounts to be
Paid
Description of Debt
GO Debt
CO Debt
Tax Note
Principal orContract
Payment to bePaid fromProperty
Taxes
1,230,000
505,000
395,000
Interest to bePaid fromProperty
Taxes
1,392,243
231,699
7,683
ooo
2,622,243
736,699
402,683
Total required for 2012 debt service
Amount (if any) paid from funds listed in Schedule A
Amount (if any) paid from other resources
Excess collections last year
= Total to be paid from taxes in 2012
+ Amount added in anticipation that the unit will collect only 100.000000% of itstaxes in 2012
= Total Debt Levy
$3,761,625
$0
$1,105,858
$0
$2,655,767
$0
$2,655,767
Schedule C - Expected Revenue from Additional Sales Tax(For hospital districts, cities and counties with additional sales tax to reduce property taxes)In calculating its effective and rollback tax rates, the unit estimated that it will receive $ 1,456,809 in additional sales and use tax revenues.For County: The county has excluded any amount that is or will be distributed for economic development grants from this amount ofexpected sales tax revenue.
This notice contains a summary of actual effective and rollback tax rates' calculations. You can inspect a copy of the full calculations at2500 Stonewall Street, Greenville, TX 75401.Name of person preparing this notice: Barbara WigginsTitle: Hunt County Tax Assessor-CollectorDate prepared: July 25, 2012
